Cover Story - Parental Benefits: windfall for foreign workers?
Monday, April 5, 2010
The number of claims for maternity and paternity benefits from seasonal workers is rising. And, some say, the program is open to fraud. What's more, it puts Canada at a disadvantage with its U.S. competitor
by SUZANNE DEUTSCH
Adrian de Boer employs two foreign farm workers on his 110-acre wholesale tree nursery north of Markham and Stouffville, and in 2009 both applied for Canadian parental benefits.
While it is unusual for 100 per cent of a producer's foreign workforce to apply for these benefits, the program has become tremendously popular.
In 2008 alone, 24 per cent, or 9,836 of the 40,984 inquiries the Agriculture Workers' Alliance (AWA) and the United Food and Commercial Workers Union (UFCW) fielded from across Canada were related to parental benefits.
Quebec shows a similar pattern.
"In 2009, 1,000 out of the 6,500 Canadian Seasonal Agricultural Workers Program (CSAWP) workers working in Quebec filed for parental benefits under the federal program," says René Mantha, general manager of the Fondation des Entreprises en Recrutement de Main d'oeuvre Agricole (FERME), the group that manages the CSAWP in Quebec. "They have lots of babies and, to be eligible, you only need to have worked 600 hours, which is easily done in agriculture."
Comparable numbers aren't available from Ontario since Ken Forth, president of Foreign Agricultural Resource Management Service (FARMS), the non-profit organization that runs the CSAWP program in Ontario, declined to comment on this story.
Tadeo Berjon, the Mexican Consul in Toronto in charge of the Mexican Seasonal Worker Program, says the increase in application numbers in recent years is mainly due to the fact that both employers and workers are better informed about the program. Both Mexican and Canadian authorities have made a point of discussing the program's benefits and how to apply for them.
The sheer numbers of applications have created a difficult situation for both FERME and the consulates of the workers' home countries. None have sufficient staff to file and follow up on all the claims. In the fall of 2009, FERME reached an agreement with the accounting department of UPA, the Quebec producer's union, which prepares the worker's income tax, to handle these claims as well. In Ontario, and for much of the rest of Canada, Babkirk Tax Preparation, a private accounting firm located in Leamington, handles claims.
"Maternity and paternity benefits have complicated the lives of employers beyond anyone's imagination," adds Mantha. "Employers now have to deal with workers who are jealous of others whose claims were accepted or who are anxious because their benefits haven't arrived yet. It can really poison the work atmosphere quickly."
While de Boer was surprised that his foreign workers applied for parental benefits under the Canada's Employment Insurance (EI) program, his workers weren't doing anything illegal. All temporary foreign workers (TFWs) in Canada, including those working under CSAWP, have been eligible to receive parental benefits through EI since 2003. Specific numbers on how many TFWs have received parental benefits are not available because the EI does not maintain separate record categories for TFWs and Canadian workers.
Majority from Mexico
The CSAWP was launched in 1966 as a short-term solution to a shortage of domestic labour in agriculture. Four decades later, it has become a permanent fixture in the fruit, vegetable and horticulture sectors. Participating countries include Jamaica (1966), Barbados (1967), Trinidad and Tobago (1967), and the Organization of the Eastern Caribbean States (Grenada, Antigua, Dominica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Montserrat) since 1976. The majority of workers, though, come from Mexico, which joined the program in 1974.
All provinces except New Brunswick and Newfoundland and Labrador participate in the program. In 2008, the number of farm migrant workers in Canada totalled 21,328. Most are employed in Ontario, followed by Quebec.
For decades, CSAWP's migrant workers had been forced to pay into the EI program without being able to claim any of its benefits. Over the years, both employers and the Mexican government requested that CSAWP workers be exempted from EI. But the Canadian government refused, Mantha says, because it wanted the system to remain universal and accessible by all.
Stan Raper of the UFCW claims there is a simple reason behind the government's refusal. A 2009 policy paper by Barbara MacLaren and Luc Lapointe, "How Canada Can Remain Competitive and Be Fair to Migrant Workers," (www.irpp.org/po/archive/feb10/maclaren.pdf ), published by the Canadian Foundation for the Americas (FOCAL), an Ottawa think-tank, said that if employers didn't need to pay EI premiums for foreign workers, it would give them a tax incentive to hire foreign workers over permanent residents and citizens.
In 2003, UFCW Canada filed a complaint to the Employment Insurance Tribunal to protest against the discriminatory practice of collecting premiums from workers who could not collect benefits. After reviewing its regulations, the tribunal ruled that these workers did qualify for parental benefits and would not be excluded as claimants. With this ruling in place, the union, with the help of the AWA, started to claim parental benefits on behalf of migrant workers. Some claims were backdated to 2000.
