An independent contractor is considered to be self-employed, whereas an employee’s work is directed by an employer. The overwhelming majority of workers are characterized as employees, and are protected by the Employment Standards Act.
In order to be characterized as an independent contractor, the Employment Standards Branch considers the nature of the work, and not what your employer, your contract or anything else may say. Because independent contractors do not have their rights protected under the Employment Standards Act, the rules are strict in order to minimize the number of people with fewer protections.
In order for a worker to be considered an independent contractor, the working relationship must meet several conditions. The Employment Standards Branch looks at 4 major things (below) in order to determine if a worker is correctly characterized as an independent contractor.
Often, employers who mischaracterize their workers as independent contractors will meet some conditions, such as flexible hours and schedules, or will require you to use some of your own tools or equipment. This alone does not mean that you are an independent contractor. If only a couple of the things listed below that indicate employment apply to you, you are already quite likely to be considered an employee. You do not have to meet all of these conditions to be considered an employee. Rather the employer must meet all of the conditions in order to prove that you are not an employee.
1. The Control Test
Some things that indicate that the employer controls the work include:
- Having to ask to take time off
- Having to follow a schedule
- Having to get permission to hire people to do the work
- Having to ask permission to have other clients
Generally if you feel like you have a boss, you are likely an employee.
2. The Four Fold Test
This test assesses the worker’s independence by considering the degree of control the employer has over the worker, the ownership of the tools and space necessary to perform the work, the worker’s chance of profit, and the worker’s risk of loss, if any.
Generally, the following conditions indicate an employment relationship:
- If you are using the employer’s tools and equipment
- If you are using the employer’s space
- If there is any risk of loss to you- for example, if you spend money on equipment or to rent a space, but do not make a profit- you can lose money as a contractor. As an employee, you will be paid your hourly wages for showing up to work.
3. The Integration Test
The integration test considers whether the work the worker performs is integral to the business and the business operations. The more integral the work is, the more likely you are to be an employee.
4. The Permanency Test
The more permanent the relationship between the employee and the employer, the more likely you are to be considered an employee.
Managers are exempt from section 4 of the Employment Standards Act that regulate overtime pay and statutory holiday pay, among other things. However, whether or not you are exempt from section 4 is determined by the Employment Standards definition of a manager, rather than your employer’s. Your employment agreement or job title might say manager, but you are protected by all sections of the act unless your work meets certain criteria.
One major factor that is considered is whether supervising and directing employees is the primary function of your role. It is not enough that your obligations include directing some of your coworkers.
Another thing that is taken into consideration is how much you can affect the working conditions of other employees. The greater the effect, the more likely it becomes that you are considered to be a manager. For example, if you are able to hire and fire workers, that increases the likelihood that you will be considered to be a manager.
Typically, if you are a manager you will be able to perform your work fairly independently, even if you do have some limitations.
If you are missing out on certain benefits because you are a manager, you can file an Employment Standards complaint. If the complaint is successful, and the Branch determines that you are not considered a manager under the Act, you may be able to recover missing wages.