Lepage Contracting Ltd. Appellant (Appellant/Employer) v. Lance McCutcheon, 2023 SKCA 83

Court of Appeal for Saskatchewan Docket: CACV3591 Citation: Lepage Contracting Ltd. v McCutcheon, 2023 SKCA 83Date: 2023-08-03 Between:Lepage Contracting Ltd.Appellant (Appellant/Employer)AndLance McCutcheonRespondent (Respondent/Complainant)AndDirector of Employment StandardsNon-Party (Non-Party/Non-Party)Before: Jackson, Tholl and McCreary JJ.A.Disposition: Appeal allowedWritten reasons by: The Honourable Madam Justice JacksonIn concurrence: The Honourable Mr.

Justice Tholl The Honourable Madam Justice McCrearyOn appeal from: LRB File No 111-19 (Sask), ReginaAppeal heard: March 6, 2023Counsel: Lynden Lepage for the Appellant No one appearing for Lance McCutcheon Alyssa Phen for the Director of Employment Standards Jackson J.A. I. Introduction [1] This appeal concerns an employee’s claim for allegedly unpaid vacation pay in circumstances where the employer submits theemployee agreed that vacation pay would be paid at the same time as wages. [2] Lance McCutcheon [employee] filed a complaint for unpaid wages against Lepage Contracting Ltd. [employer].

Thecomplaint was filed with the Employment Standards Director [director], who is a public office-holder appointed under The SaskatchewanEmployment Act, SS 2013, c S-15.1 [Act]. The director issued a wage assessment in the amount of $13,921.81 against the employer. [3] The employer disputed the director’s wage assessment, saying the monies in question had been paid under an oral agreementwith the employee whereby vacation pay would be paid on a lump sum basis in each pay packet.

The employer appealed the wageassessment to an adjudicator appointed under the Act. [4] At the hearing before the adjudicator, the employer had no documentary evidence to support its claim of an agreement.

Nordid the employer present evidence that it had provided a statement of earnings to the employee with each wage payment, showing thebreakdown between wages and vacation pay, which is required by s. 2-37(2) of the Act: “A statement of earnings must … clearly set out… the amount paid for each of wages … vacation pay and pay instead of notice”. [5] However, Lynden Lepage, sole director, officer and shareholder of the employer, testified that notwithstanding the lack ofsuch documentation, such an agreement did exist.

Further, two former employees testified about the practices of the employer, which, ifthis testimony were believed, could serve to support the existence of the alleged agreement between the employer and employee regardinghow wages were paid and that vacation pay had been paid. [6] In his written reasons, the adjudicator made no direct finding as to whether there was an agreement between the employer andemployee or if vacation pay had in fact been paid.

Nor did he make any findings of credibility: McCutcheon v Lepage Contracting Ltd. (25April 2019) Moose Jaw, LRB File No 52-19, Wage Assessment 1-000177 [Adjudicator Decision]. Instead, the adjudicator relied ons. 2-37(3) of the Act, which provides that “[u]nless the contrary is established, wages and other amounts that are not included in astatement pursuant to subsection (2) are deemed not to have been paid”. The adjudicator did not determine whether the employer’sevidence could establish the contrary proposition.

In the result, the adjudicator dismissed the employer’s appeal and increased the amountof the wage assessment to $15,903.73. [7] The employer then appealed the Adjudicator Decision to the Saskatchewan Labour Relations Board [Board], which alsodismissed its appeal: Lepage Contracting Ltd. v The Director of Employment Standards, , LRB File No 111-19 (SaskLRB) [Board Decision]. The Board determined that the adjudicator’s reasons were deficient, but sustained the Adjudicator Decision.

It didso on the basis that the presumption created by s. 2-37(3) cannot be rebutted solely by establishing that an agreement was entered intoallowing for an increase in an employee’s hourly rate of pay in lieu of setting out the amounts in issue in accordance with s. 2-37(2). Inother words, even if there were an agreement, it could not establish the contrary if there were no statement of earnings. Thus, according tothe Board, the amount required to have been paid for vacation pay was “deemed not to have been paid” within the meaning of s. 2-37(3)and now must be paid.

[ 8 ] The employer appeals the Board Decision to this Court. The employer’s essential concern is that neither the adjudicator nor the Board made a finding of fact that the allegedly unpaid vacation pay had not in fact been paid. The employer asserts that this is a relevant fact. Justice Barrington-Foote granted the employer leave to appeal the Board Decision : Lepage Contracting Ltd. v Saskatchewan (Employment Standards) , 2020 SKCA 29 [ Leave Decision ]. [ 9 ] In my respectful view, the Board has changed the terms of the agreement that the employer says it had with the employee.

The employer did not allege that the employee accepted an increase in the hourly rate of pay in lieu of receiving a statement of earnings, as the Board found. Rather, the employer says it had agreed that vacation pay and wages would be paid together.

It is the validity of those terms, as described by the employer, that the adjudicator and the Board had to assess. [ 10 ] While there are strong policy arguments against all-inclusive agreements that lump together wages for hours worked with vacation pay, particularly oral arrangements, I have concluded that the Act does not prohibit such contracts or declare them to be invalid and, moreover, does not penalize their use by deeming amounts paid pursuant to them as being unpaid.

Given this, the employer is entitled to know whether its evidence – regarding the existence of an agreement and that vacation pay has, in fact, been paid – is believed. If the employer’s evidence is accepted, it could establish the contrary within the meaning of s. 2 - 37(3) , which would prevent the director from relying on the presumption deeming the vacation pay not to have been paid. In light of my conclusions in that regard, the appeal must be allowed and the matter remitted to the Board for disposition in accordance with these reasons. II.

