In November 2017, Ontario’s Bill 148, the Fair Workplaces, Better Jobs Act, 2017, received Royal Assent. While many changes to Ontario’s employment laws have already come into effect, others are just around the corner.
This is the fourth in a series of posts providing a practical overview of the Bill 148 changes to Ontario’s Employment Standards Act, 2000 (ESA), legislation that establishes the minimum rights and obligations of provincially-regulated employees and employers in Ontario.
Our first post summarizes the changes to Ontario’s statutory leaves of absence under the ESA. Our second post outlines the changes to employee minimum wage, overtime and public holiday pay. Our third post details the expanded scope of “equal pay for equal work”, which comes into effect in a few weeks from now on April 1. This fourth post outlines the changes aimed at preventing the misclassification of employees as independent contractors and unpaid interns.
Unlike employees, true independent contractors and true unpaid interns are not covered by the ESA and therefore are not entitled to minimums under that legislation like minimum wage, vacation, benefits, notice of termination or other benefits and/or entitlements on termination. Accordingly, there have been a number of efforts in Ontario to deter employers from misclassifying employees. For example, from 2013 to 2014, the Ontario Ministry of Labour embarked on an enforcement blitz of unpaid internship programs across the province, which resulted in many unpaid internship programs abruptly coming to an end.
To continue this effort, the following changes to the ESA under Bill 148 are now in effect in Ontario.
Classification | Old Rule | New Rule |
Independent Contractor |
None under the ESA.
|
Effective November 27, 2017:
|
Unpaid Intern |
General rule is that all interns are employees and must be paid and receive other ESA protections unless one of the exceptions below applies:
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Effective January 1, 2018:
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Historically, employers needed to be concerned about misclassifying workers because of liabilities that included penalties and interest from the Canada Revenue Agency for failing to remit income taxes, Employment Insurance premiums and Canada Pension Plan contributions, penalties for failing to remit workers’ compensation premiums and unanticipated damages in wrongful dismissal actions. Under the ESA, employers can now also receive hefty fines for misclassifying their workers. We will monitor how the Ontario Ministry of Labour proceeds with the enforcement of these rules, but under the ESA a corporation can be fined up to $500,000. While fines at the upper end of the range are unlikely in the case of a single misclassification, the takeaway for employers is that there is now an additional source of liability for misclassifying employees as independent contractors or unpaid interns.
To be compliant with the new changes to the ESA aimed at minimizing misclassification issues, provincially-regulated employers in Ontario should consider: