The Ontario Employment Standards Act (ESA) provides many workers that are classified as employees with minimum rights and protections. These include a range of things, including minimum wage, rights upon termination and severance of employment, and several different types of leave, including vacation time.
However, the ESA has recently been amended to exclude a subset of individuals that meet the definition of “business consultant” or “information technology consultant.” This article looks at this new exemption, including the conditions that need to be satisfied for business and information technology consultants to be excluded from the application of the legislation.
The ESA applies to Ontario employees, subject to a range of exceptions
As we have written about before, the employment standards set out in the ESA apply to an employee and their employer if either the employee’s work is to be performed in Ontario or if it is to be performed both inside and outside Ontario in circumstances where the work performed outside Ontario is a continuation of the work performed inside.
To benefit from the ESA, the worker needs to be classified as an employee rather than an independent contractor. Under the ESA, an employee is defined to include a person who:
- performs work for, or supplies services to, an employer for wages;
- receives training from an employer, provided that the skill being trained is used by the employer’s employees; or
- works for compensation from their residence but is not an independent contractor.
See our previous articles on how to distinguish between employees and independent contractors.
Section 3 of the ESA contains a range of exceptions that carve out particular employees and employers from the scope of the legislation. A key exception is for employment relationships covered by federal jurisdiction, in respect of which the Canada Labour Code imposes employment standards. However, the ESA contains a list of other people that are excluded, such as holders of political, religious, or judicial office or elected office in an organization.
The Working for Workers Act 2022 made a suite of changes to Ontario employment law
Bill 88 received royal assent and became law on April 11, 2022. The Working for Workers Act 2022 made significant changes to the employment law landscape in Ontario, including by:
- creating the Digital Platform Workers’ Rights Act 2022, which, when it comes into force will establish certain rights for workers that perform digital platform work; and
- amending the ESA to create an obligation on employers with 25 or more employees to develop and circulate a written policy with respect to the electronic monitoring of employees.
The Working for Workers Act also introduced other changes, including excluding certain business and information technology consultants from the rights and protections granted by the ESA.
What is a business or information technology consultant according to the ESA?
As amended by the Working for Workers Act, the ESA defines a business or information technology consultant as an individual who provides certain advice or services to a business or organization.
A business consultant provides advice or services in respect of the business or organization’s performance, including in respect of its:
“operations, profitability, management, structure, processes, finances, accounting, procurements, human resources, environmental impacts, marketing, risk management, compliance or strategy.”
An information technology consultant provides advice or services in respect of the business or organization’s information technology systems, including their:
“planning, designing, analyzing, documenting, configuring, developing, testing and installing.”
According to the guide to the ESA, these definitions cover both situations where the individual provides advice or services to their employer or a client of the employer.
What other conditions need to be satisfied for the consultant to be excluded from the ESA?
Three other conditions need to be satisfied for a business or information technology consultant to be excluded from the ESA:
- the consultant provides services through a company of which they are a director or shareholder who is party to a unanimous shareholder agreement, or through a sole proprietorship if the services are provided under a registered business name;
- there is an agreement setting out when and how much the consultant will be paid, which needs to be at least $60 per hour, not including things like bonuses and expenses; and
- the consultant is paid in accordance with the agreement.
What does the exclusion actually do?
The amendment to the ESA, excluding certain business and information technology consultants, took effect on January 1, 2023.
If an individual is an employee (rather than an independent contractor) and meets all the requirements set out above, the new exception means that they do not have rights under the ESA. If one of the conditions is no longer met, the person may have rights under the ESA.
Why did the Government introduce the exclusion?
The Ministry of Labour, Training and Skills Development said that it proposed the amendment because some businesses wanted certainty that contracts with consultants would not create employment relationships and that some workers also preferred to be independent contractors rather than employees.
Robin Martin MPP reinforced this explanation in the debate on Bill 88 in the Standing Committee on Social Policy when she said:
“What we’re doing is clarifying criteria that already exempt those [employees] from the Employment Standards Act … Due to the nature of their highly skilled work in this space, they choose this [contractor] status so that they can charge a higher salary or benefit and get a more favourable tax treatment.”
Contact Haynes Law Firm in Toronto for Guidance on Employment Legislation
The Haynes Law Firm advises both employers and employees on amendments to Ontario employment legislation, including how these changes impact the classification of workers. Paulette Haynes assists organizations in determining whether the ESA covers workers to help avoid penalties and litigation and also helps employees to obtain their legal entitlements. Please contact the Haynes Law Firmonline or call us at 416.593.2731.