PART 2.10 DEPARTMENT OF HUMAN RESOURCES, LABOUR AND EMPLOYMENT NEWFOUNDLAND AND LABRADOR LABOUR RELATIONS AGENCY

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1 PART 2.10 DEPARTMENT OF HUMAN RESOURCES, LABOUR AND EMPLOYMENT NEWFOUNDLAND AND LABRADOR LABOUR RELATIONS AGENCY

2 Executive Summary The Labour Standards Division (the Division) of the Newfoundland and Labrador Labour Relations Agency (the Agency) receives, records and investigates complaints by employers and employees alleging a violation of one of the acts administered by the Division. The majority of complaints involve the Labour Standards Act, which mandates minimum terms and conditions of employment in the Province. Most complaints relate to the nonpayment of wages to employees. Although the Division has an established process for accepting and investigating complaints, our review identified a number of weaknesses. Specifically: The electronic database used by the Division to record each complaint and track the final disposition of the complaint was neither complete nor accurate. Information such as the incident date needed to investigate and monitor complaints was not always recorded, and details on the final disposition of Determination Notices, including who, if anyone, was at fault, was not recorded. Furthermore, we identified errors in the database. As a result of not always having complete and accurate information, the Division: could not adequately monitor the status and final disposition of complaints and assess its performance with regard to its success in collecting wages owed; and was not able to identify employers with multiple instances of fault for proactive follow-up. Although the Division has established guidelines for the time expected to address a complaint (as measured from the time the Agency received the complaint to conclusion), our review for 2009 identified that the average exceeded the guidelines. For an Early Resolution case, the guidelines are 2 to 4 weeks and for a Formal Complaint case, the guideline is 6 months depending on the complexities of the case. For 2009, the average was 46 days to complete an Early Resolution case and 220 days to complete a Formal Complaint case. In each instance, the average exceeded the guidelines. Furthermore, in one instance the database indicated an Early Resolution case took 746 days to complete. Auditor General of Newfoundland and Labrador Annual Report, Part 2.10, January

3 The Division did not develop and implement a strategy for inspecting employer records in instances where there have been either multiple complaints in the past about a particular organization or there had been a determination of a valid complaint by an employee or former employee where other employees at that organization may also be affected. The Labour Standards Act provides the Agency with the authority to inspect, examine and copy employer records. The Agency s Strategic Plan for through had performance measures that could not be readily comparable to either the Agency s historical or intended performance. As a result, we could not assess the performance of the Agency as it relates to prior and intended results as contemplated by the Transparency and Accountability Act. Law firms may obtain a clearance certificate from the Agency related to the sale of real property. The fee for this clearance certificate is $25 plus tax. The Agency was not proactive in collecting clearance certificate fees on a timely basis. For example, officials did not send statements to law firms and did not telephone law firms. As at 31 March 2009, there was a total of $38,269 in uncollected fees of which $20,412 was for the period prior to 1 July If amounts owing are not collected on a timely basis, the probability of collection is greatly reduced. As at 31 March 2009, the Agency determined that approximately $15,500 was considered to be uncollectable. Background Overview The Newfoundland and Labrador Labour Relations Agency (the Agency) was created in The Agency provides services to employees and employers throughout the Province. These services include: protection of the basic labour rights of all employees and employers; assistance in resolving workplace issues and collective agreements; creation of partnerships to promote the currency and relevance of the employment relations regulatory framework (i.e., legislation, regulations, policies); and provision of policy advice and information services to support positive employment relations and the effective administration of Provincial labour regulations. 354 Annual Report, Part 2.10, January 2010 Auditor General of Newfoundland and Labrador

