Should Contract Workers Receive Overtime?

Should Contract Workers Receive Overtime? | Photo by Norma Mortenson from Pexels

Estimated reading time: 6 minutes

Should Contract Workers Receive Overtime? | Author: Martel Mikhail, Employment Lawyer

By now, almost everyone has used the services of a 3rd party delivery (3PD) platform for a meal delivery from their favourite restaurant. Indeed, the pandemic has made this part and parcel of the daily food experience for millions. Many workers take on this type of work as side-hustles. Some want to pay off debt and others need extra cash to get through school. Regardless of the motivation, tech giants like UberEats, Skip the Dishes, Foodora and others have recruited a massive global workforce that performs such work as “independent contractors”.

Often referred to as gig work, these jobs are available in abundance. They attract workers because they offer flexible working hours and require lower levels of expertise. The arrangement allows the contractors to set their availability and “be their own boss.” They get paid piecemeal, per job completed.

Gig Workers Benefit Employers

Ontario has long-established laws that govern working relationships between employers and employees called the Employment Standards Act, 2000 (ESA). However, it categorically does not involve itself with independent contractor arrangements.

Consequently, employers benefit substantially when they engage workers as independent contractors. Not only do they receive just-in-time services they also avoid paying into the WSIB or contributing to their contract workers’ EI and CPP benefits. They are not obliged to offer dental, medical and disability insurance benefits. And they can end the working relationship instantaneously without worrying about notice or termination pay. Most of all, they can legally turn a blind eye to provincial mandates for minimum wage and overtime.

ESA Minimums & Overtime

None of this bodes well for gig workers and others who work on contract terms. With piecemeal rates of pay, many regularly work very long hours to meet their financial goals. In the process, they often earn far less than the minimum wage. It seems like these workers give up quite a lot for the mere opportunity of retaining flexibility over their working hours, and because few other employment options remain open to them.

Section 22 of the ESA guarantees Ontario employees overtime pay of at least 1-1/2 times their regular rate when they work more than 44 hours in a workweek. Union workers sometimes negotiate better terms through collective bargaining. Similarly, Section 23 of the ESA guarantees Ontario employees a set minimum wage with very few exceptions. But none of these protections extend to independent contractors. The gig economy is now reaching maturity. While 3PD platforms have filled their coffers since inception, their gig workers have not fared as well.

Protections for Contract Workers

This issue became the focus of a recent Macleans magazine article by food writer, Corey Mintz. He correctly points out the challenges faced by contract workers in this sector. However, he errs in his assessment of the strength of our employment laws. He suggests we will become “sheep to be sheared” when 3PD platforms bring their fight to our doorstep. Perhaps his assessment comes from not being sufficiently aware of newer developments in this area of law?

In our experience, we have some of the strongest protections for contract workers in the world. And we should know because our firm helped to shape part of this legal environment. We are, in fact, amply armed to take on employers of all stripes, including 3PD platforms, and Ontario has already seen victories in this area.

Dependent Contractors

In November 2017, the Ontario government passed Bill 148 which substantially overhauled the ESA. Some of the most significant changes impacted the minimum wage. Also, to this end, our case, Keenan v. Canac Kitchens set a precedent in 2016.

We began arguing this case in 2010 for the Keenans, a husband and wife team, who had unceremoniously been let go without termination pay after three decades of service. The reason? Their employer had labelled them independent contractors and assumed they were not subject to ESA provisions. We cleared much of the ambiguity that existed around this issue by identifying distinctions between dependent contractors, who were no different from employees, and independent contractors who operate like true businesses. It took time for this case to move through the courts. But when it concluded, with the judge ruling in favour of our clients, the terms for engaging contract workers changed.

Without any doubt, this was a watershed moment for contract worker rights. The Keenan case is cited as one of the most influential employment law cases in Ontario. It provides contract workers with a basis to challenge their independent contractor status and establish why they deserve to come under the fold of the ESA as employees with full rights to overtime pay, employment benefits and termination entitlements.

Wins Accumulating for Contract Workers

Since then, contract workers have banded together, unionized and organized lawsuits to forge better deals for themselves. To that end, Foodora could not “handle the heat” and quit operations in 2020, after being forced to classify their workers as employees.

However, Uber took its subversion to new levels. They injected mandatory arbitration clauses into contracts with gig workers. Arbitration clauses are not unusual in employment contracts. They generally allow employees and employers to resolve disputes swiftly via an internal process. However, they also contractually prevent parties from pursuing resolutions through the courts. Uber’s mandatory arbitration clauses forced their Ontario-based drivers to resolve disputes through mediation and arbitration in Amsterdam. The associated costs for moving forward with such proceedings were prohibitive and hardly solutions for the contractors.

So, they took Uber to court in a case that escalated all the way to the Supreme Court of Canada. In a unanimous ruling in 2020, the judges ruled in favour of the workers, citing Uber’s mandatory arbitration clause did not represent the spirit of the provision. This blew the doors wide open for Uber’s gig workers to pursue a class-action suit that challenges their status as independent contractors. This case is presently working its way through our legal system.

Misclassifying Contract Workers

Bill 148 requires employers to clearly classify their workers as employees or independent contractors. And 3PD platforms will not be able to skirt their way around this one. In the arena of employment law, we could not be further apart from the U.S.

Corporations simply cannot set up shop in Ontario and pretend they are unaware of our laws or blatantly choose to ignore them. They also cannot change the flag on their international employment contracts and shove them down the throats of Ontario employees. The nature of a worker’s relationship to their employer is a matter of law, and it is subject to legal scrutiny. Courts and tribunals will look at the substance of the relationship, and not just its form. If a business exerts significant control over its workers or makes them entirely reliant on the company for securing their livelihood, then the independent contractor status will not legally hold up in Ontario. Furthermore, any business that expediently misclassifies its workers to save money exposes itself to lawsuits and extensive liability.

About The Author

Martel Mikhail | Employment Lawyer | Lecker & Associates

Martel Mikhail, B.Soc. Sc., J.D., is an employment lawyer and associate at Lecker & Associates. Fearless about representing the underdog, early in his career, Martel spearheaded a multi-million dollar class-action lawsuit against a global corporation on behalf of thousands of misclassified working managers.

Lecker & Associates primarily represent Ontario employees in disputes against their employers. This has been our specialty for over 35 years.

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