Legal Alert: NB Government Throws Directors of NB Employers a Life Preserver

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Legal Alert: NB Government Throws Directors of NB Employers a Life Preserver

December 6, 2013

By Chris Borden, at McInnes Cooper

On December 3, 2013 the NB Government introduced a Bill that will, if passed into law, offer a life preserver to current and former directors of NB employers concerned about their personal liability for unpaid wages.

Bill 21 – An Act to Amend An Act to Amend the Employment Standards Act would amend Chapter 13 – An Act to Amend the Employment Standards Act. Chapter 13 received Royal Assent but created big waves with NB employers – and their directors – and was never made effective. Click here to read McInnes Cooper’s July 19, 2013 Legal Update, “Director Overboard: Directors of NB Employers to be Personally Liable for Unpaid Wages”. The NB Government subsequently decided to revisit Chapter 13 – and in particular its lack of a defence for directors. Click here to read McInnes Cooper’s October 3, 2013 Legal Alert, “NB Government Revisiting Personal Director Liability for Unpaid Wages”.

On December 3, 2013, the NB Government responded to feedback with Bill 21, which includes the following changes to Chapter 13:

Reasonable Diligence Defence. The joint and several liability of directors (and former directors) of NB employers for unpaid wages and vacation pay earned by employees during the director’s board term stays – but Bill 21 gives directors a defence. Under Bill 21, a director (or former director) will not be liable if she “exercised reasonable diligence to provide for the payments”. Bill 21 does not expressly say when the director must exercise that diligence. This raises the question whether the defence is open to “former directors” (who remain liable for 2 years after board membership) who exercise reasonable diligence to “provide for the payments” to employees after – instead of during – board membership.

No Administrative Penalties. Bill 21 expressly states directors / former directors are not liable for an administrative penalty in the context of their liability for unpaid wages and vacation pay.

Notice. Bill 21 clarifies that a current /former director will only be liable if:

the NB Director of Employment Standards has ordered a corporate employer to pay an amount of unpaid wages or vacation pay;
the amount is not paid within 30 days of the order;
a “notice of joint and several liability is sent to the director (or former director), and the Employment Standards Branch doesn’t have to wait 30 days after the order to send the notice – it can send it at the same time; and
it’s been 30 days since the notice was “received”.

Effective Date. If Bill 21 is passed into law, it will take effect on the date it is proclaimed – most likely in 2014. In the meantime, Chapter 13 – as passed – has never taken effect, and probably won’t until it’s amended.

Click here to read Bill 21.

Click here to read Chapter 13.

McInnes Cooper will continue to keep you updated on the developments in this legislation.

Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Corporate Governance and Compliance Team to discuss this topic or any other legal issue.

McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.

© McInnes Cooper, 2013. All rights reserved. McInnes Cooper owns the copyright in this document. You may reproduce and distribute this document in its entirety as long as you do not alter the form or the content and you give McInnes Cooper credit for it. You must obtain McInnes Cooper’s consent for any other form of reproduction or distribution. Click here to request our consent.

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