Canada’s Magna International says proposed changes to Ontario labour laws would make doing business in the province nearly impossible for the auto parts giant.
Magna made the assertion in a submission to the Ontario legislature’s standing committee on finance, which is gathering public input on the Fair Workplaces, Better Jobs Act. Proposed changes within the act include a $15-an-hour minimum wage, more paid leave for employees, stricter scheduling laws and equal pay for full-time and temporary workers.
“For the first time in our 60-year history we find ourselves in the very untenable position of questioning whether we will be able to continue to operate at historical levels in this province, Ontario has increasingly become a very challenging jurisdiction in which to conduct business,” Magna said in its submission, dated July 19.
Magna said the cost of electricity, increased payroll and pension costs, new provincial cap and trade policy, and some of highest personal income tax in the G7 already pose difficulties.
“We believe the tipping point for Magna may well be the Fair Workplaces, Better Jobs Act,” the parts maker said, calling the act “extremely one-sided.”
Magna employs 22,000 people at about 50 facilities in Ontario. It said the majority of its operations are Tier 1 suppliers and wouldn’t be directly affected by all the proposals but that the proposed laws would have “unintended consequences to Ontario’s supply chain.”
Tier 2 and Tier 3 supply facilities, some of which have contracts with and supply Magna, “will be extremely sensitive to labour cost increases,” Magna said.
The minimum wage is set to rise to $15 an hour on Jan. 1, 2019, from $11.40 today. Magna suggested a phase-in to the higher wage “in the range of 3-5 years” to let companies adjust long-term contracts and labour agreements.
A fellow Tier 1 supplier has similar concerns. The Narmco Group in Windsor said in its submission: “We have current collective agreements where the starting wage, which was fairly bargained with the union, is currently less than $15. Long-term contracts with our customers were set on the certainty of the fixed costs negotiated with the union and previously announced schedule of the Ontario government which limited increases in minimum wage to the rate of inflation.”
Issues with scheduling
While Magna called some additional unpaid leave-of-absence entitlements “the right thing to do,” it said additional personal emergency leave days and two more paid sick days “will add significant cost” for parts makers.
The proposed provision allowing employees to refuse scheduling changes with less than four days’ advance notice “is completely impractical for the automotive industry” because it uses just-in-time delivery and regular daily overtime, Magna said.
“Overly restrictive practices of this nature will effectively make just-in-time production impossible in Ontario,” it wrote.
Magna said it is worried about being able to remain competitive globally, calling the changes "restrictive" and "uncompetitive."
“Companies like Magna are generally not competing for business against other firms in Ontario — but with manufacturers on the global stage, and most particularly, in nearby states like Michigan, Ohio, Tennessee, Georgia and elsewhere,” it said.
The Automotive Parts Manufacturers’ Association said in its own submission to the committee that it wants a “trade sensitivity exemption formula” for export-oriented businesses, like those in the auto industry.
“Their ability to compete in a global market should not be subject to cost increases and perception devaluations caused by the blanket provisions used to target industries that take advantage of their workforce,” APMA President Flavio Volpe wrote.
Volpe didn’t outline or detail how the formula would work.
Ontario relief package
In June, the Ontario government told parts makers gathered for a conference in Windsor, Ont., that a new economic relief package will help offset costs incurred due to a 32 per cent increase in the province's minimum wage.
The minister of economic development, Brad Duguid, said the eight-point plan includes a reduction in regulatory costs, a decrease in the number of inspections for habitually compliant companies, and increased national and international harmonization when developing new Ontario regulations.
At that time, Duguid called the laundry list of changes “the most ambitious red-tape cutting package this province has ever embarked on.”
The deadline for submissions to the committee reviewing the legislation is today.