Gig workers enter agreements with companies to provide services to their clients. They often use digital platforms to book jobs, such as delivering food or transporting people. This type of income-earning activity falls outside the scope of a traditional employment relationship and various jurisdictions have struggled to determine how to regulate such relationships.
However, it is clear that gig workers are increasingly being afforded rights, and companies that use their services must take care regarding their classification. This article looks at some of the advantages of using independent contractors and the development of the law in regulating gig workers’ rights, culminating in Ontario’s Digital Platform Workers’ Rights Act 2022.
Advantages of using independent contractors
There are potential advantages to using independent contractors rather than employees. Companies do not need to comply with the employment standards in the Employment Standards Act (ESA) with respect to independent contractors. These include the requirements to pay minimum wage, provide time off, including vacation pay and make statutory deductions, such as contributions to the Canada Pension Plan and Employment Insurance.
Using independent contractors can provide greater flexibility for the business. It can be easier to terminate independent contractors, depending on the particular terms of the arrangement. Independent contractors are not entitled to statutory termination pay under the ESA or common law notice.
Could a “contractor” actually be an employee?
However, just because a contract labels a worker an “independent contractor” does not necessarily mean they are independent. They could be an employee.
We recently wrote about how courts distinguish between employees and independent contractors. The key question is whether the worker is in business for themself (independent contractor) or simply providing services for another entity (employee). Courts look to a range of factors to determine this, such as whether the worker is subject to the entity’s control, provides their own equipment, and has the opportunity to profit rather than earn a regular wage.
If employers misclassify employees as independent contractors, they may be in for a shock. Firstly, they could be liable for back pay to ensure wages already earned meet the ESA requirements, for example, through payment of vacation pay. Misclassification is prohibited by the ESA and could result in a fine. There is the possibility of penalties from the Canada Revenue Agency, such as for failure to remit income tax.
Finally, a misclassified employee could bring a wrongful dismissal claim, which could result to pay common law damages for reasonable notice or payment for the balance of the term if it is a fixed-term contract if the contract does not have an enforceable termination provision.
The battle for more rights for gig workers
The employment landscape has changed in recent times. More independent and flexible jobs have become common, aided by the internet and phone apps. This trend accelerated during the COVID-19 pandemic, with the closing of establishments and emphasis on home delivery.
Gig workers have been traditionally classified as independent contractors, exempting them from legislated employment standards like the payment of minimum wage. This has become a controversial political and legal issue in many jurisdictions.
This battle has been playing out in Ontario. For example, a community union representing gig workers, Gig Workers United, has campaigned since 2018 for gig workers to be classified as employees under the ESA. This has been strongly resisted by some companies that use gig workers. Courts have also been called upon to determine whether workers have been misclassified.
Ontario legislation passed to provide rights and protections for digital platform workers
In April 2022, the Digital Platform Workers’ Rights Act (Act) became law to enter into force on a day to be named by proclamation.
This Act provides certain rights and protections to workers who perform “digital platform work”, which is defined as the provision of payment rideshare, delivery, courier or other prescribed services by workers offered assignments through a digital platform.
The rights conferred by the Act include minimum wage for each work assignment (but not for time spent waiting for assignments), the right to receive tips and gratuities, and the right to receive certain information from the operator, such as a written explanation of the reasons for removing access to the platform.
Importantly, the Act does not make digital platform workers employees entitled to the ESA’s benefits. In fact, the Act states that it establishes rights for these workers regardless of whether they are employees. According to section 5, if the terms of an applicable contract or other legislation (like the ESA) provide a greater benefit than a right under the Act, that greater benefit applies.
Can gig workers be found to be employees?
As a result, the presence of this new legislation only settles once and for all the question of whether gig workers may be classified as employees. A class action has been brought claiming that Uber has misclassified over 350,000 workers in Ontario.
Another mechanism through which a worker may argue they are an employee is by filing a claim with the Ontario Ministry of Labour. For example, in February 2022, an employment standards officer decided that a particular Uber Eats courier was an employee rather than an independent contractor. Uber has appealed this decision.
Contact Haynes Law Firm in Toronto for Guidance on Proper Worker Classification
The Haynes Law Firm advises employers on the classification of workers. Paulette Haynes has an in-depth understanding of the law relating to worker classification and the recent statutory developments, so you can rest assured knowing that your organization is well-placed to achieve its staffing objectives. Whether it is designing contracts or policies or advising on termination, Haynes Law Firm can assist. We also advise and represent workers, ensuring they obtain their legal entitlements. If you have been misclassified, you can do something about it. Please get in touch with the Haynes Law Firm online or call us at 416.593.2731.