New Ontario Employment Legislation Bill 139 Review – May 2009
For every new piece of government legislation there are examples
of the need for the new rules and examples of ways to take
advantage of the new legislation for personal gain:
The proposed Bill 139 stated that; an assignment employee of
a temporary help agency does not cease to be the agency's
assignment employee because, he or she is not assigned by
the agency to perform work for a client on a temporary basis.
The Result could have been: “If I place someone on a job, no matter how long (a couple of days to cover reception, a week of labour at a worksite etc) then I need to keep that person on my books as an employee for 35 weeks. At the end of that time I need to pay them for all stat holidays and termination pay.”
Last week the Ontario Legislature passed a scaled down version of Bill 139. The sections requiring Severance payments for Temp or Contract workers, even if they are not on assignment were removed from the Bill. The proposed Bill and the final version should serve as a wake-up call for everyone who uses Temporary, Contact or Freelance workers.
Prediction
Bill 139 will force an increase in the employment costs and liabilities associated with the use of Temp, Contract and Freelance employees.
Background
The new economy has forced employers and employees alike to rethink the way in which they conduct business. Traditionally, organizations have maintained a set work force with a prescribed number of employees on a continuous basis to complete required work. However, increasingly, the workplace has become less "product" oriented, and more "project" oriented. Employers may not need a permanent work force and more than ever are seeking to obtain the services of individuals in a capacity other than as "employee" to reduce the costs associated with having a permanent work force. To answer this call, individuals are often willing to provide their services as an independent contractor.
Today, contract and temporary employees are an important part of the workforce. More than 700,000 people in Ontario alone have temporary jobs, many through temporary help agencies, which provide their workers to client businesses that want staff on a non-permanent basis. There are about 1,000 agencies currently operating in Ontario.
Work through temporary help agencies has also changed:
• In the 1970s and 1980s, employment through temporary help agencies was mostly in short-term, clerical jobs that lasted a few days or weeks. Temporary help agency workers were called in when regular staff members were away sick or on vacation. Today, agencies supply workers in a wide range of occupations.
• An employee of an agency might be assigned to a single client business for several months, or even years.
• In many cases, agency employees work side-by-side with the staff of an agency's client business, doing the same type of work.
New Legislation With Far Reaching and Unknown Impact
There are three major issues/changes impacting the Temporary, Contract, Freelance segment of the market:
• Bill 139 re: Temporary Help Agencies – New Costs and Liabilities including greater clarity of the specifics of each assignment and requirements for employee protection. These protections are important and should be in place for all workers.
• Revoking "Elect To Work" Exemptions as of January 2, 2009
• Greater Scrutiny of Contract & Freelance Agreements
Bill 139 Temporary Help Agencies
On December 9, 2008, the Ontario Government introduced Bill 139, the Employment Standards Amendment Act (Temporary Help Agencies), 2008. The proposed legislation is part of the provincial government’s Poverty Reduction Strategy, which aims to assist low-income workers and families. One of the intents of the bill is to remove barriers for Temp employees from becoming permanent employees of the companies where they have been on temp assignment.
One of the impacts of the new legislation is:
Temporary agencies will be prohibited from charging a "temporary to permanent" fee or finder’s fee where the employee has been working for the client company for six months or more. This six-month period begins from the first day the temporary employee performs work for the client company and is not paused or interrupted by gaps in service, volume of work or the duration of the assignment. Therefore, in theory, a client company could employ an assignment employee for the month of December and hire the employee permanently the following July without incurring a finder's fee. This six-month waiting period is likely inconsequential for most employers, as most will typically wait at least this long before directly hiring an assignment employee.
The second major impact is more documentation of the specific requirements of each assignment and documentation of the related protections and safety measures. These requirements should protect both the employee and the employer and they are hard to argue with but they will require extra documentation and therefore extra administrative cost.
Revoking "Elect To Work" Exemptions
Currently, the ESA contains special rules for certain employees. Employees who "may elect to work or not [to work] when requested to do so", were exempt from the ESA requirements regarding public holidays, and notice of termination and severance pay.
