Ontario's New Employment Laws: What Small Businesses Need to Know

By Julie King | January 26, 2018

Update: Oct 2, 2018

The Progressive Conservative government announced today that it plans to cancel some or all of Bill 148. There is currently no information about what parts of the bill will be maintained, although there are indications that the $14/hr minimum wage increase will remain and the paid sick days, vacation time changes will be cancelled. We will update this article as more information becomes available.

Original Article

Last year the Ontario government passed new legislation, the Fair Workplaces, Better Jobs Act, 2017, that amends certain parts of the Employment Standards Act. This sweeping legislation impacts minimum wage, rates of pay and even what shoes an employer can request an employee to wear at work.

It is critical for small businesses to be aware of and follow the new rules, as the rollout of these changes will be accompanied by increased enforcement. The government has announced plans to hire up to 175 additional enforcement officers and expects to inspect one in ten businesses each year.

Here is an overview of what Ontario small businesses need to know about key changes to their obligations under the revised legislation.

Implementation Timeline for Key Changes

Nov 27, 2017: Employee misclassification as it applies to all non-employees
Nov 27, 2017: Workplace footwear requirements
Jan 1, 2018: Minimum wage increase
Jan 1, 2018: Vacation time and pay increase
Jan 1, 2018: Public holiday pay calculation changes and new notice requirement
Jan 1, 2018: Personal emergency leave and other leave changes
Jan 1, 2018: Temporary help agency and termination of assignment
April 1, 2018: Equal pay requirements
Jan 1, 2019: Minimum wage increase
Jan 1, 2019: New rules around shift scheduling and pay for shift cancellations

Employee misclassification as it applies to all non-employees

Took effect on Nov 27, 2017

The new legislation sets out a requirement that has been in existence federally through the Canada Revenue Agency (CRA) for some time, as well as provincially through a right of action under the Employment Standards Act: employers cannot misclassify employees as any type of non-employee.

Note: The new legislation expressly prohibits employers from treating their employees as if they were independent contractors or any other type of non-employee. To the extent that “misclassification” results in contraventions of the ESA (e.g. failure to provide vacation with pay or public holidays), employers that misclassify will have contravened those standards. The amendment creates a new stand-alone contravention for “misclassification” and employers that misclassify their employees are subject to penalties for violating this new provision.

While the federal requirement primarily relates to tax amounts owing and source deduction requirements, the new Ontario prohibition relates to the independent contractor status being used, whether in error or to avoid protection and/or the requirements of Ontario's Employment Standards Act.

Note: Although the Ontario Ministry of Labour and the CRA both apply the common law tests to determine whether a worker is an “employee” and review similar factors when making the determinations (e.g. amount and type of control exercised by the business, who owns the “tools” used to perform the work), the fact that a person is or is not considered an employee for the purposes of income tax or employment insurance legislation is not determinative for the Ministry of Labour because the purposes of the ESA and the statutes administered by the CRA are different.

A Ministry spokesperson noted the following two points:

The amendment to the Employer Standards Act (ESA) prohibiting an employer from misclassifying employees as non-employees (e.g. independent contractors, volunteers, etc.) was put in place to prevent employers from treating employees as though they are not employees.
Possible misclassifications include treating employees as volunteers, unpaid interns or independent contractors.

Determination of employment status has no single test, and, as noted above, will be different from the test used by the CRA, although some of the key criteria such as being able to dictate work hours and/or use your own tools are the same or extremely similar.

"During an investigation or inspection, an employment standards officer would look at all of the facts and make a decision about whether or not the person is an "employee" under the ESA," the Ministry spokesperson explained.

"Although there is no single test to determine whether a person is an employee or an independent contractor under the ESA, the main question is whether the person is in business for themselves. Some factors to consider include how much control the person has over their activity, whether they provide their own equipment or hire their own helpers, and how much financial risk must be taken by the person and how much profit the person can make. In addition, relevant case law is also considered."

Workplace footwear requirements

Took effect on Nov 27, 2017

Except for the entertainment and advertising industries, employers cannot require employees to wear footwear with an elevated heel, such as a high heel shoe, unless they are needed for workplace safety.

