Employee Status: Independent Contractors and Alternative Work Relationships

• Author: Allison Taylor
• Pages: 45-76



EmployeeStatus

IndependentContractorsand

AlternativeWorkRelationships

Allison Taylor*

A. INTRODUCTION

Theextent towhich theSupremeCour tofCa nadathe highestcourt in

thelandhas focusedin itsdecisionsonthe importanceofemployment

inso ciet yiswe llkn ownE mployeesa real soent itle dtosub stant ial statu -

toryr ightsand protections As such special recognition is accordedto

thesocialstatusa ndeconomicsecurityissuesar isingfromemployment

Thecorollary ofthislegal environmentis thatthose whochooseto

providetheirservicesby wayofindependent contractualrelation ships

arenot generallyentitled tothe sameprotec tionsas employeesTheirs

are considered to be commercial relationships and ar e therefore gov-

ernedbyrulesformulatedfordierentpurposesbasedonthenotionof

thepartiesoccupyingsi milarbargaini ngpositions

The nomenclature used to reect these t wo dierent working re-

lationships are contract of service for employees and contract for

services forindependent contractorsThes ephrases demonstrate in a

nutshellthedierence inthelevelsof controlexercisedoveremployees

andindependentcontractorsrespec tivelyWhiletheemployeeserves

theemployerthe independentcontractor providesa serviceThei n-

dependentcontractorrelationshipmustofcoursebedistingu ishedfrom

∗ AllisonTayloriscounseltoSt ringerBrisbi nHumphreyManagementLawyers

AT

thatofatermcontractemployeewhoservestheemployerbutonlyfor

alimitedterm

Economicpressurehasplayedapartinthedevelopmentofthoselegal

modelsDuringthe sdownsizingledtodemandsformoreexible

workforcesatlowercostr esulting inaninc reaseint heuseofi ndepend-

entcontractorsBypercentofthetotalCanadianworkforcewas

selfemployedbutalsoemployednooneelseAsglobalcompetitiveness

hasincreasedemployerscontinuetoseekwaystoreduceoverheadcosts

byreducingpermanentworkforcesTasksandfunctionsareincreasingly

contractedoutonanasneededorpermanentbasis

DemographicsalsoplayapartEmployersoenseektoreducetheir

contingentof moreexpe nsiveolderworkers despitethehuman rights

risks Such workerssometimes oen prefer t he economicb enetsof

independentcontractua lstat uspart icularlya erret irementf romem-

ploymentThissituationcanbeexpectedtoincreaseast heboomergen-

erationretiresormoreprobablysemiretires

Anemployeeisbou ndtoserve oneemployeratati meinmost cir-

cumstances Bycontrasti ndependentcontractorshavet hefreedom in

theorytoprovide theirser vicesto manybuyers andtherefore toreap

thebenetsofcapitalismasownersoftheirownbusinessesThosewith

unique skill sets such as computertec hnicians are oen well able to

parlaytheirskillsintobusinessesofthisnatureButinmanyothercases

this independenceis an illusionEmployeesa nnuali ncomesare oen

signicantlyh igherthan thoseof contractorswhodonot employother

individualsThecertaint yofemploymentcarrieswithitsomedegreeof

nancial certa intyIndependent status ca n destroy nancial certa inty

very quickly unless the bu siness is one which can sust ain more than

oneworkerThus the result of beingdressed upas an independent

contractor may be a decline rather than a gain i n real wages fort he

workerwhilethebenetstot heemployerofsavingonso cialcostsc an

beenormous Put atits worstthe drive towardsincreasi ngindepend-

entcontractorrelationshipswouldseemtorepresentthedismantl ingof

hardwonemploymentprotectionsinre sponsetoglobalpressuresfrom

environmentsinwhichemployeeprotectionsarenotwelldeveloped

Thena ncialbenets forcompaniesof usingindependent contract-

orsin cludeno thavi ngtow ith holdorr emitt axes orpayfo rEmploy ment

InsuranceEIpremiumsbenetsorhealthtaxontheirbehalfInaddi-

tionemploymentstandardslegislationdoesnotapplytotrueindepend-

entcontractorsnordoest hecommonlawconcept ofreasonablenotice

meaningthatthen ancialrisksasso ciatedwiththetermin ationofthese

workersaresignicantlyreducedThebenettothecontractoristheabil-

EmployeeStatus

itytodeductasbusinessexpensessumsrelatedtotheirearningaliving

whicharenotavailablefordeductionbyemployeesAdditionalbenets

includetheabilitybasedontheirbargainingpowertosettheirownfees

andtheavoidanceofpayingforthesocialsafetynetapartfromtaxesand

theCPPcontributions requiredby lawInthewritersexperiencework-

ersa reoen very enthusiast icabout avoiding suchco stsat least until

theyneedtocalluponthesocialsafetynetthemselves

Thelackofvicariousliabilityisanotherdesirableaspectofindepend-

entcontract ualrelat ionshipsAn employeris vicariously liable forthe

actofitsemployeesbutnotfortheactsofthosewithwhomitcontracts

Thisconcept isofsuch signicance thatitwas thersti ssuewhichled

Canadiancour tstocreate legaltests todisting uishbetween employees

andindependentcontractors

The methodology for distinguish ing between independent con-

tractorsand employeeshaswhat isbecom inga venerablehistoryHis-

toricallythere has been an absenceof clear denitions and consistent

methodologywhichiscompoundedbydieringstatutoryapproaches

Thisremai nstruetothisdayandasare sultinanypartic ularcasethe

truecharacteroftherelationsh ipcanbediculttoascertai n

Asthelawhasdevelopedanumberoftestshavesuccessivelytaken

theirplaceto assistin thedeterm inationofwhet herthecontract isone

ofservice or forserv icesThe rst test utili zedbyt hecou rts was

whethert heworker wasu nderthe control of the employerorwas re-

sponsibleforhimorhers elfLatertestswereaddedtoth iscoreconcept

todeal withdi erentmethodologiesof performing workAs workbe-

came performed remotelywhether the work was integral to its busi-

nessalthough not underthe immed iatecontrol of the employera nd

whethert heworker wasi nfact in business for him orherself beca me

increasinglyimportant

Where a genuine independent business can b e found on the part

ofthe contractorthe courts applycommercia llegal principlesi nclud-

ing the sanctity of contract much more wil lingly than in a n employ-

mentcontextForexampleinHamiltonvO penWindowBaker yLtdthe

workeranindependentcontractorwasheldtoacontractprovidingfor

threemonth snoticeof termination basedon independentcontractual

statusin circumst ancesin whichhad theworkerbee nfoundto bean

employeetheCourtwouldhavebeenmorelikelytondawayaround

theplainwordsofthecontract

 Montreal v. Montreal Locomotive Works Ltd. DLRatPC

 SCROpenWindowBak ery