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Considering upcoming changes in worker classifications

February 16, 2021
By Jason Mandlowitz

(Kaspars Grinvalds/Adobe Stock)

One of the key workplace modernization issues for 2021 will be the classification of workers.

Governments have demonstrated their concern with precarious work and are moving to extend workplace protections for independent contractors, dependent contractors, self-employed professionals and gig workers.

Questions have arisen whether an organization contracting with an independent worker has a basic duty of care and whether occupational health and safety legislation applies.

Recent surveys report that 36 per cent of the U.S. workforce includes gig workers.


The United States Bureau of Labor Statistics’ Contingent Worker Supplement defines gig work as “electronically mediated work” and “online platform work” where individuals use a company website or mobile application to connect with customers and temporary jobs, receive compensation from the company which owns the communications platform and have autonomy to decide when and where they work.

These individuals can then be classified as independent contractors.  For organizations, the costs associated with employees is lowered because it is not responsible for employee benefits and infrastructure (office space, computers)  but secures the advantage of accessing high quality, competent specialists with no overhead costs.

Legislating the gig economy

A number of U.S. states are moving towards legislating the gig economy.  Nine states have passed legislation defining a new term, “marketplace contractor,” to cover gig workers.

A marketplace contractor is defined as an on-demand individual with an independent business structure who is treated as an independent contractor and not an employee of a marketplace platform

Advocates of this trends assert gig workers support being classified as independent which accords them  opportunities for flexible work, entrepreneurship, business innovation and work-life balance.

The most recent effort in the state of California to legislate gig workers provides support. California Assembly Bill 5 implemented a three-part test for employment status that was intended to allow more individuals to be defined as workers.

During the 2020 U.S. general election, California voters approved Proposition 22 by a 58 per cent majority vote which exempts app-based transportation and delivery companies allowing the classification of their service providers as independent contractors.

Critics of growing business independence are concerned by the growth of precarious employment relationships.

Non-employees are low-paid, temporary, receive little or no training, have no health-care nor retirement benefits, and are subject to the risk of doing work away from an organization.

Considering Ontario’s response

To address these concerns one can focus on Ontario.

Bill 148: Fair Workplaces, Better Jobs Act, 2018 amended the Employment Standards Act to place the burden on the employer to prove that a worker is not an employee for the purposes of the legislation.

Enforcement is the responsibility of the provincial ministry whose officials may conduct workplace inspections and issue penalties from $350 to $1,500 per offence, or increased fines upon conviction if misclassification of workers persists.

The laws and rules governing worker classification are diverse, inconsistent — and baffle employers. Some clarification is to be found in Ontario workplace safety and insurance law and policy.

Section 2(1) of the Workplace Safety and Insurance Act, 1997, defines worker as a “person who entered into or is employed under a contract of service or apprenticeship” and includes a number of specific relationships including a student. A contract of service is generally considered a contract under which an individual agrees to perform tasks as directed by an employer.

An independent operator is “a person who carries on an industry included under the act and who does not employ any workers for that purposes.” An independent operator is generally considered an individual who enters into a contract for services.

Guidance on classification

The Ontario Workplace Safety and Insurance Appeals Tribunal (WSIAT) has provided excellent guidance and leadership in the effort to adjudicate worker classification.

WSIAT acknowledges that no single factor is determinant of a business relationship and, rather, relies on a number of factors that “are helpful” in determining the business relationship between parties who have entered into a service contract.

These include, but may not be limited, to:

  1. ownership of tools, equipment and machinery used in the work or business
  2. form of compensation and prospect of profit or risk of loss
  3. business indicia
  4. organizational control including where, when and how work is performed
  5. intention of the parties evidenced by a service contract
  6. business or government records reflecting the status of the parties
  7. economic or business market
  8. existence of same/similar services supplied by the employer undertaken by individuals otherwise defined as workers
  9. substitute service including the right to hire and terminate others
  10. degree of integration with the employer.

Ontario employers who recognize they have engaged in a service contract with an individual who is financially dependent on the employer have the option to classify the relationship as that of a dependent contractor and are expected to arrange coverage under the WSIAT.

What changes are likely in 2021?

If experience in the U.S. is a guide, 2021 will experience government initiatives to narrow the definition of independent work to include more workers as employees with greater access to employment protections.

Following Proposition 22, California lawmakers have come forward with new provisions on minimum wage, mileage per diem, average work hours, entitlement for health care subsidies, disability payments and health and safety.

The Biden-Harris administration has articulated support for worker rights and advocated for greater gig economy regulations.

The “Biden Plan For Strengthening Worker Organizing, Collective Bargaining and Unions” has called for labour law reform including enhanced benefits and protection for gig workers, changes to legal tests enabling gig workers to receive independent contractor status and the adoption of stricter classification similar to the original California AB 5.

As with Ontario Bill 148, this would place the legal burden on the employer to prove that a worker is an independent contractor by demonstrating the worker has full control of work performance; work was completed outside of the usual course of business for the company and the worker has an independent business or occupation that usually performs the contracted work.

It would be advisable for employers to review their workplace practices and contracts for service to prepare for the inevitable challenges in worker classification.

Jason Mandlowitz is president of Mandlowitz Consulting and Paralegal Services in London, Ont.

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