Worker classification matters. It significantly impacts both the worker’s entitlements and the employer’s responsibilities under the law. The traditional distinction between employee and independent contractor is increasingly becoming blurred, with the common law also recognizing a middle ground – the dependent contractor.

To further complicate matters, we recently reported on Bill 88, the Working for Workers Act 2022. This has now received royal assent and will introduce foundational rights and protections for digital platforms, or so-called gig, workers.

This article briefly examines the differences between the types of workers, and why this matters. We also look at the rights provided to gig workers by the new legislation.

Employee or independent contractor?

Under the Employment Standards Act 2000 (ESA), an employee is a person who performs work for an employer for wages, a person who supplies services to an employer for wages, a person who receives training from a person who is an employer if the skill being trained is used by the employer’s employees, or a person who is a homeworker (a person who works for compensation from their residence, but is not an independent contractor). Employees are entitled to various entitlements under the ESA, such as minimum wage, reasonable notice for termination without cause, sick leave and vacation time. 

On the other hand, independent contractors have more control over how they perform their work and can work simultaneously for multiple clients and jobs of their choosing. They are responsible for paying tax and pension contributions and do not receive employee benefits or protections under the ESA or common law. 

The common law also recognizes a third classification, the dependent contractor. They are not employees and likely have a contract identifying them as “independent contractors”. However, they primarily work for one employer and earn at least 50% of their income from that employer. Courts look at the entire nature of the working relationship; there is no single determinative factor. If a worker is a dependent contractor, they are entitled to reasonable notice of termination or pay in lieu of such notice.

We suggest speaking to a seasoned employment lawyer to mitigate legal liability related to misclassification. Misclassifying an employee as an independent contractor may result in significant financial consequences for the employer, such as fines from the Ministry of Labour and claims by employees for entitlements like vacation pay or pay in lieu of notice if they have been terminated. 

Working for Workers Act 2022 becomes law in Ontario

The Working for Workers Act 2022 received royal assent and became law on April 11, 2022. 

One of the key changes introduced by this new legislation is the creation of the Digital Platform Workers’ Rights Act 2022 (Act), which will come into force on a day to be named by the proclamation of the Lieutenant Governor.

It covers workers that perform “digital platform work”, which means:

subject to the regulations, the provision of for payment rideshare, delivery, courier or other prescribed services by workers who are offered work assignments by an operator through the use of a digital platform.

The Ontario Government wants to provide gig workers, those who use digital apps to book jobs such as food delivery or transporting people, with basic worker rights. It has been said that, as the first province to introduce such changes, gig workers will be better off than their counterparts in other provinces.

The Act establishes foundational rights and protections for digital platform workers

The Act establishes foundational rights and protections for digital platform workers. The rights for digital platform workers are set out in sections 7 to 13.

They include:

• The right to receive a minimum wage for each work assignment, at the level set out in section 23.1(1)(1)(iv) of the ESA, which is currently $15 per hour.

• The right to receive tips and other gratuities, without deduction (unless authorized by another statute or court).
• The right to receive certain information, for example, a description of how pay is calculated when the worker is given access to the platform and an estimate of the pay when the worker is offered a work assignment. 
• The right not to be removed from the platform without a written explanation. Two weeks’ written notice is required if access is removed for at least 24 hours unless the worker is guilty of wilful misconduct.

What has the reaction been?

Some have criticized the minimum wage provisions. For example, Gig Workers United and the Canadian Union of Postal Workers have said that the minimum wage for time on assignment sets a standard for app-based delivery workers lower than the provincial minimum wage because it does not cover all hours worked. 

Some have said that the Act does little to help those workers that have been misclassified as independent contractors. Gig workers have typically been classified as independent contractors by companies. However, some gig workers have challenged this classification in the past, arguing that they are in fact employees. For example, the Ministry of Labour recently decided that a particular Uber Eats courier was an employee, rather than an independent contractor. 

The Act does not confer many of the benefits that apply to employees (under the ESA) to gig workers, such as overtime, vacation or termination pay.

Contact Haynes Law Firm in Toronto for Advice on Proper Worker Classification

Worker classification has a direct impact on the employment relationship from the moment the employment contract is signed. Employers who misclassify an employment relationship, whether deliberately or in error, run the risk of costly litigation and fines in the future.

Haynes Law Firm, led by Paulette Haynes, is a preeminent Toronto employment law firm with considerable experience in the classification of employees. The firm mitigates the risk of potential fallout for employers by ensuring all employment relationships are correctly classified from the start. Paulette’s seasoned and experienced team of employment law professionals drafts and reviews employment contracts designs internal policies concerning various employment relationships and provides guidance with respect to termination requirements. To discuss how Haynes Law Firm can assist your organization, please contact us online or by phone at 416-593-2731.