Which Of The Following Observations Is True Of Taking The Services Of Independent Contractors?

Independent Contractor Definition

Someone who contracts to do a specific work, and provides his or her equipment, and executes the piece of work under his or her terms, without existence subject to orders of work is generally anindependent contractor, not an employee.

Why do some people want to exist independent contractors?

In many cases, someone wants to be an independent contractor simply because they want to return services every bit a business organization for themselves like, for example, a computer repair person operating their own small company.

Nonetheless, in many other cases, someone wants to be an independent contractor because he or she wishes to return employment-like services and yet, for tax treatment, wants to be classified every bit an independent contractor.

Other times, some people may be motivated to classify themselves equally an independent contractor so they can claim deductions for expenses.

Why practice some employers want to classify their employees equally independent contractors?

In many cases, an employer will advise or even order that, in an attempt to save coin, a person who would otherwise be an employee should be called an independent contractor.

This is because employers know independent contractors accept no employment constabulary protections. For case, independent contractors are non entitled to reasonable notice, minimum wage, the right to turn down unsafe work, statutory holidays, or maternity leave, among other entitlements. Moreover, generally, independent contractors are not entitled to social benefits like employment insurance (EI) and CPP.

In turn, in many cases, employers prepare up sham independent contract arrangements to shield themselves from these above-noted employment police force protections.

However, just considering a sham independent contract relationships exists, does non mean that a court or a labour lath will not pause the shield and reclassify the contained contractor as an employee so that the individual tin exist awarded back-pay for all the employment police force entitlements and protections that they ought to accept received since the kickoff of the sham independent contractor relationship.

Accordingly, with the rise of the gig economy, information technology has now become a crucial question of whether someone is an independent contractor or an employee.

Is someone an independent contractor or an employee?

In many instances, information technology is crystal articulate if someone is an contained contractor. For example, if my law firm hires someone to just set up a server in the part, he or she is apparently an independent contractor.

All the same, in many other cases, it is far less clear whether someone is genuinely an independent contractor. For example, if I run a tow truck visitor, are my driver's independent contractors or employees? The answer is important because as a business organisation owner, I could relieve untold amounts on payroll expenses, minimum wage, termination pay, etc. if the tow truck drivers are truly contained contractors and not employees.

Therefore, this article will utilize the case of tow truck drivers to determine who really is an contained contractor.

The constabulary of independent contractors in Ontario

The line between an 'employee' and an 'contained contractor' is sometimes difficult to determine, and information technology is no assist that at that place are many dissimilar definitions and tests regarding the legal concept of 'contained contractor' that have been adult over the years. Yet, the standard to make up one's mind who is an independent contractor can be sufficiently summarized as follows:

First, the Employment Standards Deed does not ascertain an "independent contractor". Rather, the Employment Standards Act defines "employee", which helps differentiate but does non define "independent contractor":

Section ane(1) of the Employment Standards Deed defines an employee and employer every bit:

"employee" includes,

(a) a person, including an officer of a corporation, who performs work for an employer for wages,

(b) a person who supplies services to an employer for wages,

(c) a person who receives preparation from a person who is an employer, as set out in subsection (2), or

(d) a person who is a homeworker,

and includes a person who is an employee;

"employer" includes,

(a) an possessor, proprietor, manager, superintendent, overseer, receiver or trustee of an activity, business, work, trade, occupation, profession, project or undertaking who has command or direction of, or is directly or indirectly responsible for, the employment of a person in it, and

(b) whatsoever persons treated as one employer nether section 4, and includes a person who is an employer;

An independent contractor is someone who is Non defined in the above section. But this doesn't exactly clear things upward nicely, so, instead, nosotros move on to the common police definition of "independent contractor".