Minimum wage increase

Implemented in two phases: Jan 1, 2018 and Jan 1, 2019
Increases to minimum wage based on the Consumer Price Index will resume in October 2019

Wage type	Effective Jan 1, 2018	Effective Jan 1, 2019
General minimum wage	$14.00	$15.00
Students under the age of 18	($13.15)	$14.10
Liquor Servers*	$12.20	$13.05
Homeworkers	$15.40	$16.50

* who regularly receive tips (Note: there are other factors for the liquor server rate to apply. Please see the minimum wage chapter in the ESA guide for more information.)

For hunting and fishing guides for 2019:

$75.00

Rate for working less than five consecutive hours in a day

$150.00

Rate for working five or more hours in a day whether or not the hours are consecutive

Vacation time and pay increase

Took effect on Jan 1, 2018

Employees will be entitled to three weeks of paid vacation after five years of employment with the same employer.

Public holiday pay calculation changes and substitution changes

Took effect on Jan 1, 2018

The formula used to calculate holiday pay has been simplified and will result in pay increases for many workers.

To calculate vacation pay using the new calculation rules:

Determine the total amount of regular wages earned in the pay period immediately preceding the public holiday
Divided by the number of days the employee worked in that period
The previous pay period is used for the calculation when an employee is on a qualifying emergency leave, vacation or both, for the entire pay period immediately preceding the public holiday

In circumstances where an employee was not employed during the pay period immediately preceding a public holiday, then that person's public holiday pay will be:

The amount of regular wages earned in the pay period that includes the public holiday
Divided by the number of days the employee worked in that period

(Note: The rules that apply to substitute holidays remain the same. A substitute holiday is another working day off work that is designated to replace a public holiday. Employees are entitled to be paid public holiday pay for a substitute holiday.)

However, changes to the legislation now require the employer to provide employee(s) with written notice before the public holiday that specifies:

the public holiday on which the employee will work;
the date of the day that is substituted for the public holiday
the date on which the statement is provided to the employee

To get a rough idea of what holiday pay is owed, you can use the government's free vacation pay calculator

Personal emergency leave and other leave changes

Took effect on Jan 1, 2018

The new legislation expanded personal leave eligibility, adds new protected leave measures for victims of domestic or sexual violence, and also implements changes to other types of leave.

Personal emergency leave

All employees will now have the right to take up to 10 days of job-protected leave due to illness, injury and other emergencies/ urgent matters each calendar year. Previously, personal leave protections were in place for workplaces with 50 or more employees. The updated personal leave now applies to all workplaces covered under Ontario's Employment Standards Act (ESA.)

An employee who has been employed for one week or longer will be entitled to take 10 personal emergency leave days per year, including two paid days:

Leave is deemed to be taken in entire days, so if an employee takes any part of a day as either a paid or unpaid personal emergency leave, then the employer may deem the employee to have taken one day of paid or unpaid leave on that day.
The two paid days must be taken first and the employee is not entitled to overtime and/or premium public holiday pay if the person would normally have received this if he/she had actually worked on that day.

Employers can ask for reasonable evidence that the leave is required, but cannot request a note from a doctor, registered nurse or psychologist.

Domestic or Sexual violence leave

This leave applies when an employee or his/her child experiences domestic or sexual violence or the threat of domestic or sexual violence.

Up to 10 individual days of leave and up to 15 weeks of leave are provided.
Payment for leave periods apply to the calendar year. The first five days of leave taken during a calendar year will be paid, while the remaining days of leave will be unpaid.
To qualify for sexual or domestic violence leave, the employee must have been employed for at least 13 consecutive weeks.

Changes to other types of leave

There are also changes to family medical leave, parental leave, pregnancy leave, critical illness leave, and child death leaves. (Note: there is a new leave rather than a change. For example, there is a new critical illness leave and critically ill child leave no longer exists. There was also crime related child death or disappearance leave. Now there is a child death and a crime-related child disappearance leave).

Leave terms have been increased for the following types of leave:

family medical leave
parental leave
pregnancy leave
critical illness leave

Nurse practitioners are now included in the definition of qualified medical practitioners who can provide a certificate necessary.

