Employee or Independent Contractor?
As noted earlier, an employee is someone who works for you under a contract of service. An independent contractor, on the other hand, works for you under a contract for services. The distinction is a subtle but nonetheless important one.
First, an independent contractor is not subject to the same obligations as an employee. Specifically, a contractor is not under a general duty to provide you with his or her service. Rather, an independent contractor is usually engaged (as opposed to hired) to provide you with specific services or expertise that you require on a short-term (as opposed to an indefinite) basis.
- An independent contractor has the right to set his or her own hours of work, including any vacation time, subject to any agreement you may have with him or her.
- An independent contractor uses his or her own tools, equipment, and (often) premises in providing his or her services.
- Because of his or her independent status, an independent contractor cannot be restricted by you from providing his or her services to other businesses.
- An independent contractor is subject to his or her own control over how the services are to be performed.
Before engaging an independent contractor, you will need to have an independent contractor agreement, whether verbal or written. This agreement is not subject to employment standards legislation; there are no legislative requirements imposed on employers for things like minimum wage, hours of work, and notice of termination. The parties are at liberty to decide these things between themselves.
Employers sometimes favour the independent contractor relationship over the employment relationship because of the limited legal rights (outside of those contained in the independent contractor agreement) conferred on the contractor. In fact, many employers will insist to certain people wishing to work for them that they agree to do so as independent contractors, despite the fact that the independent contractor agreement effectively subjects the person to the same obligations that would ordinarily apply to an employee.
To help prevent this type of abuse, courts faced with the question of whether a person is an employee or independent contractor will usually resolve any ambiguities in favour of finding employee status. In other words, for an independent contractor to be considered so at law, a court must have clear evidence that the person satisfied all of the indications set out above, regardless of what the parties may have agreed to and despite what is contained in an independent contractor agreement.
Source: Swais, N. Canadian Legal Guide for Small Business. Self Counsel Press. 1999 Vancouver
