Legal File
Understanding Employment Law BY ANDREW PRIOR
E
mployment law issues span across all industries, but some issues are especially relevant to the construction industry. This article will discuss common legal issues facing employers in the construction industry. If you are facing any of these circumstances, we recommend you reach out to your legal advisor to obtain more information and advice on how to resolve the issue or minimize your risk.
WRITTEN EMPLOYMENT CONTRACTS Many employers and employees begin their employment relationship on nothing more than a handshake. However, a written employment contract provides several benefits. Firstly, a written contract provides a record of the rights and obligations of both parties. This provides clarity and certainty of the terms of the employment relationship. An employment contract can also limit liability. Employees who are terminated without cause are entitled to notice of termination, or pay in lieu of notice, pursuant to the Employment Standards Act (the Act) and the common law. The common law notice entitlement can be up to 24 months. An employment contract can limit this notice to what is required by the Act, which may be three weeks or less, depending on the circumstances. However, without clear language to indicate such a limit, an employer may be liable for pay in lieu of notice significantly exceeding the requirements under the Act. An employment contract may also provide an employer with the right to make changes to the employment relationship, such as changing work duties, business restructuring, and other changes. Without a proper contract providing this right, employers will risk constructively dismissing employees when making changes. A constructive dismissal is treated as a termination without cause, and the employer may be liable for significant pay in lieu of notice. If your employees work under an oral employment contract, it is advisable that you speak to a lawyer about implementing a written contract with your current and future employees. INDEPENDENT CONTRACTORS Another key issue is the distinction between employees and independent contractors. This distinction has significant impacts on the legal obligations of the employer. Simply naming an individual an independent contractor is
Employees who are terminated without cause are entitled to notice of termination, or pay in lieu of notice, pursuant to the Employment Standards Act... not sufficient to cement their status, and parties often fail to consider whether the facts of the working relationship support a designation as independent contractor. Whether an individual is an employee or independent contractor will depend on the following: a. Whether or not the individual works exclusively for the company; b. The degree of control the company has over the individual’s work (such as when, where, and how the work is done); c. Whether the individual supplies their own tools and equipment; d. Whether the individual has the chance to obtain profit or risk loss; and e. The degree of integration between the individual and the business. If an individual is in fact an employee, the Act will apply to the relationship, including employee entitlements to vacation pay, overtime, and statutory severance upon termination. The employer will be liable for payroll taxes and may face penalties for failure to deduct and remit income taxes. Further, upon termination, the individual may have a claim for pay in lieu of notice, which can cause the employer to be liable for up to 24 months of wages. If you intend to retain an independent contractor, but any of the above considerations are engaged (especially if you are the exclusive employer), contact your lawyer to ensure that the facts support this designation and that your contracts are drafted accordingly.
TEMPORARY LAYOFF Employers may lay off employees for up to 13 weeks in a 20-week period. To do so, typically the employee must consent to the layoff in writing. Consent can be provided at the outset of the relationship in a written employment agreement, or it can be provided in writing in advance of the layoff. Once the maximum layoff period is exceeded, the employer must pay severance
as if it were a termination without cause. Notably, under section 65(1)(e) of the Act, employers whose “principal business” is construction are not required to provide statutory notice of termination under the Act for employees who are employed “at construction sites”. However, if the employer does not have an employment contract in place to limit the notice entitlement, it will be liable for pay in lieu of notice pursuant to the common law, which can be significant.
OVERTIME AVERAGING Overtime averaging agreements are useful in the construction industry, where timelines may require employees to work long hours. Such an agreement allows the employee’s hours of work to be aver-aged over a period of one to four weeks for the purpose of determining overtime pay, potentially saving the employer from an expensive payroll. However, an overtime averaging agreement must comply with section 37 of the Act, meaning it must: a. Be in writing; b. Be signed by both parties prior to the start of employment; c. Specify the number of weeks over which the averaging agreement applies; d. Specify the work schedule for each day covered by the agreement; e. Specify the number of times the agreement may be repeated; and f. Provide a start date and an expiry date for the weeks over which it applies. While overtime averaging agreements may be a useful tool, in practice they are seldom compliant with the Act, which can result in significant liability for overtime pay. We recommend you speak to your legal advisor if you intend to use an overtime averaging agreement in your workplace. Andrew Prior is a commercial litigation lawyer with Pihl Law Corporation in Kelowna.
November/December 2021
CONSTRUCTION BUSINESS
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