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Am I an Employee or an Independent Contractor?

Not all workers are considered employees. Sometimes, the relationship between a worker and the person who is requesting that the work be done is just one of contract, not of employment.

In the Ontario, the rules that provide minimum protections for employees are contained in the Employment Standards Act, 2000 (“ESA”). The text of the ESA states that it is applicable to employment relationships, where the employee’s work is performed in the province of Ontario.

The ESA defines the term employee and provides helpful information about employment relationships. Additionally, the courts have provided further information to help distinguish between an employee and an independent contractor.

How is “Employee” Defined in the ESA?

In the ESA, the term “employee” is defined as:

(a)  a person, including an officer of a corporation, who performs work for an employer for wages,

(b)  a person who supplies services to an employer for wages,

(c)  a person who receives training from a person who is an employer, if the skill in which the person is being trained is a skill used by the employer’s employees, or

(d)  a person who is a homeworker,

and includes a person who was an employee;

The ESA establishes minimum protections for employees. All of the above categories of workers are considered employees, and therefore protected by the ESA. There are some exceptions to the types of industries that the ESA covers, based on the jurisdiction of the ESA.

The ESA does not cover individuals who are workers in federally regulated industries, such as banks, air transportation, and postal services. Individuals in federally regulated industries are protected under the Canada Labour Code, rather than the ESA.

Who is Considered an Independent Contractor?

The term ‘independent contractor’ is not defined in the ESA. The question of whether an individual should be considered an employee or independent contractor has been addressed by the courts, who have established a number of factors that can help make the determination.

In the 2001 Supreme Court of Canada case 671122 Ontario Ltd. v Sagaz Industries Canada Inc., the court addressed that the main question asks whether the worker is doing the work for another business, or for their own business. The factors used to answer this question in the case include:

“the level of control that the employer has over the worker’s activities … 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.”

Factors to Determine if a Worker is an Independent Contractor

Although not an exhaustive list, some factors that can be used to help determine whether a worker is an employee or an independent contractor include:

Control – If a worker has more control over the work that they do and how the work gets done, they are more likely to be an independent contractor.

Tools – If a worker uses their own tools in the process of their work, they are more likely to be an independent contractor.

Hiring helpers – If a worker hires other people to help perform the work, then they are more likely to be an independent contractor.

Risk – If a worker invests their own money in the business and exposes themselves to risk, they are more likely to be an independent contractor.

Responsibility – If a worker has little supervision and management, they are more likely to be an independent contractor.

Risk and potential profit – If a worker invests their own money in the business with the aim of earning a profit, they are more likely to be an independent contractor.

What if an Employee is Treated Like an Independent Contractor?

The ESA states that employers cannot treat employees like independent contractors. An employer treating their employee like an independent contractor may lead to a violation of the employee’s rights and deprivation of entitlements under the ESA. To determine whether an employer violated the rule that addresses treatment of employees like independent contractors, the employer’s knowledge and intention will be considered.

Additionally, employees cannot contract out their rights to the protections granted in the ESA. If an individual is considered an employee, and agrees to be considered an independent contractor instead, that agreement is null and void.