1973-99-ES Danilo Suarez, Applicant v. Terry Kelly and Ministry of Labour, Responding Parties.

Employment Practices Branch File No. 32005365

1987-99-ES Orestes Alfonso, Applicant v. Terry Kelly and Ministry of Labour, Responding Parties.

Employment Practices Branch File No. 32005365

1988-99-ES Rourvaldo Galvez, Applicant v. Terry Kelly and Ministry of Labour, Responding Parties.

Employment Practices Branch File No. 32005365

APPEARANCES: Danilo Suarez, Orestes Alfonso, Rourvaldo Galvez and Helen Nolan for the applicants; Terry Kelly on his own behalf; and Laurie Eisenberg for Ministry of Labour.

BEFORE: Laura Trachuk, Vice-Chair.

DECISION OF THE BOARD; October 3, 2001

1. These are three applications under section 68 of the Employment Standards Act, R.S.O. 1990, C.E.-14, as amended (the “Act”) for review of decisions by an Employment Standards Officer not to issue Orders to Pay. The three applications were heard together as all three claims relate to the same fact situation and were against the same responding party.

2. The Board heard evidence from the three applicants. It did not receive any evidence from the responding party Terry Kelly. Mr. Kelly participated when the hearing commenced. He then sought two adjournments on short notice, which were granted. In one case, he was directed to provide evidence of his inability to attend the hearing. He never did so. In a decision dated December 19, 2000 the Board indicated that in view of the multiple adjournments and the circumstances in which they were sought, no further adjournments would be granted to Mr. Kelly without satisfactory proof that he was unable to attend. Mr. Kelly then participated on the hearing dates scheduled for March 7 and 23, 2001. However, he did not appear at the hearing scheduled for June 18, 2001. That date, as well as June 19 and 20, 2001, had been set after consultation with all of the parties. Mr. Kelly sent no explanation for his absence nor did he seek an adjournment. Mr. Kelly therefore did not cross-examine Mr. Suarez or Mr. Galvez and did not present any testimony of his own.

3. These claims arise from the extensive renovations performed by the claimants on a house belonging to the responding party, Terry Kelly, between June 4 and August 28, 1998. Mr. Kelly and Mr. Galvez had an agreement that Mr. Galvez and his family could live in the house rent free after the renovations were completed in exchange for his labour. Mr. Alfonso was Mr. Galvez’s brother-in-law. Mr. Suarez was a friend of Mr. Alfonso. All three of them worked on the renovations. Mr. Galvez claims that he should be paid for the work he did on the house as he was only able to live in it for three months rather than the two years he had expected. Mr. Alfonso and Mr. Suarez claim that Mr. Kelly had promised to pay them for the work they did on the renovations and that he never did so.

4. Mr. Galvez and his family had rented the house from Mr. Kelly for one month in 1997. They paid $400.00 in rent. In 1998, Mr. Galvez approached Mr. Kelly and asked if his family could move back into the house. Mr. Kelly agreed. They decided that Mr. Galvez would do some repair work on the house first. They also agreed that they would need some other people to do the work and therefore Mr. Galvez contacted Mr. Alfonso. When Mr. Alfonso met with Mr. Kelly and Mr. Galvez, Mr. Kelly asked them to fix his friend’s roof and said that if they did that successfully they could fix his roof. Mr. Alfonso and Mr. Galvez then went with Mr. Kelly to his friend’s house where they fixed the roof. They were paid $700.00 by her for the job. Mr. Kelly then advised them that he would pay them $1,800.00 ($900.00 each) to fix his roof. If they completed that job successfully they could do the rest of the work on the house. At the end of the roof job Mr. Galvez suggested to Mr. Kelly that rather than pay him he could work in exchange for the rent he would be paying when his family moved into the house. Mr. Kelly agreed to the proposal. After the roofing job was completed, Mr. Kelly said that another worker was needed and Mr. Alfonso contacted Mr. Suarez.

