As of May 30th of this year, the Ontario government has announced its plan to put in place The Fair Workplace, Better Jobs Act, 2017. This act makes several amendments to the previous Employment Standards Act, 2000, including increases in minimum wages and different standards for scheduling, leaves of absence, and personal emergency leave.
But among the many changes the government is planning to enforce as of January 1st, 2018, there’s one employment law new staffing firms must be aware of. The employee misclassification law. With the new Employment Standards Act (ESA), the Ontario government is cracking down on employers misclassifying workers as “independent contractors.”
If you want to avoid serious penalties due to the ESA 2017 related to misclassifying workers, read on to learn what this new law entails.
To Ensure Fair Treatment
The initial announcement of the new ESA by the Ontario government states that its intention for enforcing the employee misclassification law is to prevent employers from mistreating their employees. Studies have been conducted on the matter of classification. They have concluded that, in many cases, employers have purposely classified their employees as “independent contractors” so they were unprotected by the previous ESA.
Under the new ESA, the definition of an employee is as follows: “a person who receives training from a person who is an employer, if the skill in which the person is being trained is a skill used by the employer’s employees.”
The new ESA also prohibits the classification of “dependent contractor” to be conflated with the current broad definition of employee for similar reasons. Employers who do classify their workers as independent contractors are responsible for proving that they fit the definition of said term.
Penalties for Misclassifying Workers
The penalties for misclassification under the new act are steep and include prosecution, public disclosure of a conviction, and monetary penalties. While these penalties are certainly avoidable for established Canadian businesses and startups, they could be crippling to new foreign businesses.
For instance, let’s say you own a U.S. staffing firm business looking to expand into Canada. There are already more than a few obstacles you’ll face regarding how payroll is handled in Canada versus the U.S. Noncompliance is the fastest way to see your hard efforts go up in smoke, especially if it concerns the improper treatment of employees.
While your staffing firm is probably not out to mistreat its staff or candidates (who in many cases really do fit the definition of independent contractors), you still run the risk of noncompliance. This situation could happen if, for example, you don’t have proper paperwork or lack a sufficient client relationship management system to store up-to-date information on your staff, candidates, and clients on record.
Misclassification Doesn’t Have to Be an Issue
Even if it’s a simple clerical error because of different understandings of employee classification in different countries, you’ll want to avoid misclassifying workers at all costs. Another reason for the amendments to employee definitions in the new ESA is that the status quo of work in Canada has changed. Now more than ever, the Canadian economy is one that relies on “precarious work” or the “job churn.”
In a gig economy, those who are genuinely temp workers and independent contractors don’t often have access to benefits, vacation pay, or other considerations permanent employees have. The government of Ontario is cracking down on misclassifying workers so employers don’t exploit loopholes that existed in the previous ESA.
That doesn’t mean new staffing firms and temp agencies (especially foreign firms) should suffer due to the new amendments to the ESA if they aren’t aware of the changes being made. There are ways to start a successful staffing firm by outsourcing your administrative tasks to experts who know Canadian business laws thoroughly. Don’t take chances; your staffing firm deserves to shine!