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CourtofCanadathehighestcourtin

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

insocietyiswellknownEmployeesarealsoentitledtosubstantialstatu-

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

thesocialstatusandeconomicsecurityissuesarisingfromemployment

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

providetheirservicesbywayofindependentcontractualrelationships

arenotgenerallyentitledtothesameprotections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similarbargaining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Thesephrasesdemonstrateina

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

andindependentcontractorsrespectivelyWhiletheemployeeserves

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

dependentcontractorrelationshipmustofcoursebedistinguishedfrom

∗ AllisonTayloriscounseltoStringerBrisbin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resultinginanincreaseintheuseofindepend-

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expensiveolderworkersdespitethehumanrights

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

independentcontractualstatusparticularlyaerretirementfromem-

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

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

Anemployeeisboundtoserveoneemployeratatimeinmostcir-

cumstancesBycontrastindependentcontractorshavethefreedomin

theorytoprovidetheirservices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technicians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annualincomesareoen

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

individualsThecertainty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theemployerofsavingonsocialcostscan

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

entcontractorrelationshipswouldseemtorepresentthedismantlingof

hardwonemploymentprotectionsinresponsetoglobalpressuresfrom

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

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

orsincludenothavingtowithholdorremittaxesorpayforEmployment

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thecommonlawconceptofreasonablenotice

meaningthatthenancialrisksassociatedwiththetermination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areoenveryenthusiasticaboutavoidingsuchcosts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contractualrelationships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issuewhichled

Canadiancourtstocreatelegalteststodistinguishbetweenemployees

andindependentcontractors

The methodology for distinguishing between independent con-

tractorsandemployeeshaswhatisbecoming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remainstruetothisdayandasaresultinanyparticularcasethe

truecharacteroftherelationshipcanbediculttoascertain

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

theirplacetoassistinthedeterminationofwhetherthecontractisone

ofserviceorforservicesThersttestutilizedbythecourtswas

whethertheworkerwasunderthecontroloftheemployerorwasre-

sponsibleforhimorherselfLatertestswereaddedtothis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immediatecontroloftheemployerand

whethertheworkerwasinfactinbusinessforhimorherselfbecame

increasinglyimportant

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

ofthecontractorthecourtsapplycommerciallegalprinciplesinclud-

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

mentcontextForexampleinHamiltonvOpenWindowBakeryLtdthe

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

threemonthsnoticeofterminationbasedonindependentcontractual

statusincircumstancesinwhichhadtheworkerbeen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Bakery