The Canada Revenue Agency takes on a notorious Toronto bakery

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Jordan Heath-Rawlings Sometimes people just need jobs desperately. And by that I mean right now no application process. No interviews, no training sessions, just put me to work, pay me. This is a faced, especially by new Canadians who might not know what they are entitled to or what’s safe and what’s unsafe, and so, things like this happen.

CLIP We’re live in North York where dozens of people rallied here earlier this afternoon in front of Fiera Foods, calling for better working conditions. Now the Ministry of Labor is investigating after one person died. Well on the job here, just last week, the fifth person to lose their life while working in the last two decades.

Jordan Heath-Rawlings This bakery already has a bad reputation, obviously, but now we’re also learning more about where its come from, or rather where it says its workers come from because the Canada Revenue Agency disagrees. An investigative reporting casts more doubt on these agencies that are allegedly referring workers to the bakery where accidents happen. So just how do people end up working at Fiera Foods? And you know, the stakes are high here. When a company hires The Wayne Gretzky of Tax Litigators, that’s a quote. I’m Jordan Heath-Rawlings. This is the big story. Sarah Mojtehedzadeh is a reporter on the investigations team at the Toronto Star. Uh, she’s been looking into Fiera Foods for quite some time now. Is that fair to say, Sarah?

Sarah Mojtehedzadeh Yeah, it’s been, it’s been several years, so, uh, yeah, bit of a long time.

Jordan Heath-Rawlings We could do, I’m sure, uh, the entire episode just on everything you’ve reported on them, but maybe for those, uh, who haven’t been following your work for all those years, just, uh, tell us a little bit about this company. Who are they? Why are they so notorious?

Sarah Mojtehedzadeh So, Fiera Foods is an industrial bakery with a number of facilities in North York, and they essentially mass produce baked goods for a lot of household Canadian names. As well as for export to the US. So we’re talking, you know, Tim Horton’s, um, Duncan Donuts, Sobeys, you know, places that a lot of Canadians would, would know and recognize. Fiera Foods first sort of got onto my radar after I started digging into temp agency work in Ontario and found that there had been a couple of prosecutions at a bakery over the death of, uh, temporary help workers. And, and as I was sort of digging into that, um, a third temp agency worker died in an industrial accident. And so that was when we decided to go undercover. And I ended up working at the, uh, factory for about a month. And, uh, writing a story basically about the way that temp agency workers were hired at the facility, the safety concerns that, that, that raised, and really just exploring, you know, the, the nature of this very precarious form of work in Ontario. And since that story, two more temp agency workers have died at Fire bakeries in the GTA.

Jordan Heath-Rawlings What’s it like in there? Just quickly because you’ve been inside it and, uh, I think for a layperson sitting here to hear, uh, so many deaths at a bakery can be a little scary.

Sarah Mojtehedzadeh Yeah. It’s certainly, um, not your kind of mom and pop shop. This is, um, an industrial bakery, so it is. You know, it feels like a factory. It’s loud, it’s noisy, it’s very, very fast paced of work, a lot of pressure to, you know, move more quickly. The majority of the, the workers on, on the floor when I was there were new Canadians. Um, many didn’t speak English well, and they were hired through temp agencies and that meant that they were essentially, Disposable, you can You know, decide not to call someone back the next day if you get injured, you know, that could be your last day on the job. And so, yeah, it is just this very sort of precarious form of work. Okay. And we’re gonna get into, uh, those temp agencies because that’s kind of the basis for your new reporting. And maybe we’ll just start with sort of what that looks like, uh, allegedly, I guess, for a person.

Jordan Heath-Rawlings So tell me about, uh, Iryna Rybalko, if I’m pronouncing her name right, how did she end up on the floor at Fiera Foods?

Sarah Mojtehedzadeh So, Iryna Rybalko was a, uh, witness in a recent trial, involv involving Fiera Foods in the c r a and she essentially testified that, um, she was looking for a job, a family friend recommended this bakery in North York. And so she. Essentially turned up at Fiera Foods one night around 10:00 PM and said, I’m looking for a job. Spoke to a security guard, and an hour later was on the shop floor. Hmm. And that testimony was important because she was considered a temp agency worker by Fiera Foods. But her testimony was that she’d never met anyone from a temp agency. She’d never spoken to anyone from a temp agency. She had gone directly to the factory and been hired. And so that. Um, a fact that lies at the heart of this dispute between Fiera and the CRA.

Jordan Heath-Rawlings And what would Fiera say about, um, or what, I guess, what would their records say about how Irina came to, uh, work on the floor for them?

