Employee or Independent Contractor?

The issue of whether a person is an employee or an independent contractor is one that arises frequently in my practice. A company that is found to be in an employment relationship with an individual who was treated as an independent contractor can find itself on the hook for unpaid taxes, CPP and EI contributions, and possibly wrongful dismissal damages and vicarious liability for the worker’s wrongful acts. For the individual, a finding that he or she was an independent contractor may mean that he or she was not entitled to notice of termination or pay in lieu. Consequently, it is an issue that can have significant financial consequences for both individuals and companies.

Unfortunately, there is no universal test to determine whether a person is an employee or an independent contractor. The key question is: “whose business is it?” In other words, is the person in business for themselves? Or are they working on behalf of someone else’s business?

To answer this question, the court will consider a number of different factors, including:

  • the level of control the employer has over the worker’s activities (e.g. regimented duties and responsibilities, mandatory attendance, fixed hours of work and pay, requirement to follow policies)
  • whether the worker provides his or her own equipment
  • the degree of financial risk taken by the worker
  • whether the worker hires his or her own employees
  • the degree of responsibility for investment and management held by the worker
  • the worker’s opportunity for profit in the performance of his or her tasks (meaning, does the worker have control over how much profit he or she can make doing the work?)

Each case is fact-specific, and there may be other factors that the court will see as relevant, including the intention of the parties. That said, even where the parties intended to create an independent contractor relationship (through a written contract or actual behaviour), the court will consider the above factors to determine whether the relationship was actually one of employment.  What’s more, a finding by the CRA that a worker was an independent contractor will not be determinative in an employment law context – again, the court will look at the actual substance of the relationship to make a finding.

Given the high stakes involved, parties who wish to establish an independent relationship are well-advised to seek the advice of an employment lawyer who will help them carefully consider what the true nature of the work will be, and how it will be performed. Unless a company is prepared to give the worker significant freedom to determine how the work is to be performed, it is likely best for the parties to establish an employment relationship and enter into a well-drafted agreement.



Refusal to reinstate employee after maternity leave leads to constructive dismissal and damages for discrimination

Kelly Bray was a Massage Therapy Instructor for the Canadian College of Massage and Hydrotherapy. She was employed for nine years. In her position, Ms. Bray taught classes, supervised clinics and supervised outreach programs.

In October, 2012, Ms. Bray went on maternity leave.

The college has three teaching terms, starting in January, May and September of each year. Ms. Bray was expected to return to work in October, 2013, one month into the September term. As the college went about preparing the September term schedule, it neglected to include Ms. Bray in its planning. When Ms. Bray contacted the college to discuss her return to work, she discovered that she would not be returned to her previous position. When she questioned this, she was told that working and “having to be a mother at the same time…will be a big adjustment.”

Ms. Bray filed a complaint with the Ministry of Labour in July 2013.  When she returned to work in October 2013, she found that her schedule had been reduced from 25 hours per week to 19 hours per week, and that she had not been reinstated to her former position. Ms. Bray testified that the work atmosphere on her return was “very strange” and “odd” and that she felt like she never fit back in. Then, in December 2013, the college told her that she would not be scheduled to work at all during the January term. When she asked why she had been removed from the schedule, she was told that they simply did not require her services for that term and that she would be considered for the May term.

Ms. Bray sued for constructive dismissal, and alleged that she been was discriminated against on the basis of her status as a new mother, and that her termination was a reprisal for filing a complaint with the Ministry of Labour.  The court agreed.

The court noted that it is well established that an employer has no inherent right to lay off an employee, even temporarily.  While such a right can be created by the terms of an employment contract, such was not the case here.  The court found that by removing her from the schedule, the college constructively dismissed Ms. Bray.  As she was not working and she was not being paid, there had been a fundamental change to the terms of her employment.

In the end, the court found that Ms. Bray was entitled to reasonable notice of termination, and awarded her pay in lieu of notice equal to 8 months.  The court also found that she had been discriminated against on the basis of her sex and family status, and the college was ordered to pay her an additional $20,000.00 as damages.