“Independent Contractors” generally are workers that are not considered to be employees. An independent contracting agreement is called a “contract for services” rather than an “employment contract.” Whether a worker is an independent contractor or employee can have a major impact on the worker’s rights and obligations in Alberta.
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Employers sometimes want to classify some of their workers as “contractors” or “independent contractors”. They do this for a variety of reasons, including that contractors use less administrative overhead, cost less from a benefits and tax perspective, and are not entitled to some of the employment standards employees are entitled to. It is also easier to terminate their services than it is to terminate the services of an employee.
However, in many cases even if an employer or the written contract claims a worker is an independent contractor, they are actually an employee in the eyes of the law, and therefore entitled to employment standards and severance.
Bow River Law’s employment lawyers are knowledgeable, skilled and experienced at advising workers and employers on identifying which workers qualify as employees and which do not.
Is It Better To Be A Contractor or Employee?
There can be advantages and disadvantages to workers depending on whether they are classified as contractors or employees.
Workers sometimes want to be considered independent contractors rather than employees because they often receive a higher hourly rate and can take advantage of tax write-offs and deferrals.
However, the contracts signed by independent contractors often leave the worker with very few rights and plenty of liability. Things like overtime, vacation pay, break times, protected leaves and termination pay are not generally available to a contractor. It is also debatable in Alberta whether independent contractors have the same human rights as other workers.
How To Tell If I Am A Contractor or Employee?
There are several different legal tests that can be used to determine whether someone is an independent contractor or an employee.
In several cases, the same worker has been considered a contractor for the purposes of income tax, but an employee or “dependent contractor” for the purpose of determining if the worker is entitled to severance.
Probably the most helpful test in determining if a worker is a contractor or an employee is the “integration test”. The goal of this test is to look at the whole relationship between the worker and the employer and determine whether the worker is integrated into the organization the way employees usually are. If the substance of the relationship is an employer-employee relationship, a contract which says otherwise will not prevent a court from determining someone is an employee and therefore entitled to severance.
Bow River Law’s Calgary lawyers have helped many Alberta workers negotiate severance packages despite contracts that say they are contractors, and have provided legal advice to several Alberta employers to improve the chances their workers will be considered contractors. Let us help you.
Cautionary Notes
- A well-drafted employment contract or agreement can be of enormous benefit to an Alberta employer.
- A poorly drafted employment contract can be a liability to an Alberta employer and an opportunity for an angry or dismissed employee.
- The requirements for what should be in an Alberta employment contract are always changing, so if a contract was drafted 20 years ago it might not protect an employer today.
- If you are employed in Calgary or elsewhere in Alberta and have an employment agreement, your actual rights may be different than what they seem to be. It is important that you get legal advice before you sign anything, instead of making assumptions about what the documents mean.
Independent Contractors FAQ
Do independent contractors or employees have more rights?
Employees have far more protected rights than a true independent contractor has, including all basic employment standards protections. Many independent contractors also arguably have no human rights protections at work.
Are contractors entitled to severance?
When a contract for services of an independent contractor is terminated, the contractor will generally be entitled to whatever notice the contract specifies, and are not entitled to severance. However, the written contract is not the only consideration, because many contracts state that the worker is a contractor when a judge would say they are an employee and therefore entitled to severance.
Independent Contractors Legal Blog Articles
Subcontractor or Employee? What Is Included in Wages?
In Hassen v Dunwald & Fleming Enterprises, a welder was considered to be an employee, and was entitled to wages, overtime and vacation pay.
Restrictive Covenant Not Enforced Against Consultants
In NL Fisher Supervision & Engineering v Bottger, the Alberta Court of Justice ruled restrictive covenants in consulting agreements were ambiguous and unreasonable.
Self-employed or Employee? It Depends Who’s Asking and Why
Beach Place v Employment Standards, BCCA v 147 confirms that one worker can be an “employee” for one purpose and a “contractor for another.
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