5. Mr. Kelly advised Mr. Suarez and Mr. Alfonso that they would be paid between $13.00 and $15.00 per hour for the work on the house. Originally Mr. Alfonso understood that he was to be paid weekly. Then Mr. Kelly told him and Mr. Suarez that he would pay them bi-weekly. Subsequently, Mr. Kelly provided Mr. Alfonso with a book of contracting estimates and suggested that he would pay him and Mr. Suarez according to the job being done using the rates in the book. He asked Mr. Alfonso to write down estimates using the trade rates for the various jobs according to the book because he said he wanted to be fair to them. However, they were never paid for any of the work. Mr. Kelly provided a number of excuses for not paying them. He said that he did not have the money and would have to go to the bank. Then he provided the contractor book and said they would be paid according to those estimates when he received the compensation he was expecting for a workplace injury. Both Mr. Alfonso and Mr. Suarez needed the money and they never thought that they would not be paid at all since they were performing the work. Furthermore, it is apparent that the claimants and Mr. Kelly had a close and cordial relationship during this period and sometimes socialized together. They did not expect that Mr. Kelly would take advantage of them.

6. Approximately three weeks after Mr. Alfonso started working, Mr. Kelly asked him to keep track of his hours. Mr. Alfonso then did so for himself and, less consistently, for Mr. Suarez. Mr. Alfonso also had some handwritten notes which are, in many respects, inconsistent with the calendar. He says that he starting keeping the calendar approximately three weeks after he started working for Mr. Kelly but he made the notes months later in preparation for a meeting with the Employment Standards Officer and Mr. Kelly at a time when he did not have access to the calendar. Mr. Alfonso was unable to provide the Board with the original documents, however the Board is able to determine the hours he worked during the relevant period, through the photocopies and Mr. Alfonso’s testimony,. Mr. Suarez testified that after the first week he started working from morning until late evening. He worked for at least 12 hours each day seven days per week. He did not keep track of his hours. Mr. Galvez said that he worked 12 to 16 hours per day seven days per week.

7. Mr. Kelly supervised the work performed by the claimants although not on a daily basis. He had been injured at work approximately six months before the renovations started and was not able to participate in it himself. He would plan the work in advance and tell them what had to be done. The claimants had almost no construction experience at all. Certainly none of them had ever worked as a contractor. Sometimes, particularly on evenings and weekends, Mr. Kelly would be at the house directing the actual performance of the work. Other times he would leave notes or telephone instructions. He taught them how to do the various jobs like fix the roof, do the hardwood floors and build the stairs. If they did something he did not like he would tell them to do it again. He advised them generally about what hours to work but he was flexible. Although Mr. Galvez bought some materials, neither Mr. Alfonso or Mr. Suarez ever did so.

8. Mr. Galvez and his family moved into the house at the end of August 1998, one day after the work was finished. Mr. Kelly also moved in but the arrangement broke down within a few months and Mr. Galvez’s wife and children moved out in December. Mr. Galvez moved out himself in January 1999. There was no agreement between Mr. Galvez and Mr. Kelly as to what was to occur if Mr. Galvez moved out early. After the renovations were completed at the end of August, Mr. Galvez said that he presented Mr. Kelly with an invoice for $16,000.00 which included $10,000.00 for labour plus $6,000.00 for materials. He presented the invoice to show how much rent he had worked for. However, it does not appear that there was any agreement as to how much the “rent” would be. Mr. Galvez said that he thought he could live there approximately two years without paying rent based on the rent he had paid the year before.

9. When Mr. Galvez moved out of his apartment to move into Mr. Kelly’s house Mr. Alfonso moved in. He did not have to pay last month’s rent because Mr. Galvez had paid it previously. Their agreement was therefore that Mr. Alfonso would pay the last month’s rent to Mr. Galvez when he moved out. However, Mr. Galvez moved back into the apartment after he left Mr. Kelly’s house.

10. Mr. Alfonso started working for Mr. Kelly on June 4, 1998. Mr. Suarez started a week later. They both finished working on the house on August 28. The next day there was an open house party which all the claimants attended. The day after that, Mr. Alfonso and Mr. Suarez were supposed to meet with Mr. Kelly to receive their payment but he cancelled the appointment. They made another appointment to meet the following weekend but Mr. Kelly did not show up. They tried to meet with him three or four more times about the matter but were unsuccessful.

