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Contract fantasy versus reality

Whether someone is an independent contractor or employee depends more on the actual relationship than the contract

By Jeffrey R. Smith 

Sometimes words are just words. Even if they’re written down in a contract, they might not mean a whole lot if the reality of circumstances doesn’t reflect what the words say. This is particularly true of employment contracts that try to differentiate between an independent contractor and an employee, but don’t really indicate the work the worker is doing. 

There are always cases coming down the pipe that involve a dispute over the employment status of workers. This is an important identification, because employees are subject to rights under employment standards legislation, while independent contractors usually are not. In addition, independent contractors are responsible for their own statutory deductions such as income taxes and Canada Pension Plan contributions. 

However, as many of these cases demonstrate, what the employer — or both parties — believe is an independent contract relationship may in fact be a full employment relationship. And just because the employer intends the worker to be an independent contractor and explicitly states as much in the contract, if they don’t follow the characteristics that determine an independent contractual relationship, then the worker could be an employee. 

An Ontario motel owner discovered this fact recently when it found itself on the hook for paying what she thought was an independent contractor housekeeper full minimum wage salary for full-time hours, rather than the per-room rate she had negotiated. The worker signed a registration card indicated she needed a room at the motel in exchange for work and the owner wrote a letter for a social assistance program indicating the worker worked a few  hours per week. 

The worker was paid a certain amount for each room she cleaned, and on at least one occasion for a room she painted. She was told she would have time to go to job interviews and run errands, but she was expected to be ready to clean a room whenever a guest checked out between the hours of 9 a.m. and 11 p.m. 

After a little while, the worker was transferred to another motel owned by the same person, with a similar per-room cleaning rate. She was also expected to get towels and toiletries for rooms, but wasn’t paid for this. Eventually, the worker felt exasperated at this arrangement and asked for full pay at minimum wage. The motel dismissed her and kicked her out of her room. 

The Ontario Labour Relations Board found the worker was not in fact an independent contractor but rather was an employee. Though the intention was for the worker to be independent, the reality of the situation was that the motels controlled all aspects of the job. Though she only cleaned certain rooms, she was expected to be available all day every day, so the motels controlled her hours of work, as well as the cleaning equipment she used. The worker didn’t do any other cleaning other than at the motels and she wasn’t “engaged in business on her own account,” said the board in ordering the motel owner to pay the worker three months’ in full-time wages at the minimum wage rate, plus damages for the harsh manner and bad faith of her dismissal. See Teneva v. 946900 Ontario Ltd., 2016 CarswellOnt 1003 (Ont. Lab. Rel. Bd.). 

It’s important for employers to realize that if they intend to hire independent contractors instead of employees, they must be prepared to reflect that in the nature of the relationship. For the contractor to be truly independent, she must have some control over her hours of work, use her own tools, and be free to pursue other work. These are some of the factors that help determine whether someone is an employee or an independent contractor – and none of them have anything to do with the wording in the contractual agreement itself.

© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.

Jeffrey R. Smith

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective.
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