The balance of power in contracts

Independent contractors don’t always have a better negotiating position

By Jeffrey R. Smith

Contracts are good way to set up expectations and the duties of a worker, particularly an independent worker. Both parties are bound to the contract’s provisions, and if they don’t follow through, the other party can break the contract.

Many employers use independent contractors because they have fewer obligations to those workers than they would full employees — most employment standards, payroll deductions and other legal liabIlities aren’t a worry when contracting out work, as the contractor has a choice on whether to take the work or not.

Depending on the specifications of the contract, an employer could break a contract if it’s not happy with the contractor’s performance — if that instance is provided for in the contract. The only way a contract can be broken for cause is if the contract specifically allows it. If there isn’t a provision for termination for cause, then any termination likely means the employer must pay the contractor for the balance of the contract’s term.

There are numerous cases of contracts with provisions specifying types of misconduct or failure to meet performance standards as justifying and end to the contract before its term is up. But what about the contractor’s side of things? Can the contractor terminate a contract for cause? What sort of conduct on the part of the employer/company serve as justification for the contractor to exit without penalty?

If a contractor has specific deadlines to meet and doesn’t meet them, the employer may be able to end the contract, although it depends on the circumstances. The seriousness of a missed deadline could depend on both the intended nature of the contractual term and the actual effect of the breach.

But what if it’s the employer who doesn’t meet timelines established in the contract? What if it’s late in getting information and work to the contractor, which affects the contractor’s ability to meet the established deadlines? Is that a breach from which a contractor could walk away but still be entitled to pay for the balance of the contract?

While a contractual relationship is different from an employment relationship, there are similarities as well. An independent contractor has more choice than an employee in choosing who to work for and what jobs to do, many independent contractors have that status because they can’t find permanent regular work.

In such circumstances, the employer has as much — if not more — power over the contractor as it would an employee. The contractor will take what work she can get, while not protected by most employment standards. This can  — and often does — result in independent contractors working longer hours for less pay than would be allowed regular employees. And if things get far worse than was called for in the contract due to the employer not living up to its side of the bargain, what can the contractor do? Often, their only choice is to grin and bear it.

That brings up another issue — if an employer takes advantage of an independent contractor who is desperate for work and can’t say no, should there be a higher level of compliance with employment standards required? A common refrain in employment law is that parties can’t contract out of basic employment standards minimums.

While this is fine when it comes to collective agreements — which usually confer greater than the minimums — it’s often a different story when it comes to certain independent contractors, who are still on the short end of the balance of power with employers.

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