Tax & Trade Blog
Employees vs. Independent Contractors in Ontario
The distinction between employees and independent contractors has always been an important one in Ontario because while employees are covered by the protections of the Employment Standards Act, 2000 (e.g. sick pay, maternity leave, etc.), independent contractors are not.
While there is no simple formula to determine whether a worker is an employee or an independent contractor, the Ontario government has outlined some factors to consider when trying to make this determination.
For example, the Ontario government has indicated that a worker may be deemed an employee under the Employment Standards Act, 2000 if at least some of the following apply to the relationship between the business and the worker:
- the business provides the worker with tools, equipment or materials to perform the required work;
- the worker’s compensation is not affected by the way that he or she completes the required work (e.g. quicker or higher quality work will not necessarily result in increased pay);
- the worker is not allowed to subcontract his or her work to another party;
- the business has the right to suspend, dismiss, or otherwise discipline the worker; and
- the business decides:
(a) what work the worker does;
(b) how much the worker will be paid; and
(c) when, how and where the work must be completed.
On the other hand, the Ontario government has indicated that a worker may be considered an independent contractor if at least some of the following apply to the relationship between a business and the worker:
- the worker owns and is responsible for some or all of the tools or equipment that is used for the job;
- the worker is in business for his or herself, such that the worker undertakes the risk of making a profit or losing money from the work that he or she does;
- the worker determines how and/or where his or her work is completed;
- the worker can subcontract some or all of his or her work; and
- the business can end the worker’s contract for services, but cannot discipline him or her.
That said, businesses in Ontario should take note of significant changes to the rules governing the characterization of workers as employees vs. independent contractors that came into effect with the passing of Bill 148, Fair Workplaces, Better Jobs Act, 2017 on November 27, 2017.
While Bill 148 did not clarify the distinction between employees and independent contractors, it did legislate a statutory reverse-onus on businesses to justify their classification of a worker. In effect, this reverse onus means that if there is any uncertainty as to whether or not a worker is an employee or independent contractor, that worker is presumed to be an employee unless the business is able to prove otherwise. Under Bill 148, employers that improperly misclassify employees as independent contractors can now also be fined and/or face prosecution.
With the one year anniversary of Bill 148 approaching, businesses should examine the nature of any relationships that they have historically characterized as that of an independent contractor to ensure that they are not running afoul of the Employment Standards Act, 2000.
Further analysis may however be necessary in the near future as Doug Ford, the Premier of Ontario, has indicated that the PC government is reviewing Bill 148 and may actually repeal it.
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