Background [ 11 ] By way of a brief explanatory point, I have deliberately used the words vacation pay throughout these reasons to encompass all disputed amounts. I understand that the records and the parties have not been clear about the label applied to the unpaid amounts that the employee claims. This is one issue that will have to be resolved when a new hearing is held. [ 12 ] The factual background may be briefly stated. The employer did residential construction and renovation work in south-central Saskatchewan. It hired the employee as a supervisor for a number of years in two separate periods.

Most recently, the employee worked for the employer in that capacity from April 1, 2015, to December 12, 2018. [ 13 ] According to the employer, it paid the employee a lump sum hourly wage of $30 per hour, which included vacation pay. The employer said it gave the employee the option of being paid $28 per hour, which would not include vacation pay, or $30 per hour, which would include such pay, and the employee accepted the latter option.

From the employer’s point of view, this was a better deal for the employee because it was slightly more than what he would have received for vacation pay, and, as its own financial situation was from time to time precarious, the proposed agreement guaranteed the employee that he would be paid. [ 14 ] Parts of s. 2 - 37 of the Act are essential background to understanding the director’s position, the Adjudicator Decision and the Board Decision .

I have reproduced those parts here with the most relevant passages underlined: Statement of earnings required 2-37(1) An employer shall provide a statement of earnings to an employee: (

a) on every payday ; and (

b) when making payments of wage adjustments.

(2) A statement of earning s required pursuant to subsection (1) must: (

a) clearly set out : (

i) the name of the employee; (ii) the beginning and ending dates of the period for which the payment of wages is being made; (iii) the number of hours of work for which payment is being made for each of wages, overtime and hours worked on a public holiday; (iv) the rate or rates of wages; (

v) the amount paid for each of wages, overtime and public holiday pay and work on a public holiday, vacation pay and pay instead of notice ; (vi) the employment or category of employment for which payment of wages is being made; (vii) the amount of total wages; (viii) an itemized statement of any deductions from wages being made; and (ix) the actual amount of the payment being made; and (

b) be in a form that: (

i) is separate from, or readily detachable from, any form of cheque or other type of voucher issued in the payment of wages; or (ii) if an employee is provided with an electronic statement, permits the employee to print off a copy of the statement of earnings.

(3) Unless the contrary is established, wages and other amounts that are not included in a statement pursuant to subsection (2) are deemed not to have been paid . (Emphasis added) [ 15 ] Notwithstanding that the employer alleged the existence of an agreement as to how wages and vacation pay would be paid, the employer did not keep records showing the breakdown of what amounts were being paid to the employee as wages and what were being paid as vacation pay.

Nor was there evidence that the employer provided the employee with a statement of earnings, as required by s. 2 - 37(1) and s. 2 - 37(2) . [ 16 ] The employee voluntarily left his employment on December 12, 2018. He filed his complaint with the director shortly thereafter, saying he had not been paid vacation pay, statutory holiday pay or overtime. A. Wage assessment [ 17 ] According to s. 2 - 74 of the Act , “[i]f the director of employment standards has knowledge or has reasonable grounds to believe or suspects that an employer has failed or is likely to fail to pay wages as required pursuant to”

Part II of the Act , they “may issue a wage assessment against” the employer. Pursuant to this authority, the director issued a wage assessment against the employer as follows: TAKE NOTICE that, pursuant to

section 2 - 74 of The Saskatchewan Employment Act , the Director of Employment Standards has determined that you have failed (or are likely to fail) to pay wages to the employee(

s) listed below in the following amounts: File No. Employee Name Amount Owing 1-001914 Lance McCutcheon $13,921.81 [ 18 ] While the wage assessment is sparse, the Board found the director had concluded that the statements of earnings provided by the employer to the employee did not include “amounts for public holiday pay and vacation pay” ( Board Decision at para 2), and, accordingly, the director had deemed these amounts “not to have been paid” (at para 2). B. Adjudicator’s decision [ 19 ] Under the Act , the first step of the appeal process is to an adjudicator.

The employer’s notice of appeal to the adjudicator stated as follows: The main argument of the appeal is that [the employee’s] wage was originally negotiated at $28/hr with vacation and holiday pay, however upon agreement between both parties it was agreed that he would earn a straight $30/hr . This was agreed to work to his benefit at the time of the agreement. As per the attachment it can be seen that [the employee] was also benefitted over and above the assessed amount.

I will be filing a civil court claim against [the employee] for restitution on the balance outstanding at the bottom of the benefits spreadsheet. (Emphasis added) [ 20 ] In addition, while the employer disputed that any amounts were owing to the employee, it also claimed the right to set-off amounts for various items the employer alleged that it had paid for or had provided for the benefit of the employee. This list of items included cigarettes and goods taken from the employer’s construction inventory.

In total, the employer claimed the right to set-off $39,229.69 against any amount that might be found owing to the employee. [ 21 ] As is standard in these proceedings, there is no transcript of the hearing before the adjudicator.

That means what happened must be deduced from the Adjudicator Decision and, to some extent, from the Board Decision , as the Board had access to the director’s file. [ 22 ] The adjudicator began by increasing the amount of the wage assessment, saying that the “parties agreed that the wage assessment was incorrect and was amended to $16,403.73 by agreement” ( Adjudicator Decision at 3). [ 23 ] The adjudicator described the issues to be decided as follows (at 4): 1.

Does the Legislation permit the employer to increase the employee’s agreed rate of pay in lieu of paying the employee holiday pay as required by the legislation? 2. Are payments that were made by the employer as set out in his Notice of Appeal eligible to be offset against the amount set out in the Wage Assessment? [ 24 ] Three witnesses testified for the employer before the adjudicator: Mr. Lepage; Jesse Peddue, a former employee of the employer; and Tim Martin, a former employee of the employer. The adjudicator also heard Mr. McCutcheon’s testimony. [ 25 ] The adjudicator summarized the employer’s evidence.

