Employees vs Independent Contractors Canada
In Canada, companies have increasingly sought to classify workers as independent contractors in an attempt to reduce costs and administrative obligations. Workers generally do not oppose this classification as a result of favourable tax treatment enjoyed by contractors and other small businesses.
Unfortunately, most independent contractors in Canada are misclassified and many would be deemed employees if the arrangement between them and the company retaining their services was reviewed by a governmental authority or court. Often, such a review occurs when a worker has the contract arrangement terminated and seeks employment termination or employment insurance benefits.
Misclassification of workers can have profound consequences for both the company and the wrongly classified worker. Accordingly, the importance of understanding the classification of workers as employees or contractors has increased in recent years.
Classifying a worker as an employee or an independent contractor in Canada involves a complex assessment of the true nature of the working relationship. Courts and adjudicators have established a complicated and flexible analysis for making such a determination. The
importance of making a correct classification cannot be understated. It is hoped that the following will assist companies and workers in making proper classification decisions and avoiding the financial liability associated with misclassification.