Come and listen and I’ll tell you ‘bout a thing called pay,
it’s gotta be in dollars, there ain’t no other way.
If yer try’n to pay your folks using comp’ny gift cards,
the law is gonna git ya, and it’s gonna hit hard.
(To be sung to the theme song from “The Beverly Hillbillies”)
It is a fairly uncommon thing, these days, for me to encounter an employer which doesn’t understand there are basic laws governing the employment relationship. In B.C., for instance, there’s this little item we call the Employment Standards Act.
Except as expressly excluded, the ESA applies to all employees falling within the provincial jurisdiction. As I put it, the “golden rule” of the ESA is that employers and employees cannot contract out of its requirements.
One of the immutable rules the ESA imposes is the obligation to pay employees using “Canadian currency”. Dollars, that is, not (as Jed Clampett lucked into) bubbling crude, black gold, Texas tea, or any other substitute. This, surely, is not the most complicated aspect of the ESA for employers to implement. And yet…
A recent B.C. Employment Standards Tribunal decision, involving a complaint against Dayton Boots Company Ltd. and its sole director, Eric Hutchingame, provides a glaring example of an employer which seemingly didn’t get the memo about how to properly pay its employees.
You’re Getting Paid – Either in Whole or in Part – With Gift Cards
The gist of the story is that Dayton Boots, over a period of time, paid its employees (either in part or in full) with gift cards for its own products. The Tribunal’s decision indicates that employees were “paid” a $600 gift card each week.
As an aside – and let’s be clear that I’m as big a fan of boots as the next person – how many pairs of boots could one person possibly want? Let’s say that an average pair of boots costs $200. That’s 3 pairs of boots per week, or 156 pairs per year. Even newly-wealthy people moving to “Californie” don’t need that many boots.
In any event, the Tribunal’s decision cites the factual scenario, as follows.
20. Dayton Boots operates a shoe factory and store in Vancouver BC. A BC Registry Services search, conducted May 13, 2021, showed Dayton Boots was incorporated in the province on April 1, 2018, and that Mr. Hutchingame was listed as its sole director.
21. The confidential complainants filed complaints under the ESA asserting Dayton Boots was deducting 50% of Employees’ wages each pay period and “re-paying” these wages to Employees in the form of a Dayton Boots store gift card (the “Dayton gift card”).
28. The Corporate Determination indicates that starting June 2020, “the wage statements began to show a deduction being made from some employees’ gross wages, first labeled “other deduction”, then “Dayton Card”, and finally “Dayton Gift Card””. The records showed these deductions, after CPP, Employment Insurance and Federal Income Tax withholdings, amounted to “exactly half or all of the employees’ wages” in a pay period. Citation: Dayton Boots Company Ltd. and Eric Hutchingame (Re) Page 6 of 17 2022 BCEST 23.
29. The investigation initiated by the Director on January 20, 2021, was ongoing for more than seven months, during which time Dayton Boots presented its position to the Director in several different ways and through several different persons. The Corporate Determination sets out the various arguments made by, or on behalf of, Dayton Boots: that the gift cards were never meant to be wages; that the Employees received a salary and the gift cards were paid on top of that salary; that the wage statements were issued by accident and it was never intended that the Employees were to receive the gross amount; and that it would be unreasonable to require Dayton Boots to pay the amounts shown as deducted as many Employees did not work a full 40 hours in a week.
30. The Director found, based on the information provided in Dayton Boots’ records, a breach of section 20 of the ESA, and stated in the Corporate Determination that the records provided by Dayton Boots showed “half or all of Employees’ wages in a pay period were consistently deducted, without authorization, and then “paid back” in another form other than Canadian currency.”
Although Dayton raised various explanations for the unlawful compensation scenario, the Tribunal was not swayed. In the result, Dayton was ordered to pay its employees a total of $484,995.33 (Hutchingame was found personally liable for $446,472.40), plus interest. That decision was recently upheld, on reconsideration, by a 3-person Tribunal panel.
Is there a lesson to be learned, here? Honestly, I don’t think I even need to say it.
One is left to wonder what’s going to happen with the $500,000 or so in gift cards Dayton distributed to its employees. I think I know what their relatives can expect to find under the tree on Christmas morning… they’ll all look fantastic when lounging around the “cee-ment pond” next summer.
Guest blog contributed by Robert Smithson of Smithson Employment Corporation. You can read this article and more at https://www.smithsonlaw.ca/articles/