Am I an Employee or Independent Contractor?

One of the most common questions employment lawyers in Ontario are asked is whether a specific worker happens to be an “employee” or an “independent contractor”. This question is important because it gives right to different legal protections and entitlements for the employee, as well as different legal obligations and responsibilities for an employer.

When it comes to determining this question, the courts have been clear one specific rule: Each case will be determined based on its own specific facts and circumstances; there is no “magical formula” or “hard-and-fast rule”.

What is an Employee?

Under the Employment Standards Act, 2000 (“ESA“), an employee is a worker who are in an employment relationship with an employer.

The ESA currently defines employee as including:

• a person who performs work for an employer for wages (regular labourer, manager, supervisor, director of a company, etc.)
  
• a person who supplies services to an employer for wages
• a person who receives training from a person who is an employer

Based on this definition, an independent contractor is not an employee as many of the defining features are absent – especially the financial dependency of the worker on the employer to earn a living. As a result, an independent contract is deprived of protection under Ontario employment law and will not be entitled to rights such as:

• minimum wage
• overtime pay
• public holidays
• vacation with pay
• notice of termination or termination pay (a financial severance package)
  

What is an Independent Contractor?

An independent contractor is a self-employed worker hired by a company to provide services not as an employee, but in a situation where they supervise and control their own work without a “boss”. In other words, an independent contractor is someone who is self-employed and in business for themselves.

As discussed below, the general rule is about control: a worker is an independent contractor if he has the right to control what work they perform and how it will be done, and the company that pays them only the right to direct or control the result of the work performed. What matters is that the employer has the legal right to control the details of how the services are performed.

Test for Determining Employee vs. Independent Contractor

In determining whether someone is an employee, the courts examine the actual conduct of the parties and how the relationship works “on the ground”. The most important factor in their analysis is who maintains “control”. The following court quotes illustrate this point:

“It seems to me that the difference between the relations of master and servant and of principal and agent is this: – A principal has the right to direct what the agent has to do; but a master has not only that right, but also the right to say how it is to be done.”

“The essential criterion of employer-employee relations is the right to give orders and instructions to the employee regarding the manner in which to carry out his work.“

What other factors will be considered in determining if a worker is an independent contractor or employee? These include:

• whether the worker provides his or her own equipment
• whether the worker hires his or her own helpers
• the degree of financial risk taken by the worker
• the degree of responsibility for investment and management held by the worker
• the worker’s opportunity for profit in the performance of his or her tasks

Common Misconceptions

An individual may still be considered an employee even if:

• they have signed a contract calling them an “independent contractor”. What matter is the relationship between the individual and the business, not the label they have chosen for themselves.
  
• the worker:
  • charges the harmonized sales tax (HST)
  • submits invoices to the business
  • uses their own vehicle for work purposes
• the business does not make statutory deductions (e.g., tax, Canada Pension Plan (CPP) or Employment Insurance (EI) from the worker’s pay
• the worker is not trained on or asked to abide by regular workplace policies (e.g., workplace harassment policies) or health and safety requirements
• the worker is not provided with health benefits or pension plan that other employees receive from the company
• the business tells the independent contractor they are not entitled to a vacation

Contact Employment Lawyer

If you are an employee looking for an employment lawyer to help with determining what your legal rights after termination of your employment (e.g., a severance package), or an employer looking to prepare a contract for a new worker, please contact Bune Law today.

To speak with an experienced employment lawyer in Ontario, please contact 647-822-5492.

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