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Archived - Discussion Paper on the Review of Labour Standards in the Canada Labour Code

I. Responding to the Evolving Workplace

I. Coverage under Part III

1. Definition of “Employee” and “Employer”

Commission Recommendations:

Part III should be amended to permit the Minister to enact regulations, on a general or sectoral basis, defining “employees”, “employers” and “employment”. These definitions should initially codify the current policies and jurisprudence under Part III. However, they should be reviewed from time to time to ensure that other workers who ordinarily perform substantially similar functions, under substantially similar conditions, to “employees” are covered by Part III. (R. 4.1)

Part III does not define the terms “employee” or “employment.” The term “employer” is defined as “any person who employs one or more employee”, which does not clarify matters. Part III only applies to employers and employees. Therefore, Labour Program inspectors and other officials who administer Part III must determine on a case-by-case basis whether an employee/employer relationship exists. They do this by applying principles that have been set out by tribunals and courts in case law (jurisprudence). Courts have traditionally looked to various factors in defining an employment relationship, including the following: the degree of control exercised by the alleged employer over the worker (e.g., whether the worker is subject to discipline or has the right to delegate or hire replacements); the worker’s integration into the employer’s business (e.g., day to day relationships and application of policies and procedures); the worker’s availability to work for others; the workers’ ownership of tools; and the worker’s degree of financial risk or opportunity for profit.

There are some drawbacks to the current approach. The Commission pointed out that the lack of a statutory or regulatory definition has led to some inconsistencies in how Part III is applied across Canada. The Commission was also concerned that some unscrupulous employers might exploit the lack of a definition to deny employees their rights under the statute.

In order to provide for more clarity and consistency in how Part III is applied, the Commission recommended that these terms be defined by regulation. These regulations would codify existing jurisprudence. Regulations can be issued or amended without the need to go through the legislative process in Parliament. Regulations can therefore be more easily changed than the Code. In the Commission’s view, prescribing the definitions in regulations would preserve some measure of flexibility.

Many Canadian jurisdictions have adopted legislative or regulatory definitions of terms such as “employee” or “employment.” However, the Commission’s proposal to vary definitions on sector-by-sector basis is unique. It is important to consider whether there is any need to adjust these definitions for different sectors.

For discussion:

• Should the current principles used to determine who is an “employee,” who is an “employer” and so forth, be set out in regulations?
• Is there any need to have different definitions of these terms depending on the sector where the person works?

2. Autonomous Workers and Independent Contractors

Commission Recommendations:

• A new category of “autonomous worker” should be established under Part III. “Autonomous workers” should be defined by Ministerial regulation as including persons who perform services comparable to those provided by employees under similar conditions, but whose contractual arrangements distinguish them from “employees.” Persons who provide services to or on behalf of employers, but who are neither “employees” nor “autonomous workers” should be clearly identified as “independent contractors” and expressly excluded from coverage under Part III. A definition of “independent contractor” should be provided by Ministerial regulation.
• To the extent necessary to protect their basic right to decent working conditions, and to protect the interests of employees from unfair competition, “autonomous workers” should be eligible for limited coverage under Part III. The Minister should have the power to enact regulations, based on sectoral input, specifying sector-specific criteria for “autonomous worker” status, and determining on a sector-specific basis which protections are to be extended to these workers.
• Employers should be required to provide employees, autonomous workers and independent contractors with a simple notice advising them of their status under Part III. This notice would be of no effect if the person so described meets the relevant statutory definition. If an employer fails to provide the notice, subject to written evidence to the contrary the worker should be presumed to be an employee under Part III. Furthermore, the use of coercion, undue influence or misrepresentation to cause a worker to accept the status of an independent contractor or autonomous worker should be considered a violation of Part III and the worker’s consent should be of no effect. (R. 4.2-4.7)

