Home About Us Reports Research Paper 2002 The Legal Concept of Employment: Marginalizing Workers Page 4

About Us

Reports

Research Paper

The Legal Concept of Employment: Marginalizing Workers

The topic of this report is the legal concept of employment because employment is the most important concept for determining the legal protection associated with different forms of paid work. Employment establishes the boundary between the economic zone of commercial relations, entrepreneurship, and competition, on the one hand, and the economic zone of labour protection, economic dependency, and regulation, on the other. This report focuses on how the law distinguishes between employment and self-employment, placing emphasis on own-account self-employment, where the self-employed person does not employ other employees. This case study is selected because it provides an opportunity to examine the normative question of whether labour protection ought to be limited to only certain forms of paid work. Moreover, the dramatic growth of self-employment since the 1980s in Canada raises important questions about the operation of labour markets, whether self-employment is coterminous with entrepreneurship, and the adequacy of prevailing legal tests of employment status for determining the personal scope of labour protection and social benefits.

Employing a multi-disciplinary approach to examine the distinction between employees and the self-employed, the report is divided in four parts. Part One canvasses the sociological, legal, and statistical bases for the distinction. Sociological research reveals that although the category of self-employment is heterogeneous, for most of the self-employed the connection between self-employment and entrepreneurship, ownership, and autonomy is weak. For many people self-employment is likely to be precarious in terms of pay, benefits, and security. Legal tests used to distinguish between employees and self-employed persons are becoming increasingly vague and difficult to apply as courts and administrative decision makers move to open-ended, multi-factor tests that provide little guidance as to their application. At the statistical level, the distinction between employment and self-employment is based on the mode of remuneration. The problem is that this definition is difficult to operationalize and does not correspond to legal definitions.

Part Two provides a portrait of the self-employed in Canada, drawing on public-use micro-data from Statistics Canada, and places it in an international context. In Canada self-employment was a significant source of job growth in the 1990s and has been increasing more rapidly among women than men. In 2000 the self-employed represented 16% of all workers. Much of the growth has been in the service sector. The majority of the self-employed do not employ their own employees, and women are more likely than men to be located at the bottom of the self-employed hierarchy. The self-employed are also much more likely to work part-time than employees and to have lower incomes. There is sharp income polarization among the self-employed, with 25% having incomes of $20,000 or less in 2000. Moreover, many of the self-employed depend on spouses for access to benefits. A significant number of self-employed closely resemble employees in that many of them work on their clients’ premises or on premises supplied by clients and are dependent on former employers as clients.

Part Three evaluates the legal history of the scope of employment and challenges the conventional legal narrative that assumes the distinction between employment and independent contracting (self-employment) is a long-standing and deeply embedded one. It finds that the legal definition of employee owes much more to statute than to contract and the common law, and that decisions about the personal scope of labour law were often made in the context of broader public policies and in consideration of third-party interests. These factors, in conjunction with the wide array of contractual relations that were entered into for the performance of work (often with a view to limiting employer liability), help to explain why historically no clear and coherent test for distinguishing between employees and self-employed emerged.

Building upon this revised account, Part Four provides an overview of the different approaches adopted by legislators, administrators, and adjudicators who have the responsibility for determining the personal scope of labour law. In some areas, most notably human rights and occupational safety, the salience of the distinction has been lessened either by expressly extending coverage to persons not classified as employees or by deeming such persons to be employees. In others, employment status has remained as the basis for coverage, but the test for determining who has that status has been altered to allow the category to expand (or contract) to fit the class of persons who are perceived either to need or deserve the benefit of labour law or social protection. Where this later strategy has been pursued, as for example in the common law determination of employment status for the purpose of vicarious liability, adjudicators have moved away from the presence or absence of direct subordination to the consideration of an open-ended list of factors that, in principle, should be identified and weighed pursuant to a purposive analysis of the context in which the question has arisen. Despite these efforts, the difficulty of using the categories of “employee,” “dependent contractor,” and “independent contractor” persists in a world in which the actual differences between these groups are diminishing. Moreover, the purposive approach to determining the scope of labour law transforms the legal category “employee” into a cipher whose meaning is to be determined on the basis of the view of the decision maker of the appropriate class of persons who should receive the benefit of the law.

Part Five addresses the appropriate personal scope of labour protection in light of the conceptual, statistical, historical, and legal analyses, and provides recommendations for law reform. It proceeds by identifying a range of work relationships or contracts, identifying the dimensions of legal regulation and their instrumental goals and normative concerns, and providing normative, economic, and institutional justifications for recommending a specific scope of coverage in a particular context. Its general recommendation is that it is necessary to abandon the distinction between employees and independent contractors for the purpose of determining the personal scope of labour protection, but that labour protection laws will need to be re-designed in order to accommodate the varied conditions under which different forms of paid work are performed. Specific recommendations are offered in relation to the different dimensions of labour regulation.