The Ontario Government introduced a sweeping legislation last fall regarding work and the ESA (Employment Standards Act). Many of the changes came into effect on January 1, 2018 with additional pieces that took effect April 1, 2018 and more to come on January 1, 2019.
Bill 148covers an array of components. In addition to the headline-grabbing dramatic increase of minimum wage, there are changes to vacation entitlement, personal emergency leave, equal pay and termination of assignment pay for temporary employees, union certification rules and many others. All of these components have very significant impacts to employers and employees alike.
However, another very significant impact of Bill 148 that directly impacts independent contractors is employee misclassification. The new bill introduced a reverse onus provision whereby employers must demonstrate that any independent contractors they have engaged are not in fact employees. Bill 148 shifts a substantial new burden of risk to employers and employment staffing agencies and will potentially have several unintended consequences as a result. As is often the case with activist governments, it is the unintended consequences of legislation that can be the most impactful.
In Ontario, it is estimated that about 12.5% of the total workforce of 5.25 million identify as self-employed, which is about 630,000 contingent workers. It is further estimated that of this group about 55,000 are knowledge workers in the IT, Engineering, Finance and Healthcare sectors, who bring significant economic impact to many of Ontario’s private and public sector organizations. The majority of these knowledge workers are independent, incorporated contractors. As the nature and notion of work transforms to a more project or engagement-based ideation, these knowledge workers are critical. With the modernization of our economy and overall productivity and competitiveness, our governments should be looking for ways to adapt to this new reality.
With the new legislation, when there is a question about whether an individual is an employee or independent contractor, the reverse onus provision is triggered. This means the burden lands on the employer or agency to prove the individual engaged with them is an independent contractor, not an employee and as such would be excluded from ESA coverage. As experience indicates, work moves offshore when employers are faced with impediments like this. Employers losing access to these valuable resources on a contingent basis should be very concerned.
Employers and staffing agencies are now looking at ways of assessing individuals to understand the true nature of relationships early on in engagements to ensure this risk is mitigated. These early assessments will help determine whether such individuals are properly classified as independent contractors.
As an independent contractor, there are a number questions you can ask to help establish the nature of your relationship with your clients. Here are a few of them to keep in mind:
Are you providing services through a corporation?
Have you registered with CRA for GST/HST?
Do you carry business insurance, such as commercial liability or errors and omissions insurance?
Do you market your services as a business, for example with a website, business cards, etc.?
Do you have a corporate bank account, use business invoices in the corporate name and maintain corporate books and records?
Do you have a written contract engaging your business? Is it for a fixed term period or completion of a project?
Do you have the ability to determine how the services are provided?
Have you invested his or her own financial resources into their business?
Is there risk of loss or financial loss if the services are not successfully completed?
The answers to these questions will also help employers and agencies assess an individual’s status. There are numerous others that will have to be asked to help ascertain answers for all parties and ensure against employee misclassification. And just as important, independent contractors will need to be prepared to self-assess. Those who wish to be independent incorporated contractors should seek advice. Govern yourself as a business would and avoid acting or being treated as an employee.