Ep004 Underground Economy

Soussanna Karas: 99%, or probably more than that, are all prosecutions against unlicensed contractors. I could only count maybe two or three prosecutions that we've initiated against Licensed Electrical Contractors.

Josie Erzetic: Last year, the Electrical Safety Authority received more than 350 tips about unlicensed contractors performing electrical work in Ontario. This puts homeowners and families at risk of electrical shock, fire, and even death. In this episode, we'll explain the safety and consumer protection concerns we have about hiring people who work in the underground economy and what ESA is doing about it. 

Grounded in Ontario is a podcast for you, the province's licensed electrical contractors, master and certified electricians. Safety tips, tech, and best practices. Now let's get grounded.

Hello and welcome to another episode of Grounded in Ontario. I'm Josie Erzetic and I work for ESA. Today, we're talking about a topic that I know concerns us and many of you, the underground economy. Statistics Canada estimates the underground economy is over 16 billion dollars in Ontario alone. And it may come as no surprise that residential construction remains at the top of the list as an area where homeowners will hire unlicensed contractors. 

With me today, is Soussanna Karas, Director of Licensing at ESA, and she's going to talk to us about what she and her team are doing to target the underground economy. Now, for those of you who are not familiar with Soussanna and her work, she's been with ESA for about four years and was formerly lead prosecutor. This means she's been dealing directly with hundreds of cases against unlicensed contractors since her first day on the job. She has successfully argued some cases which resulted in ESA's largest fines to date against unlicensed contractors. Soussanna, welcome to the show.

Soussanna: Thank you, Josie. I'm excited to be here today.

Josie: I think one of the most important initiatives ESA has undertaken recently is a campaign to educate homeowners about how to find a Licensed Electrical Contractor. Soussanna, can you tell us about that?

Soussanna: Absolutely. We do feel that educating homeowners is one of the most important initiatives to pursue underground economy. We have educational campaigns where we explain to homeowners the difference between electrical contracting business, master electricians, and certified electricians. We do tell homeowners that only a licensed electrical contracting business can and should be hired to do electrical work in their homes. And when they do hire a licensed contracting business, they need to look for ECRA/ESA licence number, which should be on invoicing, estimates and trucks and vans. So as a contractor, make sure that you do put those identifiers everywhere that is facing the public. That's what brings you advantage and that's what ensures safety and professionalism.

Josie: Okay. Now, I have to say that the odd time I do see, at a house that looks like it's undergoing construction or renovation, an unmarked van or truck. Does that mean that contractor's unlicensed, Soussanna? And in that case, what do I do as someone who's just walking by and I see this?

Soussanna: As licensed contractors, it is requirement of the legislation that you put ECRA/ESA license number on the truck or van that belongs to you and that is on the road. And that's what will make sure to consumers and observers that this is a licensed contracting business that does the work. However, the second part of your question, Josie, if you do see somebody who you suspect might be doing unlicensed work in your neighborhood, or anywhere that you pass by, please do use our anonymous reporting tool on the website. That is the tool that, as I mentioned, completely anonymous, you don't have to identify yourself, but we do ask you to put all information that you see and as much information as possible so that we can identify and we can follow up.

Josie: Okay. That sounds like a very important thing that people should be aware of. Can you tell us a bit more about that reporting tool?

Soussanna: We're actually quite pleased about the performance of that tool. It is on the website. If you go on, right on the homepage you will see a button that says, 'Report unlicensed activity'. You go there. There's a form. You fill out information as much as you can, as much as possible. We have staff at ESA that looks at that report every day and we follow up on all the reports. Since April last year, I can share some data with you, we've received hundreds of leads about potential non-compliances. Specifically, we received in this year, in the short period of this year, we received 140 without permit leads, without license leads, 19, code potential ... And this is all allegations at this point. Potential code violation leads, 16, and advertising leads, for someone who advertises without license, 31. That's the information that public shares with us. And we really do appreciate that. And we do encourage you to continue to do that because safety is a joint undertaking. ESA alone cannot do it. We appreciate your vigilance and your effort to report it to us.

Josie: Yeah. That's really an important message to get out to people, I think Soussanna, and particularly when you're talking about these numbers and working without permits, working without licenses. When you're going through all that data, are you seeing any trends? Where are you seeing people work without permits? Where are they working without licenses?