Service Canada's website says anyone who claims maternity or paternity benefits, whether they are residents of Canada or not, must satisfy two requirements. First, they must show that they have worked a minimum of 600 hours of insurable employment (i.e. had EI premiums deducted from their pay) in the 52 weeks prior to their claim. Second, while workers aren't required to stop working completely to receive benefits, they must show that their wages will drop by at least 40 per cent. Since wages are much lower in a foreign worker's home country than they are in Canada almost all claimants with eligible children automatically qualify.
Workers submit their claims just before their work finishes in Canada. Normally, payments are issued within 28 days from the date of filing the claim. Benefits can be directly deposited in the claimant's bank account and are considered taxable income.
The EI website states that the basic parental benefit rate is 55 per cent of the worker's average insured earnings (up to a yearly maximum insurable amount of $43,200). This means that workers can receive a maximum payment of $457 per week, depending on their hourly wage and the number of hours they have worked.
Mantha says that most workers who submit a claim are out of Canada for five months and would therefore draw benefits during approximately 22 weeks even though the program entitles them for 35 weeks. "As a rule of thumb, workers will want to come back to work as soon as they can because it is more lucrative to work than to receive parental benefits," he says. "But really, it's a windfall for them. Do the math.
If the worker did 60 hours per week at $9 an hour (minimum wage in Quebec), he grosses $540. If that's his average pay and you multiply this number by 55 per cent, that's $297 times 22 weeks. He can technically get $6,500."
More than 4,000 claimants
A person working 60 hours a week and earning Ontario's new minimum wage of $10.25 per hour could technically receive up to $11,838 if they qualified for the maximum 35 weeks of benefits at $338.25 per week.
De Boer says his worker's are paid about $1 an hour when they work in Mexico. Their Canadian benefits of about $5,000 translate into the equivalent of 5,000 hours of labour back home. Not a bad return for as little as $200 in premiums.
According to the paper by MacLaren and Lapointe, which used Citizenship and Immigration Canada (CIC) data, there were 250,000 TFWs working in Canada in 2008. Seasonal agriculture workers represent approximately eight per cent of the total. Using projected numbers, based on a national average of minimum wage earnings, the researchers estimated that CSAWP workers on average pay $24 million into the EI pool every year.
The UFCW estimates that CSAWP workers, mostly Mexican citizens, received over $23 million in parental benefits between 2000 and 2007. Assuming an average payout of $5,000 per claimant, this means that as many as 4,600 have received benefits during that period.
For his part, Adrian de Boer wonders what, if any, mechanisms are in place to detect or prevent suspected fraud and protect taxpayer's money.
He first became suspicious when he was contacted by the Mexican Consulate in 2009 to obtain a worker's record of employment (ROE). He'd known the worker for four years and had never heard of a new baby even though the worker had talked in length about his other three much older girls. Since de Boer felt the new baby had just suddenly appeared out of the blue, he asked to see proof of the claim. The Consulate complied and faxed him a copy of the birth certificate that de Boer's worker had supplied.
After careful examination of the document, de Boer contacted Service Canada to alert them that he was suspicious the claim was fraudulent because it appeared the hand-written document had been modified.
De Boer alleges that the worker had changed the date of birth of his child by turning the last zero in year 2000 to a nine to indicate a new birth, in order to qualify for parental benefits in 2009. He said he hopes that Service Canada is not routinely accepting these types of documents as proof because they could be easily modified. Service Canada, though, just requires a date of birth to process a claim.
"Unlike Mexico, which requires proof of birth, Canada only requires the worker's social insurance number (all foreign workers Canadian SINs start with nine), a filled application, and a record of employment in order to successfully process an application," says Berjon. When queried, the Consulate said it relies on the Mexican civil registry for a number of circumstances, like deaths, births, marriages and divorces, which are obtained through a local office.
Mantha explains that Canada's interwoven computerized record systems make it virtually impossible for Canadians to file a fraudulent maternity or paternity claim because a false one creates a short circuit in the system. "You are a champion if you, as a Canadian, are able to fool the system. But, honestly, what can Service Canada workers do besides take the Consulate's word that these claims are legitimate?" he adds.
De Boer thinks foreign workers would be willing to go to great lengths to get benefits because, to them, $5,000 is a huge amount of money. "They're all excited about it and are getting on the phone to tell their relatives and friends. I also know from talking to that worker that he'll be driving a cab when he returned to Mexico," he adds. "He won't be looking after the newborn. There, it's a woman's work to look after the children."
Majority legitimate
A spokesperson for the UFCW says he's confident the majority of claimants, whether they're offshore or domestic, are legitimate, but like any insurance program, there will be a certain degree of fraud. "That is unfortunate but I would hate for it to become more grist for the mill for directing anger towards people who provide a very vital and important service working under hard conditions and a personal sacrifice to be separated from family."
"Unfortunately, the penalties in force notwithstanding, forgery, falsification or false testimonies may take place," adds Berjon. "And, as in other countries, the falsification of documents or the presentation of false information is an offense whose penalties are determined by the act itself and the regulations in force at the time."
