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Chicago’s Wage Theft Law: A Good Idea for Canada?

Starting July 2013, deadbeat bad employers will not be able to operate a business in Chicago. A new city ordinance was passed recently that could deny businesses a right to operate if they have violated wage laws. The law was the result of an effective campaign by worker centres in the Chicago area.

I like this idea.  In fact, I argued way back in 2010 on this very blog that people who have been convicted of ESA violations should be denied the right to register new business and corporations for a period of time.  It takes time for my brilliance to be recognized :)    Seriously though, let’s take a look at what the Chicago law will do.


Here is the Chicago Wage Theft Ordinance.

The main charging section of the law says this:

4-4-320 License denial, revocation or suspension for certain offenses.

(a) The commissioner, for good and sufficient cause, may deny an application for any license issued under this Title 4 if, during the 5-year period prior to the date of the application, the applicant admitted guilt or liability or has been found guilty or liable in any judicial or administrative proceeding of committing or attempting to commit:

1) a wilful violation, or two or more violations which do not include a wilful violation, of the Illinois Wage Payment and Collection Act, 820 ILCS 115/1, or any other federal or state law regulating the payment of wages

The law also allows for the revocation of a business licence for the same reasons.  Note that a single ‘wilful’ violation of a wage law triggers the law, which means basically ‘on purpose’.  It also applies to non-wilful breaches, which would include violations due to ignorance of the law for example, as long as there have been two or more such breaches in a 5 year period.  So a single, innocent mistake cannot result in a loss or refusal of a business licence.  Finally, even a settlement of a wage theft complaint could trigger the denial of a license if in the settlement the employer “admitted guilt”.

Laws like this work by what I have described in my scholarly writing as, “injecting risk into the bloodstream of business actors”.  I explained this theory in an Osgoode Hall Law Journal paper, which is here, for you legal theory geeks.  These types of laws can be effective because business actors respond to risks by trying to limit them.  The law aims to provoke risk management responses that will guide the business towards compliance with a law. The threat of losing the ability to operate will make business people take wage laws much more seriously than our existing model, which punishes wage theft with a simple order to repay the stolen wages, and possibly a small fine.  This model is notoriously ineffective for dealing with employers who are not motivated to learn and comply with employment standards laws.

There needs to be a real business threat associated with wage theft.  Revoking a business licence is one threat.  I argue in my Osgoode Hall Law Journal article that another is changing the rules so that employees of employers who engage in wage theft have easier access to unionization and collective bargaining.  The core idea is the same.  The fear of being unionized will cause many employers to pay much closer attention to the ESA, while giving employees of low-road employers a more effective ability to obtain collective bargaining protection.

In Toronto, many businesses that tend to be at high risk for wage theft and ESA violations require business licences.  Here is a list. It includes all food service businesses, and many retail establishments, the sorts of business that often appear on the Bad Employer Sunshine List. The City is debating right now whether to condition licence approval on health inspections, so why not add a search of whether the business is a repeat employment standards law offender too? Should businesses be granted a right to operate in Toronto if they fail to comply with even the most basic and minimal employment standards laws?  Are companies that violate employment standards law obtaining a competitive advantage over decent employers who do comply with the laws?

Questions for Discussion

Can you make an argument why Toronto should not follow Chicago’s lead and condition business licences on compliance with wage laws?

Should the law be extended to violations of other Employment Standards laws, such as those respecting overtime pay and hours of work?


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