Soussanna: Yes. That's a great question. And I am actually proud to share this information, because every time we analyze trends and every time we identify trends, we do address underground economy and we do improve safety. One of the trends that we just recently noticed is increasing number of pot light installations. It's a very fleeting nature of electrical installation. And some might say, "Well, what's the big deal?" But it is a big deal. I can tell you that we received 81 online complaints regarding pot light installations, and it's covering 174 locations. That is a staggering number. Every member on my team is passionate about safety. And when we see something like this, this is alarming to us. What we do about this is we launched, so far, two large investigations. We have three investigators involved on this. They're quite diligently following all of these leads. They're putting together investigation reports. And I can tell you, where it's justified, we will push those to be prosecuted and brought before courts.

Josie: Soussanna, just talking about prosecutions, can you tell us how much of ESA's efforts go into prosecuting license holders versus unlicensed folks, or in other words, those who participate in the underground economy?

Soussanna: I have to say, and I've been with ESA as Josie mentioned for four years, three years as a lead prosecutor and the last year in my position as Director of Licensing. I do see all of the investigations that come through ESA. And I have to say that 99%, or probably more than that, are all prosecutions against unlicensed contractors. I could only count maybe two or three prosecutions that we've initiated against licensed electrical contractors. We are not in the business to go after LEC's who had a mistake. We look for patterns. We look for serious and repeated refusal to comply.

One of the examples I can give you about the charges that have been filed against licensed contractor was where the contractor issued fraudulent Certificate of Inspection. What they did is they filed inspection for, I don't know, three pot lights and four receptacles. They did do much more work than that over the next period of time. They took the certificate, they falsified it and gave it to the homeowner to say that the inspection took place. Now we take those cases as very serious. Licensed contractors should be the example of compliance. They should not engage in fraudulent activity where they defraud the homeowner and they mislead ESA.

Josie: Now how does ESA actually know when it wants to prosecute? How do you make that decision? And maybe you could take us through your thought process as a former prosecutor, but as well in your current role as Director of Licensing.

Soussanna: Yes. This is something that we do with respect to every case that comes through every report that we receive. As you know, prosecution is a very resource and time intensive process. It takes time to investigate. It takes time to bring before the court. It takes court resources and witness resources to get it to completion. We've created a process where ... What we call, "compliance pyramid." What it means is that we take our compliance and steps. The first step is always to educate, unless there are circumstances that show us that education will not work. Usually, the default is educate. To ensure that the person who comes across as not compliant, understands what it is that they breached and understands how to get into compliance. Both for licensed and unlicensed, that's our first step.

Now, if we see this person or the business for the second time, that means that education did not work so we need to escalate. We need to direct them, or we need to take more serious steps; investigation and prosecution. But we want to make sure that if it's a one off, we are showing them understanding and education. If it's something serious and a pattern, then we escalate and take more serious steps.

Josie: That's really good information to know. And I know one of the other areas that your group is focused on, Soussanna, is broader blitzes of activity. We talked earlier about analyzing data, and I think in that analysis of data, you have found certain areas where you really want to put a focus and you want to put a blitz, let's call it that, of inspection/investigation to see if you can really locate who those unlicensed folks are and try to bring more folks into compliance. Can you tell us about that?

Soussanna: Yes. This is another thing that we take to heart. Under licensing department, we have staff who's dedicated to look at the trends and analyze data. As you said Josie, all of us are passionate about safety, but I doubt you'll find anybody more dedicated to pursuing underground economy than folks in my department who deal with the blitzes in the regulatory compliance program. What they do is they review reports of non-compliance. They figure out if there's any trends. And then we work with our partners at ESA, whether that's inspectors, investigators or communications team, and we design or create blitzes. We create short pilots where we go after identified trends.

