FAQ for Employers
The most significant factors creating the sense of urgency are the legislative changes in Alberta and Ontario increasing the scrutiny being placed on employers. In Alberta as of September 1, 2017 dependent contractors can unionize. In Ontario employers will be in violation of the Employment Standards Act if they misclassify their employees as independent contractors. The burden of proof will now fall on the employer. The Ontario government’s clear emphasis on enforcement includes a plan to hire 175 more employment standards officers, by 2021. A requirement will be set to complete all employment standards cases within 90 days of filing and inspecting one in 10 Ontario workplaces.
Canada Revenue Agency
Over the past few years Canada Revenue Agency has introduced significant changes to the business criteria and classifications that directly impact independent contractors, exposing them to tremendous financial risk upon assessment. And most recently in 2016, CRA added 700 more tax auditors (making a total of 1000) to specifically target PSBs. When a contractor has a large tax bill to pay due to reclassification as a PSB they may look to the organization to pay their tax bill claiming they are dependent. The criteria used by the CRA for PSB classification is extremely close to the criteria used in Employment Court for deeming someone as dependent.
Worker’s Compensation eligibility decisions have also started to shift. First, we observed Worksafe BC refuse coverage to “Independent Contractors” stating they viewed them as a Personal Services Business (PSB). Shortly after Ontario, Alberta and Saskatchewan Workers’ Compensation Boards followed suit. This development matters to employers because if your contractors are declined WCB coverage for the reason of being viewed as a PSB it increases the visibility of you (the end employer) as a source of PSBs. This puts a target on your back as well as on the back of all of your other contractors.
Over the last decade, the Canadian courts have created a massive potential severance liability for companies that utilize independent contractors by deeming many of these resources to be “dependent contractors”. This means dependent contractors are entitled to many of the same benefits owed to full-time employees, including: severance upon the termination of a contract, legal fees associated with the severance process, and even legacy tax obligations incurred by your dependent contractors.
The unique PCSI partner model significantly reduces the risk of your contractors being deemed to be “dependent” on your organization and in turn distances your company from a host of severance, potential tax and legal obligations that would otherwise be associated with those contractors.
In an Ontario Court of Appeal decision called McKee v. Reid’s Heritage Homes Ltd., the Court of Appeal made reference to a category of worker known as a “dependent contractor”. The court was clear that this is not a third category along with employees and independent contractors. Workers are either employees or contractors. If a worker is a contractor, in certain circumstances the court will go on to decide if that contractor is dependent or independent. The relevance of this question basically relates to notice upon termination. Where a dependent contractor relationship exists, reasonable notice will have to be provided on termination to the extent that it is not specified in any written agreement. A contractor could be deemed as “dependent” in Employment Court based on the following criteria;
- Control of Work
- Economic Vulnerability
- Ownership of Tools
- Risk of Loss/Profit
PCSI only came to market in mid 2016. We are proud to say that we are the first company with a true risk mitigation solution and still the only real solution in the marketplace. Our only competition has been addressing the depth of misperceptions people have about the issue and their actual risk exposure.
Most often it is the individual or group initiating PCSI’s involvement who pays the fees.
- If the employer is seeking PCSI engagement – they negotiate and pay the fees on behalf of their contractor base
- If the contractor seeks out PCSI on their own – they negotiate and pay the fee for themselves
Some of the benefits of paying the fees on behalf of your contractors:
- Major employer differentiator will help your organization secure and retain preferred contractors
- Positively impact your corporate and employer brand
- Change management is less challenging if contractors are not faced with an additional ongoing cost/fee