Sarah Mojtehedzadeh So these workers were in FI’s system as 10 patients, agency workers with an assigned temp agency. And, You know, FI’s position is that all of these people were genuinely hired through temporary help agencies and were aware that they were temp agency workers. Even if it seemed like the relationship between the worker and the temp agency was pretty minimal. They, they did acknowledge in court that there were some sort of unusual features about the setup that, you know, in the context of how temp agency. Often goes, they said, this isn’t actually that, that unusual. And you know, we have the payroll records to show that all of these individuals were in fact assigned to temp agencies and, and hired through, through temp agencies. So that’s sort of the position that they went into the trial maintaining.

Jordan Heath-Rawlings Can you outline what the CRA is alleging is happening here in the scope of it?

Sarah Mojtehedzadeh Yeah, so essentially the c a, uh, did a series of audits of Thera Foods relationship with, uh, a web of 13 temporary health agencies in the gta. Through those audits, it determined, Fiera was paying millions of dollars for hundreds of temp agency workers coming from these 13 temp agencies, 13 temp agencies. According to this, CRA essentially had no real trace of genuine business operation.

Jordan Heath-Rawlings Hmm.

Sarah Mojtehedzadeh Their addresses were ups mailboxes. The CRA was unable to track down most of the list of directors of the temp agencies. In some cases, they were individuals who didn’t have social insurance numbers. The temp agencies themselves only had a few employees on the books, in most cases.

Jordan Heath-Rawlings Hmm.

Sarah Mojtehedzadeh Um, and yet were somehow supplying, you know, millions of dollars in, in labor. Fiera employs about a thousand people, and around 60% of those, um, are, are temp workers. So the CRA’s finding, uh, essentially was that Fiera could not claim tax credits based on its purchase of this temporary labor from these 13 agencies. Because, because there’s no way that the agencies could genuinely have provided those work groups to Fiera.

Jordan Heath-Rawlings Why would Fi want to go to, um, what sounds like allegedly at least a great deal of trouble to create this scenario? You know, what are the benefits to them? You’ve mentioned tax breaks and how much are we talking about here? Like what’s at stake?

Sarah Mojtehedzadeh Yeah. So, um, based on, um, this relationship with these 13 temp agencies, over a period of about three years, Viera claimed almost 6 million in tax credits, which the CRA has, has denied, and, and Fiera is now appealing that denial. So it is a, it’s a fairly significant sum of money and, you know, these input tax credits are very sought after. It essentially means you don’t have to pay sales tax on, on the purchases you’re making to produce a good, you know, lawyers for the C R A argued in court that, you know, this relationship was extremely murky. It was amorphous, it raised red flags, and certainly if the question kind of hanging in the room was, why would you set up your business this way? But Fiera’s argument was, you know, it makes sense for the type of work that this is. You know, they acknowledged in court that this is a unpleasant working environment. People will show up for one shift and never come back. They’ll walk off mid-shift, you know, it’s physically demanding it’s low wage.

Jordan Heath-Rawlings Mm-hmm.

Sarah Mojtehedzadeh Many of these workers, according to the CRA’s evidence, where we’re getting less than minimum wage. So there was this, this constant. Demand for, for labor, and uh, you know, by all accounts a very high turnover. And also that, you know, these types of industries can kind of have. Ebbs and flows in terms of like the orders that they’re getting, you know, seasonal highs and seasonal lows. Right. But to that, the c r a sort of said, well, actually it looks like your production is, is pretty steady over the year. And so that argument that the c r a, you know, didn’t, didn’t hold water.

Jordan Heath-Rawlings You also dug into these temp agencies? When you looked closely at them, what did you see?

Sarah Mojtehedzadeh Yeah, so several years ago I actually, I had gotten a list of, of some of the temp agencies that happened to be in question in, in this trial. At that point, I wasn’t aware of everything going on behind the scenes at the CRA, but I knew that these 13 temp agencies were, were facing scrutiny. And so I tried to reach out to their listed directors and you know, much like the c r a auditor. I wasn’t able to contact any of them except for one. I managed to speak to one of them at his home, a, a high rise building in North York, which was also the listed address for the temp agency. And he essentially told me that, um, he had nothing to do with Fiera Foods. He had nothing to do with his temp. The other. Then he was approached one day in a billiards hall by a guy called Vladimir. And asked to set up this temp agency and he did it. He was told it would be a good opportunity for him, and that was the last, he really had to do with the temp agency. So, you know, that certainly raised questions about. The role that these listed directors were playing in the operation of these temp agencies and in court we heard that in fact, fear of foods didn’t deal with the listed directors of these temp agencies. Almost at all. It was, it was all done through these three sort of mysterious middle men. Who were the ones that would turn up at the factory with, with cash for the workers who would pick up checks on behalf of the temp agencies and who, for the most part, Fiera would contact if, if they needed workers. And so again, for the CRA that raised questions of you know, who the true supplier of these workers were.

