Employing A Family Member - A Cautionary Tale
For a small business owner, filling employee requirements often begin by hiring family members or friends. This can benefit both the employer and the employee. However, a recent Ontario Superior Court decision provides a cautionary tale and provides guidance to both potential employers and their family member employees. In summary, as set out below, when hiring family members it is important to remember not to treat the employee/employer as family.
The defendants, a married couple immigrated from India and started a small business importing cemetery memorials. A few years later, they decided to hire the wife's sister as a caregiver for their children. It was agreed that she would immigrate from India and she would care for their children and perform housekeeping services.
For nine years, the plaintiff did just that. Then a dispute between the husband and his wife's brothers in India caused family tension and the plaintiff was dismissed. She sued for wrongful dismissal and included claims that she had not received proper notice, payment for overtime worked, and that monies had been removed from her bank account.
The Defendant's first line of defence was that many of the plaintiff's claims were statute barred for having been commenced too late. In the normal course, a claim must be started within two years of when the wrong was committee or when someone discovers (or reasonably should have discovered) the wrong. In this case, the plaintiff was claiming lack of proper payment for nine years. It is easy to see why the defendant's claimed she should have known she was not getting paid properly.
The judge, however, did not agree that the plaintiff did discover or should have discovered she wasn't being paid properly. The plaintiff had limited English skills and relied heavily on her sister and brother-in-law to perform banking for her. She was told that she would be charged for obtaining bank statements so she never requested them. Almost all banking was done by the defendants as the bank was located outside a reasonable walking distance and the plaintiff did not drive. Additionally, the plaintiff did not calculate her own income tax so she did not see what her income actually was. In these particular circumstances, it was reasonable that she did not learn of the wrongdoing until she left the employment.
The second issue was a dispute regarding the wage the plaintiff was promised. She claimed she was promised $5,000 a month for her services. In contrast, the defendants claimed they promised to pay minimum wage minus expenses for room and board. On this issue the judge ruled in favor of the defendants. A wage of $5,000 was extremely high for a caretaker. Additionally, there was some corroboration for the defendant's claim in the form of a letter sent to HRDC in support of the plaintiff's immigration application stating she would be paid minimum wage.
In addition to wages, the plaintiff claimed that she had never been paid overtime despite working long hours. In contrast, the defendants claimed that the plaintiff's duties were light and that she only worked about 37 hours a week; well below the requisite 44 needed to trigger overtime. The judge ruled against the defendant's on this issue. In doing so, Her Honour reminded employers that wages are not based on productivity but rather on time that the employee is not available for other pursuits. Anytime that the employee was not available to go about her own business was time spent working. In this case, the judge ruled, the employee worked 58 hours a week resulting in monies owed for overtime.
The judge ruled in favor of the plaintiff on the unauthorized withdrawals from the bank account.
Finally, on the issue of whether the plaintiff had been wrongfully dismissed the judge ruled that wrongful dismissal had occurred and that it was linked to the dispute between the plaintiff's brothers and the husband defendant. In determining that nine month's notice should have been provided, the judge noted the plaintiff's potential difficulty in finding other work given her extremely limited English language skills.
The Lesson: If hiring a family member, or being hired by one, it is important to prepare for things ending badly. Set out all relevant terms of the employment relationship in writing including wages, benefits, pay periods and potential deductions such as room and board. Keep accurate and timely records of payments and deductions, including repayment of any monies advanced for vacations or immigration. All employment obligations such as vacation pay and notice for termination remain owing. It is crucial to remember that despite an employee being a family member, they are an employee and entitled to be treated as one.
Fernadas v Goveas, 2016 ONSC 1992 http://www.canlii.org/en/on/onsc/doc/2016/2016onsc1992/2016onsc1992.pdf
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