He indicated that Mr. Lepage, on behalf of the employer, testified that “[p]rior to commencing work the employer had a conversation with the employee, wherein the employer gave the employee the option to be paid $28/hour plus vacation pay or $30/hr which included vacation pay” ( Adjudicator Decision at 4), with the alleged implication that the employee accepted the $30/hr arrangement. The reasons go on to say that both Mr. Peddue and Mr. Martin testified that they, as former employees, accepted to be paid in the same way.

He noted that the “employer does not have any time sheets or other records to substantiate the rate of pay or his position with respect to the holiday pay being included” (at 11). [ 26 ] The adjudicator also summarized the employee’s evidence on the question of the wage assessment as follows (at 9):

He had worked for the employer from April 1, 2015 to December 23, 2018, when he voluntarily left his employment with the employer. The employee stated that he did not have any conversation with the employer regarding being paid $28/hour plus vacation pay or $30/hrwhich included vacation pay. The employee stated that he was just paid $30/hour and was not paid vacation pay. The employee did notsubmit a request for overtime.

The employee did not submit any time sheets as none were provided by the employer and he submitted his hours to the employer by wayof text or telephone. [27] The adjudicator then began his analysis by asking this question: “Is holiday pay permitted to be included in the employee’s rateof pay?” (at 11). [28] The adjudicator appears to have answered that question negatively and concluded that there was no evidence to the contrarywithin the meaning of s. 2-37(3). He gave these reasons for deeming the vacation pay to be due and owing to the employee (at 11–12):

Section 2-37 of the Saskatchewan Employment Act requires that the employer must provide a statement of earnings to the employee, andsets out a number of requirements of what must be stated on the statement of earnings. One of which, is the amount paid for each ofwages, overtime and public holiday pay and vacation pay. Subsection 3 states that, “unless the contrary is established, wages and other amounts that are not included in a statement pursuant tosubsection 2 are deemed not to have been paid”.

As the vacation pay was not set out in a statement of earnings to the employee, and I am not satisfied that there is any evidence to thecontrary, vacation pay is deemed not to have been paid. Consequently the vacation pay is due and owing to the employee, Mr. McCutcheon. (Emphasis added) [29] On the set-off question, the adjudicator reviewed s. 2-36(2)(

f) of the Act. That

section provides that “an employer may deductfrom an employee’s wages … voluntary employee purchases from the employer of any goods, services or merchandise” but does notextend to payments made on behalf of an employer to third parties. The adjudicator also relied on Myers v Walter Cycle Co. Ltd. (1990), (SK CA), 71 DLR (4th) 190 (Sask CA). [30] With this law in mind, the adjudicator noted the employee testified that he had purchased cigarettes from the employer to thevalue of $500 but had not paid for them.

He held that all other amounts that the employer claimed by way of set-off “were paid by theemployer to third parties” (Adjudicator Decision at 14), presumably on the employee’s behalf. In light of this, the adjudicator concludedthat the employer was entitled to set-off an amount for the cigarettes only, thereby reducing the wage assessment to $15,903.73($16,403.73 less $500.00). [31] The employer appealed the Adjudicator Decision to the Board, pursuant to s. 4-8 of the Act. C.

Appeal to the Board [32] The employer’s essential complaint with respect to vacation pay was, again, that it had in fact paid the employee vacation pay,and the adjudicator had made no finding in that regard. He submitted in his letter of appeal to the Board that the dispute is whether or not [the employee] was paid out his vacation pay and holiday pay on every pay check … . As verified by two past employees, my company has always paid out all vacation pay on every paycheque.

Any time an employee washired this was discussed and that employee being happy with their wage earned could at anytime calculate the 3/52 from their paychequeif they wanted to know. The policy behind holiday as verified was that the employee would mark 8 hours on any public holidays.Overtime pay was calculated at a payment rate of 1.5 x wage as verified. [The employee] claims he was not told this, however [theemployee] had previously worked for my company before, and the same system was used. All of my employees have always been paidlike this, as verified.

I am guilty of not showing the vacation pay or holiday pay on the stubs, and was unaware that this was the law,however this does not prove it was not paid. … … I do admit to not detailing these amounts on the paystubs as I was unaware that this was a requirement. It is inconceivable that someonewould work for this long knowing that they were not being paid these amounts. (Emphasis added) [33] The employer also appealed the portion of the Adjudicator Decision whereby he was allowed to set-off amounts paid forcigarettes only.

The employer submitted that there was no logical basis to allow a set-off for cigarettes taken from it but not to set-off otheritems taken from its stock, like construction materials, including sliding windows and doors. [34] In arguments to the Board, the director sought to sustain the Adjudicator Decision with respect to the vacation pay issue on twomain bases: (

a) the adjudicator must be taken to have found that the employer’s evidence did not constitute evidence to the contrary; and (

b) in any event, the alleged agreement between the employer and the employee was contrary to the Act, and, therefore, it was ofno force and effect. [35] On the set-off issue, the director sought to sustain the Adjudicator Decision on the basis that whether an item paid for by an

employer on behalf of an employee is a payment to a third party is a question of fact. Since appeals to the Board are on questions of law only, the director submitted that the Board had no jurisdiction to reconsider if any of the amounts claimed by the employer by way of set- off were payments made to a third party on the employee’s behalf. [ 36 ] In its assessment of the Adjudicator Decision , the Board disagreed with the director as to whether it could sustain the decision on the footing that the adjudicator had rejected the employer’s evidence.

It found that the reasons were deficient and then moved on to consider the validity of the alleged agreement. In context, this is what the Board wrote: [53] The Adjudicator appears to have weighed the evidence and thereby determined that the Employer’s evidence was not to be believed, at least with respect to [the employee’s] circumstances. The ostensible agreement simply never existed. The Adjudicator’s reasons, however, do not provide a description about how the testimony of the witnesses informed this finding, for example, through an assessment of the witnesses’ credibility .

