Some employers misclassify their employees as independent contractors. Now this misclassification can be the result of an innocent mistake, but it can (in the case of some sneaky business owners) be an intentional act meant to deny their employees protections under the Employment Standards Act, 2000 (“the ESA”). What do we say to these business owners? It’s not worth it!
Whether intentional or not, the employer could be issued a notice of contravention or even face prosecution by an employment standards officer. The employer could also face other legal exposure if they continue treating an employee as an independent contractor. So yes, it is important to know the difference between an employee and an independent contractor in your hiring practices.
Unlike independent contractors, employees have rights and protections under the ESA, such as: minimum wage guarantees, overtime pay, public holidays, and vacation pay. Rights under the ESA are guaranteed to employees, whether they sign an employment agreement or not.
Independent contractors on the other hand, as we mentioned, do not benefit from the ESA – this is why some employers will try to pass off employees as contractors. Tsk! Tsk! Don’t do it. Understand the difference and hire accordingly.
So what is the difference?
A worker can be seen as an independent contractor if they:
- Own the tools and equipment they use for their work;
- Set their own hours and work schedule;
- Submit invoices to the employer;
- Make a profit;
- Have the ability to subcontract out their work; and
- Cannot be disciplined by the employer.
This may seem like a neat little test but remember, these are not definitive! A business owner may find that their employee/independent contractor meets some of these items, but not all.
If you find yourself in this situation, consult a lawyer (*cough* a business lawyer is probably best) to ensure you understand and comply with the employment status of those you hire, and have the proper agreement drawn up.
Robin K. Mann, JD