O Contractor Model! We Stand on Guard for Thee.

“Do not follow where the path may lead. Go, instead, where there is no path, and leave a trail.” – Ralph Waldo Emerson

In relation to managing the current contractor model, Canada has a choice, follow or make our own path. Following in this context would mean doing nothing and therefore by default, taking the same unfortunate path of the US and UK and watching our contractor model be destroyed. Making our own path would mean taking action now to mitigate the risk thereby protecting the contractor model in Canada.

In the US and UK, their equivalent Departments of Labour have done well to go after those employers that have taken advantage of the most vulnerable in the workforce. Employers have misclassified what should be employees, as independent contractors. In many cases, this misclassification has excluded these workers from the basic rights and protections that should have been afforded to them under employment standards legislation and for that I am the first to applaud their efforts. However, you do not throw the baby out with the bath water as they say. As the US has done well to protect those vulnerable workers, they have destroyed the contractor model for independent contractors. Ask any employer facing significant class action suits from those that the changes in the law were not meant to protect. These contractors are being forced to use class actions against employers to pay high tax bills back to their governments’ tax collectors.

Today the provincial government in Ontario is proposing some significant changes to their Employment Standards Act that will do the same as what was done in the US to protect vulnerable workers. One of the largest proposed changes is to align with the employment courts by including dependent contractors as a protected group under the legislation. Furthermore, it has been proposed that the definition of employee would be officially changed within the legislation to include dependent contractors. The responsibility would be placed on the employer to prove the independence of the contractor therefore avoiding misclassification. There is also a provision outlined that would proactively enforce the legislation to identify and rectify misclassification. The proposed legislation would also make the employer liable for the financial costs of misclassification. The depth of the proposed changes even provided for the consideration of liens to be placed on employers for financial non-compliance.

One of the most surprising changes in the proposed legislation is the attention being paid to Temporary Helping Agencies (Third party recruitment agencies). The increased attention would also make them along with the end employer jointly and severely liable for non-compliance to misclassification. The proposed legislation would also put more power in the hands of the contractor by making them aware of the “mark-up or margin” being paid by the end employer to the agency. The proposed changes also consider putting caps on end employers for the number of independent contractors that they can employ from agencies (for example 20%).

Please don’t be complacent on this matter because it is currently only the Ontario Government reviewing Legislation. Other provinces are likely to follow suit as we have seen with Workers’ Compensation eligibility decisions. First, we observed Worksafe BC refuse coverage to “Independent Contractors” stating they viewed them as a Personal Services Business (PSB), and shortly after Ontario, Alberta and Saskatchewan Workers’ Compensation Boards followed.

In Canada, we have the common law and corporate structures, that when followed, provide a compliant model of doing business, small or large. Decades have been passed with certain precedence’s that have allowed for a happy medium between growing one’s business and maintaining an entrepreneurial spirit here in Canada. However, if companies and contractors continue to disregard their own protection and not seize the opportunity to work together, the contractor model as we know it will slowly be squeezed from the Canadian marketplace.

By learning the lessons from other countries, we still have the opportunity to protect the Contractor Model in Canada. To do so, employers and independent contractors must work together. Let’s leave a trail, rather than follow an unnecessary path.