Jordan Heath-Rawlings Maybe this is a big picture, uh, philosophical question, but why would the system be set up this way? Why would fear be incentivized and, and how through the tax system to prefer temp workers over actually hiring workers?

Sarah Mojtehedzadeh You know, it’s hard for me to speculate on the business decisions that Fiera makes. Right. But I can certainly speak generally to why we have seen an increasing turn or reliance on temporary labor. And that’s something that, you know, labor advocates are really concerned about. Um, because essentially using temp agencies as our laws are currently set up, Allows companies to sort of shift liability in a lot of ways. So you know, it reduces your obligations to workers who you wanna get rid of, essentially cheaper and easier to get rid of temp agency workers. If they are injured on the job. That injury is going to be assigned at the worker’s compensation board to the temp agency, not the workplace where they got injured, right? So that’s another potential cost saving for employers. And again, um, if you’re purchasing labor from a temporary health agency, you’re able, in theory, to apply for input tax credits, right? So all of those financial incentives, I think typically underpin the sort of increasing reliance, especially in these kind of industrial settings.

Jordan Heath-Rawlings Um, on temporary. How did this particular setup come to light? Would the CRA have been looking at, uh, their tax claims and sort of seen a ton of things and decided to investigate? Like, how did we end up here?

Sarah Mojtehedzadeh Yeah, so this all kicked off because of what, what seems to be a sort of routine audit of fear of foods. The audit, you know, it allowed the tax claims that Fiera had made, but it noted that the factory had what they called an abnormally. Number of relationships with temp agencies who were tax delinquent. They weren’t remitting taxes to the government, and they decided that that relationship warranted further scrutiny. And so that’s what kicked off this series of audits that Thera is now contesting. You know, there were a number of. Issues that raise red flags. You know, one of them being that they found that the relationship between the agencies and FI foods wasn’t commercially realistic because, The temp agencies were billing fear of foods that are at a rate that was below the minimum hourly payroll costs.

Jordan Heath-Rawlings Hmm.

Sarah Mojtehedzadeh Which the CRA said, you know, it doesn’t make sense for them to, to be in this relationship.

Jordan Heath-Rawlings And fear is, um, from what I gather from your reporting, uh, fighting back on this pretty hard, including, and I have to include this, hiring the, uh, wing Gretzky of tax litigators.

Sarah Mojtehedzadeh Yeah. So, um, it, it, it’s an interesting case because from my understanding, there’s been a growing scrutiny of the use of temp agencies at the CRA, and so, you know, there, there were representatives from the CRA and the Department of Justice, you know, sitting in on this trial and, and watching to see how things shake out. And part of the reason why it’s so interesting is, you know, this is a, a significant employer and they’ve hired the best possible lawyers. So you know that the argument that is being heard in this courtroom is gonna be the best argument that can be made. Right? And so I think it’s a legal team and you know, it, it’s gonna be interesting to see how the judge makes this decision.

Jordan Heath-Rawlings What comes after that, if there is anything. And do we know when?

Sarah Mojtehedzadeh So it could take months for the judge to, to, to reach a decision. In this case, it is, it is a complex one. There’s a huge amount of evidence that was submitted. A lot of it is very technical, you know, lots of payroll records. Once the judge has made their decision, there’s a possibility for appeal, which would then, you know, go up to a higher court. And, and that’s really where the potential for, you know, a new precedent to be set around. You know, what the c r a or what is expected of employers in their dealings with, with temp agencies and, and other kinds of, Suppliers in order to make these very lucrative tax credit claims. But again, it’s, I think of additional interest just because, you know, there is this increased use of temporary labor in a lot of workplaces. And so for that reason, you know, the case sort of has an additional. Significance. It’ll be fascinating to see, um, where this ends up.

Jordan Heath-Rawlings Sarah, thank you so much for this.

Sarah Mojtehedzadeh Thank you.

Jordan Heath-Rawlings Sarah Mojtehedzadeh of the Toronto Star. That was the big story. For more, you can head to the big story podcast.ca or look us up on Twitter at the big story f p n. You can as always send an email. We’ve gotten some great episode suggestions over the last little while. Some of these we’ve been doing. Some we will get too soon, but we always welcome more. You can even call and suggest them by voicemail, 4 1 6 9 3 5 5 9 3 5. The big story’s available wherever, whenever you get your podcasts. New episodes debut at 4:00 AM every weekday, sometimes on the weekends when we’ve got a little something extra for you. Thanks for listening. I’m Jordan Heath-Rawlings. We’ll talk tomorrow.