It can sometimes be difficult to determine if a person is an employee or an independent contractor. In fact, it is rather a common occurrence that an employee is misclassified as an independent contractor by an employer. Further, there are many misconceptions about how to tell the difference between an independent contractor and an employee. Misclassification happens when an employer does not treat an employee as an employee.

Independent contractor versus employee.

Simply put, an independent contractor is not an employee. Rather, the independent contractor is an individual who provides services to others under a contract and accepts payment for those services.

An individual may be considered an independent contractor when some of the following describe their work conditions:

• An individual owns and is responsible for some or all of any equipment or tools that are used to complete the work.
• An individual is in business for themselves. This means that they can make a profit, but they also have the risk of losing money from the work the individual completes.
• Whether the individual is economically dependent on the business that they do work for.
• Whether the individual determines how and/or where the work is completed.
• If the individual can subcontract some of the work to others to complete.
• Whether a business can end the contract for service(s) from the individual easily.
• Any business or company that works with the individual cannot discipline them for wrongdoing.

Usually, a key factor in the analysis will be who has control. It would be an independent contractor rather than an employee who has control if they are able to set boundaries and determine when, how and where they perform work and how much they will be paid for those services. By contrast, in an employment relationship with an employee, an employer generally controls when the employee works and where, how much the employee is paid, and what type of work they are expected to complete. An employer can also discipline the employee when there is misconduct or wrongdoing.

However, there is no single factor that Ontario courts will look at to determine if an individual is an employee or an independent contractor. Ontario courts will look at the relationship as a whole before classifying an individual as an independent contractor or employee, and this is done on a case-by-case basis. As such, whether an individual agreed, verbally or in writing, that they are designated as an independent contractor, is not determinative of the issue.

Why misclassification can be risky for an employer.

Employers often misclassify employees as independent contractors. There is a variety of reasons for this misclassification. Common examples include the fact that the employer may want to avoid having to pay payroll taxes or having to provide notice when the employer wants to dismiss the employee. Further, simply paying an employee via an invoice or having a document that sets out that the employee is an independent contract will not change the classification.

There is a risk when an employer misclassifies an employee as an independent contractor that upon dismissal the employee will file a statement of claim claiming that the employee was subject to a wrongful dismissal and demand the employer pay the employee termination and severance pay. A misclassified person may also file a complaint with the Ministry of Labour to enforce his or her rights under the Employment Standards Act. A misclassified employee is owed all the legal entitlements to compensation that an employee is legally entitled to upon dismissal and this fact often catches an employer by surprise.

How Zeilikman Law can help.

In circumstances where an employee is unsure about the status of his or her employment as either an employee or an independent contractor, it is recommended that the employee speak to an employment lawyer.

For more information about inducement in the employee and recruitment context, please look at our blog, “Independent Contractor or Employee?”

Contact one of Zeilikman Law’s experienced employment lawyers today to set up a confidential consultation. Zeilikman Law can be contacted online here or via telephone at 905-417-2227 to schedule a confidential consultation.