The Rise of the Gig Economy and its Implications for Non-Profits
by Lesha Van Der Bij, CEO & Co-founder, Compliance Works
Nonprofit and charitable organizations need to stay alert to issues related to “gig workers” and other types of independent contractors. It is critical to ensure that any workers hired and treated as independent contractors are, in fact, correctly classified as independent contractors. And this may become trickier for organizations to navigate, as more Canadian governments explore legislation governing workers outside of the traditional employer-employee relationship.
Gig Workers vs Employees
The gig economy tends to refer to task-based work that is performed “on-demand”, and is not subject to guaranteed minimum hours. Gig workers are typically considered to be independent contractors, as opposed to employees.
For non-profit organizations it can be tempting to hire people as gig workers or other types of independent contractors, as opposed to “traditional employees”. Hiring independent contractors may make it easier to tie particular work to specific funding. And it may seem like a good way to reduce some costs, such as benefits, withholdings and other remittances.
When hiring any type of contractor, however, it is important to first ask whether these workers are in fact independent contractors or are they more aptly described as employees or dependent contractors?
Whether a person is an independent contractor is determined by factors governing their relationship with the business. It is a legal question - not something that you and the contractor can just decide. Some key questions to consider include:
● Does the person work exclusively for the paying organization?
● Does the organization exercise control over how, when and where their work is
● Does the organization provide the worker with tools or equipment?
● Does the organization take on risks of profit and/or loss associated with the person’s
Answering yes to any of the above questions indicates that the worker is probably more akin to an employee, or at least a dependent contractor, than an independent contractor. That said, whether someone is an independent contractor or employee is determined by the facts that apply in the specific circumstances. If you are unsure whether a person is an independent contractor or employee, it is best to seek legal advice.
Government Response to the Rise of Gig Workers
Since gig workers tend to exist in a legal “grey area” – somewhere between employees and independent contractors – it is not always clear whether employment standards legislation applies to them. Canadian governments have begun considering whether gig workers (and contract workers, generally) need further legislative protection.
The federal and Ontario governments provide recent examples of changes, which may be adopted more broadly in Canada.
The federal government recently amended the Canada Labour Code (the Code) to prohibit employers from misclassifying an employee as an independent contractor in order to deny them their employment standards entitlements. In this year's budget, the government announced that it will amend the Code to further strengthen prohibitions against employee misclassification.
Ontario was the first province to pass legislation specifically aimed at gig workers. The Digital Platform Workers’ Rights Act, 2022 (which is not yet in force) will provide workers who perform digital platform work with certain rights, including rights to information on pay, regular pay periods, and protection from reprisals. While this may not be directly applicable to nonprofit and charitable organizations, it is important to know that Ontario is starting to consider whether these types of workers should have more entitlements. It is a trend to watch out for.
There are two important takeaways for nonprofit and charitable organizations:
If you have independent contractors, you may want to consider whether that is the correct classification.
And even if it is, keep in mind that the lack of legislation governing independent contractors could change.
The pandemic helped to accelerate the pace of change in Canadian workplaces. This includes gig workers who have increasingly become a part of the language of work. With these changes, comes additional scrutiny from governments. It is still early days, but you can expect to see governments respond with additional regulation of what (to date) has been a largely unregulated component of Canadian workplaces.
Lesha Van Der Bij is the CEO and co-founder of Compliance Works. Compliance Works is an online legal information platform, which provides non-profit organizations with immediate answers to HR compliance questions, and real-time alerts about important changes to the law. EPIC members are eligible for discounted subscriptions to Compliance Works.