Are you an independent contractor or an employee? This question is one of the most common and important issues affecting employment law today in Ontario for which we can advise on.

Employees are often misclassified as independent contractors. Misclassification can sometimes be an innocent mistake by all parties involved, or a conscious decision made by an employer to avoid certain costs and responsibilities as legislated by the Employment Standards Act. In either case, the penalty for making the wrong distinction can lead to big problems for both employer and employee.

Primarily, some employers misclassify their employees as independent contractors, intentionally or not. They call them consultants, advisors or agents when they are actually employees under the law.

Some employers intentionally misclassify their employees as independent contractors to avoid their obligations under Ontario’s Employment Standards Act.

Independent contractors are not protected by the Employment Standards Act; only “employees” are protected by the Employment Standards Act, which makes it cheaper for a company to hire independent contractors rather than to employ employees.

For one, employers who hire independent contractors do not have to pay them minimum wage, overtime pay and vacation pay as per the Employment Standards Act.

Last but not least, independent contractors are not entitled to statutory or common law notice of termination, termination pay or severance.

Rather, independent contractors’ only rights are those delineated by their written contract, which are generally oppressive for most individuals except high earners with significant bargaining power. In our experience, most employees who were misclassified as independent contractors did so because they were told to “take it or leave it” – they had little choice.

Workers may nevertheless benefit from being classified as an independent contractor because of certain tax deductions plus EI and CPP contribution savings (with a resulting burden in case of termination and retirement, respectively). Also, some workers choose working in an independent contractor relationship because such an enterprise, in the right circumstances, provides greater autonomy and freedom. Even still, the majority of workers in Ontario who work for only one employer, who are not in business for themselves, are hurt by a classification as an “independent contractor”. They would have far greater rights if they were an “employee” as described above.

We have seen that many workers in Ontario who are classified as independent contractors are misclassified – they are actually employees.

Call Wahab Law at 226-686-1070 for a free 15 minute phone consultation to determine if you are an employee misclassified as an independent contractor entitled to severance.