Many call centers and temporary help agency employees were considered to be "elect to work" since they could choose to accept or refuse an agency assignment without any negative consequences. Because they were considered "elect to work", these employees were exempt from full public holiday entitlements, and requirements around termination and severance.
The government has now made a regulation removing the "elect to work" exemptions regarding public holidays, effective January 2, 2009, ensuring that call center and temporary help agency employees will have the same rights to public holiday entitlements as full-time employees in Ontario.
It’s not just call center and temp agency workers that benefit from this change. Many other workers like home care workers (personal support workers) will now get public holiday pay as a result of the removal of the elect to work rule. The additional cost to a Call Center can be as much as 9 days additional pay over a 240-day year or a 3.8% bottom line impact.
Mat-Leave, Contract, Self-Employed and Freelance Agreements
Among the many changes arising from a rapidly evolving economy is the expanded nature of services provided by independent contractors. Whether home based, or more traditional in structure, it is important to recognize that the business relationship between your company and the independent contractor is different in the eyes of various government agencies.
Failure to understand these government rules regarding independent contractors can, in some instances, result in cost increases or liabilities and penalties that may be greater than the cost of hiring the contract labour in the first place.
Basically, Canada Revenue Agency defines two types of employment contracts:
1. Contract of service (insurable employment income - employer must deduct EI, CPP)
2. Contract for service (non-insurable contract work)
There is a four-fold test that the Canada Revenue Agency uses to help determine whether or not someone is an independent contractor or an employee. By merely saying that one party is an independent contractor, or having a lawyer draft an agreement does not legally or conclusively ensure that the party is an independent contractor. The legislation is specific, but due to the many forms of contract work the rulings often fall into very grey areas.
Four Fold Test
1. Control
The main difference between employees and contractors is the employer/payer's authority to exercise control over not only what work will be done, but also the manner in which it is done. Even if the control is never exercised, this factor is strong evidence that an employer / employee relationship exists. Similarly, with an independent contractor the employer is entitled to stipulate what is done or what result is achieved but not the manner in which it is completed.
2. Ownership Of Tools & Equipment
Where the payer/employer supplies tools, equipment, materials, etc., it is indicative of control over the worker. It also indicates a substantial investment in the business. This supports an employer/employee relationship. Alternatively, where the worker provides the tools, equipment, materials, etc., it indicates a lack of control by the employer/payer. This also indicates (depending on the size of the investment) that the worker is in the business as a self-employed contractor with an investment into that business. However, this does not necessarily apply to occupations where it is customary for employees to use their own hand tools (i.e. mechanics).
3. Risk Of Profit/Chance Of Loss
This indicates that a person is in the business to make money and is at risk of losing money as opposed to earning a fixed wage / salary or ongoing commission.
4. Integration
Integration has to be considered from the point of view of the worker, not the employer/payer. Where the worker integrates the employer’s activities to his own commercial activities, this demonstrates an independent status. The worker is acting on his own behalf, he is not dependent on the payer's business and he is in business for himself.
Where the worker integrates his activities to the commercial activities of the payer, an employer-employee relationship probably exists. The worker is acting on behalf of the employer; he is connected with the employer's business and is dependent on it.
Points to Consider When Using a Temp Agency, Contract of Freelance Staff
If you plan to hire someone through a Temporary Help Agency, a Freelancer or a Contractor, make sure that you are covered and that the business or supplier that you are dealing with is properly insured and submitting all of the employer documentation and remittances for CPP and WSIB etc. In the extreme case, if you hire someone on ‘Contract’ and they do not submit the CPP or Income Tax, you could be liable as the employer.
Summary
Bill 139 has been introduced to protect Temporary workers but as a result there have been potential liability issues and costs added to the entire industry.
We have attempted to provide an overview here and raise some issues for you to be aware of. Readers are cautioned against making any decisions based on this material alone. Be sure you are dealing with a reputable firm and/or contact your employment lawyer for advice.
Wayne Percy, Senior Partner, May 2009
We invite your comments to wayne@Derhak.com, or call (416) 675-7600 ext. 209.