Change to Ontario Employment Standards: IT consultants and business consultants excluded from ESA

Mark Tector and Ben Currie

Effective January 1, 2023, amendments to Ontario’s Employment Standards Act, 2000 (“ESA”) took effect, excluding “business consultants” and “information technology consultants” from the application of the ESA.

This is a significant change, and one which may assist some employers with adapting to changing work arrangements, including dealing with consultants and the legal risks associated with dependent contractors. Based on the recent changes to the ESA, if the following conditions are met, certain “business” or “IT” consultants are exempt from the application of the ESA (i.e. no statutory vacation, no statutory overtime, no statutory notice or severance pay).

The conditions are as follows:

1. Definition of Position: The consultant must meet the definition of either “business consultant” or “information technology consultant”, which are as follows:

“Business consultant” is broadly defined as:

an individual who provides advice or services to a business or organization in respect of its performance, including advice or services in respect of the operations, profitability, management, structure, processes, finances, accounting, procurements, human resources, environmental impacts, marketing, risk management, compliance or strategy of the business or organization.

“Information technology consultant” is similarly broadly defined as:

an individual who provides advice or services to a business or organization in respect of its information technology systems, including advice about or services in respect of planning, designing, analyzing, documenting, configuring, developing, testing and installing the business or organization’s information technology systems.

2. Provide Services Through a Business: The business or IT consultant must provide services either through a corporation (of which the consultant is either a director or a shareholder subject to a unanimous shareholder agreement), or a sole proprietorship (of which the consultant is the sole proprietor and provides services under a sole proprietorship registered under the Business Names Act);
3. Agreement: There is an agreement in place for the consultant’s services that sets out what the consultant will be paid, which must be expressed as an hourly rate and at least $60 per hour excluding bonus, commission, expenses, allowances, and benefits; and
4. Payment: The consultant is actually paid the amount set out in the agreement, i.e. at least $60/hr.

There may also be additional requirements prescribed by regulation in the future. Given this change only took effect at the beginning of this month, we await caselaw interpreting the new exclusions.  We will also be monitoring whether other provinces follow Ontario’s lead.

Fitting within the new exclusions will require carefully drafted agreements. Contact a Stewart McKelvey employment lawyer for assistance in drafting an agreement, or with any questions related to these or other workplace related legal issues.

This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact a member of our Labour & Employment group.

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