Knock Knock? Not for $3.32 per hour!
Let's start with a basic example...
Suppose you hire someone to paint your fence. You offer them a set price, and a date you would like the work completed. Past that, the rest is up to them. They can decide what brand of paint to use, what kind of brush, which days they are available to do the job, and if they want to have anyone help them paint. Moreover, nothing in your agreement stops them from painting your neighbour's fence as well, or a few more fences on the street. This painter is, more likely than not, an independent contractor.
Now, turning the tables a bit, suppose you put far stricter controls on that painter and their work. You own the paint, and the brush, and any other materials that they need. You tell them exactly what hours they are able to work, and restrict any help available to them to complete the job. You also do not allow them to take up any other fence painting jobs in the neighbourhood. You may think you still have an independent contractor relationship, but more likely than not the courts would rule that the painter is actually serving as your employee.
Why does this matter? Well, as the Toronto Star highlighted yesterday, employees who are misclassified as independent contractors are getting a raw deal. While they may have signed agreements that limit them to low pay and restrictive non-competition clauses, these workers should in fact be considered employees, and thus eligible for the benefits and protections in the Employment Standards Act, 2000 (the "ESA").
The Toronto Star article featured a new class-action lawsuit in Ontario filed by a group of 7,000 workers who conducted door-to-door sales for an energy retailer. The company oversaw uniforms, customer interactions, training, scheduling, and discipline for its workers. While the workers' conditions were tightly controlled as to indicate an employer-employee relationship, the company instead classified the workers as independent contractors, which left them ineligible for the protections available under the ESA. The article focused on a father who worked "at least six days a week from 9 a.m. to 9 p.m. on commission set out by the company, which sometimes came out to as little as $3.32 an hour - far below Ontario's $11.25 minimum wage."
The workers claim that the company benefitted unfairly from this misclassification. Not only does an independent contractor relationship restrict the company's duties relating to wages, benefits etc., but the company is also likely not responsible for paying termination or severance pay when the working relationship ends. This is, of course, not true in an employer-employee relationship.
A similar situation made headlines earlier this year in the case of Keenan v. Canac Kitchens, 2016 ONCA 79, when two kitchen installers who had worked for the same employer almost-exclusively for over three decades were terminated without notice in 2009. The employer claimed that it had shifted the working relationship to an independent contractor one in the late 1980s, but this was never clear to the workers. The Court of Appeal ruled that the installers were 'dependent contractors,' a relatively new hybrid category where the workers have some independence, but their work is still largely controlled by the company, and thus the company is still eligible for termination and severance pay. As I wrote in an earlier blog for Stancer Gossin Rose LLP:
After analyzing the Keenans’ control of their work, their ownership of their tools, and their risks of profit and loss, Mr. Justice Mew determined that the Keenans were ‘dependent contractors’ (as opposed to ‘independent contractors,’ or ‘employees’) of Canac. As the Court phrased it, “Finally, consideration is to be given to the question, “whose business is it?” The answer is: Canac’s…. To the outside world, the Plaintiffs were Canac.” Thus, as dependent contractors, the Court ruled that the Keenans were entitled to payment in lieu of reasonable notice of termination, and issued an award of 26 months’ pay in lieu of notice at a value of $124,484.04, plus interest, to reflect their many years of service.
On appeal (2016 ONCA 79), lawyers for Canac argued that the Keenans were independent contractors rather than dependent contractors. Even if they were found to be dependent contractors, Canac’s lawyers argued that the award was excessive and should be set aside. The Court of Appeal, upholding the award, held that the Keenans served Canac exclusively for all but their last two years of work, and thus were dependent contractors. As for damages, the Court of Appeal found that the trial judge assessed the circumstances properly and made a determination based on relevant case law. The appeal was dismissed, and the Plaintiffs were awarded an additional $24,000.00 in costs on top of their previous judgment.
Employment lawyers will be following this new case closely to see how the Court deals with such a large number of workers who claim to have been misclassified. If the Court agrees with the workers' position, the new-found employer could be on the hook for a tremendous sum in owed termination and severance pay, along with any implications that come from CRA for potentially mishandled employee deductions. Furthermore, the decision would effectively put a large number of companies that structure their sales agents in the same way 'on notice' to review their contractor agreements.
For employers, the lesson from these cases is vigilance. Independent contractor agreements must be written with absolute precision, and must be performed the same way. As seen in the example of the fence painter above, the courts look at key criteria such as the nature of the work, ownership of the tools, the chance of profits and the risk of loss involved in the work. No one criteria will usually be determinative of an employee or an independent contractor relationship. Instead, courts look at the situation as a whole to determine the true nature of the relationship. Thus, if a working relationship shows strong signs of the workers being treated as employees, it is most likely they will need to be paid and protected as such. An employment lawyer can help you carefully structure these agreements in order to help avoid unintentionally misclassifying workers.
For employees, it is always important to be aware of your rights at work. If you are an employee who is regulated by the Employment Standards Act, 2000, your employer is responsible for providing information on the key pieces of the law. If you are instead working in an independent contractor relationship, and feel you may have less control over your work than you should have, an employment lawyer can help you review and interpret your working agreement. if you are, in fact, being misclassified and receiving less pay and protection than you should be from your employer, there are legal remedies available. A lawyer can guide you through your options, and help recommend the best course of action to resolve your situation.
The bottom line is if you walk like an employee, and talk like an employee, then you may just be an employee. If you're walking and talking like an employee and not being paid or treated like one, then it may be time to consult with a lawyer.