Nonetheless, for the following reasons, the Board finds that this deficiency in the Adjudicator’s reasons is not determinative of this Appeal. (Emphasis added) [ 37 ] The Board then went on to hold that, notwithstanding the deficiency in the Adjudicator Decision , the issue to be decided was “whether the legislation permits the Employer to increase the rate of pay in lieu of setting out the amounts for public holiday pay and vacation pay, as per

section 2-37” (at para 54). As I will be examining the Board Decision in greater detail later in these reasons, it is sufficient to note here that the Board answered this question negatively.

It held that an agreement allowing for an increase in an employee’s hourly rate of pay in lieu of setting-out the amounts in issue does not rebut the presumption in s. 2 - 37(3) : see paragraphs 58, 59 and 60. [ 38 ] On the set-off issue, the Board agreed with the director that the adjudicator “found as a factual matter that, outside of the cigarettes, the remaining goods, services, and merchandise were purchased from third parties and not from the Employer” (at para 70).

In assessing this finding, the Board went on to hold that there “is no basis upon which the Board can conclude that this inference was based on no evidence, on irrelevant evidence or in disregard of relevant evidence, or on an irrational inference of fact” (at para 70). D. Application for leave to appeal [ 39 ] The employer applied for leave to appeal the Board Decision , pursuant to s. 4 - 9 of the Act . As I have indicated, leave was granted. The Chambers judge helpfully identified the possible questions of law as follows ( Leave Decision at para 35 ): (

a) Did the Board err in law by failing to ask the correct question as to whether [the employer] paid public holiday pay and vacation pay to [the employee]? (

b) Did the Board err in law as to the test to be applied in determining whether the contrary has been established pursuant to s. 2 - 37(3) of the Act ? (

c) Did the Board err in law by disregarding or mischaracterizing relevant evidence as to the existence and terms of the alleged agreement between [the employer] and [the employee]? (

d) Was the Board’s conclusion that [the employer] could not deduct the price of certain items taken from inventory by [the employee] from his wages grounded in a finding of fact made on the basis of no evidence, in disregard of relevant evidence, or by mischaracterizing relevant evidence? III. Issues [ 40 ] For the purposes of analysis necessary to answer the questions of law raised by this appeal, I will consider the issues in this order: (

a) With respect to vacation pay: (

i) Since the Board found the adjudicator’s reasons were deficient, did the Board err by considering the validity of the agreement? (ii) Did the Board err by upholding the wage assessment on the basis that an agreement allowing for an increase in an employee’s hourly rate of pay in lieu of setting-out the amounts in issue does not rebut the presumption in s. 2-37(3)? (iii) Did the Board err by not holding that an all-inclusive agreement for the payment of wages and vacation pay is valid ? (

b) With respect to the set-off issue, did the Board err by dismissing the employer’s appeal with respect to its claim for set-off? (

c) If the Board erred in any of the above ways, what is the remedy? IV. Analysis A. The vacation pay issues 1. The Board was required to consider the validity of the agreement

[ 41 ] In its written material submitted to the Board, and similarly worded in its notice of appeal to this Court, the employer argued as follows: “I am going to submit that we have altered course completely in this case. The question is not whether vacation pay can be included in an hourly wage. It is whether or not the vacation pay, stat holiday pay and overtime were paid to [the employee]”. [ 42 ] In other words, the employer argues that it was not necessary for the Board to go on to consider if the alleged agreement was valid.

Rather, the only issue the Board had to decide was whether the employer had paid the employee vacation pay. [ 43 ] For their part, the director submits that, if the wage agreement is of no force or effect, it is irrelevant that the employer has already paid the sums in question. Any sum would be “deemed not to have been paid” in accordance with the presumption created by s. 2 - 37(3) of the Act . In that regard, the director seeks to sustain the Board Decision on the basis that the alleged agreement is of no force or effect for three reasons: (

a) it deprives the employee of vacation entitlements; (

b) it deprives the employee of easily accessible information; and (

c) an all-inclusive agreement is not permitted under the Act . [ 44 ] The director also asserts that the Adjudicator Decision can be interpreted as holding that the adjudicator did not believe the employer, such that there truly was no evidence to the contrary within the meaning of s. 2 - 37(3) of the Act . [ 45 ] Addressing the director’s last argument first, I agree with the employer that the adjudicator did not say that he had rejected the evidence of Mr. Lepage and the two former employees.

The adjudicator wrote that “I am not satisfied that there is any evidence to the contrary” ( Adjudicator Decision at 12). However, the question the adjudicator set out to answer was, “Is holiday pay permitted to be included in the employee’s rate of pay?” (at 11).

This, coupled with the lack of any credibility finding, supports the conclusion that the adjudicator determined that it was not necessary to determine whether he accepted the employer’s evidence because the key issue was the validity of the agreement. [ 46 ] In point of fact, there was evidence capable of establishing the contrary – if the adjudicator believed it. The employer did not have any documentary evidence to support its position. But it is trite to say that oral testimony can constitute evidence establishing the contrary, if believed.

In that regard, the Board’s conclusion that the Adjudicator Decision is deficient is undeniably correct. [ 47 ] However, I agree with the director that the Board was required to consider the validity of the alleged agreement.

If the Board had not done so, and had remitted the matter to the adjudicator to make credibility findings only, the issue of the validity of the agreement would still remain and would have the potential of leading to a further appeal. [ 48 ] Thus, although the employer is entitled to know whether the adjudicator found that the wages in question were or were not paid, I also agree with the first of the director’s submissions that the Board could not stop by considering the sufficiency of the Adjudicator Decision on that question alone.

The key issue is whether the Board erred by saying, in essence, that it did not matter whether the employer had paid its employee vacation pay because the agreement permitting this to occur was invalid. It is to that question that I now turn. 2. The Board erred by asking the wrong question [ 49 ] As previously noted, the adjudicator had formulated his first issue as “Does the Legislation permit the employer to increase the employee’s agreed rate of pay in lieu of paying the employee holiday pay as required by the legislation?” ( Adjudicator Decision at 4).