As the Commission noted in its report, legal and labour market experts have traditionally distinguished between “employees” and “independent contractors” (also known as “own-account self employed”). According to the Federal Jurisdiction Workplace Survey 2004, about 10% of all workers in the federal sector were self-employed or contract workers, the largest concentration of which were in the trucking sector. Part III applies only to employees and not independent contractors.[12]

The Commission characterized “autonomous workers” as being contractors who share some important characteristics of employees, especially dependence on the employer for all or the majority of their income. The Commission distinguished autonomous workers from truly independent contractors—those who themselves employ others, exercise complete control over the manner in which work is performed, provide services to their own clients, have their own business premises or operate as corporations. The Commission believed that independent contractors should be ineligible for any Part III protections. However, by bringing autonomous workers under Part III, access to certain provisions of Part III would be provided to allegedly “self-employed” workers who are in a true position of economic dependence on the employer.

The Commission submitted that “employees” would also benefit from the inclusion of “autonomous workers” in Part III. This is because unregulated working conditions of “autonomous workers”—namely long working hours and generally low levels of remuneration—may undercut labour standards for their employed fellow workers.

One concern with the Commission’s proposal is the difficulty of defining “autonomous worker”. There is also the possibility that adding the category of “autonomous worker” to Part III would result in less coverage for some employees. That is, some “autonomous workers” who have been treated like employees or who currently meet the test for “employee” could be re-categorized as “autonomous workers” and may see a reduction in coverage under Part III. Another related concern is determining what labour standards in Part III ought to be extended to an “autonomous worker”. For instance, many would agree that autonomous workers should have the right to seek recovery of unpaid wages; but views differ significantly as to whether these workers should have the right to long-term leave or annual vacations, especially if their employer has little control over their hours of work.

The Commission recognized that defining “autonomous worker” is no easy task given the different work practices that exist across the federal sector. Anecdotal evidence and briefs provided by worker representatives about who should be covered under Part III demonstrated the controversy on this issue. While some unions and community groups argued that coverage should be extended to self-employed workers in general, others—mainly owner-operators in the trucking sector—did not want to be covered under Part III. The Commission provided several possible reasons why trucking owner-operators or their counterparts in other sectors may want to be excluded from Part III, and rather to maintain their status as “independent contractor”: entrepreneurial motivations; the ability to deduct expenses from taxable income; tax benefit implications; and the ability to take on additional work. To reflect the different needs of various sectors, the Commission proposed that regulations could be passed to specify sector-specific criteria for “autonomous worker” status. These regulations could also determine on a sector-specific basis which Part III protections should apply.

Another concern about the proposal to include an “autonomous worker” category is that it might be difficult to apply and enforce. For instance, some employers might have difficulty making the distinction in certain cases, and would risk violating Part III if they make the wrong decision.

The Commission proposed that employers be required to provide employees, autonomous workers, and independent contractors with a notice advising them of their status under Part III. Some would view this requirement as administratively burdensome and, in any case, unlikely to curb the behaviour of unscrupulous employers who do not want to provide Part III rights, in whole or in part, to marginalized employees. Others would say that it could provide more clarity around the nature of the employment relationship.

For discussion:

• Should a new category of employees, “autonomous workers”, be given access to Part III? If so, how should this term be defined? Should the definition vary depending on the sector in which the person works?
• Which Part III rights, if any, should apply to an autonomous worker?
• Should an employer be required to give workers a notice of their status? Should employers be prohibited from using coercion, misrepresentation or undue influence to secure a worker’s consent to independent contractor or autonomous worker status?

[12] Note that Part I of the Canada Labour Code (“Industrial Relations”) recognizes and provides coverage to “dependent contractors”. This category of worker has the same coverage under Part I as employees. However, Part I does not apply to independent contractors. The term “dependent contractor” includes, among others, those persons who, whether or not under a contract of employment, perform work or services for another person on such terms and conditions that they are in a position of economic dependence on, and are under an obligation to perform duties for, that person.

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Date Modified:

2012-02-15