Workers hired as independent contractors may end up being employees anyway
Nov 4, 2014
By Jeffrey R. Smtih
Anyone who’s hired to do work can be considered a worker. But considered an employee? Maybe not.
It’s a popular practice for businesses to hire someone to do work as an independent contractor that keeps the individual at arm’s length while performing work. By taking a worker on as an independent contractor, a business hopes to keep labour costs down by only paying for the work and not worrying about benefits, payroll deductions or notice of termination.
Since contracts like this have fixed terms, the costs are fixed and known. Some elements of employment standards, such as hours of work, don’t have to be as much of a concern either, if the contract specifies the work to be done only.
And once the contract term has expired, that’s it — the business doesn’t have to worry about notice of termination, just cause or anything like that. And termination provisions can be written into the contract, which can allow for early termination under specified circumstances. As long as the provisions are adhered to, it can be a simple arrangement.
However, it’s not so simple if the employer isn’t careful and allows the nature of the relationship to change. While having independent contractors do the work is all fine and good, employers have to be careful that the contract actually reflects the working relationship. Courts and adjudicators have been quick to throw out the independent contractor excuse if the circumstances more resemble an employer-employee relationship.
Even if a worker has agreed to work as an independent contractor, certain factors such as who controls the timing and performance of the work, the tools and equipment used in the work, who profits most from the work and who takes on the risk. If the business controls any of these factors, it’s more likely the worker will be considered an employee rather than an independent contractor.
If that’s the case, those trappings of the employment relationship that the employer is trying to avoid — such as a right to notice of dismissal, employment standards obligations, payroll deductions and an indefinite term of employment — may very well be in effect.
Another category of worker has emerged fairly recently in employment law that sort of bridges the gap — that of the dependent contractor. Workers who may not fall entirely into the categories of independent contractor or employee could be placed here. These workers may have some elements of independence, but are tied closely enough to the employer where some rights of employees are in effect.
If the characteristics of a working relationship resemble an employer-employee one, it doesn’t really matter if the worker went into it with the intention of being an independent contractor and agreed to those terms. But should she be allowed to willingly enter such a relationship and the business accept it?
Or does the inherent power imbalance between businesses and workers mean workers couldn’t have the choice of being a contractor while working more like an employee?
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Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective.