Independent contractors present several issues in employment law in Ontario for which Monkhouse Law employment lawyers can advise on. We are experienced independent contractor lawyers who can help with misclassification issues, notice on termination, contractual damages, non-compete and non-soliciation clauses.
Primarily, some employers misclassify their employees as independent contractors, intentionally or not. They call them consultants, advisors or agents when they are actually employees under the law.
Some employers intentionally misclassify their employees as independent contractors to avoid their obligations under Ontario’s Employment Standards Act.
Independent contractors are not protected by the Employment Standards Act; only “employees” are protected by the Employment Standards Act, which makes it cheaper for a company to hire independent contractors rather than to employ employees.
For one, employers who hire independent contractors do not have to pay them minimum wage, overtime pay and vacation pay as per the Employment Standards Act.
In addition to Employment Standards Act wage protections, it is an advantage for a company to classify a worker as an independent contractor rather than as an employee because they have no obligation to contribute to tax, EI, CPP or WSIB premiums.
Last but not least, independent contractors are not entitled to statutory or common law notice of termination, termination pay or severance.
Rather, independent contractors’ only rights are those delineated by their written contract, which are generally oppressive for most individuals except high earners with significant bargaining power. In our experience, most employees who were misclassified as independent contractors did so because they were told to “take it or leave it” – they had little choice.
Workers may nevertheless benefit from being classified as an independent contractor because of certain tax deductions plus EI and CPP contribution savings (with a resulting burden in case of termination and retirement, respectively). Also, some workers choose working in an independent contractor relationship because such an enterprise, in the right circumstances, provides greater autonomy and freedom. Even still, the majority of workers in Ontario who work for only one employer, who are not in business for themselves, are hurt by a classification as an “independent contractor”. They would have far greater rights if they were an “employee” as described above.
We have seen that many workers in Ontario who are classified as independent contractors are misclassified – they are actually employees. And we have experience litigating misclassification cases, including by both certifying and winning class actions on this issue.
When is an independent contractor actually an employee?
“Whether a worker is an employee or an independent contractor is a question of law. Just because a business classifies a worker as an independent contractor does not make it so.”
The law considers someone truly an independent contractor, generally, only if they are in business on their own account as opposed to someone in the business of their employer. The key is the substance of the relationship between the parties.
To determine if someone is an independent contractor in that they are in business on their own account, and not an employee, the law has various factors to characterize a worker. In making this determination, the level of control the employer has over the worker’s activities will always be a key factor. However, other factors to consider 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, and the worker’s opportunity for profit in the performance of his or her tasks.
When a person devotes most all of their time to one employer, the courts are much less likely to find that the individual is an independent contractor.
The courts have held that the followings factors are not as relevant in determining if someone is an independent contractor or an employee: First, parties cannot decide employee/independent contractor status merely by mutual agreement or by the signing of a written independent contractor agreement. Second, the method of payment is mostly ignored.
What happens if an employee is misclassified as an independent contractor?
If an independent contractor is terminated without any notice (beyond the notice period contemplated in the contract), and a court determines that the individual was actually an employee all along, then he or she will be awarded severance, any other wages owed that ought to have been paid to the employee over the employment relationship plus legal costs.
If the independent contractor still works for the employer, and a court determines that the individual was actually an employee all along, then he or she will be awarded that overtime pay, public holiday pay, vacation pay, and any remittances for EI or CPP that they ought to have received over the working relationship.
Monkhouse Law has successfully certified class actions demanding wages for workers misclassified as independent contractors. Call us today for a free consultation at 416-907-9249 or submit a callback request.
Employment relationships exist on a continuum. The employer-employee relationship lies at one end of the continuum and independent contractors lie at the other end. However, a third category of relationship has emerged, between those two points, in which reasonable notice of termination must also be given: Dependent Contractors.
“There are some cases where the relationship of employer and employee does not exist but notice of termination (i.e., severance) is still obligated to be given by a company to a contractor.”
Dependent contractors are said to be such intermediate workers between independent contractor and employee entitled to notice of termination where the worker is economically dependent on the company, generally due to complete exclusivity or a high-level of exclusivity in their work.
The legal principles applicable to distinguishing between employee and independent contractor and dependent contractor is carved-out from the above-noted test differentiating employees and independent contractors. In this way, the initial step is to determine whether a worker is a contractor or an employee. The next step, required only if the first step results in a contractor conclusion, determines whether the contractor is independent or dependent, for which a worker’s exclusivity is determinative, as it demonstrates economic dependence. Therefore, exclusivity is the “hallmark” of the dependent contractor category.
The policy justification for using the “intermediate” status of “dependent contractors” is to extend the safeguards of severance to self-employed workers who are subject to high levels of subordination and/or economic dependency, but who, technically, do not qualify as “employees”.
Accordingly, if an individual is a genuine contractor, but is not independent because he or she works almost exclusively for one company, relying on that company for his or her livelihood, then he or she should be awarded severance in case they are dismissed from work.
Call Monkhouse Law at 416-907-9249 for a free 30 minute phone consultation to determine if you are a dependent contractor entitled to severance. We are independent contractor lawyers in Toronto, Ontario.