By Natalia Buendia Calvillo
Approximately $45 billion, or 2.4 per cent of the country’s total GDP, comes from the underground economy, according to Statistics Canada.
The construction industry accounts for almost one-third of all the illegal economic activities in the country. It is the largest underground sector in the nation, apart from sexual exploitation and the drug trade.
Paying workers in cash is a major contributor to the growth of the underground economy in Canadian construction.
The consequences for hiring workers illegally go beyond the risks that are taken by the workers and the companies that hire them.
Worker removal and company fines are only the tip of the issue. Companies are avoiding income taxes, pension, workers’ compensation and unemployment insurance contributions, as well as other mandatory premiums, while putting law-abiding companies at legal and financial risk.
According to WorkSafe BC policies, the employer onsite is responsible for all the workers – legal or not. If a worker without authorization is injured, the contractor managing the project is still legally responsible. Subcontractors and temporary labour agencies in B.C. that hire undocumented workers put contractors who manage projects at risk.
Contractors affected, despite following rules
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| This photo is for illustrative purposes only and it does not imply that the construction scene or workers shown are breaking any law or breaching work permit regulations (Photo by Natalia Buendia Calvillo). |
Tom, who requested his last name not be used, is a foreman with 15 years in the industry, and five years as a superintendent working for a reputable commercial construction contracting company.
With the construction industry booming, a common problem is not finding enough labourers for a job. He and other companies have recruited temporary labour agencies to help him fill the gaps. But in his experience, the workers those agencies provide are mostly undocumented.
“They don’t tell you, so when you get these guys on your site, you have to ask them … 99.9 per cent are from Mexico, and they don’t have work visas,” Tom said.
The biggest impact a labour shortage has on contractors is the inability to meet deadlines. When a project needs more labourers to be completed on time, companies often look to temporary labour.
“Then they show up and we find out that none of these guys are legal to work,” Tom said. “So, we get rid of them all and then we have lost two, three, even four or five weeks worth of time because we were trying to find guys that actually can work in the country.”
On top of exposing contractors like Tom to legal risks, subcontractors and temporary labour agencies make a profit for each worker hired illegally. Workers commonly get less than half of what the contractor pays the agency or subcontractor.
“They are charging me $35 to $40 dollars an hour per guy, when he only pays them $15. And that is not even a livable wage; that’s what bothers me,” Tom said.
Even if employers deduct income taxes from workers’ pay, they do not receive government benefits or services – no medical coverage, worker’s compensation or pension.
Two types of scenarios of illegal work
In some situations, the term “illegal workers” doesn’t necessarily mean foreign workers without a permit, but Canadians or permanent residents who are evading taxes to boost their take-home pay.
Steeve Mongrain, associate chair of the Simon Fraser University economics department, studies tax-evading behaviours in companies. He said there are two kinds of illegal hiring.
“There is one kind which is where it would arise more like a beneficial decision both by the worker and the [company] to work informally,” Mongrain said.
“Imagine somebody working for construction. It may be the case that half of the work is going to be recorded and half of the job is not going to be recorded. In this case … they can both save on taxes by not declaring the revenue.”
The second scenario occurs when the labour force is inadequate, and there is a shortfall of authorized workers to take those jobs.
Not many people are willing to take highly seasonal jobs where the wage is low and the working conditions are marginal.
“Companies will hire illegal workers to save on costs or to fill in positions that they are not able to fill, but they will pay income tax on their profit – they will be complying at least, with the CRA,” Mongrain said.
“But at the same time, (they) will have part or the majority of their employment composed of illegal or undocumented workers that they will pay at a lower wage.”
Cash leaves no paper trail, making it harder for the authorities to trace. What’s more, the nature of the industry helps the underground economy to thrive because it goes from contract to contract.
“And often you will have from one job to another, a worker who will be paid formally for part of the year and informally for some part of their jobs.”
One in five B.C. construction workers in union
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| (Photo by Natalia Buendia Calvillo) |
Mongrain said unionization could help lower illegal hiring by increasing the monitoring of the industry.
“Unions in that aspect often have the same kind of interests as the government – they want their workers to be paid as high as possible. If workers are being hired without abiding by all labour regulations, the union may not be able to collect union dues and stuff like that,” he said.
“So basically, unions act as a monitoring device for formal work. This is one big predictor of the proportion that will be hired informally … unionization.”
According to the ICBA survey, 80 per cent of the workers in the industry are in open shop companies.
B.C. Construction Association president Chris Atchison said he has never heard of these types of cases from his members or from the regional construction associations.
“I think that there is a tremendous sense of responsibility within the industry and within all of the trades and sub-trades that are involved on projects to hire credentialed workers to have the rights and freedoms to work in Canada appropriately and have the necessary training both in terms of certifications and safety requirements in order to be appropriately on work sites,” Atchison said.
“I don’t really work in hypotheticals, but I would suggest that any practices like these are not considered legal and should not be allowed to continue out of both fairness for people that may be taken advantage of, and people who are legally entitled to work in Canada, who are being excluded from those opportunities.”
Three companies disciplined in last five years
Under immigration laws, a person who hires an undocumented worker can be fined up to $50,000 and face two years in jail.
Since 2013, the Canada Border Services Agency Pacific Region has charged three companies for hiring undocumented workers.
The CBSA could not pinpoint how many foreign workers have been excluded or deported for the specific reason of working without authorization. Their tracking system records removals based on the Immigration and Refugee Protection Act.
“With that in mind, from 2013 to September 18, 2018, the agency removed 8,846 foreign nationals who were inadmissible for non-compliance with the act,” said a CBSA spokesperson.
In 2012, the CBSA was criticized for raiding a construction site while the Border Security TV show was filmed.
The B.C. Liberties Association filed a human rights complaint for one of the workers removed.
The company and the owner were charged in January 2017 with four counts of hiring foreign workers without authorization, fined $3,000 and placed on a one-year probation order.
Last March, a labour subcontractor was fined $14,000 after pleading guilty to four counts of employing a foreign worker without authorization to work. The workers were removed, and some voluntarily left Canada.
