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Multinationals more likely to comply with employment law when unions involved

Tuesday, August 28, 2018

Manhattan skyline

Unless unions are involved, foreign multinational corporations (MNCs) operating in Canada are less likely than their domestic counterparts to comply with employment law.

In the most significant study of its kind, researchers from the University of Waterloo found that MNCs from nearly every country complied better with Canadian labour laws if their operations in Canada were unionized.

“Unions entirely mitigate the country of origin effect,” said Chris Riddell, economics professor at the University of Waterloo and co-author of the study. “The study shows an example of how unions can play a broader role in ensuring companies comply with the law.”

In conducting the study, researchers looked at government records in Ontario from 2005 to 2015 – a time period which saw significant layoffs in the province. Multinational corporations are defined as large organizations where the parent company is based in one country with affiliates or subsidiaries operating in other countries.

By Ontario law, organizations of 50 or more employees are required to provide data on whether they provided notice of layoffs and severance and offered any adjustment (such as retraining) to assist employees in their transition. It’s the first study to examine the issue of compliance in a developed country over such a long time frame with administrative data.

The study also found that when unions were not present, foreign MNCs generally have a much lower rate of compliance with employment law in Canada than Canadian MNCs do. Moreover, compliance rates differ among countries of origin. For instance, MNCs based in the U.S., Mexico and Asia (with the exception of Japan) had lower rates of compliance than Canadian MNCs. Most European firms had a slightly higher rate of compliance.

“Employer compliance with the law is perhaps not as high as people often believe,” said Riddell. “Our research suggests that MNCs from countries with a reputation of lower employment standards seem to behave in a similar way abroad rather than complying with the standards of the host country.

“Basically, unions bring everyone up to the Canadian and European levels.”

The study, “Multinationals’ Compliance with Employment Law: An Empirical Assessment Using Administrative Data from Ontario, 2004 to 2015”, appears in the ILR Review.


Originally published as a University of Waterloo media release.

Photo: Free-Photos/Pixabay

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