Employment Standards Act and Misclassifying An Employee or Contractor

Employee or Contractor

Changes to the Employment Standards Act: Are you aware of the potential implications for your business?

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By Émilie Tremblay, Manager, Tax & Advisory Services

Ontario’s recent minimum wage increase has made all the recent headlines, but there are additional considerations to the provincial workplace legislation changes that business owners need to be aware of.

Effective November 27, 2017, the Employment Standards Act (the “ACT”) was amended to include that employers who misclassify their employees as “independent contractors” could be subject to penalties, including prosecution, and public disclosure.

The penalty starts at $350/employee for the first contravention, increased to $700/employee for the second contravention, and as much as $1,500/employee for the third or subsequent contravention. Nevertheless, an individual who contravenes to the Act could be liable to a fine of up to $50,000, or imprisonment for a maximum term of one year. A corporation could be liable to a maximum fine of $500,000, if the corporation has already been convicted of an offence under the Act.

The relationship between the worker and business owner has long been deliberated by the Canada Revenue Agency. The penalties stated above are in addition to those outlined by the Income Tax Act, the Canadian Pension Plan (CPP), Employment Insurance (EI), Workplace Safety and Insurance Board (WSIB) benefit, and Employer Health Tax (EHT).

Please contact your accountant to help ensure your employees and contractors are properly classified.