BUSINESS AND IT CONSULTANTS: NEWLY EXEMPT FROM THE EMPLOYMENT STANDARDS ACT, 2000

By: Elliot Saccucci, Alessia Grossi and Student at Law Amanda Franker-Shuh

Recent amendments to the Employment Standards Act, 2000 (ESA), which came into effect on January 1, 2023, have carved out an exemption for certain business and information technology (IT) consultants.

This means, provided that certain requirements are met, the ESA will not apply to qualifying consultants.

Who are business and IT consultants?

The ESA provides broad definitions for both business and IT consultants, creating the potential to capture a wide range of workers:

  • A “business consultant” provides advice or services to a business or organization in respect of its performance, including operations, profitability, management, structure, processes, finances, accounting, procurements, human resources, environmental impacts, marketing, risk management, compliance, or strategy.
  • An “information technology consultant” means an individual who provides advice or services to a business or organization in respect of its IT systems, including advice about services in respect of planning, designing, analysing, documenting, configuring, developing, testing, and installing the business or organization’s IT systems.

Apart from these definitions, there has been no additional guidance released to assist with the classification of business and IT consultants. Furthermore, there is no direction as to how broadly (or narrowly) these ESA definitions may be applied in practice.

How do consultants qualify for the exemption?

For a business or IT consultant to qualify for this exemption to the ESA, the following requirements must be met:

(1)   The consultant must provide services through either (i) a corporation of which the consultant is either a director or shareholder who is a party to a unanimous shareholder agreement, or (ii) a sole proprietorship of which the consultant is the sole proprietor, provided that services are provided under a business name of the sole proprietorship that is registered under the Business Names Act.

(2)   There must be an agreement for the consultant’s services that sets out when the consultant will be paid and the amount to be paid, which must be equal to or greater than $60 per hour, excluding bonuses, commissions, expenses, travelling allowances and benefits, or such other amount as may be prescribed. The amount must be expressed as an hourly rate.

(3)   The consultant must actually be paid the amount set out above.

(4)   Any other requirements as may be prescribed.

If the criteria set out above are satisfied, the minimum employment standards in the ESA will not apply to the qualifying business or IT consultant.

Takeaways for Employers

ESA Exemption – Given these legislative amendments, qualifying business and IT consultants will be entirely exempt from ESA, which includes provisions surrounding overtime, vacation pay, holiday pay, hours of work, statutory notice and severance pay, and various leave-related regulations.

Independent Contractor Misclassification – It is unclear how these new exemptions will impact (if at all) the common law analysis surrounding the classification of business and IT consultants as independent contractors. Will qualifying consultants who provide services to solely one company be classified as employees at common law though exempt under the ESA? What if a consultant’s hours are set and entirely controlled by the company? There remains a real possibility that business and IT consultants, although exempt from the ESA, may still be classified as employees or dependent contractors and therefore have common law rights and protections, as we saw with the Infectious Disease Emergency Leave provisions of the ESA which ousted constructive dismissal for statutory but not common law purposes.

Common Law Obligations – A further consideration is common law obligations owed to employees. Companies should remain cognisant of common law duties with respect to their workers. Even though a business or IT consultant is exempt from the ESA, they could nevertheless be found to be either an employee or a dependent contractor at common law. This may give rise to common law employment-related obligations, even though the ESA does not apply.

Overall, there remains a sense of uncertainty with respect to these recent amendments:

  • The ESA definitions for “business consultant” and “IT consultant” are broad, potentially capturing a wide range of workers;
  • The requirements to qualify for the exemption are not particularly onerous;
  • There are no guidelines to assist in the classification of workers as business or IT consultants; and
  • There are no guidelines regarding (i) the characterization of these consultants as either employees or independent contractors, and (ii) the role of the common law with respect to employment-related obligations owed to qualifying consultants.

With all this in mind, companies should take appropriate steps to review their existing agreements and determine whether or not they comply with the above requirements. This is necessary to determine the applicability of the ESA. Where consultants under existing agreements do not qualify, terms of such agreements will have to be revised and renegotiated to trigger the exemption.

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