Feb 2023 Charity & NFP Law Update
New Exceptions to the Ontario Employment Standards Act for Business and IT Consultants
On January 1, 2023, an amendment to the Employment Standards Act, 2000 (“ESA”) came into effect that removes rights for minimum employment standards provided under the ESA from individuals who meet the definition of a business consultant or an information technology (“IT”) consultant. When hiring business or IT consultants, charities and not-for-profits should be aware of this change.
The amendment only applies to those who would be previously covered by the ESA. This means that independent contractors and other self-employed business and IT consultants are not affected by this change.
The ESA defines a “business consultant” as “someone who provides advice or services to a business or organization on its performance,” including:
- operations
- profitability
- management
- structure
- processes
- finances
- accounting
- procurements
- human resources
- environmental impacts
- marketing
- risk management
- compliance
- strategy
Similarly, the ESA defines an “IT consultant” as “someone who provides advice or services to a business or organization on its information technology systems,” including:
- planning
- designing
- analyzing
- documenting
- configuring
- developing
- testing
- installing
For determining if an individual qualifies under these categories, the amendment states that, “It does not matter whether the business or organization the consultant provides advice or services to is the consultant’s employer, or a client of the consultant’s employer.”
There are four requirements which must be met for a business or IT consultant to be excluded from the ESA.
Firstly, the individual needs to meet the statutory definition of an IT or business consultant.
Secondly, the individual must be providing their services through one of two business structures. One manner is a sole proprietorship, registered under the Business Names Act, which offers service under that name. The second manner is through a corporation in which the individual is the director or “a shareholder party to a unanimous shareholder agreement”.
The third requirement is that there must be an agreement between the employer and the consultant which stipulates the terms of compensation. The terms must have the consultant being paid an hourly wage, with a minimum rate of $60 an hour. This rate cannot include bonuses, commissions, expenses, travelling allowances or benefits. The agreement must also stipulate when the consultant is to be paid by the employer.
Finally, the employer must strictly follow the stipulations of the agreement in requirement three.
If these four exceptions are met, the consultant no longer has rights to the minimum standards under the ESA. However, if the conditions are not met or stop being met, the consultant may have rights under the ESA. This puts the burden on employers to ensure that, despite not being covered by the ESA, business and IT consultants who work for them are afforded the minimum wage of $60 an hour stipulated in exception three of the amendment.
The amendments are a result of the engagement with both management and labour by the Ontario Workforce Recovery Advisory Committee. A number of workers expressed a desire to be treated as independent consultants rather than employees covered by the ESA. Likewise, businesses expressed concerns with hiring consultants and wanted assurance that they would not be found to be employers under that legislation.