4 Figure 1 The Agency is headed by a Chief Executive Officer appointed by the Lieutenant Governor-in-Council. The Chief Executive Officer reports directly to the Minister of Human Resources, Labour and Employment. As of March 2009, the Agency had 27 staff with 24 in the St. John s office and 3 in the Corner Brook office. Figure 1 provides a summary of expenditures for the last five fiscal years. These expenditures are funded through the Department of Human Resources, Labour and Employment. Newfoundland and Labrador Labour Relations Agency Expenditures Fiscal Years 2005 through to 2009 Activity Executive Support $ 254,473 $ 305,782 $ 319,563 $ 322,140 $ 350,525 Administration and 358, , , , ,171 Planning Labour Relations and 1,043, ,659 1,114,663 1,172,183 1,009,395 Labour Standards Fish Price Setting Panel ,854 Labour Relations Board 648, , , , ,551 Total: $2,305,029 $2,280,183 $2,559,322 $2,647,389 $2,904,496 Source: Government of Newfoundland and Labrador Financial Statements Note: Prior to 2009, expenses for the Fish Price Setting Panel were not separately disclosed, but included with other expenses of the Agency. Organization Although the expenditures of the Fish Price Setting Panel and the Labour Relations Board, as depicted in Figure 1, are paid by the Department through the Agency, the Panel and the Board report directly to the Minister of Human Resources, Labour and Employment and not the Chief Executive Officer of the Agency. Figure 2 shows the organizational structure of the Agency. Auditor General of Newfoundland and Labrador Annual Report, Part 2.10, January

5 Figure 2 Newfoundland and Labrador Labour Relations Agency Organizational Structure Source: Newfoundland and Labrador Labour Relations Agency Annual Report Legislation The legislation administered by the Labour Relations Agency includes the following: Labour Standards Act and Regulations; Labour Relations Act and Regulations; Shops Closing Act and Regulations; Public Service Collective Bargaining Act and Regulations (Consolidated Orders); Fishing Industry Collective Bargaining Act and Regulations; Interns and Residents Collective Bargaining Act; and Teachers Collective Bargaining Act. 356 Annual Report, Part 2.10, January 2010 Auditor General of Newfoundland and Labrador

6 Labour Standards Division activities The main activities of the Labour Standards Division (the Division) are to receive, record and investigate complaints by employers and employees alleging a violation of one of the acts administered by the Agency. The majority of complaints involve the Labour Standards Act, which mandates minimum terms and conditions of employment in the Province. Most complaints relate to the non-payment of wages to employees. The Division is responsible for the investigation of these complaints and the Director of Labour Standards is empowered to issue Determination Notices. Determination Notices document the decisions of the Director and outline required actions. When a required action includes the collection of monies owing to employees, a copy of the Determination Notice is also filed with the Office of the High Sheriff for follow-up action. Employers and employees can appeal the decisions of the Director to the Labour Relations Board. Complaint process Figure 3 outlines the complaint process of the Labour Standards Division. Figure 3 Newfoundland and Labrador Labour Relations Agency Labour Standards Complaints Process Inquiry Is there an issue? No Yes Can it be resolved quickly? No Yes Early Resolution Information Provided to Inquirer Formal Complaint No Do the parties agree? Yes Investigation Do the parties agree? Yes Respond to Parties No Determination Notice Appeal Auditor General of Newfoundland and Labrador Annual Report, Part 2.10, January

7 The Labour Standards Division processes labour standard complaints as follows: Inquiry The Division receives daily inquiries from the public on possible violations of the Labour Standards Act. Is there an issue? In most cases, the inquiries relate to employees wanting to know their rights and employers wanting to know their obligations under the Labour Standards Act. When an employee or employer indicates that they want to file a complaint, a Labour Standards Officer will take the necessary details to determine if there is an issue. Can it be resolved quickly? If the respondent to the complaint is agreeable to settling the matter quickly, the Labour Standards Officer will work at developing an Early Resolution. Early Resolution An Early Resolution is documented by the Labour Standards Officer and followed up by the Director to ensure that the agreed upon terms and conditions are met. Do the parties agree with the Early Resolution? When the parties cannot agree upon a settlement during the Early Resolution, the Officer transfers it to a Formal Complaint. Formal Complaint The Formal Complaint documents the positions of both parties. Investigation The Labour Standards Officer will conduct an independent review of the facts involving the alleged labour standards violation and report to the Director of Labour Standards. Do the parties agree with the investigation report? If the parties agree with the investigation report, the Labour Standards Division informs the parties involved. Where there is no agreement, the Director of Labour Standards will issue a Determination Notice. Determination Notice The Determination Notice documents the decision of the Director of Labour Standards. When a Determination Notice includes the collection of monies and there is no appeal, a copy of the Determination Notice is also filed with the Office of the High Sheriff for follow-up action. Appeal The decision of the Director of Labour Standards can be appealed to the Labour Relations Board. 358 Annual Report, Part 2.10, January 2010 Auditor General of Newfoundland and Labrador