EI fraud penalties in Canada include repayment of amounts to which claimants weren't entitled and fines of up to three times the benefit rate for every false statement. In addition, claimants known to have abused the system are required to work more hours to qualify for benefits in the future.
Fraud is a criminal offence and can be prosecuted. Charges can be laid under either the Employment Insurance Act or the Criminal Code of Canada, as determined by Service Canada.
HRSDC/Service Canada says that it investigates all allegations of suspected fraud and abuse of the EI program. Since separate statistics aren't kept for foreign workers it's unknown how many fraud cases, if any, involve foreign workers. Most times Service Canada hears about allegations of fraud from anonymous third party reports, investigative leads resulting from computerized detection programs or other internal and external sources. When reviewing allegations, Service Canada says its investigators gather information, review computerized reports, interview clients and/or employers to validate information obtained.
HRSDC/Service Canada refused to comment on de Boer's allegations.
In the meantime, de Boer's is waiting to see if his worker will receive a work visa and be allowed back into Canada. If not, de Boer says that will be an answer in itself.
For the 2008-2009 period, the Public Accounts of Canada show that the EI program took in just under $16.9 billion in premiums and paid out $16.3 billion in benefits. This means the overall program is more than half a billion dollars in the black. Even if all 20,000 workers received $6,500 of parental benefits every year, the EI program would still show a $370 million dollar surplus.
Benefits very different
There are approximately five million migrant agricultural workers in North America today, according to a 2002 study, "Protection of Migrant Agricultural Workers in Canada, Mexico and the United States," conducted by the Commission for Labor Co-operation in Washington, D.C.. And, while there are important similarities in the working conditions of these workers in each of these countries, there are also great differences in the benefits they receive.
Contract workers covered by the U.S. Department of Labor's H-2A Temporary Agricultural Worker Visas do receive benefits such as housing and travel expenses according to the United Farm Workers of America's website (www.ufw.org/_board.php?mode=view&b_code=org_key_back&b_no=4536). But they do not have to pay social security (FICA) and unemployment taxes on H-2A workers' wages.
However, the majority of U.S. farm workers don't even receive the minimal benefits available under the H-2A program. According to a 2007 New York Times article, the Department of Labor reported that up to 53 per cent of their 2.5 million farm workers are working illegally in the United States. In the same article, though, growers and labour unions say the percentage of illegal younger farm hands is likely closer to 70 per cent.
If this is the case, it's no wonder that the U.S. Department of Agriculture's website boasts that, for many food products, U.S. producers are among the lowest cost producers in the world.
"The sheer fact that temporary foreign workers have to fly into Canada reduces the chances of having undocumented workers," says Mantha. "Therefore all farmers who employ foreign workers have to comply with CSAWP requirements and can't skirt employer contributions to EI and CPP. It raises farmers' fixed costs and sets us further apart from the United States." BF
Sidebars
EI – a pillar of the social safety net
Employment Insurance is a pillar of Canada's social safety net and was created in 1940. It was formerly known as Unemployment Insurance until 1996, when the term was changed due to its negative connotation. The system was intended to provide an income while unemployed workers find new jobs. Canada's EI system was once among the most generous in the world until rules were tightened in 1996.
No easy solution in sight
Everybody contacted for this story had a solution. Unfortunately, none are simple.
The whole concept of H-2A and CSAWP-style temporary worker visas goes against the long history in Canada and the United States of accepting immigrants. The United Farm Workers of America advocates bringing in workers on regular visas. The question then becomes whether workers would continue working on farms or would they migrate to other sectors to get year-round employment? Once they do, they likely wouldn't return to the farm.
"Ideally, all CSAWP countries should have their own parental benefits programs and, under the agreements with these countries, Canada should forward the contributions to the worker's country of origin," says René Mantha. "That's how it's done with France." The problem is not all countries have EI or parental benefits and can't afford to go that route.
According to a study of CSAWP workers in Ontario by the North-South Institute in 2006, "Farm workers from afar", workers suggested that instead of their EI payments going to the Government of Canada they should go into a Migrant Worker's Fund that would offer loans to workers who wanted to start or expand small businesses in their home country.
De Boer, for his part, would like the government to set up a separate fund for foreign workers.
This way, it would be equitable for all parties. But in order to do so, we would need to duplicate bureaucracy.
In the end, continuing to collect premiums and paying out claims is probably as cheap as anything else. BF
Other programs available for temporary foreign workers
Besides being able to claim parental benefits, temporary foreign workers may also qualify for workers' compensation benefits for a job related injury or illness.
Just like any Canadian who has paid into the Canada Pension Plan (CPP), temporary foreign workers are eligible to receive pension and disability benefits. Canada has international social security agreements with many countries, including Mexico and
a number of Caribbean countries. These agreements help people qualify to collect pension benefits from either country. BF