The federally regulated minimum wage

The New Democratic Party has begun releasing its platform for the expected 2015 federal election. Last week, the NDP promised it would raise the federal minimum wage to $15 an hour, over the course of its first term should the NDP form the next government.

As a payroll subject matter expert, I don’t have an opinion on this one way or another. There are many people who would argue that, although symbolic, this is an important step in countering the increasing polarization of wealth and incomes in Canada, with the wealthiest Canadians significantly increasing their share of national income over the last several decades. On the other hand, there are also plenty of economists who argue minimum wages are counterproductive, shrinking the number of jobs available to poorly skilled employees.

Here, my only point is to counter an unfortunate impression left by both the NDP’s position statement on this issue, as well as in the related media coverage (see this article in the Globe and Mail).

In both, readers are left with the clear impression there is no federal minimum wage, this having been eliminated by the Chretien Liberals in 1996. In one sense, this statement is quite literally true. However, it’s not true to say there are no federal requirements of any kind related to the requirement to pay a minimum wage.

While the 1996 Canada Labour Code amendments did remove what had previously been a separate federal minimum wage, these amendments replaced that with minimum wages set at the provincial or territorial level. In other words, instead of having a distinct minimum wage that applies to federally regulated employees, such employees must be paid, under CLC section 178, at least as much as required by the minimum wage that generally applies in the province or territory where they usually work. Some jurisdictions have minimum wage rates that apply to ‘inexperienced’ employees or servers in bars and restaurants. Those targetted rates don’t apply to federally regulated employees. It’s the provincial or territorial rate that generally applies that is used for federal employment standard purposes.

In practical terms, most federally regulated employees are paid more than these minimum wages. However, where employers do wish to pay just the applicable minimum wage, this is based on the jurisdiction where employees, ‘usually’ or ‘normally’ work. This will not always be the same as the province of employment or the province where the employee resides. For example, an employee who lives in BC, on one side of the Crowsnest Pass, but works in Alberta on the other side, would be subject to the minimum wage set under the Alberta employment standards. This would be true, even if the employee did not report to work an employer’s permanent establishment, anywhere, and was paid from Ontario (i.e. ON as the province of employment), whether or not the employment was federally regulated.

Alan McEwen is a Vancouver Island-based HRIS/Payroll consultant and freelance writer with over 20 years’ experience in all aspects of the industry. He can be reached at armcewen@shaw.ca, (250) 228-5280 or visit www.alanrmcewen.com for more information.

About Alan R. McEwen

HRIS/Payroll consultant and freelance writer
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