8 Figure 4 Figure 4 shows the number of labour standards complaints each year from 2005 to Newfoundland and Labrador Labour Relations Agency Labour Standards Complaints Fiscal Years 2005 through to 2009 Description Early Resolution cases Formal Complaint cases Total cases per year Source: Labour Relations Agency s Annual Reports Audit Objectives and Scope Audit objective The objective of our review was to assess whether the Agency had adequate systems and procedures in place to protect the employment rights of employees and employers through the receipt and investigation of complaints. Audit scope Our review included an examination of various reports and documents for fiscal years 2008 and 2009, and included interviews with officials of the Newfoundland and Labrador Labour Relations Agency. Our review was completed in April Detailed Observations Findings This report provides detailed audit findings and recommendations in the following sections: 1. Information Systems 2. Enforcement Actions 3. Financial Controls 4. Performance Monitoring and Reporting Auditor General of Newfoundland and Labrador Annual Report, Part 2.10, January

9 1. Information Systems Overview We would expect the Division to have a computerized database to track complaints received and the subsequent follow-up action taken. The information system would be expected to provide timely, accurate and relevant information for decision-making purposes on staffing, monitoring compliance and enforcement activities. In addition, the system would be used to assist in identifying potentially high-risk workplaces and to prioritize enforcement activities. The Division has a computerized database system to keep track of the labour standards complaints received and their status. However, our review identified the following weaknesses: Key information not recorded The database was incomplete in that it did not contain information on: the amount to be recovered as a result of a complaint. This information would make verifying money owed for the purposes of issuing clearance certificates in relation to sales of real property easier and for generating performance indicators such as the Agency s success in collecting wages owed; the incident date related to a particular complaint. This information would enable the system to verify that the complaint was received within the statutory limit of six months; and the final disposition of Determination Notices, including who, if anyone, was at fault. The information would enable the Division to identify employers with multiple instances of fault for proactive follow-up. Database errors The database contained errors. For example, our review of 304 of the 3,608 Early Resolution cases and 109 of the 1,144 Formal Complaint cases in the database as at 25 March 2009 identified the following: 47 Early Resolution cases had completion dates earlier than the date of complaint, indicating that the case was concluded before the complaint was received; 360 Annual Report, Part 2.10, January 2010 Auditor General of Newfoundland and Labrador

10 22 Formal Complaint cases had Assign Date fields earlier than the Complaint Date, indicating that the Director had assigned the case to a Labour Standards Officer before the Division received the complaint; 21 Early Resolution cases had completion dates indicating that it took more than 2 years to resolve the complaint. Furthermore, one case had a completion date of 28 December 2061 which clearly shows an error in the dates; and 5 Formal Complaint cases that were completed had the date of completion omitted. This missing information makes it difficult for accurate statistics to be generated for performance reporting purposes. Missing information The complaint forms were not pre-numbered and, as a result, it cannot be determined if all complaints are recorded. For example, our review of the files in April 2009 identified one complaint that the Division had not recorded in the database although it was received 29 October 2008, some 5 months before. Furthermore, we found that the database contained both duplicate and missing case numbers. Unable to reconcile cases The number of cases reported in the Agency s annual report for fiscal years 2007 and 2008 for either the Early Resolution cases or the Formal Complaint cases did not agree with the database. This brings into question the accuracy of the annual report and the reliability of the database. Recommendation The Agency should take steps to ensure its Labour Standards database is complete and accurate. 2. Enforcement Actions Overview The Labour Standards Act provides for enforcement through inspection of employers for compliance and the laying of charges under the Act. We would expect the Division: Auditor General of Newfoundland and Labrador Annual Report, Part 2.10, January

