Independent contractor assessments needed after Bill 148 changes
By AdvocateDaily.com Staff
Businesses must reassess their relationships with independent contractors after recent changes to Ontario’s workplace laws, Toronto labour and employment lawyer John De Vellis tells AdvocateDaily.com.
Following the passage of Bill 148, the Fair Workplaces, Better Jobs Act, 2017, Ontario employers must prove their independent contractors are not employees subject to the province’s Employment Standards Act (ESA).
“None of the definitions have changed, but the onus has shifted to the employer to show they haven’t misclassified an employee as an independent contractor,” says De Vellis, a partner with Shibley Righton LLP.
“As a result, businesses are going to have to evaluate their relationships with the people who work for them.”
The province has also promised to hire up to 175 more employment standards inspectors to enforce the new law, which also boosted the minimum wage and requires part-time, temporary, casual and seasonal employees to be paid the same rate as full-time employees when performing the same work.
De Vellis says the changes have also raised the stakes for businesses who see their independent contractors’ status challenged. If an individual is adjudged to have been misclassified, the company may face significant payments to the employee and the Canada Revenue Agency (CRA).
Businesses that deemed a worker an independent contractor will not have withheld any taxes, or paid employment insurance and Canada Pension Plan contributions as required, he explains.
In addition, a worker who should have been classified as an employee will become entitled to overtime, severance and vacation pay, as well as other protections afforded by the ESA. Unlike contractors, employees must also be paid minimum wage, but De Vellis says Bill 148’s pay parity provisions could mean employers owe even more if the misclassified worker did the same work as full-time employees earning higher levels of pay.
“There are some exceptions, such as when pay scales are determined on the basis of seniority, merit or the quantity of production, but if the only difference between two people is that one’s a contract employee and the other is a full-time employee, you may have some trouble,” De Vellis says.
He says the Ministry of Labour and the CRA place little value on the contract between the parties when determining whether someone is an independent contractor or employee.
“The fact that the person is called an independent contractor in the agreement doesn’t mean they’re not an employee. It’s the substance of the relationship that governs,” De Vellis says.
Instead, government agencies use the same, long-standing four-part test to make the determination — one De Vellis says businesses should apply themselves as part of internal assessments to minimize the chances of misclassification.
The first factor concerns the level of control the company has over the working conditions of its contractor, including the hours and methods of work. The second surrounds the tools of the craft and which party provides them.
Thirdly, who bears the financial risk of loss?
“For example, does the person bear fixed monthly costs that have to be paid even if no work is being done?” De Vellis says.
“And finally, who has the opportunity for profit?”