Bill 148 and the government attack on independent contracting
Among the many provisions of Bill 148 is the Ontario government’s intention to hire many more employment standards officers (175) and send them out into the business world (you know, the folks that pay taxes) with a mandate to classify independent contractors as employees and then sanction the business now deemed to be an “employer”.
This can have severe repercussions for small businesses, as elaborated on in this article by Jackie VanDerMeulen of Fasken Martineau DuMoulin LLP “Once bitten, twice shy: greater scrutiny ahead for employees misclassified as contractors“:
“Misclassification of contractors can lead to significant liability for employers, as the individual can lay claim to vacation pay, statutory holiday pay, overtime pay, termination and severance pay, among other entitlements. These are all considered to be inalienable rights of employees under employment standards legislation.
“Beyond employment standards legislation claims, there can also be consequences for unremitted taxes, Canada Pension Plan payments, employment insurance, health taxes or government health insurance, and workers’ insurance premiums. Employees and dependent contractors may both have common law entitlements on termination.”
VanDerMeulen neatly summarizes what the adjudicators will supposedly be looking at:
“There is no one single factor for determining whether a worker is an employee or independent contractor in Canada. Adjudicators consider the relationship between the parties as a whole to determine whether the workers are in business for themselves. The factors that are most commonly considered include:
— “the company’s control over the performance of the contractor’s work (eg, whether the individual hires helpers and determines the timing and manner in which services are rendered);
— “the ownership of the equipment required to perform the work;
— “whether the contractor is economically dependent on the company;
— “whether the contractor has a meaningful chance of profit or risk of loss; and
— “the operational integration between the contractor and the company, including whether the individual is incorporated.”
I type “supposedly” simply because I doubt that all these shiny new examiners will be in any-way business-experienced, business-friendly or even business-sympathetic. My own view is that we are going to see a rash of perfectly functional and correct business-contractor relationships classified as “employment” because that’s what these examiners are hired to find, and so, in the manner of iron rice bowls everywhere, that’s what they will continue to find:
“Bill 148 reverses the onus in misclassification cases under the Employment Standards Act. This means that if an Ontario contractor claims to be an employee for the purposes of the act and is therefore entitled to overtime, vacation pay or other relevant statutory entitlements, the employer will have the burden of proving that the contractor is not an employee.”
As Upton Sinclair so accurately noted: “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” These folks’ salaries will depend on not undertanding (or deliberately not recognizing) how modern small businesses work.