To that finish, in2006515 Ontario Inc. (c.o.b. Greco Health Shack), [2005] OESAD. No. 34 (January 12, 2005), the Ontario Labour Relations Board made the post-obit observations apropos the ever-evolving mutual law definition of an independent contractor:

37. The examination to exist applied in determining whether an private is an employee or an independent contractor at common law was recently reviewed by the Supreme Court of Canada in671122 Ontario Ltd. v. Sagaz Industries Canada Inc.[2001] SCR 983. The Court reviewed the diverse tests which have been articulated at common law over fourth dimension: the "command test"; the "fourfold exam"; and the "organizational test" or "integration test". The Court noted the difficulties which have emerged from the application of each of these tests. Of note, with respect to the "system examination", the Courtroom referred favourably to the following statement past MacGuigan J.A. inWiebe Door Services Ltd. v. MNR, [1986] FC 553:

Of course, the organizational test of Lord Denning and others produces entirely adequate results when properly applied, that is, when the question of organization or integration is approached from the persona of the "employee" and not from that of the "employer", because information technology is e'er too like shooting fish in a barrel from the superior perspective of the larger enterprise to assume that every contributing cause is and then arranged purely for the convenience of the larger entity. We must bear in mind that it was with respect to the business of the employee that Lord Wright [in Montreal v. Montreal Locomotive Works Ltd. 1946 CanLII 353 (U.k. JCPC), [1947] i DLR 161] addressed the question "Whose business is it?" [Emphasis added [by the Supreme Courtroom of Canada].]

38. The Courtroom concluded (at paragraph 46) that: there is no conclusive test which tin exist universally applied to make up one's mind whether a person is an employee or an contained contractor". The Court continued, still, equally follows:

Para. 47 Although there is no universal test to determine whether a person is an employee or an independent contractor, I agree with MacGuigan J.A. that a persuasive approach to the result is taken past Cooke J. in Market Investigations, supra [Market place Investigations Ltd. 5. Minister of Social Security [1968] 3 All. E.R.732]. The fundamental question is whether the person who has been engaged to perform the services is performing them as a person in business on his ain account. In making this conclusion, the level of command the employer has over the worker's activities always will be a cistron. However, other factors to consider include whether the worker provides his or her own equipment, whether the worker hires his or her ain helpers, the degree of financial risk taken past the worker, the degree of responsibility for investment and management held by the worker, and the worker's opportunity for profit in the performance of his or her tasks.

Para. 48 It bears repeating that the in a higher place factors constitute a not-exhaustive listing, and there is not set formula every bit their awarding. The relative weight of each will depend on the particular facts and circumstances of the example.

39. Finally, it is important to note that whether or not an private is an employee or independent contractor is a question of law to be determined after consideration of all the relevant factors. The intention of the parties is relevant only to the extent that it is reflected in the actual arrangements they have made with each other in structuring their relationship. Put another style, the parties cannot by their "agreement" render the relationship of an employee an independent contractor or vice versa: see for exampleGreypoint Properties Inc. [2000] OLRB. Rep. May/June 479 at paragraph xv.

Moreover, the Supreme Courtroom of Canada inMcCormick v. Fasken Martineau DuMoulin LLP, supra recently commented on the indicia of an employment relationship:

[23] Deciding who is in an employment relationship for the purposes of the Code means, in essence, examining how two synergetic aspects function in an employment relationship: control exercised by an employer over working conditions and remuneration, and corresponding dependence on the part of the worker. In other words, the test is who is responsible for determining working atmospheric condition and fiscal benefits and to what extent does a worker accept an influential say in those determinations? The more the work life of individuals is controlled, the greater their dependency and, consequently, their economic, social and psychological vulnerability in the workplace: …[27] Command and dependency, in other words, are a function not only of whether the worker receives immediate direction from, or is affected by the decisions of others, just also whether he or she has the power to influence decisions that critically affect his or her working life. The answers to these questions represent the compass for determining the true nature of the relationship.[28] While control and dependency ascertain the essence of an employment human relationship for purposes of human rights legislation, this does not hateful that other indicia that courts and tribunals have developed, such equally theCrane factors, are unhelpful in assessing the extent to which control and dependency are present. Only such factors are unweighted taxonomies, a checklist that helps explore dissimilar aspects of the relationship. While helpful in framing the research, they should not be applied formulaically. What is more defining than any item facts or factors is the extent they illuminate the essential graphic symbol of the relationship and the underlying command and dependency. Ultimately, the key is the degree of command, that is, the extent to which the worker is bailiwick and subordinate to someone else's decision-making over working atmospheric condition and remuneration:…

