Home Research Projects The Vulnerable Worker Publications Is Work Working - Discussion Paper chapter 1

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The Vulnerable Worker

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Is Work Working? Work Laws that Do a Better Job

PART I — WORK AND VULNERABILITY TODAY

Chapter One — Self-Employed and Part-Time Workers

In the past two decades, there has been an increase in non-standard forms of employment: part-time, term, temporary, casual and on-call, work obtained through temporary employment agencies, and self-employment or independent work. Non-standard jobs differ from the standard model of salaried employment that grew out of the industrial revolution and was later enshrined in labour legislation. For a long time, non-standard work was considered marginal, because relatively few individuals were involved in it and it was considered to be just a means of earning extra income. But recently, the number of these jobs has increased, and for many workers they are a long-term reality, a way of participating in the labour market intermittently or permanently for much, if not all, of their working lives.

By most estimates, 33 to 37 percent of the labour force is now engaged in non-standard work.⁴ In many ways, non-standard work fills an important need. It provides flexibility that benefits workers, businesses, families and even communities. Many workers are better able to accommodate the needs and interests of their families and communities while employers benefit from being able to tailor the terms of their labour contracts to the precise needs of the business.

Some non-standard workers combine flexibility with adequate to excellent financial remuneration and work conditions. However, there is growing evidence that many others are not faring as well. Among the problems associated with non-standard work are the following: poor pay, little job security, a lack of access to important statutory benefits and protections (such as Employment Insurance,⁵ employment standards protections, workers' compensation, the right to collective bargaining) and a lack of access to employer-provided benefits such as dental, life and disability insurance. Although the phenomenon of non-standard work has been growing for many years, labour and employment legislation, originally designed to provide conventional employees with a minimum of social protection, has not been updated to reflect these new realities.

The following is a case study of one worker who moved from a standard employment arrangement to several different forms of non-standard employment.

Research indicates many low-paid workers are employed full time, but an increasing number are in temporary, part-time, casual or other non-standard forms of employment characterized by low wages and few benefits. 6

About one in three low-paid workers across Canada works part time. Another 29 percent are in temporary jobs (seasonal, casual or contract), and about one in four has multiple jobs to get more hours of paid work. 7

Ginette Leduc — Part-Time Worker and Independent Consultant

Ginette Leduc is a 32 year-old Canadian. After graduating with a communications degree from the Université de Montréal, Ginette worked for eight years with a major telecommunications company as a communications officer. She was responsible, among other things, for the publication of a company newsletter.

Four years into her job, Ginette met Uri. The two decided to get married and had a daughter, Patricia. Ginette took six months of topped-up maternity leave as provided under the collective agreement and Unemployment Insurance (as it was called in 1991).

Shortly after Ginette went on leave, Uri was laid off, and rather than look for another job, he started his own business. He and Ginette had often spoken about the advantages of a home-based business that would allow them the flexibility and autonomy to meet family needs and put their professional skills to profitable use. So, although he pursued some leads for jobs in other businesses, Uri devoted himself to getting his business started while Ginette devoted herself to Patricia.

When she went back to work, Ginette asked if she could work a four-day week in order to spend more time with Patricia. This request was granted and as Patricia grew, the part-time arrangement provided Ginette with time to volunteer in Patricia's preschool. It also gave Ginette one day a week to devote to her sick mother.

Then, in 1994, Ginette received word that her employment was being terminated. Her supervisor explained that the company was facing stiff international competition and all non-essential operations were being reduced or shut down. The news could not have come at a more difficult time. Ginette was three months pregnant with their second child, her mother was seriously ill and although Uri's business was beginning to make money, he was working 50 to 60 hours a week.

The silver lining, if there was one, was that Ginette's supervisor informed her she would be offered a contract to continue to produce the newsletter she had been writing. The supervisor could not guarantee how long this would last, but it looked reasonably secure for another year or two. Ginette could work from home. In essence, she would be doing most of the tasks she had been doing while employed, but she would have more flexibility with respect to work hours.