I have two examples. One of them is the electrical vehicle chargers blitz that we just recently finished. The way that it initiated is that we've heard from our inspectors that they have been seeing more and more electrical vehicle chargers installations, just passing on the streets that were done either by unlicensed contractors or without notification being filed with ESA. Now that's a risk of fire if it's installed incorrectly, as you know, and that mandated a focus on that particular issue for us. What we've done is we created a pilot, we partnered with inspectors, with communications group, and we did a targeted approach in Toronto area. We educated consumers through the website and through social media. We educated licensed electrical contractors, and we issued letters and we worked together with other safety partners to engage them. And as a result, we noted a significant increase in notifications compared with the same period of 2020. And that goes well beyond the growth of electrical vehicles being sold. That is a great result that shows that we are making difference.

Josie: Agreed. That's a great outcome. And I would point our listeners to, again, to look for the podcast and look for our previous episode dedicated to EVs and the importance of safely installing EV chargers. That was part of the blitz that Soussanna talked about as well. And Soussanna, you mentioned another example. Can you tell us about another example that your team carried out in terms of regulatory compliance?

Soussanna: Absolutely. It is Kijiji partnership that we've established last year and we seek to continue with this going forward. Just so a few details about what it looks like. The staff at ESA goes on Kijiji website at the regular intervals and looks at leywords, advertisements under keywords, such as pot lights, electrician, electrical work and other keywords. If they see an advertisement by a person or business that doesn't show ECRA/ESA licence, they follow up with that advertiser. We try to educate first. We'll send a message saying, "If you're LEC, please post the licence. If you're not, please remove your ad." If we see that person, a business again, again, we send the message. And if we see them the third time we ask Kijiji to remove their ad, which means that they will be forcefully removed and will not be advertising to consumers. And sometimes we see them again, which means that this is a person who refuses to comply and cooperate. And that is a case where we escalate this to investigation and prosecution.

Josie: What are your outcomes here, Soussanna, in terms of pulling down ads, what's been the outcome there? And in terms of prosecutions, how many prosecutions have resulted from the Kijiji blitz?

Soussanna: Yes. And I can confidently say that every time we ask Kijiji to remove the ad, it has been removed. We removed a hundred percent of non-compliant ads from the website. In terms of the prosecutions, and there will all always be those who are in the underground economy, we currently have 58 investigations ongoing, and we have 20 charges before the court, and more coming in. ESA launched a prosecution blitz, which means that we are putting more charges before the court and we are proceeding with them swiftly. And we want to make sure that the public knows, and those who are in underground economy know that we are looking into this and we are serious about this.

Josie: That's with respect to unlicensed individuals, Soussanna, that you're proceeding with those prosecutions. But what about for our licensed community? Are there any learnings that you can impart to our audience about what you've uncovered as a result of doing this type of work on Kijiji?

Soussanna: Yes. I'm glad that you asked this question because there's some trends that we've seen, and one of them I wanted to bring up today, and that is where the unlicensed contractors using licensed contractors' numbers fraudulently, meaning without their consent. One of the examples I can bring you is we have an investigation where licensed contractor asked a relative who they trusted to put post on Kijiji and advertise on their behalf. Obviously, with the understanding that those deals or those contracts are brought back to LEC for work. And the ad was compliant, there was LEC/ECRA number posted. So everything was well until such time as the LEC or licensed contractor found out that that relative was using the ad for their own benefit. They were advertising and they were taking those contracts and they were entering into those contracts and doing work without license, without letting LEC know. The consumers think that they deal with LEC. There's no notifications filed. And there is a risk to reputation of the LEC. My message to you, our listeners, is to make sure that if you entrust somebody to advertise on your behalf, there are mechanisms to review and control those advertisements so you're not taken advantage of.

Josie: Yeah. That's a very, very important message. Do not allow someone to use your LEC number. If you are asking them to help you with something like advertising be very, very cognizant and aware of what is happening with your number. That's an important message. Currently, I also want to explore this area with you around home renovations. Demand for home renovations, still really high, and some LEC's might be tempted to subcontract work. Is that something that's allowed?

Soussanna: We do see this quite often. It may come from lack of understanding by licensed contractors of their obligations with respect to subcontracting. I would urge you to go and look at the resources that we have on our website. And there will be one under the podcast. This is where you can find guidelines for licensed electrical contractors and master electricians. Those guidelines outline certain duties and responsibilities and provide examples.