Decision

11. The relevant sections of the Act are as follows:

12. In this Act,

"employee" includes a person who,

(a) performs any work for or supplies any services to an employer for wages,

(b) does homework for an employer, or

(c) receives any instruction or training in the activity, business, work, trade, occupation or profession of the employer,

and includes a person who was an employee;

"employer" includes,

(a) any owner, proprietor, manager, superintendent, overseer, receiver or trustee of any activity, business, work, trade, occupation, profession, project or undertaking who has control or direction of, or is directly or indirectly responsible for, the employment of a person therein, and

(b) any associated or related corporations, individuals, firms, syndicates or associations treated as one employer under section 12, where any one has control or direction of, or is directly or indirectly responsible for, the employment of a person therein,

and includes a person who was an employer;

"wages" means any monetary remuneration payable by an employer to an employee under the terms of a contract of employment, oral or written, express or implied, any payment to be made by an employer to an employee under this Act and any allowances for room or board as prescribed in the regulations or under an agreement or arrangement therefore but does not include,

(a) tips and other gratuities,

2. (2) This Act applies to every contract of employment, oral or written, express or implied,

(a) where the employment is for work or services to be performed in Ontario; or

3. (1) Subject to section 4, no employer, employee, employers' organization or employees' organization shall contract out of or waive an employment standard, and any such contracting out or waiver is null and void.

4. (1) An employer shall pay to an employee, in cash or by cheque, all wages to which an employee is entitled under,

(a) an employment standard; or

(b) a right, benefit, term or condition of employment under a contract of employment, oral or written, express or implied, that prevails over an employment standard.

(3) All wages due and owing to an employee shall be paid by an employer on the regular pay day of the employee as established by the practice of the employer.

23. Every employer who permits any employee to perform work or supply any services in respect of which a minimum wage is established shall be deemed to have agreed to pay to the employee at least the minimum wage established under this Act.

24. (1) Except as otherwise provided in the regulations, where an employee works for an employer in excess of forty-four hours in any week, the employee shall be paid for each hour worked in excess of forty-four hours overtime pay at an amount not less than one and one-half times the regular rate of the employee.

(2) In complying with subsection (1), no employer shall reduce the regular rate of wages payable to an employee.

(3) Where an employer has not made and kept complete and accurate records in respect of an employee pursuant to clause 11 (1) (a), an employment standards officer may determine the regular rate of and the number of hours worked by the employee in each day and week.

28. (1) Every employer shall give a vacation of at least two weeks to each employee upon the completion of each 12 months of employment, whether or not the employment was active employment.

(2) An employer shall pay vacation pay to an employee entitled to a vacation under subsection (1).

(3) The vacation pay must be not less than 4 per cent of the wages (excluding vacation pay) earned by the employee during the 12 months for which the vacation is given.

Regulation 325

10. (1) For the work week in which January 1, 1995 occurs and thereafter, an employer shall pay not less than the following minimum wage:

11. To an employee other than one to whom paragraph 1, 2, 3 or 3.1 applies, $6.85 an hour.

(2) For the week in which January 1, 1995 occurs and thereafter, if meals or room or both are taken into account by an employer in calculating the minimum wage of an employee, the maximum amount at which meals or room or both shall be valued for the purposes of determining if the minimum wage has been paid to the person is as follows:

1. Room $31.70 a week if the room is private and $15.85 a week if the room is not private.

2. Meals $2.55 a meal and not more than $53.55 a week.

3. Both room and meals $85.25 a week if the room is private and $69.40 a week if the room is not private.

(3) Charges for meals or room shall not be deducted from the minimum wages of an employee unless the employee has received the meals or occupied the room supplied.

12. It is undisputed that the claimants worked for three months renovating Mr. Kelly’s house and were not paid. If they were his employees then they were entitled to be paid under the Act. A review of the facts leads the Board to the conclusion that all three claimants were his employees. None of them had any construction experience and Mr. Kelly taught them what to do. He told them what jobs to perform and criticized them if it was done improperly. He generally decided when they would start and finish work. He set the promised wage rate. Neither Mr. Alfonso nor Mr. Suarez provided any materials. Mr. Galvez bought some materials but did so under Mr. Kelly’s instruction and in the expectation that he would be reimbursed for them. Mr. Kelly provided the tools.

13. In the end there was no evidence to dispute Mr. Alfonso’s and Mr. Suarez’s claims that Mr. Kelly promised to pay them at least $13.00 per hour to do the renovations on his house. Mr. Alfonso’s evidence was given in a forthright manner and his and Mr. Suarez’s explanation for remaining on the job for three months without pay was credible. They had a friendly relationship with Mr. Kelly and he told them he was expecting to be paid money for the injury he suffered at work. It is apparent that Mr. Alfonso and Mr. Suarez needed the money. It is more likely that Mr. Alfonso and Mr. Suarez performed the work in the expectation of being paid than that they performed it merely to assist Mr. Galvez.

