Bill 148 Compliance
In November of 2017, Bill 148 introduced new provisions that expressly prohibits the misclassification of employees and places the onus of proof on an employer that an independent contractor and any other non-employee is in fact an independent contractor or non-employee.
Employers need to review and audit the current use of independent contractor and other non-employees to ensure compliance with Bill 148.
Below are some tips and tools on how to approach the review of the current use of independent contractors and other non-employees:
Characteristics of an Independent Contractor:
- independent contractors are individuals who carry on a business separately from any organization
- independent contractors work on a profit/loss basis
- independent contractors carry the risk of losing money from the work they perform
- independent contractors make a significant capital investment in the equipment they provide
- independent contractors are not financially dependent on any one organization or customer
- independent contractors exercise control over their own business activities (how and where the work is completed)
- the agreement with an independent contractor can be suspended but independent contractors cannot be disciplined
It is the responsibility of any Organization that hires an Independent Contractor to:
- Ensure that the independent contractor is legally allowed to work in Canada. Organizations that hire foreign nationals who do not have legal authority to work in Canada are committing an offence. As a consequence, the organization committing the offence can be fined (up to $50,000) and sentenced to up to 2 year in prison.
- Issue a T5018 for independent contractors in the construction industry for payments over C$500 https://www.canada.ca/en/revenue-agency/services/tax/businesses/contract-payment-reporting-system-cprs/information-payers-t5018.html
- Issue a T4A for all other independent contractors for payments over C$500 https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/completing-filing-information-returns/t4a-information-payers/t4a-slip/what-report-exceptions.html
- Collect information from the independent contractor required to complete a T5018 or T4A: SIN (Social Insurance Number), Last Name/First Name, Address
- Verify and ensure WSIB coverage; either through a clearance certificate issued by WSIB to the independent contractor, or by including the amounts paid to the independent contractor into the employer’s insurable earnings reported to WSIB
Under the Employment Standards Act, 2000, Independent Contractors and other Non-Employees are considered Employees if at least some of the following applies:
- an organization provides an independent contractor and other non-employees with equipment or materials to perform work
- an organizations pay structure is not affected by the way an independent contractor and other non-employees do their work (e.g. working faster, creating a better product, will not result in higher pay)
- an independent contractor and other non-employees cannot subcontract their work to another person
- an organization has the right to suspend, dismiss or otherwise discipline an independent contractor and other non-employees
- an organization decides:
- what their independent contractor and other non-employees does
- how much their independent contractor and other non-employees will be paid
- when the independent contractor and other non-employees have to have the work completed
- how and where the independent contractor and other non-employees complete the work
If the majority of the above applies, the independent contractor or other non-employee is in fact an employee and as such falls under the Employment Standards Act, 2000
Organizations that are found to have misclassified employees as independent contractors may be required to pay significant penalties and interest on top of statutory remittances to CRA, WSIB and, if applicable, the Ministry of Finance.
Disclaimer: This article is intended for general information only and is not intended as legal opinion or advice. The views and opinions expressed do not reflect the official position of BNG Bossy Nagy Group or any other affiliate.