Canadian HR Reporter

CANADIAN HR REPORTER MARCH 2019 EMPLOYMENT LAW 5 sherrardkuzz.com | 416.603.0700 | 24 Hour 416.420.0738 250 Yonge St #3300, Toronto, ON M5B 2L7 | @sherrardkuzz If you're an employer, we're the only call you need to make. 24 HOUR 416.420.0738 At Sherrard Kuzz LLP we collaborate with our clients to anticipate and avoid human resources problems. We know proactive steps today will prevent Murphy's Law tomorrow. From human rights to health and safety, and everything in between… JOINT VENTURE BY: Independent contractors: Riskier than ever In our gig economy, organizations are in- creasingly looking to meet staffi ng needs through temporary and freelance posi- tions, hoping to avoid costly overtime and termination pay that could otherwise be owed to an "employee." Individual workers looking for flexibility, independence and tax-friendly income may also be attracted to temporary and free- lance work, often as "independent contractors." While this type of arrange- ment may seem like a win-win, misclassifying an "employee" as an "independent contractor" has always been risky for Canadian employers, exposing them to po- tential liability under employment standards legislation for unpaid wages, overtime pay, vacation and public holiday pay, and under the common law for reasonable notice of termination. In Canada, these risks are now greater than ever. Independent contractors: e new frontier for class-action lawsuits Historically, employment-related class-action litigation in Canada has been relatively uncommon. No longer. On Jan. 2, 2019, the Court of Appeal for Ontario released its decision in Heller v. Uber Tech- nologies Inc., striking down a mandatory arbitration clause in Uber's service agreement with its independent contractor drivers. The decision paves the way for a proposed class-action law- suit in which drivers seek a dec- laration they are "employees" of Uber — not independent contrac- tors — and are therefore governed by the provisions of the Employ- ment Standards Act, 2000, (ESA). The drivers claim damages for alleged violations of the ESA of $400 million. In 2016, the Ontario Superior Court in Omarali v. Just Energy (leave to appeal refused) certi- fi ed a class action fi led on behalf of about 7,000 sales agents hired as independent contractors to sell products door-to-door. Similar to the proposed Uber class action, the claim alleges the independent contractors were, in fact, employees, entitled to the benefi ts and protections of the ESA, including minimum wage, overtime pay, vacation and public holiday pay. In most cases, a class action will be settled before reaching court. However, settlement still comes with a cost. Amendments up the ante Even if an organization does not engage a large number of inde- pendent contractors, exposing it to a potential class-action lawsuit, an independent contractor may still fi le a claim with the Ministry of Labour claiming she has been misclassifi ed and is an employee for the purpose of the ESA. A misclassifi cation can result in a penalty of $250 for the fi rst contravention, $500 for the sec- ond contravention in a three- year period and $1,000 for the third contravention in a three- year period. In our gig economy, organizations are in- creasingly looking to meet staffi ng needs through temporary and freelance posi- tions, hoping to avoid costly overtime and termination pay that could otherwise be Sundeep Gokhale and omas Gorsky LegaL VieW Notable cases Glimhagen v. GWR Resources Inc., 2017 CarswellBC 1238 (B.C. S.C.). Lars Glimhagen provided accounting and computer consulting services to GWR Resources as an independent contractor starting in 1989. He used the equipment and offi ce space to complete assigned tasks, but also made money through an accounting business he had on the side. Around 1998, Glimhagen started managing GWR's offi ce operations and also worked as a personal assistant to the CFO. In 2010, he became CFO and a formal employee. However, GWR terminated his employment without cause or notice in 2012. The court found that Glimhagen became a dependent contractor when he took on more tasks and became an integral part of GWR's operations in 1998 — the point at which his years of service started accumulating. Based on Glimhagen's 12 years of combined service as a dependent contractor and employee, the court awarded 12 months' reasonable notice. Quinte Children's Homes Inc. v. Minister of National Revenue, 2015 CarswellNat 5264 (T.C.C. (Emp. Ins.). Quinte Children's Homes (QCH) hired Sara Fobear under a consulting services agreement. QCH paid Fobear for the hours she worked and reimbursed her for using her car for work. When Fobear began working full-time in 2012, she indicated on her tax return that she earned employment income, not business income. The Ministry of National Revenue found Fobear was engaged in insurable employment and QCH must make appropriate deductions and payments. QCH appealed and the court found that QCH intended for Fobear to be an independent contractor. While QCH gave Fobear a substantial amount of instruction on how to do her job, that was part of the regulated industry. QCH was "simply engaging workers to perform services in accordance with the law." QCH's lack of control over the actual assignment of work was the largest factor in determining Fobear was an independent contractor. LIABILITY > pg. 16 Credit: structuresxx (Shutterstock) Percentage of Canadian millennials who have had or anticipate having some form of gig job. Source: TD Insurance Popular reasons for taking contract work autonomy and control extra money on the side work-life balance 49 % 49 % 42 % Source: BMO Wealth Management Downsides to the gig economy lack of medical, dental or disability benefi ts (69%) not getting paid when sick (55%) not earning enough (41%) A misclassifi cation can result in a penalty of $1,000 for the third contravention in a three-year period.

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