14. The more difficult question is whether Mr. Galvez is entitled to monetary remuneration under the Act since it is undisputed that the agreement between himself and Mr. Kelly was that he would work in exchange for future rent. When they entered that agreement they did not provide for the possibility that Mr. Galvez would only live in the house a short time. They did not articulate any agreement about how much the rent would be. Mr. Galvez expected to be able to live in the house for about two years. He gave Mr. Kelly an invoice in September 1997 indicating he had earned $10,000 for the summer’s labour.

15. The definition of employee under the Act includes a person who works or supplies services for wages. However, the word “includes” indicates that an employee is not limited to someone who works for wages. For the reasons set out in paragraph 12 above, the Board finds that Mr. Galvez was an employee even though he had agreed to work for something other than money. However, while the definition of employee encompasses someone who has agreed to work for something other than money, the Act requires that an employee be paid at least the minimum wage (section 23). That wage must be paid in cash or by cheque (subsection 7(1)(a)). Mr. Galvez was an employee of Mr. Kelly and is therefore entitled to be paid the minimum wage for all the hours he worked plus applicable overtime and vacation pay. Parties may be free to enter a contract for services in exchange for some other goods as Mr. Galvez and Mr. Kelly purported to do. However, they may not contract out of the Act. Thus, if the individual providing the services is an employee, then he or she must receive the minimum wage by cash or cheque whatever else the parties to the employment contract have agreed to. However, it is only the minimum wage or monetary portion, of the contract which can be enforced under the Act. A person wishing to enforce other promises under a contract of employment must find a different forum. Likewise, Mr. Galvez’s claim that Mr. Kelly owes him for the purchase of materials cannot be enforced under the Act.

16. The Act does contemplate an allowance for room as part of an employee’s wages but that amount can only be deducted if the individual has occupied the room (Regulation 325 (10 (3)). At the time that Mr. Galvez was performing the services for Mr. Kelly and became entitled to be paid the minimum wage he was not occupying the room and therefore no deduction can be made.

17. The Board finds that Mr. Galvez is entitled to be paid the minimum wage ($6.85 per hour) x 84 hours per week (12 hours per day x 7 days) + $3.42 x 40 hours of overtime per week x 12 weeks x 4% for vacation pay. Mr. Galvez is therefore entitled to be paid $8,900.73.

Disposition

Board File No. 1987-99-ES (Orestes Alfonso)

18. Pursuant to section 68(20) of the Act, this application for review of the Employment Standards’ Officer’s refusal to issue an order is allowed. The Board under that section may issue an order and in doing so, has, pursuant to section 68(19) of the Act, powers of an Employment Standards Officer under the Act. Therefore, pursuant to section 65(1.2) of the Act the Board hereby orders Terry Kelly to pay forthwith to the Director of Employment Standards in trust for the benefit of the applicant, Orestes Alfonso, the sum of $7,891.68 (representing wages and vacation pay).

Board File No. 1973-99-ES (Danilo Suarez)

19. Pursuant to section 68(20) of the Act this application for review of the Employment Standards’ Officer’s refusal to issue an order is allowed. The Board under that section may issue an order and in doing so, has, pursuant to section 68(19) of the Act, powers of an Employment Standards Officer under the Act. Therefore, pursuant to section 65(1.2) of the Act the Board hereby orders Terry Kelly to pay forthwith to the Director of Employment Standards in trust for the benefit of the applicant, Danilo Suarez, the sum of $10,000.00 for wages owing to him.

Board File No. 1988-99-ES (Rourvaldo Galvez)

20. Pursuant to section 68(20) of the Act this application for review of the Employment Standards Officer’s refusal to issue and order is allowed. The Board under that section may issue an order and in doing so, has, pursuant to section 68(19) of the Act, powers of an Employment Standards Officer under the Act. Therefore, pursuant to section 65(1.2) of the Act the Board hereby orders Terry Kelly to pay forthwith to the Director of Employment Standards in trust for the benefit of the applicant Rourvaldo Galvez, the sum of $8,900.73 for wages owing to him.

“Laura Trachuk”

for the Board