Family medical leave requirements cover a range of family relationships that qualify for a leave, including. parents of the employee’s spouse, grandparents and grandparents of the employee’s spouse, siblings and step siblings, aunts, uncles, nephews and nieces of the employee’s spouse and more.

Information on leaves can be found on the ministry’s website at Ontario.ca/leavesofabsence.

Temporary help agency termination of assignment pay changes

Took effect on Jan 1, 2018

People employed by temporary help agencies will now be entitled to one week's written notice or pay in lieu of notice if an assignment that was scheduled to last three months or longer ends early.

Under this new rule, the temporary agency will have to do one of the following when an engagement as described above ends early:

Provide one week's notice
If less than one week's notice is given, pay the employee the wages he/she would have received if the week of notice had been given
Offer the employee a reasonable assignment that lasts at least one week

Exceptions: The one week’s written notice of termination of assignment or pay in lieu of notice requirement will not apply in the following circumstances:

there is wilful misconduct by the assignment employee
an unforeseeable event occurs that makes it impossible for the employee to perform his/her assignment
the assignment termination is due to a strike or lock-out at the location of the assignment

Equal Pay Requirements

Takes Effect on April 1, 2018

The new equal pay provisions amend the Employment Standards Act (ESA) to prohibit employers from paying an employee a lower wage than a co-worker doing substantially the same job because of a difference in their employment status.

A representative from the Ontario Ministry of Labour notes that "Under the current provisions, generally, the Employment Standards Act, 2000 (ESA) does not require employers to pay all full-time employees the same rate for doing the same job."

"For example, employers may base rates of pay on seniority, merit or quantity or quality of production. However, employers are prohibited from paying full-time employees different rates for doing the same job because of a difference in sex or employment status."

The new legislation will also protect casual, part-time, temporary and seasonal employees against repercussions for inquiring about their wage rate or asking another employee about their wage rate. Once a review is requested, an employer must either adjust the employee’s pay rate accordingly or, if the employer does not believe a rate adjustment is warranted, provide a written explanation to the employee explaining the reasons for the employer’s decision.

Exceptions: This law is intended to address pay rate differences that are based on sex or employment status. A company can be exempted from this requirement if the difference in pay rates is not based on one of those reasons.

Specific examples of exemptions cited by the government include:

pay based on seniority or a merit system,
production outputs such as quality and/or quantity
other factors outside of sex and employment status

New rules around shift scheduling and pay for Shift cancellations

Takes Effect on Jan 1, 2019

The changes related to shift scheduling and pay primarily relate to rights of refusal, the right to request a shift at an alternate location and pay for cancelled shifts.

Shift change request: After being employed for three months, an employee can request a schedule or location change without fear of being penalized.

96 hours' notice: An employee can refuse a shift when the employer asks them to work (or be on-call) with less than 96 hours' notice, except when they are asked to be at work or on call:

to deal with an emergency
to remedy or reduce a threat to public safety
to ensure the continued delivery of essential public services, regardless of who provides those services.

Three hours’ pay: There are several conditions when an employer must pay employees a minimum of three hours’ pay:

When an employee who regularly works more than three hours a day, shows up for work and does not work or works less than three hours despite being available to work longer. Employers will not be required to pay wages for three hours for a shift that lasts fewer than three hours if they were unable to provide work because of fire, lightning, power failure, storms or similar causes beyond their control.
When a scheduled shift or an on call shift is cancelled within 48 hours of the scheduled start time. Employers will not be required to pay for three hours when the shift is cancelled if the employer was unable to provide work due to an emergency beyond their control (fire, power failure, storms, etcetera) or when the employee's work is weather-dependent and is not provided work due to weather-related reasons.
When an employee is scheduled to be on call, is available to work, but is either not called into work or works less than 3 hours. This applies to each 24-hour period the employee is on call. Employers will not be required to pay the minimum three hours if the employee was on-call to ensure the continued delivery of essential public services and was not required to work.
Employees are only entitled to one three-hour’s wages entitlement per event.

Acknowledgement: CanadaOne would like to thank the Ontario Ministry of Labour for their assistance in preparing and fact checking this article.

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