What is an independent contractor?
Not every person who completes work for pay is an "employee". Lawyers, for instance, are not employees of their clients. If you pay someone to mow your lawn, that person is not considered an employee either. These are strictly contractual, not employment relationships.
Why do I need to know if I am an independent contractor or an employee?
This is an important distinction if you are terminated. That's because employees and "dependent contractors" are entitled to common law severance and can sue their employers for wrongful dismissal . When independent contractors are terminated, their entitlements are always limited to the amounts set out in their contract.
Am I an employee, a dependent contractor, or an independent contractor?
If you find yourself asking this question, you are likely an employee or a dependent contractor.
If the following factors describe your work situation, you are more likely to be an independent contractor:
You provide the tools and equipment that you use to do your job.
You make profit and risk losing money from the work you do (aside from simply earning or not earning wages).
- You have overall control over when, how, and where you're going to complete the work.
You have the ability to subcontract or hire others to complete the work.
Dependent contractors are not quite employees, but not quite independent. They usually do most or all of their work for one client, which makes them economically dependent. Because of this economic dependence, the law recognizes that these workers should be entitled to sue for wrongful dismissal damages just like employees.
What are the benefits and drawbacks of being an independent contractor as opposed to an employee?
Some workers prefer to operate as independent contractors because of their ability to reduce payroll deductions and deduct expenses from taxes. Many contractors feel that such benefits outweigh the drawbacks, like having no access to group health insurance, employment insurance, vacation and holiday pay, as well as reduced severance.
Why do employers misclassify employees as independent contractors?
Although the Ontario Employment Standards Act deems it an offence for any employer to misclassify an employee as an independent contractor, many companies continue in this practice. They do so because paying independent contractors is cheaper than paying employees, given the savings in vacation pay, holiday pay, EI and CPP premiums, overtime, and severance, to name a few.
Certain classes of employees are frequently and chronically misclassified as independent contractors, such as sales employees, couriers, drivers (even those who use their own cars), and various professionals identified in an agreement as "consultants".
Does it matter that I specifically agreed to be hired as an independent contractor?
No. Your employer cannot avoid the legal consequences of treating you like an employee, simply by having you agree to call yourself a contractor. If you are considered to be an "employee" in the eyes of the law, the Employment Standards Act deems your agreement with your employer to be void.
Does it matter that I'm an independent contractor for income tax purposes?
No. Whether or not you pay taxes as an independent contractor does not determine whether you are considered to be an employee for other purposes.
What can Hyde HR Law do for me?
The employment lawyers at Hyde HR Law are experts at reviewing and interpreting independent contractor agreements. If you are an independent contractor who has been terminated, or if you simply have questions about your contract or your employment status, contact us today. Should you be deemed an "employee", we can assist you in obtaining the legal remedies that you are lawfully entitled to upon termination.