Ginette estimated that the work would take about 15 hours a week and thought this would be ideal as it might give her more time to care for her mother and attend to the demands of a three year old and a newborn. The difficulty, of course, was that all the benefits and advantages of paid employment were now gone. Those benefits had been crucial to the well-being of the family because Uri, as a self-employed worker, did not have a benefits package. As an independent contractor, Ginette knew she would not have access to the maternity leave provisions of Unemployment Insurance, and she knew the extended health care plan, disability and life insurance, dental care and employer contributions to her pension plan were gone. However, given her circumstances, Ginette felt she had no choice but to accept the contract.

The couple's combined income was about $35,000/year when their second daughter was born. In spite of their difficult financial circumstances, Ginette felt fortunate to have the time to spend with her children and mother. In fact, she felt that were it not for the financial difficulties they were having, their life style would be quite good.

Ginette and Uri are part of a segment of the workforce that grew significantly during the 1990s and then hit a plateau. In 2000, the self-employed represented 16 percent of all workers, down from a high of 19 percent in 1998, but up from 11 percent in 1976.⁸

Self-Employment and the Law

Once a worker becomes self-employed, he or she is denied a whole series of rights, protections and benefits that have come to be associated with the standard employment contract. This is because the legal status of being an employee is the requirement for most employment-related protections at common law and under legislation, under statutory regimes of collective bargaining, and for a range of social benefits from Employment Insurance to pensions. People who work for pay, but are self-employed, are treated for most legal purposes as independent entrepreneurs or contractors who, unlike most dependent employees, are not seen as being suitable for labour and employment protections.

Numerous tests have been developed for determining whether a worker is an employee or an independent contractor. In a case decided in 2001, the Supreme Court of Canada acknowledged that no one conclusive test can be universally applied to determine whether a person is an employee or an independent contractor.⁹ The central question is whether the person hired to perform the services is performing them as a person in business on his or her own account. In making this determination, the level of control the employer has over the worker's activity is a factor. However, other factors that must be considered include: whether the worker provides his or her own equipment; whether the worker hires his or her own helpers; the degreof financial risk taken by the worker; the degree of responsibility for investment and management held by the worker; and the worker's opportunity for profit in the performance of his or her tasks.

Over time, tests for determining whether a worker is an employee have embraced a wider range of workers seen by the courts to be in need of protection. The Supreme Court endorsed this purposive approach to the determination of employee status. However, uncertainty regarding employee status is still common as a worker may be considered an employee for some purposes and an independent contractor for other purposes. It is not uncommon for workers to be told they are independent contractors and, therefore, not entitled to various statutory and non-statutory benefits and protections when an analysis of the circumstances of their work arrangement, based on the legal tests, would reveal that they are, in fact, employees.

In Ginette's case, the transformation of her work from employment to self-employment means that if she was a member of a collective bargaining unit while she was an employee, she likely will no longer be included in the bargaining unit. As a result, she will no longer be guaranteed the wages and other work conditions and benefits provided for under the collective agreement that governed her previous employment relationship. Moreover, it is uncertain whether she will be able to avail herself of the protections offered under Part 3 of the Canada Labour Code that are intended to benefit workers within the federal jurisdiction (such as telecommunications) who are not covered by a collective agreement. Although adjudicators increasingly attempt to extend employment standards protections to workers who are economically dependent on their “clients” and who do not fit the standard definition of employee, this is by no means certain. Ginette would likely have to engage in a legal battle to establish entitlement to these protections. However, if she does this, her “client” may no longer be willing to renew her contract. This is a powerful disincentive.