One of the examples is with respect to subcontracting. The rule is this, all electrical work on behalf of the licensed electrical contracting business must be done by the business' employees. Those employees must be on the payroll. And the reason I say this, and it's very important, is that LEC's, as you know, have an obligation to have WSIB and liability insurance. In order to protect yourself and your employees and the homeowners, only your employees that are on payroll should be doing the work. That's how they will be covered by the insurance. That's the rule. And that's very important to keep in mind. If you hire unlicensed, somebody who doesn't have a license, and who's not on your payroll, there's many, many risks to your reputation, safety, defects, and injury that's not going to be covered by the insurance.

Josie: What if I'm an LEC and I'm subcontracting to another LEC, again, just because I've got an overflow of work and I need to satisfy my clients. I need some help.

Soussanna: That is absolutely allowed. And if you look at the reasons behind it, another LEC's also licensed, also covered by insurance and WSIB. They will file their own notification and so the work will be protected and it will be safe. That is allowed.

Josie: Now all of these issues around workload may bring us to another interesting topic area, which is oversight of work. Your designated master electrician, or DME's. What are the responsibilities of DME's?

Soussanna: As you mentioned, oversight is very important. One of the obligations of DME's, and this is legislation driven and it's also explained in the guidelines if you want to go check it out. One of the obligations is personal oversight and responsibility for electrical work and compliance. DME's role is very important for the business, for the electrical contracting business. They oversee safety of the work. They oversee compliance with the code. They oversee in many cases relationship with the homeowner or the client. But that also means that if you have a fairly large business with a number of locations or sites you need to ensure, as a DME, that you personally can answer this question. Am I able to personally provide oversight of all the work for this LEC? Or is there a need for another DME to be hired for the business? That is the question that you and the LEC the license contracting, the management of the business need to answer for yourself.

Josie: And Soussanna referred to the guidelines and you can of course find all of this type of information on our website. So to And Soussanna, I thought that was an important thing you mentioned here about that type of personal oversight. Have you ever seen a situation where a DME might have overextended in that regard?

Soussanna: Yes, we do see this, unfortunately. I would prefer not to, but we do see the examples. And one, I can bring you with a fairly large LEC business. They had two sites, one in Barry and one in Windsor, and they had only one DME who was on the record. Now, I have to say that you may have more than one DME. It's actually preferred if you are a large business. In this particular case, the DME's location, so the physical location of the designated master electrician was in Barry. The Windsor one was left without oversight. And we've seen defects in that other location. That tells you that it's important to provide personal oversight and planning of the business and all of the locations.

Josie: That is important. And in that situation, Soussanna, what's your role and particularly, is it one of education and bringing it to the away of the LEC that, you know, you need to make sure there is oversight in place?

Soussanna: It is education. Again, there's guidelines that you can check out. In fact, you need to check out if you have questions. You can reach out to us, if you have questions. You can reach out to license team. There's a phone number on the website where you can do that, and you certainly need to inquire of your peers. We have advisory council that actually took part in designing guidelines. They're your peers. And so all of that is encouraged be done. The first thing we do is to educate and ensure there is understanding of the obligations.

Josie: Absolutely. Now, another topic that we get questions about a lot, and I have certainly heard raised as an issue, is homeowners doing their own work, their own electrical work that is, within their own homes. Can you talk to us about that? And a typical question that we hear is why does ESA allow homeowners to do their own electrical work at their homes?

Soussanna: I can say this, ESA does not create the law; we apply it as it's written. The legislation and regulation allows homeowners to do electrical work in their own house, but there's limitations. They can only do it within their own house, and they absolutely must file notifications so that ESA inspectors can come and ensure that the work that has been done is safe. We also educate and make sure that homeowners understand that if they do not feel that they can do the work themselves, that they hire a proper person or business for it. We try and explain the difference between certified electricians and master electricians. And we say that you need to hire licensed electrical contracting business. We also educate homeowners on the risks of doing electrical work on their own, because we keep saying that electricity inherently carries risks and if you don't know what you're doing, you may be putting yourself and your family at risk.

Josie: That's great, Soussanna. Thank you so much for that. And just based on our conversation today, I have a few things certainly that I would take away and please feel free to add to this list. But I would say for our listeners, please feel empowered to report any suspicious unlicensed electrical activity. You've heard Soussanna talk about the reporting tool. Please use that so we can be made aware. We do have leads to follow up and investigate and take the appropriate action where necessary.