11 to have an inspection program in place to identify issues prior to a complaint and to determine whether work places comply with the orders issued to meet employment standards and requirements; to have policies and procedures for promptly responding to complaints; and to impose fines and penalties, in instances where violations are identified, to prevent and deter future violations. Our review identified the following: Lack of enforcement of the Labour Standards Act Although the Labour Standards Act provides the Agency with the authority to inspect, examine and copy employer records, the Division did not develop and implement a strategy for inspecting these records. An inspection would be appropriate where there have been either multiple complaints in the past about a particular organization or there has been a determination of a valid complaint by an employee or former employee where other employees at that organization may also be affected. Guidelines for time to address complaints exceeded The Division has established guidelines for the time expected to address a complaint, as measured from the time the Division received the complaint to conclusion. For an Early Resolution case, the guidelines are 2 to 4 weeks and for a Formal Complaint case, the guideline is 6 months depending on the complexities of the case. Our review identified that for 2009, the average was 46 days to complete an Early Resolution case and 220 days to complete a Formal Complaint case. In each instance, the average exceeded the guidelines. Furthermore, in one instance the database indicated an Early Resolution case took 746 days to complete. No charges laid Although the Division has the authority to impose charges and penalties for violations of the Labour Standards Act, no such charges or penalties have been imposed. As a result, employers that do not comply with current labour standards are not penalized other than having to comply with the Determination Notice. 362 Annual Report, Part 2.10, January 2010 Auditor General of Newfoundland and Labrador

12 Recommendations The Agency should: develop policies for the enforcement of the Labour Standards Act through the inspection of employer records and the laying of charges for violations of the Act; and monitor the time taken to resolve complaints and follow-up on variances. 3. Financial Controls Overview Financial controls are the processes that an organization uses to direct, monitor and measure its financial resources. Financial controls help prevent and detect errors, protect the organization's assets from loss, and ensure compliance with laws and regulations. Our review of the Agency s financial controls identified the following issues: Uncollected clearance certificate fees The Agency was not proactive in collecting clearance certificate fees. For example, officials did not send statements to law firms and did not telephone law firms. Law firms may obtain a clearance certificate from the Agency related to the sale of real property. The fee for this clearance certificate is $25 plus tax. Lawyers then charge the cost of the Agency s clearance certificate to their clients as one of many disbursements required to complete the sale of property. As at 31 March 2009, there was a total of $38,269 in uncollected fees of which $20,412 was for the period prior to 1 July 2006, with an additional $7,695 dating back to between 1 July 2006 and 31 December If amounts owing are not collected on a timely basis, the probability of collection is greatly reduced. As at 31 March 2009, the Agency determined that approximately $15,500 was considered to be uncollectable. Figure 5 shows the amount of outstanding fees owed the Agency. Auditor General of Newfoundland and Labrador Annual Report, Part 2.10, January