Similarly, Ginette would not likely benefit from protections provided to her against workplace health and safety dangers, and would not likely receive compensation for a work-related illness or accident unless she had been paying her own premiums for coverage. To obtain credit toward her eventual receipt of benefits under the Canada Pension Plan, Ginette would need to contribute at the full rate, whereas as an employee, she was only required to pay half with the other half paid by the employer. Finally, as a self-employed person, Ginette would not likely qualify for Employment Insurance or maternity and parental leave unless she was somehow able to convince an adjudicator that she was a disguised employee.

Questions:

· Are the existing supports and laws for self-employed people adequate?

· If not, what do you think workers like Ginette Leduc might need to reduce their vulnerability in self-employed work arrangements and in the labour market generally?

· Does the law have a positive or negative impact in other ways on the well-being of self-employed workers?

Self-Employed Workers: Entrepreneurs?

Self-employed people are commonly understood to be entrepreneurs who have willingly traded the legal protections and benefits of the employment contract for the autonomy, flexibility and likelihood of great financial gain inherent in self-employment. While this is sometimes the case, studies reveal that reality is often more complex.

Self-employed workers range from people like Ginette, who are essentially disguised employees in that they do the same job they did when they were employed, to independent professionals and owners of incorporated businesses. At best, some types of self-employment provide a high degree of autonomy and flexibility as well as financial gain. At worst, self-employed workers are treated as employees without the benefits and rights of that status.

Certainly, with respect to financial remuneration, there would appear to be solid evidence that many self-employed workers experience relatively low levels of economic security. In 2000, 25 percent of the self-employed had incomes of $20,000 or less, and 22 percent had incomes above $60,000. Fully 47 percent of all self-employed women had incomes of $20,000 or less while self-employed men were more evenly distributed across income groups.¹⁰

Self-employed people can be employers who hire other paid employees or they can be own account, which means they do not hire anyone else. Most self-employed people (63 percent) are own account. When data on self-employment are broken down to look specifically at how own account self-employed workers fare, these workers are very poorly remunerated. Sixty percent of unincorporated own account self-employed women had incomes of less than $20,000 in 2000, a finding magnified by the fact that the majority of self-employed women fall into this category (unincorporated, own account). As the following data underscore, many self-employed workers, like Ginette Leduc, do not reap great financial rewards when they become self-employed.¹¹

Evidence also indicates that the level of retirement preparation of the self-employed is inferior to employees. At the rate they are going, Ginette and her husband, are unlikely to be able to prepare adequately for the financial challenges of retirement.

Disguised Employment

Few self-employed workers conform to the stereotype of the entrepreneur. Like most, Ginette Leduc more closely resembles an employee than an entrepreneur. She will continue to work with the same people, using the tools and resources provided by her former employer and will take direction from her former employer or supervisor. Research reveals that 67 percent of self-employed workers with strong ties to former employers report the same degree of control over the content of their work that they had as employees. Indeed, 30 percent of own account self-employed people work in either client locations or locations supplied by the client.¹³

Based on these data, some have concluded that self-employed workers with strong ties to their former employer more closely resemble paid employees. This kind of self-employment arrangement has been termed “disguised employment” by the Organization for Economic Co-operation and Development (OECD) and the International Labour Organization (ILO). Disguised employment occurs when an employer treats a worker as an independent contractor or self-employed person to avoid the responsibilities and costs associated with being an employer. These responsibilities include paying into Employment Insurance, the Canada/Quebec Pension Plan, informing workers of health and safety risks, paying into the workers' compensation system, making income tax payroll deductions and recognizing and negotiating with the collective bargaining agent chosen by the workers. The costs include paying the employer portion of the benefits and perquisite programs provided to employees of the firm. Analysts increasingly recognize the overlap between paid employees and the self-employed, prompting organizations like the OECD and the ILO to call on countries to scrutinize the growth of nominal or disguised self-employment, and devise policies to extend social protections and benefits to this segment of the self-employed.

Questions:

· How can we facilitate proper treatment of disguised employees?

· Should legislative controls be placed on employers' freedom to dismiss workers and hire them back on contract?

