Are you an Employee or Independent Contractor?
Employee vs. Independent Contractor
The definition of an employee is provided in a variety of forms, including under employment standards legislation. However, these forms of legislation are often remedial in nature, therefore they apply a very liberal approach to the definition of an employee.
As a result, the definition of an employee is developed by comparing it to other relationships – such as an independent contractor relationship.
The leading decision in Canada comes from the SCC in 671122 Ontario Ltd v Sagaz Industries Canada Inc, 2001 SCC 59.
In this decision, the court was dealing with an issue related to vicarious liability, which only existed if the relationship between the parties was one of employment instead of an independent contractor.
At paras 47 and 48, the court defines the test for an employee:
The central question is whether the person who has been engaged to perform the services is performing them as a person in business on his own account. In making this determination, the level of control the employer has over the workerʹs activities will always be a factor.
More specifically, the court adopts a holistic approach to answering this question by evaluating a number of factors, which includes (para 47):
(i) Control test,
(ii) Ownership of tools,
(iii) Workerʹs opportunity for profit,
(iv) Degree of financial risk borne by worker,
(v) Business integration/organization test,
(vi) Hiring of Assistants,
(vii) Degree of workerʹs responsibility for investment and management.
Control Test
The Control Test is heavily relied upon in determining the nature of the relationship between the parties. When an employer has considerable influence over what work is done and how it is accomplished, it is often more likely to be an employment relationship. When an employer only controls what work is done, but not how it is done, this weighs in favour of an independent contractor relationship. The degree of supervision and progress evaluations are often relevant too.
Ownership of Tools
This is a simple application, and often not relevant depending on the circumstances of the work performed.
Worker’s Opportunity for Profit
Any potential profitability weighs in favour of an independent contractor relationship.
Degree of financial risk borne by work
Similar to above, the more financial risk, the more likely there is an independent contractor relationship.
The Business Integration Test
Court will examine the worker’s integration within the employer’s organization – specifically from the worker’s perspective.
Hiring of Assistants
If the employer covers the cost of assistants or additional workers, this weighs in favour of an independent contractor relationship.
Degree of Worker’s Responsibility for Investment and Management
This is a simple category where the court considers whether the worker invests in their own work. For instance, a worker who borrows money to purchase tools is more likely to be an independent contractor.
