Epiq Systems, Inc.
Employment & Labour

Independent contractor misclassification can prove costly

A $20-million proposed class action brought against a private school by a number of its former sessional teachers highlights the importance of consulting an employment lawyer before classifying individuals as 'independent contractors,' Toronto employment lawyer Miriam Anbar tells AdvocateDaily.com.  

She says hiring independent contractors seems attractive to businesses because it can be less costly than taking individuals on as employees, who attract employment insurance and Canada Pension Plan payments.  

However, Anbar, an associate with Rodney Employment Law, says there’s a significant downside for companies that are judged to have misclassified employees as independent contractors following a challenge from the Canada Revenue Agency, the Ministry of Labour or the contractors themselves through a civil action or otherwise.

That risk only intensified following the passage of Bill 148, the Fair Workplaces, Better Jobs Act, 2017, which requires Ontario employers to prove their independent contractors are not, in fact, employees subject to the province’s Employment Standards Act.  

“There are severe penalties for misclassification under the Act,” Anbar says. "In the past, companies may have gotten away with it, but as the legislation expands, it’s becoming more difficult."

This issue is going to be coming up more frequently, she says. One of the first steps that companies should take when hiring someone is to have an assessment conducted by an employment lawyer, Anbar says.

“That way, an employer can get an opinion about whether it even makes sense to classify the individual as an independent contractor before they put them in that arrangement,” she adds.

The Toronto Star recently reported on the proposed class action brought against a private school by a number of its former sessional teachers who claim they should have been classified as employees rather than independent contractors.

They say the school’s decision deprived them of protections under the Employment Standards Act, including the right to minimum wage, vacation pay, overtime and termination payments.

According to the Star, the class action could affect hundreds of teachers who were paid flat rates to teach courses. One told the newspaper she was worked between 60 and 80 hours a week in preparation and class time, meaning that she was effectively working for less than minimum wage.

The school’s statement of defence denies the woman’s teaching duties could reasonably have resulted in her working enough hours “such that her remuneration was less than the applicable minimum wage,” and says all of its independent contractors were properly classified.

While none of the allegations have been proven in court, Anbar says if the case does go to trial, a judge will decide how the teachers should have been classified based on a number of factors, including:

  • The level of control a business has over the working conditions of its contractors, including their hours of work;
  • Which party provides the tools and equipment for the work;
  • Who bears the financial risk in the relationship;
  • What degree of responsibility the parties have for investment and management; and
  • Whether there is an opportunity the worker to profit in providing the services.

“Based on the information that has come to light so far, the school is going to have a hard time proving that these were actually independent contractor relationships,” says Anbar, who is not involved in the matter and comments generally.

To give clients an idea of what an independent contractor looks like, Anbar offers the example of a plumber who will typically have other clients and arrive at a worksite with their own tools at a time that is convenient for both of them.

She says some employers may be lulled into a false sense of security when a written agreement describes one party as an independent contractor to the other.

“People think that’s the be-all and end-all. Unfortunately, while the agreement is relevant in any assessment, it’s definitely not the determining factor,” Anbar explains.

To Read More Miriam Anbar Posts Click Here
Lawyer Directory
BPFG: NEW AD TO ROTAE MONTHLY WITH BICOToronto Lawyers AssociationMKD InternationalFeldstein Family LawLegal Print & Copy Inc.Davidson Fraese Family LawyersJHG Criminal Law/Jordana GoldlistBales Beall LLP