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 stewmac.arrdev.ca.

SHARE

Archive

Search Archive


 
 

Dude, where’s my cure? On the road to benefits coverage of psychedelics

May 3, 2023

Included in Discovery: Atlantic Education & the Law – Issue 12 By Dante Manna[1] Once known for recreational use, psychedelics are slowly gaining medical legitimacy as research emerges on possible therapeutic benefits for mental health…

Read More

Discovery: Atlantic Education & the Law – Issue 12

April 28, 2023

We are pleased to present the twelfth issue of Discovery, Stewart McKelvey’s legal publication targeted to educational institutions in Atlantic Canada. Our lawyers provide insight on a number of topics facing universities and colleges including…

Read More

Raising capital under the Nova Scotia Innovation Equity Tax Credit regime

April 17, 2023

By Kyle S. Hartlen, Gavin Stuttard, and Colton Smith What is the Innovation Equity Tax Credit? The Nova Scotia Innovation Equity Tax Credit (“IETC“) is a non-refundable personal and corporate income credit intended to encourage…

Read More

Changes to Canada’s Competition Act coming into effect this summer: a primer on recent amendments impacting Canadian businesses

April 13, 2023

By Deanne MacLeod, K.C., Burtley G. Francis and David F. Slipp In June 2022, Canada’s federal government enacted a number of changes to the Competition Act (the “Act”) as the first step in a comprehensive…

Read More

Nova Scotia to limit medical notes for employee absences

April 4, 2023

This article was updated on April 19, 2023. By Mark Tector and Ben Currie On April 12, 2023 Bill 256: Patient Access to Care Act received Royal Assent. Schedule B of the Bill is the…

Read More

Recent Amendments to the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations

April 3, 2023

This Thought Leadership article is a follow-up to our January 2023 article on the introduction of the Prohibition on the Purchase of Residential Property by Non-Canadians Act. By Brendan Sheridan On January 1, 2023, the…

Read More

Consultation on potential amendments to the Cannabis Regulations

March 31, 2023

By Kevin Landry and Jahvon Delaney Background On March 25, 2023, the Government of Canada released a Notice of Intent titled Consultation on potential amendments to the Cannabis Regulations. The Notice outlines that Health Canada is…

Read More

New reporting requirements for beneficial ownership of Nova Scotia companies

March 28, 2023

By Kimberly Bungay On April 1, 2023, the Nova Scotia government will proclaim into force Bill 226, which amends the Companies Act (the “Act”) to require companies formed under the Act to create and maintain…

Read More

Abuse of sick leave / failure of employee to participate in accommodation process: Vail v. Oromocto (Town), 2022 CanLII 129486

March 21, 2023

By Chad Sullivan and Kathleen Starke Background A recent decision, Vail v. Oromocto (Town), 2022 CanLII 129486, involved several grievances including an unjust dismissal claim by a firefighter as well as a grievance filed by…

Read More

Underused Housing Tax Act introduces new tax on vacant or underused housing

March 13, 2023

By Stuart Wallace and Kim Walsh On January 1, 2022, the Underused Housing Tax Act (the Act) took effect. The Underused Housing Tax (the UHT) is an annual 1% tax on the value of vacant or…

Read More

Search Archive


Scroll To Top