Employee vs. Dependent Contractor vs. Independent Contractor
When hiring, it is critical to accurately identify workers. Despite common intent and/or a written contract between an employer and a worker, the CRA may still rule that the worker is an employee. Incorrectly classifying an employee as a contractor may have serious legal and monetary ramifications. The Chart below is a guide only and does not constitute legal advice. It should be used in conjunction with other resources.
- A person who provides work or services for an employer for wages. Protected by Minimum Standards set out in the ESA
EMPLOYEE VS. INDEPENDENT CONTRACTOR
These are not strict & rigid rules, but rather, variables that are collectively considered by the CRA when classifying a worker
Degree of Control over the worker’s activities.
i.e. what work is done & in what manner
- Employer controls the workers activities
- Employer may choose to listen to the worker’s advice
- Worker is subordinate to the employer
- Employer chooses and controls the method & amount of pay
who provides, maintains & insures tools & equipment
- The Employer provides the workspace for the workers
Can the worker subcontract work or hire assistants
- The Employee cannot hire helpers or send replacement workers
degree of financial risk the worker takes
- Minimal to none
- Worker receives protections under the ESA and benefits from the employer
Workers’ opportunities for profit
- Minimal to none
- The worker is not financially liable
- Worker may need employer consent to work for another employer
other relevant factors
i.e. written contracts
What are the consequences to mis-classifying?
Employer may be required to
- Pay both the employer’s and employee’s share of EI and CPP
- Pay penalties and interest
- Pay legal fees and other costs
Workplace Safety & Insurance
- If a worker is injured at work and makes a claim under the Workplace Safety and Insurance Act (WSIA) the hiring organization may be held responsible for costs and damages incurred by the injured worker and unpaid WSIB premiums, interest/penalties
- May be subject to substantial fines
Wrongful Dismissal Claims
- Monetary claims in lieu of notices, substantially exceeding the minimum requirements of the ESA
- Severance Pay
Recommendations & Next Steps
- Do your research and seek expert advice on hiring & classifying workers
- Seek independent legal advice and ensure each worker is covered by a contract of employment
- Assess the position your organization is looking to fill. Can it survive CRA scrutiny?
- Be sure to ask the intent of the worker – does the worker believe he/she is being hired as an employee or as an independent contractor?
- Know your rights. Either an employer or worker can request a CRA ruling to determine employment status. CRA rulings must be appealed within 90 days of notification of a ruling.
More Information is available through the CRA
Written March, 2020.
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