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Employment / Labour Law
Independent Contractor vs. Employee

The employer – employee relationship is governed by the Labour Relations Act (LRA) for unionized workers and the Employment Standards Act (ESA) for non-unionized workers. Employment law generally refers to the area of law dealing with non-unionized workplaces, while Labour law generally refers to the area of law dealing with unionized workplaces.

There's a saying that you should always know what you are getting into? This is especially so when it comes to employment law/ labour law.

You are protected neither by employment law nor labour law if you are deemed to be an independent contractor rather than an employee. There’s a four-point test that have repeated been used by the court and the CRA to determine whether you are an employee vs independent contractor.

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

1. Control

Does the payor pay you to do work 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 employee 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 a major investment 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 payor’s activities to his/ her own commercial activities? Does the worker have commercial activities multiple clients rather than just one client – the payor? Does the payment from the payor constitutes the main of the worker’s income?

It's substance over form. If the Court has determined that it satisfy the four point test, the worker will be deemed to be an employee despite the contract stated otherwise. The final determination of whether a person is an independent contractor or an employee is very fact specific. If you are deemed to be an independent contractor instead of an employee, then your rights and obligations are governed by the agreement signed between the independent contractor and the worker, and you WILL NOT be covered by any of the protections proffered by the ESA or the LRA.

You should always have the rights and expectations of the parties reduced to writing. Having a carefully crafted business agreement setting out the intentions of the parties is crucial. It is highly recommended that you should always seek legal advice to fully appreciate your rights and responsibilities, and legal ramifications of signing an agreement to make sure you don’t end up creating an employer-employee relationship inadvertently, if you are the payor. In contrast, if you are a worker, you want to make sure that if you are signing an agreement, you want to be sure whether you are going to be deemed as an employee or an independent contractor.

HTW Law can help. Call us now at 647-849-6582 or send us a message if you have some legal questions / inquiries or want to schedule an appointment with HTW Law.