Canadian Employment Law Today

September 27, 2017

Focuses on human resources law from a business perspective, featuring news and cases from the courts, in-depth articles on legal trends and insights from top employment lawyers across Canada.

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OVER THE LAST decade, the number of companies that comprise what is colloquially called the "gig economy" has grown tremendously. The gig economy is characterized by businesses that enter into short-term contracts with workers who are paid for "gigs" they perform. Uber, Airbnb, and Grubhub are each prominent examples of businesses that fall under this label and have enjoyed great success. But where do these workers and companies fall under employment standards legislation? 4 Canadian HR Reporter, a Thomson Reuters business 2017 CASE IN POINT: EMPLOYMENT STANDARDS BACKGROUND Sorting out the gig economy Employment standards must adapt to new types of employment from companies such as Uber and Airbnb BY GEOFF MASON T he rapid expansion of the gig economy is not surprising, given the numerous benefits it provides. Effectively, anyone with a smart - phone and an Internet connection can find a job or develop a business. However, the gig economy also has certain disadvantages that pose complex questions for lawmakers. Chief among these concerns is the fact that a majority of workers in the gig economy are clas- sified as independent contractors, and thereby left without employment benefits and protections. In order to enjoy the benefits of the gig economy while addressing its problems, legislators will need to rethink the legal framework that applies to its workers. However, this will also be an exception- ally challenging task. e case for regulation ere are two ongoing debates regarding the legal classification of workers in the gig economy. e first is being addressed in court- rooms throughout Canada, the United States, the UK and elsewhere. It concerns whether workers in the gig economy are being properly classified as independent contractors under current legal regimes. e second (and the more interest- ing one) is being addressed in the public sphere. It concerns whether workers in the gig economy should be classified as independent contractors notwithstand- ing the current legal frameworks for dis- tinguishing employees from independent contractors. e evidence suggests that they should not. e gravest concerns about the rise of the gig economy are a function of simple economics. A June 2016 study entitled e Talented Mr. Robot conducted by the Brookfield Institute for Innovation and Entrepreneurship says that approximate- ly 42 per cent of the Canadian workforce is at a high risk of being displaced by auto- mation over the next two decades. Many of these positions — salespeople, admin- istrative assistants, cashiers, and the like — are traditionally filled by employees and not independent contractors. While estimating the size of the gig economy is challenging given that there is no consistent definition of "gig economy," current estimates suggest that it is large and growing. Brad Smith, CEO of market research company Intuit, says that it is estimated that the gig economy currently comprises approximately 34 per cent of the U.S. workforce, and that number is set to grow to 43 per cent by 2020. Many gig economy companies are also directly replacing traditional employee- driven industries. Airbnb, for example, is converting a substantial portion of the hospitality industry from employee-driv- en to independent contractor-driven. Put simply, jobs that have been tradi- tionally filled by employees are dying and are being replaced, either directly or indi- rectly, by independent contractor-driven positions in the gig economy. is para- digm shift requires us to rethink how we categorize workers for multiple reasons. First, as automation continues to dis- place jobs, more and more people will be left without work. is means there will be an increasing number of people who will be in need of assistance. Traditionally, employees have received benefits such as notice of dismissal, pay in lieu of notice, and employment insurance contributions from employers that have provided es- sential assistance in times of current or impending unemployment. However, as employee positions con- tinue to be displaced by independent contractor positions, there will be fewer and fewer people entitled to these vital benefits. e math is simple: there will be a growing number of people in need of unemployment assistance and a shrink- ing number of people entitled to it. Given the economic trends, this disparity will continue to grow. is will have conse- quences not only for individuals, but for the economy as a whole. ere is also a more principled objec- tion to the application of the independent contractor model to gig economy work- ers. Scholars such as Guy Davidov note that "it is often said that the basic char- acteristic of an employment relationship — which is also the background reason for all protective labour and employment regulations — is the inequality of bar- gaining power between the…employer and the…employee." While inequality of bargaining power is challenging to de- fine, a useful definition Davidov provides is "the acceptance of an unreasonable of- fer because of a lack of freedom to choose otherwise." As businesses evolve from employee- driven to independent contractor-driven, many workers will have no choice but to seek independent contractor work. ey will be compelled to due to the short supply of employee-driven jobs. As the independent contractor labour market becomes more saturated, workers will necessarily lose bargaining power. If such inequality provides a basis for justifying employee protections, there is no prin- cipled reason why it should not provide a justification for extending those same protections to independent contractors. e trouble with regulation e easy part is recognizing that some- thing needs to be done. e challenging part is determining exactly what that is, as regulators are tasked with conducting a puzzling balancing act on multiple levels. For one, regulators must recognize that they cannot simply extend employee protections to contract workers in the gig economy. If companies are compelled to provide complete employee benefits to workers in the gig economy, they would likely not extend traditional independent contractor benefits to those workers, such as independence. Rather, companies would be much more likely to simply label their workers as employees, thereby de- priving individuals who legitimately want to be treated as independent contractors

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