Independent Contractors – HRM Now! by Top Hat

When HR professionals see the words “independent versus dependent,” it may give many of them vague flashbacks to a psychology or statistics course that they took, but all HR professionals should brush up on these terms, because they are vitally important in the new world of gig employment.

Let’s refresh our memory banks on what an independent versus dependent contractor is in the HR world. According to the Ontario Ministry of Labour (MOL), an “independent contractor” is defined as the following:

“An independent contractor is someone who is in business for themselves. An individual may be considered an independent contractor, and not covered by the [Employment Standards Act], when at least some of the following applies:

the business can end the individual’s contract for services, but cannot discipline the individual
the individual:
- has the opportunity to make a profit and has a risk of losing money from the work
- determines how, when or where the work is performed
- decides whether to subcontract some of the work”

It is important that HR professionals know the status of individuals doing work or providing services for their organization. They need to determine if the employees are independent or dependent contractors, as each category has significant laws and liabilities that pertain to them.

According to the Ontario Labour Relations Act, 1995 (LRA), a “dependent contractor” is defined as:

“A person who performs work or services for another person for compensation or reward on such terms and conditions that the dependent contractor is in a position of economic dependence upon, and under an obligation to perform duties for, that person more closely resembling the relationship of an employee than that of an independent contractor.”

The key wording to note from the definition above is “more closely resembling the relationship of an employee.” It is that wording that makes all the difference and places legal liabilities on the employers to the employees, such as ensuring minimum wage, vacation pay, and safety.

There was a recent ruling by the Ontario Labour Relations Board (OLRB) that Foodora Workers were to be considered dependent contractors and not independent contractors.

This was a case with a ruling that was precedent setting, similar to the one in California, where Uber drivers were to be considered employees and not independent contractors.

This new OLRB ruling allows Foodora workers the right to unionize, and if the union is successful in organizing Foodora workers, it may drastically change employees’ rights and benefits, not only for Foodora workers but all gig economy workers in Canada.

All HR professionals should brush up on the legal definitions of “employee,” “independent contractor,” and “dependent contractor” in their jurisdiction, and conduct an audit to see if there could be potential liabilities in the near future for their organization.

Discussion Questions:

1. Research the Labour Relations laws in your jurisdiction. Identify the definitions of “employee,” “independent contractor,” and “dependent contractor.” Prepare a three-minute presentation, which highlights the differences.

2. Imagine you have just been hired by Uber to review the latest OLRB ruling on Foodora workers. What recommendations would you make to the senior leadership HR team at Uber to help them reduce their legal HR liabilities?

Uber has been called a disruptive technology that has wreaked havoc with the taxi industry worldwide. Here is where things get interesting – Now the Teamsters want in and organized labour wants to be disruptive by gaining greater rights and workplace benefits for Uber Drivers.

According to the CBC as reported on March 23, 2016:

“Drivers for the ride-hailing service Uber have been given the right to unionize by Seattle city council, the only jurisdiction in North America to do so.” (By Chris Brown, Chris Corday, CBC News March 23, 2016).

Click Here to Watch a Video and Read the Article

There is one fundamental principal at the heart of this issue; that is the legal debate about the definition of independent contractors versus the definition of employees.

Every jurisdiction in North America has their own definitions, but they all have the similar theme that to be an independent contractor you must have some or all of the following:

Control over the work
Control over amount and method of payment
Control over tools and equipment required
Control over financial risk and capital costs

As stated in the video, sometimes Uber Drivers act like independent contractors and other times they act like employees. Who is correct? This issue becomes even more complex if they are considered employees and not independent contractors because minimum employee standards legislation would then apply to the employees.

Discussion Questions:

Every province has slightly different definitions of employee versus independent contractor laws. Review your jurisdictions’ rules and discuss if Uber Drivers would be allowed to unionize or not?

If unions achieve the right to unionize contingency workers such as Uber Drivers what impact could it have on using a smartphone application to hire individuals?