Independent Contractor Situations: Best Described as an Attempt to “Put Lipstick on a Pig”?

An issue that comes up often these days is whether independent contractor agreements and arrangements are lawful in Ontario.

In my 30 years of experience, I have never seen a valid situation where someone is said to be an independent contractor on paper, and they were. They are almost always not independent contractors at all. Rather, they are “employees” with lots of rights upon termination and otherwise, which translates to financial compensation for you and your family.

The Supreme Court of Canada says that all employees are in a vulnerable position in employment where there is no equality of bargaining power. With independent contractors, the situation is much worse. You have been taken advantage of and may be entitled to a significant payday if terminated.

Common Questions

Below are some common questions and answers relevant to situations involving independent contractors.

Are independent contractor agreements legal in Ontario?

In Ontario, treating an employee as an independent contractor is illegal, and it is a violation of the Employment Standards Act 2000 to do so. The ESA was amended in 2017 to protect most people involved in these independent contractor arrangements.

Why do employers want to use independent contractor agreements?

It depends on the motivation of each employer. There are several common themes, such as wanting to avoid paying taxes and remittances, seeking to contact out of minimum standards legislation, and seeking to prevent WSIB premiums. Generally, it is a way to take advantage of an employee or group of employees to increase an employer’s profits or seek to avoid unionization of their workforce.

How often are independent employment agreements held to be lawful in court?

In the context of a wrongful dismissal action where the employee is trying to set aside an independent contractor agreement, they are rarely upheld. In my 30 years of practice, I have never seen an instance where the independent contractor agreement was arguable.

These independent contractor situations are usually best described as an attempt to try to put lipstick on a pig, and it’s still a pig.

Where there is an instance of a true independent contractor-it will be so apparent that it leaps off the page and is completely evident from the facts and surrounding circumstances. That is because few would assert that they were an employee when they were a true independent contractor-like a plumber who comes to your house to repair your sink-they aren’t your employee.

What is the legal test to determine if it is a genuine independent contractor relationship?

The courts are concerned with one primary question at the end of the day: Whose business is it anyway?

To answer this question requires a full review of the facts and circumstances.

Factors and Considerations

The factors and considerations applied by the courts include some of the following:

• Who has the real risk of loss in the business undertaking?

• Who has a real chance for profit in the business undertaking?

• Who owns the tools or equipment necessary to do the work?

• Does the person hire or employ helpers or others to do the work?

• Does the person who performs the work have any trade designation or recognized qualifications?

• Does the person doing the work advertise to the public or profession for other clients?

• What or where is the source of work or revenue, and does it represent all or most of the person’s work or income?

• Does the person work exclusively for this one employer?

• Does the person work full-time hours?

• Were the hours prescribed by the employer?

• Was the person told or directed by the employer where, when, and how to perform the work?

• Is the work to be performed highly specialized or more of a general nature?

Am I really an independent contractor or should I be considered an employee?

Despite being called independent contractors, most sales positions are employment situations, as is anything of a general unqualified, non-trade, unregulated type of work.

On the other hand, if you work as a certified electrician for ten different entities who give you about the same amount of work, you operate your own business with your equipment, trucks, logos, goodwill, business cards, letterhead, office space and support staff, you are an independent contractor.

From what I have seen, most alleged independent contractor relationships are a sham and were probably set up by employers seeking to avoid the costs and liabilities associated with being an employer.

If I signed an independent contractor agreement, am I bound to it? 

This requires a deeper dive into the facts to answer fully, but usually, the contract is given little or no weight. This is because what you are doing is different from the terms of the independent contractor agreement, which is almost always the case. 

These contracts, by nature, are drafted in such a way as to support the inference that someone is an independent contractor. They are vague and lack specifics on purpose. Sometimes the contract will say you can work anytime you like, yet when you start, you are told you must work 9 to 5 pm, five days a week, at a specific location.

The problem for the employers, though, is that the contract rarely, if ever, bears any relationship with the reality of what work is done and how the workplace operates.

If I am not an independent contractor, then what is my status?

Usually, people are considered “employees” or found to be in an “employment relationship”; they have the rights and privileges of all other employees. Most importantly, if terminated, they have the right to common law notice and statutory notice and severance. Such a result may be worth hundreds of thousands of dollars to a person who thought they were independent contractors.

Even if you are not an employee but a dependent contractor where the employer is responsible for giving you most of your work or revenue-they still must give you notice before terminating you.

What if I get hurt at work? Am I covered for benefits and WSIB?

For benefits, most insurance companies require that persons covered for benefits be employed. If you are getting benefits, this is excellent evidence that you are already being treated as an employee. If you aren’t getting benefits, then you should be.

If you have an independent contractor agreement, chances are you aren’t covered, and if you get hurt at work, you won’t be entitled to Workplace Safety and Insurance Board (WSIB) benefits. If you injure yourself seriously, you could be left with no statutory income replacement benefits, which are mandated for almost all workers in Ontario. 

What should I do about it?

If you have been terminated or believe you may be terminated soon, or you have concerns about your status as an employee or independent contractor and want to know your rights-find, a knowledgeable and experienced employment lawyer like John R. Evans of Evans Law Firm. At Evans Law Firm, all cases are reviewed with prospective clients on a no-charge basis. While different retainer options are available, we usually don’t get paid unless and until we recover monies from your employer, as many of our clients wish to retain us on a contingency basis.

We can help and have helped countless others before you – you have nothing to lose and everything to gain.