November 19, 2019
by Stuart Rudner, Employment Lawyer and Mediator
Perhaps you’re fresh out of school, looking for your first position as a hygienist. Or maybe you have been working as a hygienist for many years and are looking to move to a new practice (or multiple practices). Or, perhaps the dentist you have been working with has just asked you to sign a very legalistic new contract.
When you are presented with that contract, what should you do? Should you sign? What difference can it really make?
The short answer: Signing a Contract, or even an offer letter, can…
• cost you tens of thousands of dollars (or more),
• expose you to unwanted changes in your duties, compensation, and even location of work,
• deprive you of vacation, statutory holidays, and entitlement to basic rights like overtime pay, and
• limit your ability to work elsewhere, even if they let you go.
We work with hygienists, dentists, and dental practices. We understand the unique elements of the industry and the relationships that exist. We also understand the risks.
Employee or Contractor?
Speaking of relationships, when you assess your current or potential role, what is the legal relationship – are you being treated as an employee or an independent contractor? And is that defensible if questioned by CRA, the Ministry of Labour, or a court? Have you unknowingly given up some of your rights by agreeing to be paid as a contractor?
It is not unusual for hygienists to be paid as contractors. Sometimes, the dentist will tell you that it will be better for you from a tax perspective. That may be true, but true contractors are not protected by employment laws. So, they are not entitled to basic rights like vacation, statutory holidays, breaks, overtime pay, or severance.
Imagine working in a practice for twenty years and then being let go with 30 days’ notice, as opposed to months or even years of severance. That’s what happens if you are a Contractor.
The term “independent contractor” refers to more than how you are paid. It reflects the nature of the relationship. If you are effectively in business for yourself, offering your services to several “clients” and operating independently, then you may meet the legal definition of an Independent Contractor. Or you may be a hybrid: what the courts call a “dependent contractor”. What is important to remember is that
1. you should understand the impact of the legal relationship you choose – it is not just a question of how you are paid, but what your legal rights will be;
2. no matter what the parties say the relationship is, courts and government agencies like CRA can and will impose their own assessment and may decide that you have been mischaracterized – that can result in a substantial debt for unpaid taxes and other premiums.
There are many advantages to truly independent relationships. The contractor is able to work with significantly more independence than an employee and has the freedom to decide how (and often when) work will be performed. They are also entitled to deduct business earnings and expenses, and can earn income from several different organizations at one time.
In order to take advantage of these benefits and freedoms, some people will proceed as if the hygienist is an independent contractor when the reality is that the relationship is more like one of employer-employee. Misclassifying an employee as an independent contractor can have serious implications for both parties.
Just Because You Say You are Independent Doesn’t Make It So
Many hygienists believe they are safe from liability as a result of the existence of a written agreement which states that the hygienist is an independent contractor and not an employee. However, the courts and the Canada Revenue Agency are not bound by such an agreement. Courts have repeatedly ruled that the written agreement is only one factor to consider, even where the parties confirm that their intention was to create an independent contractor relationship. In other words, courts will assess the reality of the situation rather than deferring to the parties’ characterization of the relationship.
Assessing the Relationship
The CRA, the courts and adjudicators such as employment standards officers will consider various factors when attempting to determine whether an individual is an employee or an independent contractor, including:
• The degree of control that the hygienist has over her or his activities;
• Whether the hygienist or the employer provides the required equipment and tools;
• Whether the hygienist hires his or her own helpers;
• Whether the hygienist can work for other practices or must provide exclusive services;
• The hygienist’s degree of financial risk (chance of profit and risk of loss); and
• The hygienist’s responsibility for investment and management.
The bottom line often comes down to whether the individual is truly an integrated or integral part of the organization, or whether the individual is carrying on business on his or her own account. In that regard, any indicia that the Hygienist is a part of the organization will weaken the argument that they should be seen as independent. Such indicia can include:
• Business cards
• Corporate email address
• Provision of benefits
• Participation in company events, and
• Mention on the website as a member of “our team”
While there may be tax advantages to being a contractor, you may also lose out on significant protections that they would otherwise have as an employee.
Remember that the question to be answered is not “do you want to be paid as a Contractor or an Employee?” The question is what the reality of the relationship will be. No contract will change that.
Every Employee has a Contract
You may be thinking that you have been working for years without a contract. However, contrary to popular belief, every employee in Canada has a contract. However, most are verbal, with a number of “implied terms”. Those implied terms are intended to protect employees, but written contracts can remove many of those protections. You need to understand what they mean before you sign.
Whether it is a one-page letter or a lengthy legal document, your contract sets out the fundamental terms of your relationship. You may be excited about the new opportunity, but “look before you leap” is good advice in this context. Signing a contract is not something to be taken lightly.
Employers are becoming more aggressive in their use of contracts. If someone wants you to sign an agreement, it is usually because they have something to gain.
