Accounting for Law
Employment & Labour

Employee vs. contractor at heart of class action

With the courts being asked to take another look at the employee vs. contractor debate, Toronto employment lawyer Kumail Karimjee tells Law Times the test is based on the practical realities of the working relationship between the worker and employer.

“The law is very clear [that] what matters is the substance of the relationship and not just the form of contract that may be entered into between an individual providing services and the worker and the company,” says Karimjee, principal of Karimjee Law.

“The result of that is that the relationship can always be challenged and re-assessed by a number of adjudicative bodies that may have an interest in the relationship.”

Law Times reports that a recently proposed class-action lawsuit alleges that the production company that makes a number of popular TV programs has been misclassifying workers.

The $5-million lawsuit, filed in the Ontario Superior Court in October, alleges that the company violated the Employment Standards Act (ESA), breached workers’ contracts, and acted in bad faith, reports the online legal publication. 

The statement of claim for the proposed class action states the "defendants are liable for any adverse tax liability sustained by the class members resulting from a determination that the class members are/were employees ... and must reimburse the class members, for any Canada Pension Plan ('CPP') or Employment Insurance Act ('EI') contributions which may have been paid or are owed ..."

The allegations have not been proven in court.

Karimjee says employers can be on the hook for large costs if they are found to have misclassified employees as independent contractors.

He tells AdvocateDaily.com that some workers may want to be classified as independent contractors and provide services through a corporation for tax benefits, but recent changes to the rules — relating to income splitting and the tax treatment of passive income — make the benefits for many independent contractors less significant.

Karimjee says employers should include termination clauses in their independent contractor agreements that provide protections that are at least equal or greater to the rights on termination outlined in the ESA.

But it’s a “delicate balance,” he says, noting that it’s difficult to say someone is an independent contractor if the agreement includes many employee-like provisions including all rights provided for in the ESA.

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