Author: Laura Rask
Many workers and employers assume that simply labelling a working relationship as an “independent contractor” arrangement will make it so. In reality, courts in Saskatchewan look beyond the wording of a contract and examine the actual relationship between the parties. A worker who is called an independent contractor may still be found to be an employee if the facts support that conclusion.
The distinction between employees and independent contractors is important because it affects entitlement to employment standards protections, termination rights, vacation pay, benefits, tax obligations, and other legal rights and responsibilities.
The Importance of Proper Classification
Whether you are classified as an employee or an independent contractor can have significant legal and financial consequences.
Employees are generally entitled to protections under employment standards legislation, including minimum standards relating to wages, vacations, leaves, and termination. They may also be entitled to reasonable notice or pay in lieu of notice when their employment ends.
Independent contractors are generally considered to be operating their own business. They typically do not receive employment standards protections and are responsible for managing their own taxes, business expenses, insurance, and other obligations. They also assume the risk that their business may be less profitable than anticipated.
Because the consequences are significant, disputes frequently arise regarding whether a worker has been properly classified.
The Approach to Classification
There is no single test that determines whether a worker is an employee or an independent contractor.
The Supreme Court of Canada states that the central question is whether the worker is operating a business of their own or is working as part of someone else’s business. Courts often describe this as asking whether the worker is “in business on their own account.”
To answer that question, courts consider the entire relationship between the parties, including:
- The degree of control exercised over the worker;
- Who owns the tools and equipment used to perform the work;
- Whether the worker has an opportunity to earn additional profit;
- Whether the worker bears a risk of financial loss;
- Whether the worker can hire assistants or subcontract the work;
- Whether the worker is free to provide services to other clients; and
- The parties’ intentions as reflected in both the contract and their actual conduct.
No one factor is determinative. Courts look at the totality of the relationship.
While a written agreement is not conclusive, it is often an important starting point. If you are trying to determine whether you may be an employee or an independent contractor, review your contract carefully.
Some contractual terms that may suggest an employment relationship include:
- Entitlement to paid vacation or vacation days;
- Paid sick leave or other employee benefits;
- Fixed working hours;
- Requirements to obtain approval for time off;
- Exclusive service obligations preventing work for others;
- Detailed job descriptions and ongoing assigned duties; and
- Compensation based on salary or hourly wages rather than invoiced services.
On the other hand, terms that may support an independent contractor relationship include:
- The ability to work for multiple clients;
- The requirement to submit invoices for services rendered;
- Responsibility for paying business expenses;
- The ability to hire assistants or subcontractors;
- Payment on a project-by-project basis; and
- The freedom to determine how the work will be completed.
The wording of the contract is only part of the analysis. Courts will examine how the relationship functions in practice.
Understand Your Legal Position
The difference between an employee and an independent contractor is not always obvious. A lawyer can review your contract and the reality of the working relationship to identify potential risks, clarify your rights and obligations, and determine whether the classification is likely to hold up if challenged. Addressing these issues early, even prior to signing the agreement, can help businesses avoid costly disputes and help workers understand protections they may not realize they have.
The distinction between an employee and an independent contractor is not determined by a job title or a single clause in a contract. Saskatchewan courts examine the entire relationship, including the degree of control, ownership of tools, financial risk, opportunity for profit, and the practical reality of how the work is performed.
If you are unsure about your classification, start by reviewing your contract. Look for provisions regarding vacation time, benefits, scheduling requirements, exclusivity, invoicing, and control over the work. Those details may provide important clues, but the actual day-to-day working relationship is equally important.
At Avenue Law LLP, we assist both businesses and workers with employment law issues, including worker classification, employment agreements, and termination disputes. Contact our Employment Law Team to discuss your situation and obtain advice tailored to your specific circumstances.
This article is intended for general informational purposes only and should not be taken as legal advice. It does not address the specific circumstances of any individual case and is not a substitute for obtaining advice from a qualified lawyer. Reading this article does not create a solicitor-client relationship, and you are encouraged to consult legal counsel before making any decisions regarding your legal rights or obligations.
