Business and IT Consultants Excluded from the Employment Standards Act

Effective January 1st, 2023, individuals who meet “business consultant” or “information technology (IT) consultant” definitions are not included under the Employment Standards Act (ESA) if certain conditions are met. 

A “business consultant” under the ESA is someone who provides advice or services to a business regarding its performance, including: 

• Operations 
• Profitability 
• Management 
• Structure 
• Processes 
• Finances 
• Accounting 
• Procurements 
• Human resources 
• Environmental impacts 
• Marketing 
• Risk management 
• Compliance 
• Strategy 

An “information technology consultant” is defined as someone who provides advice or services to a business or organization regarding its information technology systems, including: 

• Planning 
• Design 
• Analysis 
• Documenting 
• Configuration 
• Development 
• Testing 
• Installation 

A business or IT consultant may only be excluded from the ESA if all of the following conditions are met: 

1. The individual meets the ESA’s definition of either a business consultant or an information technology consultant as prescribed above. 
2.  The consultant provides services either through a corporation or through a sole proprietorship. This means that either:
   1. The individual provides services through a corporation where they are either a director, or a shareholder party to a unanimous shareholder agreement. 
   2. The individual provides services through a sole proprietorship with a business name registered under the Business Names Act. 
3. The employer and consultant have established a written agreement containing specific terms, including: 
   1. When and how much the consultant will be paid 
   2. The consultant is paid at an hourly rate, and  
   3. The rate must be equal to or greater than $60 per hour  
   4. This rate excludes bonuses, commissions, expenses, travel allowances, or benefits 
4. The consultant must actually be paid as set out in in in Paragraph 3 above  

If all four of the above conditions are met, the exception will apply, and the individual will not be protected under the ESA. However, if any of the conditions are not met, the exception no longer applies, and the individual will be entitled to the rights as set out in the ESA.   The Ministry of Labour guidelines state the following about the application of the new exception: 

In light of these changes, employers are encouraged to review the agreements that they have in place with the relevant consultants and determine whether these relationships may be impacted by the ESA amendments. 

As a first step, employers should determine whether the consultant is a true independent contractor, such that the ESA would not apply, or whether the consultant is more accurately an employee. If it is determined that the consultant is an employee and not an independent contractor, then the next step would be to assess whether the consultant is excluded from the ESA as a result of the amendments described above. 

Employers are encouraged to keep these provisions in mind in order to appropriately structure consultant or independent contractor arrangements moving forward. 

The team at HR Enable can help. We specialize in employment law and provide HR Consulting to our clients.  We have the knowledge and expertise to guide you through the recent changes to the ESA and can help you to structure your consulting agreements for compliance. For more information contact HR Enable today at 905-483-5115.