13 Figure 5 Newfoundland and Labrador Labour Relations Agency Clearance Certificates Receivable Fiscal Years 2005 through to 2009 Description Receivable $19,291 $27,198 $32,950 $36,652 $38,269 Allowance for doubtful accounts ,252 14,461 15,508 Net Receivable $19,291 $27,198 $22,698 $22,191 $22,761 Source: Department of Human Resources, Labour and Employment Public Accounts Submissions Money received for unpaid wages is not being paid out The Labour Standards Act requires that the Director of Labour Standards maintain an account known as the Unpaid Wages Account for depositing unpaid wages and gratuities received by the Director from employers. Furthermore, the Act requires the Director to remit to the employees, all money received on their behalf as soon as possible. If the Director is unable to locate the employee within a period of 2 years from the date the money was credited to the Unpaid Wages Account, the money becomes the property of the Crown. Our review found that, as at 28 February 2009, the Unpaid Wages Account included three amounts totalling $392 that should have been remitted to the Crown. Recommendations The Agency should: increase efforts to collect clearance certificate fees; and comply with the Labour Standards Act and remit all undisbursed monies in the Unpaid Wages Account to the Province after a two year period. 364 Annual Report, Part 2.10, January 2010 Auditor General of Newfoundland and Labrador

14 4. Performance Monitoring and Reporting Overview Performance monitoring and reporting helps an entity in evaluating the effectiveness of its programs and taking corrective action when necessary. We would expect the Agency to measure and report on the effectiveness of its monitoring and enforcement of employment standards. We would expect to see performance measures and indicators expressed in measurable units and actual results presented and compared to prior years information, target results and, if available, results from similar organizations. In accordance with the Transparency and Accountability Act, the Agency has been categorized as a category 1 government entity, which requires the Agency to prepare a strategic plan that identifies objective performance measures specific to its goals and objectives. The Act also requires the Agency to prepare an annual report that compares actual results to the strategic plan s projected results in a form and language that is precise and as readily understandable as practicable. Furthermore, the Act requires that information in the strategic plan and the report be readily comparable. No objective measures or indicators Our review identified that the Agency s Strategic Plan for through had performance measures that could not be readily comparable to either the Agency s historical or intended performance. As a result, we could not assess the performance of the Agency as it relates to prior and intended results as contemplated by the Transparency and Accountability Act and presented in its Annual Report. Recommendations The Agency should: establish and report performance targets in measurable units; and provide an interpretation for performance information contained in its annual report. Auditor General of Newfoundland and Labrador Annual Report, Part 2.10, January

15 Agency s Response 1. Information Systems Recommendation: The Agency should take steps to ensure its Labour Standards database is complete and accurate. Agency s Response: The Labour Relations Agency had identified concerns with its database prior to the review of the Auditor General (AG) and had made application to the Office of the Chief Information Officer (OCIO) for a new system. The Agency has been in contact with the OCIO in response to the concerns identified by the AG with the current in-house database and efforts are being made by the Agency to address the issues raised and to improve the management of the existing system. 2. Enforcement Actions Recommendations: The Agency should: develop policies for the enforcement of the Labour Standards Act through the inspection of employer records and the laying of charges for violations of the Act; and monitor the time taken to resolve complaints and follow-up on variances. Agency s Response: The Labour Relations Agency works with employees and employers to support effective employment relations throughout Newfoundland and Labrador. By working with our partners, the Agency helps to create an optimum employment relations climate that is conducive to economic growth, competitiveness and prosperity. 366 Annual Report, Part 2.10, January 2010 Auditor General of Newfoundland and Labrador

