Employee misclassification remains key concern

The lawsuit, filed in the Ontario Superior Court in October, alleges that the company violated the Employment Standards Act, breached workers’ contracts and acted in bad faith. The claim asks for a declaration that these workers are employees and not independent contractors and for $35,000,000 in general damages and $10,000,000 in punitive, aggravated and exemplary damages. Employees are entitled to minimum wage, overtime benefits and vacation pay under the ESA, the claim says. Independent contractors are not entitled to the same benefits.

Tassia Poynter, a lawyer at Cavalluzzo Law LLP in Toronto, who is working on the case, says as far as she knows, this is the first class action lawsuit alleging employee misclassification in the factual television industry.

“In the rising gig economy, [employee misclassification is] becoming more common,” she says. “People working in creative industries are likewise vulnerable to misclassification. It’s not just confined to certain industries.”

The suit could be certified this fall, she says. None of the allegations in the claim have been proven in court. Cineflix did not respond to multiple requests for an interview.

The claim alleges workers were classified as independent contractors when their work most closely resembled that of employees.

The claim details how the company told them when and where to work, provided them with equipment to do their jobs and required them to follow company style guides and handbooks. It alleges the company “exerted excessive pressure to have class members to work hours in the excess of the overtime threshold” and that “managers would insist upon class members meeting the deadlines set by Cineflix’s pre-determined production schedules, regardless of the number of hours of work required in a day or week in order to meet those deadlines.”

The claim repeatedly alleges that Cineflix benefited unjustly from these workers.

“Cineflix is/was in a position of power and direct control over the class members and the class members were and are in a vulnerable position vis-a-vis the defendants,” the claim says, alleging that Cineflix failed to fulfil its responsibility to inform workers of their entitlements to minimum wage, and vacation, overtime, holiday and premium pay.

“There was no basis for the defendants’ arbitrary designation of class members as independent contractors and ineligibility for minimum wage, overtime pay, vacation pay and public holiday and premium pay, which was contrary to the employees’ express or implied terms of contract with the defendants,” the claim alleges.

“There is no juristic reason for the defendants’ unjust enrichment and the class members’ corresponding deprivation. The systemic exclusion of the class members from their contractual and statutory entitlements is unlawful,” the claim says.

The issue of how to define employees and independent contractors is a pressing concern, says Natalie MacDonald, owner of the Toronto employment law firm MacDonald & Associates.

“The definition of what it means to be a worker is constantly evolving,” she says. “I think this is one of the most important topics that we have to date. I think it is a very significant public and national issue, which needs to be addressed.”

In 2017, Bill 148, The Fair Workplaces, Better Jobs Act changed the ESA to make employers responsible to prove someone was an independent contractor and not an employee when allegations of misclassification arise.

This changed in December when the government passed Bill 47. It is still an offence to misclassify someone as an employee, but the worker has to prove they are an employee and not an independent contractor.

In Ontario, there are also “dependent contractors,” but this classification is only in the Labour Relations Act and not the ESA. The LRA defines these workers as “a person, whether or not employed under a contract of employment, and whether or not furnishing tools, vehicles, equipment, machinery, material, or any other thing owned by the dependent contractor, 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.”

Dependent contractors are between independent contractors and employees, says MacDonald. Independent contractors are not financially dependent on one particular employer for their income and can work for many employers, she says.

Dependent contractors cannot do that.

“Dependent contractors are not generally recognized in Canadian employment standards legislation,” says MacDonald. “The provinces and territories are really failing to recognize this kind of category. The concept of the dependent contractor has not thoroughly been litigated nationwide.

“There are countless decisions where the Supreme Court has seen work to be one of the most fundamental aspects in a person’s life in recognizing that it provides the individual with a means of financial support, and a contributory role in society and that their employment is essentially the ingredient or essential component of their sense of identity and sense of self worth and emotional well-being,” she says.

“We need to now apply that type of sentiment that’s been expressed for the employment relationship for those relationships that are dependent contractor and characterized as such, because they really do bear the same hallmarks as the employment relationship.”

The practical realities of the working relationship determine if a worker is an employee, independent contractor or a dependent contractor, says Kumail Karimjee, a lawyer at Karimjee Law in Toronto.

“The law is very clear [that] what matters is the substance of the relationship and not just the form of contract that may be entered into between an individual providing services and the worker and the company,” he says.

“The result of that is that the relationship can always be challenged and re-assessed by a number of adjudicative bodies that may have an interest in the relationship.”

There could be large costs to employers for misclassifying employees as independent contractors, he says.

Karimjee advises employers and employees to consider how their working relationship will look. Some workers may want to be independent contractors for tax benefits, he says, but changes to income splitting means those benefits may not be as great as they think.

He encourages employers to consider writing termination clauses in their independent contractor agreements that resemble the benefits for termination outlined in the ESA.But it’s a “delicate balance,” he says, noting that it might be more difficult for employers to insist that someone is an independent contractor if the agreement has many benefits similar to the ESA.

“There is no magic bullet,” says Bonny Mak, a partner at Fasken LLP.  “Courts and adjudicators will really look at how the relationship is on the ground.”

Mak advises employers about how to classify workers. Sometimes, employers hire independent contractors to provide a service they need but don’t intend to or can’t provide on their own, she says.

Employers should always be ready to describe their relationship with workers, regardless of whether the contract specifies them as “independent contractors” or “employees,” she says. Practically speaking, if there’s an investigation or a lawsuit, the employer will be asked to prove if a worker is an “independent contractor” or “employee.”

“The employer is always expected in a practical matter to put its best foot forward in terms of providing facts or arguments,” says Mak.