With a new year comes new legislative updates!

On January 1st, 2023 significant changes came to the Employment Standards Act. Many independent contractors have now shifted to employee status after these changes.

What does this mean?

  • If your independent contractors are now considered an employee they will be entitled to minimum wage, overtime pay, statutory holiday pay, vacation with pay, and all the other rights that come with employee status under the ESA.
  • Employers will be required to make employee deductions and government remittances.

Who does this apply to?

This change does not apply to everyone, but this is significant change and will make an impact for a lot of individuals and businesses. This change applies to “business consultants” and “information technology” consultants.

As per the Employment Standards Act:

“Business consultant” means an individual who provides advice or services to a business or organization in respect of its performance, including advice or services in respect of the operations, profitability, management, structure, processes, finances, accounting, procurements, human resources, environmental impacts, marketing, risk management, compliance or strategy of the business or organization.

“Information technology consultant” means an individual who provides advice or services to a business or organization in respect of its information technology systems, including advice about or services in respect of planning, designing, analyzing, documenting, configuring, developing, testing, and installing the business or organization’s information technology systems.

What are the exceptions?

The Employment Standards Act has detailed some exceptions to be aware of.

The act (and employee status under the ESA) does not apply when:

  1. The business consultant or information technology consultant provides services through,
    • a corporation of which the consultant is either a director or a shareholder who is a party to a unanimous shareholder agreement, or
    • a sole proprietorship of which the consultant is the sole proprietor, if the services are provided under a business name of the sole proprietorship that is registered under the Business Names Act.
  2. There is an agreement for the consultant’s services that sets out when the consultant will be paid and the amount the consultant will be paid, which must be equal to or greater than $60 per hour, excluding bonuses, commissions, expenses and travelling allowances and benefits, or such other amount as may be prescribed, and must be expressed as an hourly rate.
  3. The consultant is paid the amount set out in the agreement as required by paragraph 2.

To summarize, the individual must charge $60 or more, is incorporated, OR is set up as sole proprietor with a registered name under the Business Names Act, accompanied with a written consultancy agreement. All three bases must be covered.

If an employer misclassifies an employee in this way, an employment standards officer can issue a notice of contravention that results in a penalty, a prosecution or both against the employer. The consequences can be quite severe in the cases of “employee or contractor?”. Now is a good time to review these changes and the exceptions and have an employment agreement drafted recognizing previous services while starting to make deductions if applicable.

To learn more, reach out to RLB People. Our team of Human Resources Professionals offer support in Policy Developments, Legal Compliance, Training Sessions, Performance Management and so much more! To find out more about the wide variety of services RLB People can provide you with contact the team at people@rlb.ca or visit their website at people.rlb.ca.