Also, notably, in2006515 Ontario Inc. (c.o.b. Greco Health Shack), [2005] OESAD. No. 34 (January 12, 2005) (cited in Professional Recovery Equipment Inc. v. Mootoo, supra),the Ontario Labour Relations Lath commented on the intention of the parties concerning independent contract status:

Finally, it is important to notation that whether or not an individual is an employee or independent contractor is a question of law to exist determined afterward consideration of all the relevant factors. The intention of the parties is relevant only to the extent that it is reflected in the actual arrangements they have made with each other in structuring their human relationship. Put another way, the parties cannot past their "agreement" render the relationship of an employee an independent contractor or vice versa: run across for exampleGreypoint Properties Inc. [2000] OLRB. Rep. May/June 479 at paragraph 15.

For farther reading, see my article, independent contractor or employee? or watch this video by my colleague:

Application of the Constabulary to an Example

Here is the background of my hypothetical tow truck business concern.

My business concern provides towing and emergency roadside assistance to customers according to a service contract with an automobile association. All my calls come up in from the car clan.
I hire tow truck drivers as independent contractors, and I make them sign a contract maxim they are an independent contractor.
I result each driver a vehicle (which they pay me for), compatible and ID, and I pay for insurance and maintenance. I permit the drivers to accept the car home at night and utilize it for other purposes.
I brand the drivers work five 12 hours shifts per week. Drivers are subject to penalties in example they miss or are belatedly for a shift.
I practise not supervise and cheque in with the drivers.
Drivers are field of study to rules and standards from the auto association.
Each truck is outfitted with a acceleration device from the car association. The driver can accept or decline a call. If a call is rejected, the drivers must supply a reason. Drivers are not disciplined if they pass up calls; they just do not get paid.
My drivers tin pick upwards any other stranded car non dispatched from the automobile association, simply they never do.
Drivers must document all pickups.
Drivers are rated by customers and must maintain a certain rating to work with me.

Determination

The issue to be determined is whether my drivers are an employee or an independent contractor.

This question is to be determined by examining the substance of the relationship.

The fact my drivers are obliged to work a minimum number of 12-hr shifts in one week, with the threat of penalties, is persuasive in finding an independent contractor relationship.

The fact I supply the equipment and am responsible for insurance and maintenance is also persuasive in finding an contained contractor relationship.

The fact my drivers are controlled past a rating system and had to follow my automobile associations' rules is as well persuasive in finding an independent contractor relationship.

My drivers did non in whatsoever real sense accept a run a risk of turn a profit or take chances of loss, and they did not control the corporeality they would charge for their services.

Lastly, my drivers are economically dependent on me. Their schedule does not permit them any extra time to make additional income.

In these circumstances, a courtroom or labour board would likely conclude that my drivers are employees and not independent contractors (indeed, I argued a very like case with the aforementioned outcome). I would, therefore, owe all unpaid wages that my drivers ought to have received.

There are thousands of other types of businesses that operate this sort of sham relationship. Phone call u.s.a. for a free consultation to run across if y'all are truly an contained contractor today. Nosotros offer a complimentary consultation.

If y'all believe you are being misclassified past your employer,contact us urgently. We at human action for worker's misclassified past their employees in all cases at the Ministry of Labour, the OLRB and the courts. Jeff Dutton is a former Ministry of Labour prosecutor and Monkhosue Police force, to which Dutton Employment Law operates nether, recently argued (on behalf of an intervener) a misclassification example at the Supreme Court of Canada inUber Technologies Inc., et al. v. David Heller. We have feel in private files and class actions on behalf of many workers at one employer, so don't hesitate, call today for a gratuitous consultation. We will explain how we tin can quickly and economically get you lot your dorsum pay.

Jeff is an employment lawyer in Toronto. He is the Chief of the Dutton Employment Law Group at Monkhouse Law. Jeff is a frequent lecturer on employment law and is the author of an employment law textbook and various merchandise journal manufactures.