Lexpert Magazine

LEXPERT MAGAZINE | JANUARY/FEBRUARY 2017 53 | THE MODERN WORKPLACE | Liberal government is prepared to do with those recommendations. DEPENDENT CONTRACTORS A very quick primer is in order to under- stand the next point. ere are employees, who enjoy all the rights of full employees. ere are independent contractors, who don't enjoy those same protections but have different rights. en there are also so-called "dependent contractors," who are something of a hybrid. e definition of a dependent contractor is hard to pin down, but it's generally based on the amount of time worked for a client company and the proportion of income received from that client. So a contractor may start out independent, but over time become dependent. e work may not have changed in any way, but the relationship has, and the difference is huge because de- pendent contractors are already entitled to some employee protections. Still, they're not entitled to all the pro- tections of an employee — and that could be about to change, if the special advisors' report holds any sway. In their report, the advisors make no bones about their suspi- cion that many companies are classifying new employees as dependent contractors to save their companies the costs of EI, CPP, health benefits, paid holiday time, etc. Currently, about 630,000 Ontarians — 12 per cent of the total Ontario work- force — call themselves self-employed, but the advisors note that both the Ministry of Labour "and significant anecdotal evi- dence" suggest that a portion of them are misclassified. Karine Dion, a labour and employment associate at Nelligan O'Brien Payne LLP in Ottawa, says it's much cheap- er for companies if you're not an employee, tooth and nail by the business community; and two is that it would send the amount of employment suits handled by lawyers like Dion through the roof, with contract- ors suing companies for the same wages, benefits and back pay as they would have received as employees. CIRCLE OF LIABILITY Another issue in the review that is sending out red flags in the employer commun- ity is the question of who is the employer with the direct responsibility towards an employee and, specifically, whether there should be changes that would create so- called "related and joint employers," says Michael Sherrard of Sherrard Kuzz LLP, a management-side employment boutique. It's an issue closely tied to globalization. Some sectors once protected by tarriffs, no- tably manufacturing, are now subject to in- tense international competition, especially from imports from low-wage developing countries. To compete, companies have contracting out non-core work to lower- cost suppliers. A manufacturing company, for example, may decide to sub-contract out its maintenance department, which takes care of all its machinery, to a stand- alone third-party company that specializes in that. It's cheaper — the manufacturer doesn't have to do training and HR for the maintenance workers — and definitely more efficient than doing it in-house. What the review puts on the table, says Sherrard, is the question of whether the manufacturing company should share li- ability related to those maintenance work- ers, even though they are not employed by the company itself. "at's a big concern," he says, "because many employers have set up their commercial relationships based on certain assumptions. "ey've made decisions to engage spe- cialized expertise that can do part of their production better than the company. So when you set that all up, then you have a government looking at possibilities that could interfere with some of those com- mercial relationships, it's obviously a worry." And they're looking at not just sub-contracting but also outsourcing, temp agencies and other kinds of businesses that provide services as well. What's particularly troubling for some observers is the "undertone or theme" of "but it would be hard to argue if a company has 200 contract workers that they don't have employees." Many employer-side labour and employ- ment lawyers across the country share the worry that companies are misclassifying portions of their workforce, says Lawson Lundell's Sider. "We as lawyers always have a very significant concern about em- ployees who try to play that line, because if you have employees in your workplace and contractors doing exactly the same thing, in BC at least, you're running a very signifi- cant risk of Employment Standards [Act] finding that they're employees. "en, if you haven't paid them things like overtime and statutory holiday pay and vacation pay, you're going to get nailed with a very significant Employment Standards claim. So you're running a pretty big risk of a claim being made by the independent contractor. But we always find no one com- plains until aer the relationship ends." at's the problem, says Dion, who oen represents employees. As things stand now, in Ontario, a contactor who wants to chal- lenge the company has the legal burden of proving they were, de facto, an employee. Because the issue almost always arises aer someone's been terminated, she says, "they have no income, and they have no job. ey are the least financially equipped of the parties to mount a legal challenge. e sys- tem's unfair." e special advisors' review is asking whether the legal burden should be shied on to the company to prove that the person was not a de facto employee. In an era when it's all about the bottom line and squeezing the margins, contract employees are a valuable financial tool, so two things seem certain about this pro- posed change: one is that it will be fought MICHAEL SHERRARD SHERRARD KUZZ LLP "MANY EMPLOYERS HAVE … made decisions to engage specialized expertise. … So when you set that all up, then you have a government looking at possibilities that could interfere with some of those commercial relationships, it's obviously a worry."

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