· What are the implications of extending labour and employment protections to disguised employees?

Access to Benefits

Most self-employed people and their families have no access, through their workplace, to the extended benefits that paid employees normally obtain through their employer. This includes hospital, physiotherapy, vision and dental care, prescription drugs, and life and disability insurance. These workers must either purchase the benefits, or acquire them through a spouse. Purchasing a benefits plan on the income Ginette and her husband generate would be impossible. Analysts speculate that self-employment is more common among couples than singles, because a spouse with steady paid employment provides economic support for household members. But sometimes, as in the case of Ginette and her family, obtaining the benefits package through the spouse is not an option. Fully 25 percent of the self-employed have a spouse who is also self-employed, 78 percent of whom are partners in the same business. This lack of coverage has implications for the well-being of the entire family.

Unpaid Work

In a very real sense, Ginette is making a significant immediate and long-term financial sacrifice to provide unpaid care services to her children and mother.

According to a 1998 study, the value of unpaid work in Canada per person was $12,256. Women spent over 28 hours/week at household work (17 hours for men). With one billion hours in 1998, informal unpaid work outside the household was valued at $10 billion. Women spent more time, on average, in unpaid work than they did in market work. Only 37 percent of females' productive time occurred in the market and was therefore captured in conventional economic statistics. The remaining two thirds (29.7 hours per person per week) was unpaid and remained hidden. Although it appears to be slowly changing, women still do the largest share of household work, yet they are working in the paid labour force in greater numbers than ever before.¹⁴

Questions:

· What should be done to better accommodate and value unpaid work?

· What are the implications of not valuing unpaid work?

Part-Time Work

Some Canadians work part time, because they cannot find full-time work. Others work part time to better manage their responsibilities in the paid and unpaid labour forces. Either way, part-time workers often face penalties. For example, although most labour and employment laws in Canada apply equally to full- and part-time employees, in all jurisdictions except Quebec, employers are free to treat part-time employees less advantageously than full-time employees provided they meet the standards provided in those laws. In other words, there is no requirement for equality of treatment between full- and part-time employees. Part-time workers are often ineligible for non-statutory employment benefits, such as dental and extended health care plans and pensions. In addition, they are excluded from the benefits of certain labour and employment laws and policies, either directly or indirectly, through qualifying requirements based on total work time. So, for example, in Newfoundland and Labrador, vacation entitlements depend on having worked a defined number of regular hours in a year, but part-time workers often have insufficient hours to claim vacation leave (although they can still earn vacation pay).¹⁵

Questions:

· Are there other concerns with respect to the regulation of part-time work?

· Should the laws ensure equality of treatment between part- and full-time employees?

· What are the consequences of such a change?

Summary

As a part-time employee in a large federally regulated company, Ginette received employment-related benefits, rights and protections. Once she became self-employed, many of these protections and benefits disappeared. Her choice was not entirely voluntary, yet like many workers, she appreciated the fact that there might be more flexibility and autonomy as a self-employed worker

Research done for the Law Commission suggests that although some may appreciate the flexibility and autonomy, it comes at a cost both to the individual and to society. There is evidence many self-employed individuals do not have a sufficient degree of financial security to be able to save for retirement or to purchase the benefit plans needed. Moreover, the lack of access to statutory benefits and protections, such as Employment Insurance, maternity benefits, workers' compensation and employment standards protections, can be a serious hardship.

Nonetheless, it must be noted that self-employment allows some workers to realize greater professional and personal satisfaction than would be possible within the confines of the employment relationship. Similarly, engaging the services of self-employed workers may allow employers to obtain the necessary labour at a lower cost and without commitment to long-term employment relationships. This may make an important difference to the financial well-being of the business.

In the same ways, other forms of non-standard employment such as part-time work provide both employers and employees with distinct advantages. However, evidence suggests a significant number of workers do not reap the benefits of non-standard work and, in fact, suffer significant financial and personal hardship.