It is critical that you understand what you are giving up before you agree, particularly if you are being lured away from your previous organization, or if you have been provided with a contract containing extensive terms and conditions. Signing without understanding will undoubtedly come back to haunt you later on.
Imagine if you were to find out, years from now, that your severance entitlement was a few weeks, rather than months or years.
Unfortunately, it is all too common for us to meet with an individual who has recently been dismissed and is baffled by the minimal severance they have been offered, and we have the unfortunate duty of advising them that this is because of the contract they agreed to when they were hired.
As discussed above, the first thing is to consider the very nature of the contract: does it treat you as an employee or a contractor, and is that both 1) to your benefit and 2) consistent with the true nature of the relationship?
Signing a contract should never be treated as a formality; it can dramatically impact your legal rights.
Check the Termination Clauses
By default, all employees are entitled to “reasonable notice” of dismissal. That can be extensive, especially if you are older, or were lured away from prior employment, or are in a small town. However, this entitlement can be displaced by a termination clause, which can dramatically reduce your entitlement at the most critical time: when you lose your job. Furthermore, independent contractors do not have this entitlement.
It is a sad reality that we routinely meet with people that have been let go and are shocked to realize what they agreed to back when they accepted the job offer. Watch out for clauses that try to limit your entitlement to the minimum amounts required by employment standards legislation.
It can be the difference between 14 days of notice or two years of severance.
Look for a Probationary Clause
If there’s a probationary clause in your contract, you have absolutely no protection in the first few months.
If the termination clause limits your entitlement to the minimum amounts required by employment standards legislation, the result is the same: you can be dismissed without any notice or severance in the first few months.
Particularly if you are being recruited away from secure employment, you should be entitled to more security, not less.
Make sure Compensation is Clear and Not Discretionary
Sometimes, people are told their compensation package will be worth $x, but the contract provides for a lot of variable compensation that is not guaranteed. Watch out for bonuses or other payments that are purely discretionary, because that means the company can simply decide not to pay them.
You should also make sure that the contract does not provide that you must be “actively employed” when bonuses or other compensation are paid out. Otherwise, you will not be entitled to them during any severance period, which will further reduce your severance entitlements.
What’s Not There Can Be As Important As What Is
It is also crucial that you consider what is not in the contract, and that the contract is consistent with verbal discussions and with your expectations. You may have discussed and agreed on certain terms (like a guaranteed number of hours per week), but if they are not explicitly set out in the agreement, then you should not assume they will be in place.
This is particularly important because most contracts include an “entire agreement” clause which means that unless it is stated in the contract, it is not part of your agreement – any other discussions or agreements are meaningless. Even if you have a separate email message confirming a signing bonus, or that you can work from home two days each week, you will probably not be able to enforce it. What they promised you doesn’t matter; what matters is what is written in the agreement.
Watch Out For Limits On What You Can Do Now And In The Future
Many dental practices will insert language which limits your ability to work anywhere else during and after the contract. For example, the contract might say that for a period of six months, or even longer, after the contract ends, you cannot work for another dental practice within 50 km. That can restrict your right to work, even if they let you go.
Look Out For Changing Duties And Other Terms
By default, employers cannot unilaterally impose significant changes into key terms of the contract, such as your role, duties, or compensation.
However, some contracts contain language that allows the employer to change your title, duties, reporting relationships, location of employment and other key terms at their discretion. Imagine being told that as of next week, you have effectively been demoted, or that you have been transferred from Toronto to Winnipeg. Unless you want to run this risk, make sure any discretion to change the terms of employment is limited and reasonable.
See An Employment Lawyer
This may sound self-serving, but it is critical that you receive legal advice from someone with expertise in Employment Law before you sign a contract that may dramatically limit your rights. An employment lawyer will be able to point out any potential pitfalls that you may not be able to see. A termination clause is a perfect example of this.
We understand that legal advice costs money. However, there is truth to the old adage that it is unwise to be “penny wise and pound foolish”. You may save a little money by not seeing a lawyer before you sign the agreement, but it can cost you and your family a lot more in the long run. This is your career and your livelihood; do not blindly sign away your rights.
You need to make informed decisions. That’s where a lawyer comes in. They explain how the law applies to your situation, discuss the options and strategies available to you, and the pros and cons of each. You can then take all of that into account, and decide what makes sense for you.
They will then work with you to develop an effective strategy and negotiate on your behalf where it is appropriate, or can guide you while remaining in the background.
At the end of the day, you will either end up with a better contract, understand enough to reject a bad contract, or at the very least, enter into a contract knowing the impact on your legal rights.
About the Author
Stuart Rudner is the founder of Rudner Law, a firm specializing in Employment Law. The team at Rudner Law works with dentists, hygienists and dental practices to help them understand their rights and obligations. Stuart can be reached at email@example.com or 416-864-8500.