It’s Official: The Ontario Government Will Pursue Companies Who Misclassify Workers as Independent Contractors

June 5, 2017

 

Big headlines coming out of Queen’s Park: the Government of Ontario announced that the province will be increasing the minimum wage to $15 by 2019. The news set off a flurry of responses and debates, with many arguing the change is long overdue and some suggesting that a rapid increase in the minimum wage – which currently sits at $11.40 – will harm small businesses who’ll incur much higher labour costs.

We’re not going to wade into that debate, but we want to highlight some of the other changes the Ontario Government’s proposing to employment law in Ontario. There are quite a few other meaningful changes that aren’t getting as much attention as the top-line minimum wage increase, but they’re worth paying attention to, especially for corporate or large-scale employers who might not be concerned about the minimum wage increase. Here are a few of the most salient changes:

  • The legislation mandates that casual, part-time, temporary & seasonal employees make the same amount of money as full-time employees, including a review process.
  • Employers will be legally required to provide three weeks vacation. This has been the standard, from our perspective, for quite a while, but it’s good to see it becoming official policy.
  • All employees will be entitled to ten days of paid emergency leave. Employers won’t be allowed to ask for doctor’s notes from employees using these days.

These are some significant changes. But for our money – and, quite possibly, many companies’ – the most significant change that isn’t getting much attention is that:

  • The new legislation will prohibit employers from misclassifying employees as “independent contractors,” and subject violators to penalties including prosecution, public disclosure of a conviction, and monetary penalties.

In other words, if you’re a large company and you employ individuals as “independent contractors” – for example Procurement or Information Technology workers – the government is now going to take more proactive action to make sure that those workers are actually independent. You’ll have to prove that these employees truly are independent contractors – and not employees – or else you could be opening yourself up to huge risks. We’ve written about this topic quite a bit in the past make sure companies are aware of this issue, but it looks like it’s about to get a lot more relevant with the new legislation.

There’s been a lot of talk about how a sharp increase in labour costs due to a higher minimum wage might eat into small business’s bottom lines – for example restaurants, cafes, etc. But this change in employee classification could actually represent a bigger risk for large businesses, many of whom rely on business contractors for their contingent labour needs.

The thing is, there are lots of companies out there who use contingent staffing for its flexibility, hiring high-skilled individuals on 6 or 12 month contracts to staff for peak workloads, or as a “trial basis” for permanent employment. But a lot of these companies haven’t done enough to ensure that when the Ontario government comes knocking, they can prove an arms-length relationship with these contractors.

We think it’s worth taking a moment to ask yourself – is my company in this boat?

If you have independent contractors on your payroll, you might be exposing yourself to legal risks under these changes. There are quite a few criteria that the government will be looking at to determine whether workers are employees or independent contractors. But one concrete way to help prove that arms-length relationship is with a third party payrolling solution. If you hire a third party to payroll and administer your contractors (through onboarding, back checking, etc.), it can go a long way towards proving these workers’ independence and avoiding stiff penalties.

Argentus has helped a number of Fortune 500 companies with 3rd party payrolling by helping them avoid risk due to employee misclassification. Let us take this burden off your hands. Reach out to us today and we can discuss how to mitigate risk in your contingent staffing. 

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