The Board noted the importance of the question and reformulated it to be “whether the presumption [in s. 2 - 37(3) ] can be rebutted solely by establishing that an agreement was entered into allowing for an increase in an employee’s hourly rate of pay in lieu of setting out the amounts in issue” ( Board Decision at para 58). The Board concluded that the s. 2 - 37(3) presumption cannot be rebutted by such an agreement. [ 50 ] In reaching this conclusion, the Board began by noting that it would be guided by the modern principle of statutory

interpretation, which requires the Board “to read the legislative text in its ordinary sense harmoniously with the scheme and objectives of the Act , in particular

Part II, and the intention of the Legislature” (at para 55). In that regard, the Board observed that

Part II of the Act was of particular importance as it “sets minimum standards to protect employees in their employment”, and it is “remedial, benefits-conferring legislation” that “must be interpreted in a broad and generous manner” with any doubt being “resolved in favour of the employee” (at para 55). [ 51 ] The Board quoted extensively from

Part II of the Act and noted that it “sets out the statutory minimum employment standards for workers in Saskatchewan” (at para 56). The Board also observed that the Act provides “[n]o provision of any agreement has any force or effect if it deprives an employee of any right, power, privilege or other benefit provided by this Part” (at s. 2 -6). [ 52 ] The Board continued its analysis: [57] The purpose of sections 2-23 through 2-32 is to ensure that employees are fairly compensated for vacation time and for the occurrence of public holidays. The objective of

section 2-37 is to provide employees with information about whether and how much they are paid in respect of each of the required categories. The amount paid is to be “clearly set out” in the statement of earnings. The statement of earnings is to be provided to an employee. The information contained therein enables an employee to guard against a discrepancy in earnings and entitlements and to seek recourse if deprived of either. [58]

Section 2-37 requires that an employer set out in the statement of earnings provided to an employee the amount paid for public holiday pay and vacation pay. The language of

section 2-37 is mandatory. Subsection 2-37(3) creates a presumption that amounts not included in a statement pursuant to subsection (2) are deemed not to be paid. To rebut the presumption, there must be evidence to the contrary establishing that those amounts not included in a statement have been paid. The question, then, is whether the presumption can be

rebutted solely by establishing that an agreement was entered into allowing for an increase in an employee’s hourly rate of pay in lieu of setting out the amounts in issue . The Board finds that it cannot. [59] The alleged agreement in this case operates in direct conflict with

Part II of the Act .

Part II sets standards for minimum employment entitlements and, together with

Part IV, provides mechanisms to facilitate the enforcement of those standards.

Section 2-37 is a mandatory statutory mechanism that guarantees employees the necessary information to enable them to monitor the statutory minimum amounts that are due and owing. Taking into account the purpose of the legislation, the Board agrees with the Director that such an agreement defeats the purpose of the statutory entitlements, as there is no accounting for whether the standards were met . [60] Therefore, although the Adjudicator’s reasoning is deficient, the result is correct. The alleged agreement, even if it did exist, was invalid.

The Adjudicator was correct in upholding the wage assessment to the extent that it directed that the Employer pay to [the employee] the amounts for public holiday pay and vacation pay that were not set out in the statements of earnings . (Emphasis added) [ 53 ] In my respectful view, by stating the issue as being “whether the presumption can be rebutted solely by establishing that an agreement was entered into allowing for an increase in an employee’s hourly rate of pay in lieu of setting out the amounts in issue” (at para 58), the Board modified the terms of the alleged agreement between the employer and the employee. [ 54 ] According to the employer, it had an agreement that allowed for the paying of wages and vacation pay at the same time.

Further, the adjudicator acknowledged that the employer was alleging an agreement in those terms: “Prior to commencing work the employer had a conversation with the employee, wherein the employer gave the employee the option to be paid $28/hour plus vacation pay or $30/hr which included vacation pay” ( Adjudicator Decision at 4). [ 55 ] As will be seen from this, the alleged agreement was not one that allowed an increase in an employee’s hourly rate of pay in lieu of setting out the amounts in issue on the pay records.

The alleged agreement had that effect, but its terms were that the employer and employee agreed that the employee would be paid an all-inclusive sum that included vacation pay. Nothing was said about whether the employer would set out vacation pay in the pay records. [ 56 ] An agreement that an employer is not required to maintain proper records would, of course, be contrary to the Act , which imposes these record keeping obligations (that are pertinent to this appeal): Employer to keep record of wages, hours worked, etc. 2-38

(1) No employer shall fail to keep: (

a) records showing the particulars of every unwritten contract dealing with wages or other monetary benefits to which any employee is entitled; (

b) a copy of every written contract or other document dealing with wages or other monetary benefits to which any employee is entitled; and [ 57 ] Further, the Act creates an offence for the failure to keep records as follows: Offences 2-95

(1) No person shall: (

a) in the case of an employer: … (iv) fail to keep true and accurate records as required pursuant to this Part or the regulations made pursuant to this Part; (

v) fail to provide a statement of earnings to an employee that satisfies the requirements of this Part or the regulations made pursuant to this Part ; …

(2) Every person who contravenes a provision of subsection (1) is guilty of an offence and liable on

summary conviction: (

a) subject to clause (b), to a fine of not more than $10,000; and (

b) in the case of an offence that is committed within six years after the person is convicted of any offence: (

i) to a fine of not more than $25,000 for a second offence; and (ii) to a fine of not more than $50,000 for a third or subsequent offence. Order to pay wages or deliver records and information 2-96

(1) Subject to subsection (3), if a person is convicted of an offence respecting the failure to pay wages, the convicting court may, in addition to any fine imposed by the court, order the person to pay the unpaid employee the amount of the wages to which the employee is entitled: (

a) immediately; or

(

b) on those terms and conditions that the court directs.

