Skip to content

Client Update: Directors will be liable for unpaid wages and vacation pay

Clients who sit on boards of corporate employers should take note of recent amendments made to New Brunswick’s Employment Standards Act (the “ESA”) which could increase their exposure to personal liability in connection with claims advanced by employees of the corporation.

The amendments, which have already been passed by the Legislature and will come into effect on a date to be determined by cabinet, will impose responsibility on directors for unpaid employee wages and vacation pay. The changes will not be applicable to directors of not-for-profit organizations.

As a result of the amendments, directors will be jointly and severally liable with the corporation for:

  • Up to six months’ wages that were earned or became due and payable while a person was a director.
  • Up to 12 months of vacation pay owing to an employee or former employee that accrued or became due and payable while a person was a director.

Directors may also be liable for payment of certain administrative penalties ranging from $150 to $900.

Given the definitions of “wages” and “pay” contained in the ESA, the potential exists that directors’ liability may extend to employee severance pay, subject to administrative and/or judicial interpretation.

Not only will employees be able to seek enforcement of these new rights against directors through an administrative process existing under the ESA, they may also be able to enforce their rights directly against directors by commencing an action, or even a class action, in court.

Pursuant to the amendments to the ESA, a director’s exposure does not end when he or she ceases to be a director of the corporation. An employee has one year to launch a complaint and an order against a former director can be made up to two years after he or she has ceased to be a director.

Director liability for employee wages has been imposed by business corporations and/or employment standards legislation in other provinces and territories including British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, the Northwest Territories, the Yukon and Nunavut, as well as federally under Part III of the Canada Labour Code. While the details of such legislation vary from jurisdiction to jurisdiction, the legislative framework (including employment standards and corporate statutes) often provides one or more of the following protections for directors:

  • An employee must first seek a remedy against the corporation before he or she can pursue the directors personally.
  • Directors will not be held liable where they have exercised due diligence and acted in good faith (similar to the defence available to directors under the Income Tax Act in connection with the non-remittance of source deductions).

The amendments to the ESA provide no similar protections. Employees will be able to bypass the corporation and seek payment for unpaid wages and vacation pay from directors in their personal capacities, notwithstanding that such directors may have exercised due diligence and acted in good faith. Effectively, the ESA imposes an absolute liability on directors with no express statutory defences.

Currently in New Brunswick, standard directors’ liability insurance policies do not provide coverage for claims advanced by employees for nonpayment of wages and vacation pay. Consequently, depending on the size of the corporation’s payroll, a director could face significant personal liability in the event of corporate insolvency.

The foregoing is intended for general information only and is not intended as legal advice. If you have any questions, visit our Labour and Employment Group. For more on our firm see www.stewartmckelvey.com.

SHARE

Archive

Search Archive


Search
Generic filters

 
 

The Winds of Change (Part 4): A Review of Rental and Royalty Regimes for Wind Development on Crown Lands: Options for Newfoundland and Labrador’s Economic Wind Policy

August 3, 2022

By: John Samms, Sadira Jan, Paul Kiley, Dave Randell, Alanna Waberski, and Jayna Green As we explained in our July 6, 2022 “Winds of Change” article, the announcement made by Minister Andrew Parsons on April…

Read More

Update on the Economic Mobility Program for Refugees (phase 2): The Economic Mobility Pathways Project (“EMPP”)

August 2, 2022

Included in Beyond the Border – July 2022 By Brittany Trafford; Fredericton   Brief Overview In an attempt to address the Canadian labour market shortages, the Economic Mobility Pathways Pilot (“EMPP”), was introduced in 2018.…

Read More

HR Best Practices When Employing Foreign Workers

July 29, 2022

Included in Beyond the Border – July 2022   By Brendan Sheridan; Halifax Canadian employers are increasingly relying on foreign workers to fill gaps in the labour market and to provide specialized skills. In 2020,…

Read More

Beneficial Ownership Registry Rules Come to New Brunswick

July 28, 2022

By Alanna Waberski, Graham Haynes and Maria Cummings On June 10, 2022, the Government of New Brunswick proclaimed into force Bill 95, which amends the Business Corporations Act (New Brunswick) (the “NBBCA”) to require corporations…

Read More

Recent trends in defined benefits pension plans – a review of public sector plans

July 28, 2022

Included in Discovery: Atlantic Education & the Law – Issue 10 Hannah Brison and Dante Manna Increased financial volatility caused by recent global events has caused public sector defined benefit (“DB”) pension plans to reflect…

Read More

Atlantic Canada offers immigration pathways for workers in Trucking, Health, Construction and Food Service Industries

July 27, 2022

Included in Beyond the Border – July 2022 By Sara Espinal Henao; Halifax It is a well-known fact that Atlantic Canada needs workers. In the aftermath of COVID-19, regional employers in the trucking, health, construction,…

Read More

The winds of change (part 3): Newfoundland and Labrador releases wind energy guidelines

July 27, 2022

By: John Samms, Matthew Craig, Dave Randell,  and Jayna Green On July 26, 2022 the Province of Newfoundland and Labrador (the “Province”) released “Guidelines: Nominating Crown Lands for Wind Energy Projects” (the “Guidelines”). Described as…

Read More

Trends in tenure and promotion for unionized employers

July 25, 2022

Included in Discovery: Atlantic Education & the Law – Issue 10 By Kate Profit    Tenure is a well known and often discussed topic amongst academics. Viewed by unions as a cornerstone of modern universities,…

Read More

Car-Sharing Comes to PEI – Insurance Implications

July 22, 2022

Dalton McGuinty Jr. and Kegan Bradley On May 17th, 2022, Canada’s largest car-sharing company, Turo, brought their platform to Prince Edward Island. The service allows car owners (lessors) to lend out their vehicles to drivers…

Read More

Federal Government announces significant investments in Nova Scotian clean energy initiatives

July 21, 2022

Nancy Rubin & Tiegan Scott On July 21, 2022, the Federal government announced a new investment of up to $255 million for clean energy initiatives in Nova Scotia. The funds will be allocated in two…

Read More

Search Archive


Search
Generic filters

Scroll To Top