On June 20, 2024 Bill C-69 (Budget Implementation Act, 2024, No. 1) received royal assent, establishing a new presumption of employee status that shifts the burden of proof from workers to employers.
This significant change represents one of the most substantial reforms to Canadian labor law, with far-reaching implications for businesses across multiple sectors. Since implementation, this legislation has had significant impacts, making it crucial for HR professionals to understand the implications and necessary compliance measures.
Understanding the Legislative Changes
At the heart of this legislation is a fundamental shift in how worker classification is determined. Previously, workers often had to prove they were employees to access various protections and benefits. Now, the equation has been reversed.
According to Employment and Social Development Canada (ESDC), the law establishes that “all workers — including gig workers — are considered employees unless proven otherwise when their classification is contested.” This means independent contractor status is now the exception rather than the norm when employment status is questioned, with employers bearing the burden of proof.
The legislation makes two critical changes:
- It creates a presumption of employee status for anyone paid remuneration by an employer
- It shifts the burden of proof to employers to demonstrate why a worker should be classified as an independent contractor
These changes apply specifically to federally regulated industries, which include banking, telecommunications, transportation services that cross provincial or international borders, and certain Crown corporations. However, the legislation may influence provincial approaches and set standards that extend beyond federally regulated sectors.
Enforcement Mechanisms
The Canadian government has established robust enforcement measures to ensure compliance with the new worker classification standards. Employment and Social Development Canada (ESDC) and the Canada Revenue Agency have entered into data-sharing agreements specifically designed to facilitate inspections and enforcement activities.
To support enforcement and provide clarity, the Labour Program has published detailed guidance documents including interpretations on misclassification (IPG-105) and determining employer/employee relationships (IPG-069).
When an individual files a misclassification complaint, the burden falls on the employer to demonstrate why the worker should be considered an independent contractor rather than an employee. Companies relying on independent contractor models should anticipate increased scrutiny and prepare accordingly.
Impact on Different Business Models: The presumption of employee status affects various business models differently, with some facing more significant adaptations than others.
Traditional Staffing Agencies: Staffing firms that already classify temporary workers as employees may see minimal direct impact. However, these agencies should review client contracts and indemnification provisions to address potential misclassification risks.
Gig Economy Platforms: Digital platforms facilitating ridesharing, delivery services, and other on-demand work face substantial challenges under the new framework. The current independent contractor model typical to many platforms directly conflicts with the presumption of employee status.
Professional Services and Blended Workforce Models: Organizations using a mix of employees and contractors must be particularly vigilant about consistent application of classification criteria. These businesses should conduct thorough workforce audits to identify and address potential vulnerability points.
Distinguishing Legitimate Independent Contractors: While the legislation creates a presumption of employee status, ESDC has clearly stated that “the changes will not affect legitimate independent contractors.”
Key factors that Canadian authorities consider when evaluating contractor status include:
- Business independence (separate business identity, multiple clients)
- Operational control (how and when work is performed)
- Integration level with the company
- Financial risk and opportunity for profit
For businesses operating in federally regulated sectors, documenting evidence of independent contractor status is essential for compliance. Simply having a contract that labels someone an independent contractor is insufficient if the working relationship resembles employment.
Comparison with Provincial Approaches
Canada’s federally regulated industries now operate under this presumption of employee status, but provincial approaches to worker classification vary significantly, creating a complex compliance landscape.
Ontario’s Approach: Ontario’s Digital Platform Workers’ Rights Act, scheduled to come into effect on July 1, 2025, creates a separate category of worker protections specific to platform-based work rather than reclassifying gig workers as employees.
British Columbia’s Model: British Columbia’s amendments to its Employment Standards Act specifically recognize two types of “online platform workers” as employees: delivery service workers and ride-hail service workers.
Organizations with operations spanning multiple Canadian jurisdictions should consider implementing jurisdiction-specific compliance protocols rather than applying a one-size-fits-all approach.
Practical Compliance Strategies
With eight months of implementation experience, businesses can now draw on emerging best practices to navigate this new classification landscape.
First, conduct a comprehensive classification audit by examining each contractor relationship individually. This means comparing actual working conditions against written agreements and identifying high-risk classifications that require immediate attention.
Next, update contracts and documentation to strengthen contractor agreements with legitimate independent contractor criteria. Ensure these contracts accurately reflect the actual working relationship and specify project deliverables rather than ongoing responsibilities.
Operational practices should also be revised to limit supervisory control over how work is performed. Establish clear project parameters rather than ongoing oversight, and create separate communication channels for contractors versus employees to maintain appropriate boundaries.
Consider alternative workforce solutions such as employer of record (EOR) services for contingent workforce management, agent of record (AOR) solutions for legitimate independent contractor relationships, or staff augmentation through established staffing agencies.
Finally, implement ongoing compliance monitoring by scheduling regular reviews of contractor relationships, providing manager training on proper contractor engagement, and monitoring relevant case law and regulatory developments. This proactive approach helps businesses stay ahead of evolving interpretations and enforcement priorities.
Future Outlook
As we look to the future, several key trends will likely shape worker classification in Canada:
- Expanded Enforcement: Expect more audits of high-risk industries, stringent penalties for violations, and data-driven identification of potential misclassification through enhanced tax information sharing.
- Evolving Interpretations: As cases move through administrative and judicial processes, expect clearer guidance on what constitutes a “legitimate independent contractor” and industry-specific standards reflecting different operational realities.
- Cross-Jurisdictional Harmonization: Economic pressures and business advocacy may drive greater consistency across federal and provincial approaches, potentially simplifying compliance for multi-jurisdiction operations.
Organizations should prepare for these developments by addressing compliance gaps proactively rather than reactively.
Ultimately, Canada’s gig worker protection legislation represents a significant shift in how worker classification is determined in federally regulated industries. Businesses now face increased documentation requirements, greater scrutiny of contractor relationships, and potentially significant penalties for misclassification.
For businesses navigating this complex environment, the path forward requires both rigorous compliance and strategic workforce planning.
By understanding the specific requirements, conducting thorough audits, and updating documentation, organizations can manage risks while maintaining operational flexibility.