(2) If an employer is convicted of an offence for failing to keep or deliver up for inspection any records or information as required or directed, the convicting judge may, in addition to any fine imposed, order the employer to immediately prepare and deliver to the director of employment standards those records or that information. (Emphasis added) [ 58 ] However, the fact that the failure to keep records may give rise to an offence does not answer whether, if an employer pays wages under an agreement that is otherwise valid, that agreement and the payment of sums pursuant to it establish the contrary within the meaning of s. 2-37(3). [ 59 ] To repeat, s. 2 - 37(3) provides that “[u]nless the contrary is established, wages and other amounts that are not included in a statement pursuant to subsection (2) are deemed not to have been paid”.

This is the only presumption provision in the Act . It allows an employer to prove that wages and other amounts that are not included in a statement of earnings have in fact been paid. [ 60 ] In my respectful view, the Act does not provide that the penalty for the failure to keep proper records is that the employer will be required to pay the vacation pay twice, which would be the effect of the Board Decision . [ 61 ] Thus, I have concluded that the Board erred by upholding the wage assessment on the basis that it did. 3.

An all-inclusive agreement for the payment of wages and vacation pay is not invalid [ 62 ] In its November 8, 2019, written submissions to the Board, the director put forward a two-pronged position: 9. The Director respectfully submits that an hourly wage cannot include vacation pay. An hourly wage inclusive of vacation pay defeats the purpose of the timing requirements of

section 2 - 27(3) of the Act . 10. In the alternative, the Director respectfully submits that an hourly wage inclusive of vacation pay is only permitted if a portion of that hourly wage is clearly defined as vacation pay. [ 63 ] As I read the Board Decision , the Board decided not to pursue the first of the above two arguments, opting instead to decide the appeal on the basis that the parties had agreed to include wages and vacation pay in each pay packet in lieu of providing a breakdown of amounts.

As I have concluded above, the Board erred in so finding. [ 64 ] The director, however, asks the Court to sustain the wage assessment on the alternative basis that he had put before the Board, notably that an agreement, which allows an employer to increase an employee’s agreed rate of pay in lieu of paying the employee vacation pay, is of no force and effect, in accordance with 2-6, which I repeat for ease of reference: “No provision of any agreement has any force or effect if it deprives an employee of any right, power, privilege or other benefit provided by this Part”. [ 65 ] In support of its position, the director points to several key provisions of the Act , notably s. 2 - 24 , which provides that every employee is entitled to an annual paid vacation.

Further, s. 2-25 provides that an employee is entitled to take their entire vacation in certain ways, including “in one continuous and uninterrupted period” or, in certain circumstances, in periods of one week. [ 66 ] The director then draws the Court’s attention to s. 2-27, which provides as follows: Vacation pay 2-27

(1) An employee is to be paid vacation pay in the following amounts: (

a) if the employee is entitled to a vacation pursuant to clause 2-24(1)(a), three fifty-seconds of the employee’s wages for the year of employment or portion of the year of employment preceding the entitlement to the vacation; (

b) if the employee is entitled to an annual vacation pursuant to clause 2-24(1) (b), four fifty-seconds of the employee’s wages for the year of employment preceding the entitlement to the vacation.

(2) With respect to an employee who is entitled to a vacation pursuant to

section 2-24 but who does not take that vacation, the employer shall pay the employee’s vacation pay not later than 11 months after the day on which the employee becomes entitled to the vacation .

(3) The employer shall pay vacation pay to the employee in an amount calculated according to the length of vacation leave taken : (

a) at the employee’s request, before the employee takes the vacation; or (

b) on the employee’s normal payday.

(4) An employer shall reimburse the employee for any monetary loss suffered by the employee as a result of the cancellation or postponement of the vacation if: (

a) the employee has scheduled a period of vacation at a time agreed to by the employer; and (

b) the employer does not permit the employee to take the vacation as scheduled.

(5) A monetary loss mentioned in subsection (4) is deemed to be wages owing and this Part applies to the recovery of that monetary loss. (Emphasis added)

[67] With these provisions in mind, the director makes these submissions. The purpose of s. 2-27(2) is to ensure employees arefairly compensated in the event they do not take vacation, but it does not permit the employer to pay an employee vacation as a regularcourse. The words “calculated according to the length of vacation leave taken” in s. 2-27(3) mean that vacation pay is paid in connectionwith vacation leave, when that leave is taken.

Further, to pay an employee a portion of their vacation pay periodically, even if they do nottake vacation, defeats the purpose of s. 2-27(3) of the Act, which is to ensure employees receive a wage when they take a vacation. Anhourly wage that includes vacation pay is contrary to this purpose. Permitting an hourly wage inclusive of vacation pay effectively permitsthe employer to pay vacation pay at any time, subject to the 11-month limit set by

section 2-27(2). If the intention of the Legislature wereto permit the inclusion of vacation pay in an hourly wage, s. 2-27(3) would serve no purpose. [68] The director acknowledges that there is a line of Saskatchewan authorities holding that all-inclusive contracts are recognized:most recently by this Court in DJB Transportation Services Inc. v Bolen, 2010 SKCA 50, 318 DLR (4th) 174 [Bolen]. In that decision, theCourt reviewed an all-inclusive employment agreement, which included overtime, statutory holiday pay and vacation pay in a monthlyrate of pay.

At paragraph 43, Lane J.A. observed that the director had conceded that all-inclusive contracts are not contrary to The LabourStandards Act, RSS 1978, c L-1, as repealed by The Saskatchewan Employment Act, SS 2013, c S-15.1 [previous Act]. [69] In this appeal, the director submits that, despite Bolen and the line of jurisprudence that it represents, “it is no longer settled lawthat all-inclusive agreements are not prohibited under the current Act”. In that regard, the director relies on the change in the legislation in1994, when the previous Act was amended.

