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Do Contract Work Count as Employment?

Contract Work does count as employment. The primary distinction between contract employees and permanent workers revolves around differences in the employer-employee relationship. The main differences between contract employees and full-time employees are the degree of the employer’s control over their work.

A contract worker, also known as an independent contractor is an individual who enters into a contractual agreement with a business in order to provide a service in exchange for a fee. Contracted workers are not technically “employees” since they provide services on a short-term or individual project basis. Also, unlike full-time employees, contract workers do not have to be offered employment benefits by the businesses that hire them.

A permanent employee, on the other hand, is supervised by his or her employer, who directs and controls his or her work throughout a long-term relationship.

The Four Point Test for Determining Independent contractor vs employee Status:

1. Control

​Does the company has the right to determine the monthly amount to be paid, and decide on the time, place, and manner in which the work is to be done? Do you work exclusively for that company? Is there any notice requirement before you can stop doing the work you are contracted to do?

2. Ownership of tools

​Ownership of tools is no longer a good indicator. Nowadays even employees under an employment contract need to supply their own tools in some trades such as painters and garage mechanics.

The cost of using the tools is a much better indicator. When workers purchase or rent equipment or large tools that require major investments and costly maintenance, it usually indicates that they are self-employed individuals, because they may incur losses when replacing or repairing their equipment.


3. Chance of profit / risk of loss

​Do you have a chance of making a profit? Do you run the risk of incurring losses due to bad debts, damage to equipment or materials, or delays? Do you cover the operating costs?

4. Economic dependency & Integration

​Does the worker integrate the company’s activities into his/ her own commercial activities? Does the worker have commercial activities with multiple clients rather than just one client – the company? Does the payment from the company constitutes the worker’s main income?

Contract Workers are entitled to the statutory employment rights (Occupational Health and Safety Act (OHSA), Human Rights Code (the Code)), but is NOT entitled to protection under Employment Standards Act (ESA), Not entitled to employment law Common Law legal jurisprudence regarding employer-employee relationship.
employment law Common Law legal jurisprudence regarding employer-employee relationship.

In other words, a contract worker is NOT able to sue for wrongful dismissal, or to claim reasonable notice. When terminating a contract worker, all the employer needs to do is to inform the employee that the contract work has ended.

Do note that however, misclassifying employees as contract workers are strictly prohibited, and if a Court of law has ruled that a misclassification has occurred, the contractor worker would receive the same employment law entitlements as if he or she was being hired as a permanent employee. The factors that are being used by court in determining reasonable notice are “the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant”.

Click here to learn more about employment contract.

Click here to learn about misclassification.

Click here to learn about wrongful dismissal.

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