Over a billion dollars is lost annually in the underground construction economy in Ontario and Queen’s Park is getting tough.
In March, Minister of Labour Steve Peters introduced a piece of legislation called the Regulatory Modernization Act. It is part of a larger strategy to enforce health and safety regulations, meet the 2008 goal to reduce workplace injuries by 20 per cent, and to recoup approximately $1.5 billion dollars in lost revenue.
This new legislation is intended to provide opportunities for inspectors from 13 enforcement ministries to work more co-operatively, share compliance-related information between ministries, or provide a “heads-up” to share observations that may be relevant to another ministry, says Ministry of Labour (MOL) spokesperson Bruce Skeaff. This sharing of information will reduce unnecessary duplication of government compliance efforts, he says.
“Better connections equal better protection,” Peters said in a news release. He added the legislation could make it easier to administer and enforce about 85 statutes and almost 600 regulations across the province.
Another MOL strategy is to remove voluntary insurance coverage under the Workplace Safety and Insurance Act called “self-declared independent operator status.” The government says mandatory coverage would promote a system where everyone has a vested interest to ensure proper health and safety practices.
However, the Canadian Federation of Independent Business (CFIB) strongly opposes the mandatory coverage. Ontario’s CFIB vice-president, Judith Andrews, sees it as an attack on above-board small construction firms.
In a March 28 news release, she stated:
“Mandatory coverage is just another in a series of attempts by the WSIB to extend its reach, while simultaneously playing into the hands of big business and big unions in construction, who would not be heartbroken if their smaller competitors were wiped out.”
An Ontario Construction Secretariat (OSC) study released in 2004 estimated construction work accounted for roughly one-quarter of all underground work performed in Ontario. This ranged from 11 per cent in the non-residential sector to 34 per cent in the residential sector.
“It’s a move to level the playing field,” says Doug McVittie, assistant general manager and director of operations for the Construction Safety Association of Ontario.
He explains that the larger employers that play by the rules and pay their taxes to support infrastructure are upset to see other work being done when those monies are not being paid into the system.
McVittie says there are a lot of issues all knitted together from qualified trades people performing the work to consumer protection. But he added the home renovation market is huge, and its work is unlike other construction businesses.
The OCS study says underground work places higher tax and contribution burdens on legitimate contractors, and results in unfair competition. These practices potentially weaken health and safety policies, and erode labour and construction standards. Lastly, it reduces the contribution base for benefits plans and weakens apprenticeship training and skill development.
Much of the problem is attributed to the introduction of the Goods and Services Tax in January 1991. Cash transactions do not leave a paper trail and are easily carried out. Since 1995, income generated from underground work has increased by 21.5 per cent, averaging $2.4 billion annually.
The major contributors are employers who practice as independent operators. Consequently, they:
• Escape their obligation to pay Workplace Safety and Insurance Board (WSIB) premiums;
• Avoid the requirement to make employer contributions to Canadian Pension Plan and Employment Insurance;
• Get out of the need to pay Employment Standards Act Benefits for vacations and statutory holidays; and
• Are relieved of the requirement to make source deductions under the Income Tax Act.
Since 2004, the MOL has hired 200 more safety inspectors in order to target 6,000 high-risk companies with the highest lost-time injury rates and insurance claim costs. They want to reduce lost-time injuries by 20 per cent over four years.
The proposed Act will give safety inspectors greater enforcement powers to issue on-the-spot fines of up to $500 per offence to workers without proper certification (Trades Qualification and Apprenticeship Act -TQAA). Those trades people affected are electricians, hoisting engineers, plumbers, refrigeration and air-conditioning mechanics, sheet metal workers and steamfitters.
Other MOL actions include:
• Signing formal agreements with the WSIB, the Electrical Safety Authority and the Ministries of Finance and Training, Colleges and Universities to work together to identify underground economy activity and recover lost revenue;
• Collecting data, including WSIB registrations and tax information for these organizations to follow up on; and
• Educating consumers about the dangers inherent when using underground, and possibly unqualified, contractors and workers.
McVittie says he sees these initiatives helping to close the gap between the underground and above ground economy.
“It’s not a magic bullet solution by any means, but it should help,” he says.