Under the previous Act, s. 48(1.1) and s. 48(1.2) implicitly permitted an employer to payvacation pay along with wages, as long as certain information was provided to the employee. Those provisions read as follows: Time for payment of wages in cases not provided for 48(1.1) Where an employee is paid his or her holiday pay together with the employee’s wages at each regular payment of wages, theemployer shall, not later than at the time when wages are paid, provide to the employee a written statement that: (

a) specifies the amount paid as wages and the amounts paid as annual holiday pay and public holiday pay, if any; and (

b) meets any requirements prescribed in the regulations.

(1.2) Wages and other amounts that are not included in a written statement pursuant to subsection (1.1) are deemed not to have been paidunless the employer can establish that the employee was regularly informed of the amounts of annual holiday pay and public holiday pay,if any, that were paid to the employee at each regular payment of wages. (Emphasis added) [70] Section 2(4) of The Labour Standards Regulations, 1995, RRS c L-1 Reg 5, as repealed by The Employment StandardsRegulations, RRS c S-15.1 Reg 5, defined regularly informed, within the meaning of s. 48(1.2) of the previous Act, to include “a writtenstatement at regular intervals of 13 weeks or less” (s. 2(4)).

Section 28 of those previous regulations provided that “the written statementmust be readily detachable from or separate from the employee’s pay cheque or any other form of pay voucher issued in payment ofwages”. [71] Having regard for the change in legislation, the director urges the Court to reconsider Bolen on the question of the validity ofall-inclusive agreements that permit the payment of vacation pay as part of a lump sum payment, which includes both wages and vacationpay.

In support of this argument, the director submits that “the wage agreement in the case at hand is non-compliant with the Act becauseit deprives the employee of benefits conferred through ss. 2-24, 2-25, 2-27, and 2-37 of the Act” and “[a]s a result, the wage agreement isof no force or effect”. [72] I agree that the agreement as alleged by the employer does not comply with the Act.

As the director asserts, it deprives theemployee of paid vacation leave and easily accessible information, among other matters. [73] Nevertheless, the Act does not state that an agreement providing for wages and vacation paid as a lump sum is prohibited orinvalid such that any sums paid under it are deemed not to have been paid. Indeed, as I understand the director’s position, that office doesnot ask for the employer’s alleged contract to be declared invalid.

I believe this to be so because finding such agreements to be invalidwould carry legal consequences not just for vacation pay but would extend to the wages themselves. That said, the issue is what is thestatus of an agreement that is of no force and effect? Did the Legislature intend that, in the circumstances that arise in this case, theemployer would be required to pay vacation pay twice? In that regard, s. 2-37(3) becomes the pivotal provision. [74]

Section 2-37, in its current form, did not exist in the previous Act. However, in 1994, the Legislature first enacted s. 48(1.1) ands. 48(1.2) – the first provisions to bear some resemblance to the current s. 2-37. [75] The director submits that the change in the language from the previous Act to the new provisions supports the

interpretationthat the Act does not permit the inclusion of vacation pay in an hourly rate of pay and that vacation pay is meant to be paid when anemployee exercises their vacation entitlement. The director extends this argument to say that any agreement that contravenes the purposeof the Act is of no force or effect, thereby precluding an employer from relying on s. 2-37(3). [76] But not expressly permitting an action and prohibiting it are two very different legislative directives. [77] At its most basic, this is an exercise in statutory

interpretation that requires the Court to consider s. 2-10(2) of The LegislationAct, SS 2019, c L-10.2(2), which provides that “[e]very Act and regulation is to be construed as being remedial and is to be given the fair,large and liberal

interpretation that best ensures the attainment of its objects”. As the Supreme Court recently confirmed in R v McColman,2023 SCC 8, 478 DLR (4th) 577, “In determining the meaning of the text, a court cannot read a statutory provision in isolation, but mustread the provision in light of the broader statutory scheme” (at para 35). [78] It is also useful to consider Machtinger v HOJ Industries Ltd., (SCC), [1992] 1 SCR 986 [Machtinger], whereIacobucci J., for the Supreme Court (with concurring reasons by McLachlin J.), commented in relation to the Employment Standards Act,

RSO 1980, c 137: “an

interpretation of the Act which encourages employers to comply with the minimum requirements of the Act, and soextends its protections to as many employees as possible, is to be favoured over one that does not” (at 1003). [79] Machtinger is the predecessor to Rizzo & Rizzo Shoes Ltd. (Re), (SCC), [1998] 1 SCR 27, where Iacobucci J.,writing this time for a unanimous Court, stated as follows in regard to the same legislation as was considered in Machtinger: “Any doubtarising from difficulties of language should be resolved in favour of the claimant” (at 29). [80] Having regard for these legislative and jurisprudential imperatives, I have no difficulty concluding that the Act as a whole, andin particular

Part II, with which the Court is presently concerned, is remedial. The Legislature intended to offer certain minimumprotections to employees, and any doubt should be resolved in favour of the employee. [81] That said, however, the application of the interpretive principles does not lead to the dismissal of this appeal. The criticalsection to be interpreted remains s. 2-37(3) of the Act, which I repeat here for ease of reference: “Unless the contrary is established, wagesand other amounts that are not included in a statement pursuant to subsection (2) are deemed not to have been paid”. [82] The Legislature has made its intention in the balance of

Part II plain. Employees are entitled to paid vacation leave. Employeesare also entitled to receive a statement of earnings that provides basic information regarding the payment of wages. Failure to provide sucha statement is an offence. However, the Legislature has created only one deeming provision regarding unpaid wages and that is s. 2-37(3).It gives employers the opportunity to prove that they have in fact paid wages and other amounts not included in a statement of earnings soas to avoid the effect of the deeming provision.