The second thing I would say is, please be careful with your business license. Be careful who you're giving it to. Be careful how people are using it, because Soussanna has given an example of fraud, quite frankly. And also please be careful around subcontracting. And Soussanna has given us a few important messages there. Soussanna, is there anything else you'd add to that list?

Soussanna: Yes. I'd like to also say that as a Director of Licensing, it is my priority to engage licensed electrical contractors and master electricians in the conversation and partnership with us. Safety is a joint priority, and I would invite you to read a licensing corner that I update every time the Plugged In comes out. As you know, we have a quarterly publication called Plugged In and I have licensing corner there. And I provide news about what licensing department has been up to. Also, we'd like to hear from you. There's an email there that you can use contact us with your questions, suggestions. We really do want for you to be engaged and involved in making sure that Ontario is electrically safe and consumers are safe.

The other thing, if I may, Josie, I wanted to use this opportunity to invite all the licensed electrical contractors and master electricians to attend our license holder meeting. We do it every year. We provide important updates at the meeting, have technical questions and answers at that meeting. It's going to take place virtually this year, again. Same as last year. You can connect from wherever you are in the province as long as you have internet and reliable phone or laptop. The date is November 18. If you go on ESA website under this podcast, there will be link to click in and register for the event. We would love to see you there.

Josie: Yes. I would endorse that. License holder meeting is a great thing that is important to us at the ESA, and is also important, I think, to LEC's. And a particular segment, that's always a big favorite, which is the technical Q and A will be included in the agenda this year. I have to say that's a particular favorite of mine because it was that technical Q and A that sparked this podcast, because we do get a lot of questions from licensees and we do think it's very important to answer those questions and to connect with our community. And we love doing that.

That brings us to the last part of the podcast, which is answering a question. And as I said, we love to get questions so please keep them coming. We'll feature your questions, and we can also turn questions into larger topics where we'll spend a whole podcast discussing the answer. The question today, Soussanna is on the topic of underground economy and specifically about general contractors. In what ways does ESA oversee illegal activity that could be occurring within the general contractor group?

Soussanna: We do know, and from the investigations and from the cases reported to us, I see that general contractors are often hired by the homeowner and they're entrusted by the homeowner to organize the work, to ensure that all the proper trades are hired for the work. Plumbers, electricians, and those people are properly qualified and properly licensed. We see a lot of great general contractors who do do that, and who ensure that the work is done in compliance with the legislation. Unfortunately, we also see those who are not. As I mentioned before, we go after those if the circumstances justify to do that. We see that sometimes general contractors are hiring unlicensed contractors to do the work. They know somebody, that somebody is not licensed or they don't check and that somebody does the work. And then we see defects. It is unfortunate. In those cases, we do investigate and, again, as I said, where warranted lay charges. We're also looking at the new ways to spread this message with homeowners and general contractors so that both those groups involved in the business understand their responsibilities and their rights. One of those is we're doing more awareness. We're spreading more awareness in this area through Holmes Group partnership.

Josie: Yeah, I think that's a good one to mention, Soussanna. Many of our listeners would know Mike Holmes and his family, the Holmes Group. And we do have a relationship with Mike Holmes and his family, specifically to talk about issues like the ones we've been talking about today. Mike has a tremendous following and particularly with homeowners who are looking for the right way to do renovations, the right way to do construction. And he is definitely spreading the message that electrical work is risky. It's an area where you want to hire a professional and it's an area where you must hire a licensed electrical contractor. It's very good to emphasize that message, Soussanna.

So thanks, Soussanna, for the response to the question and thanks for talking to us today about the underground economy.

Soussanna: It's my pleasure. As I said, Josie, we're passionate about it. And we want to make sure that we do everything we can to reduce those occurrences.

Josie: Absolutely. Thank you so much.

If you have any questions on this topic or any other electrical safety topic, we want to hear from you. Email us at We plan to answer some frequently asked questions in future episodes. Make sure you subscribe to this podcast so that you'll get notified whenever we have new episodes. So until next time, be safe, work safe and stay grounded.