16 The Agency is committed to building collaborative and constructive relationships with all stakeholders by engaging partners in decisions that affect them, including the administration of the Labour Standards Act. It is felt that this approach is an effective and proactive way to help foster positive employment relations, while at the same time enhancing compliance with the legislation. The Labour Standards Division of the Agency proactively seeks to enhance legislative compliance through its Preventive Intervention Program. The program enables an officer to visit workplaces randomly or in response to anonymous complaints to discuss rights and responsibilities in relation to the Act with both employers and employees and ensure legislative compliance. Over the years, the program has been targeted at employers and sectors that have generated increased calls and complaints. However, in response to concerns raised by the AG with respect to enforcement, the Agency will examine current policies and resources in relation to carrying out more inspections. With respect to the prosecutions and the laying of charges for violations of the Act, the Agency will consult officials with the Department of Justice to assess this recommendation. At present, if there is non-compliance with a Determination issued by the Labour Standards Division, the order can be registered with the Trial Division of the Supreme Court and acted upon like any other court order, by filing enforcement/recovery instructions with the Office of the High Sherriff. This provision of the legislation was introduced in 2000 and enabled the Division to expedite proceedings and focus on the fundamental goal of recovery of wages for workers. The issue of repeat offenders of the legislation is limited in this province; however, once identified, the Agency devotes immediate resources to effect legislative compliance with the knowledge that prosecution would be an option if compliance was not obtained and maintained. With respect to concerns raised regarding the timeframes to resolve complaints, much of the problems identified originate with the Agency s existing database and administrative errors linked to the process for data entry. The Agency will continue to work with the OCIO in an effort to improve and eventually replace the current system. In addition, the Agency will take steps to ensure that data is accurately entered into the database and that appropriate management reports are generated to monitor performance and ensure the prescribed timeframes are adhered to where possible. Auditor General of Newfoundland and Labrador Annual Report, Part 2.10, January

17 3. Financial Controls Recommendations: The Agency should: increase efforts to collect clearance certificate fees; and comply with the Labour Standards Act and remit all undisbursed monies in the Unpaid Wages Account to the Province after a two year period. Agency s Response: In 2000, the Labour Standards Division implemented a fee for service of $25 dollars, plus Harmonized Sales Tax, for issuance of clearance certificates pertaining to requests from lawyers for confirmation that parties to a pending real estate transaction are not currently engaged in activity or have any liability in relation to the Division. Since its inception, the Labour Standards Division has generated in excess of $500,000 in revenue to the Crown from these fees. In 2009, the responsibility for the financial administration of the clearance certificate process was transferred to the Finance and General Operations Division of the Department of Human Resources, Labour and Employment in order to benefit from the enhanced financial management support and experience at the Department. The Agency will ensure that any undisbursed monies in the Unpaid Wages Trust Account will be remitted to the Province after a two year period. 4. Performance Monitoring and Reporting Recommendations The Agency should: establish and report performance targets in measurable units; and provide an interpretation for performance information contained in its annual report. 368 Annual Report, Part 2.10, January 2010 Auditor General of Newfoundland and Labrador

18 Agency s Response: The Labour Relations Agency Strategic Plan outlines goals and objectives that pertain to two key areas: (i) the preparation and identification of changes to collective bargaining legislation that support optimum employer and employee relations; and (ii) improvements to the quality and availability of information regarding the province s employment relations climate. In and , the Agency published Annual Reports that assessed its performance in relation to these goals and objectives and compared actual results to the Strategic Plan s projected results. The Agency notes that the performance measures and indicators relating to the goals and objectives identified were transparently assessed in the and Annual Reports. Indeed, the presentation and format used to communicate the Agency s performance in these areas was enhanced in to more clearly articulate how these goals and objectives were addressed. The indicators and accomplishments identified in the Annual Reports are the measurable units used to assess the Labour Relations Agency s performance. In some cases, these measurable units have qualitative, rather than quantitative, indicators given the nature of the specific goal or objective. The accomplishments associated with these indicators are interpreted and assessed in each of the Labour Relations Agency s Annual Reports. The Labour Relations Agency acknowledges the comments of the AG in relation to the value of performance measures and indicators relating to the monitoring and enforcement of employment standards. The Agency currently publishes statistical data in its Annual Reports that provides an overview of the number of labour standards cases assigned, cases concluded, cases resolved early, as well as other data pertaining to education and outreach activity and clearance certificates issues. This information includes a presentation of data for these categories over multiple years and allows for comparison to occur and trends to be identified. In light of the AG s comments, the Agency will assess the presentation of this data and examine the possibility of including more detailed information relating to the monitoring and enforcement of employment standards. Auditor General of Newfoundland and Labrador Annual Report, Part 2.10, January

19 370 Annual Report, Part 2.10, January 2010 Auditor General of Newfoundland and Labrador