It is not tied to whether the employee received the paid vacation leave, i.e., leave with payto which they were entitled. [83] In coming to this conclusion, I give little weight to the change in the legislation from the previous Act to its present form. Ifanything, the previous Act provided a greater measure of protection to employees because the deeming provision was linked to whetherthe employer had regularly informed the employee regarding the breakdown of how wages and vacation pay were being paid.

Here, thedeeming provision is tied to whether the amount in question has been paid, which is also the critical fact in issue. [84] It bears saying, however, that where the employer has no documentary evidence to support either the existence of an all-inclusive agreement or that monies were paid in accordance with that agreement, it may be difficult to persuade an adjudicator throughoral testimony, but that is a matter for an adjudicator to decide, based on the evidence presented. A decision on this point was not made bythe adjudicator. 4.

Conclusion re vacation pay [85] Returning to the specific questions of law posed in the Leave Decision, I conclude as follows: (

a) the Board erred by not asking the correct question; (

b) the Board erred by misconstruing the terms of the alleged agreement between the employer and employee; and (

c) the Board erred in its

interpretation of s. 2-37(3). [86] The baseline conclusion is that the Act does not expressly prohibit all-inclusive employment agreements on wages and vacationpay or declare them invalid. Such agreements are contrary to the Act in that they do not allow an employee to take paid vacation.However, the only legislative presumption that deems wages and other amounts as being unpaid is s. 2-37(3). But that provision leaves theemployer with the escape hatch of proving that the allegedly unpaid amount was in fact paid. B.

The set-off issue [87] The remaining question of law to be decided is, and I repeat, “Was the Board’s conclusion that [the employer] could not deductthe price of certain items taken from inventory by [the employee] from his wages grounded in a finding of fact made on the basis of noevidence, in disregard of relevant evidence, or by mischaracterizing relevant evidence?” (Leave Decision at para 35). The basis of thisquestion is that the adjudicator allowed the deduction of $500 for cigarettes taken from inventory but did not permit any deduction forother items taken from inventory.

The employer asserts there was no evidence that any of these amounts related to payments made to athird party, rather than to purchases from the employer. [88] There is merit to this allegation of error as well. On the evidence, as recounted by the adjudicator, it is unclear how he decidedthe issue of payment to third parties. With respect to the cigarettes, the employee admitted that he had taken the cigarettes but had not paidfor them. As to the remaining inventory items, the employee denied the employer’s claim, but the adjudicator, again, made no finding ofcredibility.

In light of my conclusion that there must be a new hearing, this issue, as well, can be revisited then. C. The appropriate remedy [89] On an appeal to the Board from an adjudicator’s decision, s. 4-8(6) confers the following powers: Right to appeal adjudicator’s decision to board 4-8(6) The board may: (

a) affirm, amend or cancel the decision or order of the adjudicator; or (

b) remit the matter back to the adjudicator for amendment of the adjudicator’s decision or order with any directions that the boardconsiders appropriate.

[ 90 ] As previously indicated, s. 4 - 9(1) of the Act provides for a right of appeal from a decision of the Board to this Court on a question of law. The Act , however, does not indicate what the powers of the Court are when it finds an error of law. [ 91 ] Reading s. 4-9(1) of the Act only, the Court’s jurisdiction is limited to answering questions of law.

However, it would be of little use to the parties if the Court answered the questions in the affirmative but did not then provide a remedy. [ 92 ] Having regard for my conclusion that an all-inclusive agreement is not invalid, the issue that must still be resolved by a fact- finder is whether the employer’s evidence can establish the contrary proposition to that stated in s. 2 - 37(3) : that is to say, does the evidence have sufficient probative value to persuade an adjudicator that the director cannot rely on s. 2 - 37(3) of the Act to deem the disputed amounts unpaid. [ 93 ] In such circumstances, it would seem appropriate to invoke the Court’s powers under s. 12(1) of The Court of Appeal Act , SS 2000, c C-42.1 : Powers of the court 12(1) On an appeal, the court may: (

a) allow the appeal in whole or in part; (

b) dismiss the appeal; (

c) order a new trial; (

d) make any decision that could have been made by the court or tribunal appealed from; (

e) impose reasonable terms and conditions in a decision; and (

f) make any additional decision that it considers just. [ 94 ] In reliance on these powers, I have concluded that the Court should allow the appeal, set aside the decision of the Board and remit the matter to it, with the direction that it cancel the Adjudicator Decision in accordance with the powers outlined in s. 4 - 8(6) of the Act , cited above. [ 95 ] The effect of the cancellation of the Adjudicator Decision is that the wage assessment, and the employer’s notice of appeal from it, must be dealt with in accordance with

Part 4 of the Act , which will require the registrar to select a new adjudicator: “On being informed of an appeal or hearing pursuant to subsection (2) and in accordance with any regulations made pursuant to this Part, the registrar shall select an adjudicator” ( s. 4 -3(3)). V. Conclusion [ 96 ] The appeal is allowed, the Board Decision is set aside, and the matter is remitted to the Board with the direction that it cancel the Adjudicator Decision in accordance with the powers conferred on the Board by s. 4 - 8(6) .

The remaining issue is costs. [ 97 ] The employer has been successful with respect to this appeal. It is customary for a successful appellant to receive an award of costs. Here, however, there is no opposing party against whom it would be appropriate to order costs. The employee did not appear and made no submissions. [ 98 ] The director provided submissions, but that particular office-holder is not a party, as such. According to s. 4 -10(1)(a), the director has the right “to appear and make representations” on any appeal to the Court of Appeal but is not a named party.

On this appeal, the director chose to provide representations without which the Court would not have been able to address the issues as fully as it has. [ 99 ] In these circumstances, I decline to make any order as to costs. “Jackson J.A.” Jackson J.A. I concur. “Tholl J.A.” Tholl J.A. I concur. “McCreary J.A.” McCreary J.A.