It’s a Bird, It’s a Plane, It’s a … Dependent Contractor
This summer, the British Columbia Supreme Court released a decision[i] that provides helpful guidance for companies, including those located in Ontario, on the contractor/employee distinction.
What’s a dependent contractor?
Everyone likely knows what an employee is (i.e., at a very high level, an individual providing work directly to an employer and that is afforded certain protections under employment standards legislation).
On the opposite end of the spectrum lies an “independent contractor”—a self-employed individual controlling all or most aspects of their work and that is not subject to employment standards legislation.
A “dependent contractor” falls in between the two categories, and despite the name, is an individual treated more like an employee than a contractor under the law. Dependent contractors are just that—dependent on a single “employer” for work and compensation. Perhaps the biggest impact of being deemed a dependent contractor is that the amount of termination notice such a worker is entitled to will resemble common law reasonable notice of an employee.
Recent decision highlighting what a dependent contractor is
In this decision, a music therapist had been providing services to a company for almost 12 years, pursuant to a “Terms of Agreement” contract, when the company terminated the contract without any notice or pay in lieu.
The music therapist:
did not receive a T4 from the company or benefits;
was not subject to statutory deductions on her pay; and
was responsible for her own workers' compensation insurance premiums.
As such, the court found that it was reasonably clear that the music therapist was not an employee of the company.
However, the court also considered the following factors in assessing what type of contractor she was – i.e. dependent or independent:
in her last full year with the company, over 90% of the music therapist’s income came from the company;
the company required her to arrive early for lessons, respond to communications from the company immediately, and advise the company of any changes to her schedule;
her contract held that she could not provide “locum work” outside of the company;
the company would pay her even if one of her clients did not pay for the session;
she was subject to staff reviews; and
she was given a company name tag to wear while providing services.
The court weighed the above (and some additional) factors, and held that the music therapist was a dependent contractor. As such, she was entitled to common law reasonable notice, which the court set at 12 months before implementing a reduction for the failure to mitigate.
Takeaways:
This case serves as a helpful guide to companies hoping to avoid the trappings of the dependent vs. independent contractor classification:
The more control exercised over a worker, and the more economically dependent a worker is on a company, the more likely it is that an adjudicator will find that a worker is an employee.
Though clear language outlining the relationship in a contract helps, courts will look at the substance of the relationship and the day-to-day dynamics of same to determine the worker’s classification. Some of those factors are totally outside the company’s control – i.e. whether the worker has other clients and sources of income. In addition, what started out as an independent contractor relationship can become a dependent one as the worker’s other customers fall away.
Even if a worker is a contractor, companies must still consider what entitlements that worker may have, if any. At times, this could be particularly expensive depending on the worker’s entitlement to notice at the time of termination.
If a company wants to (or does in fact) exercise substantial control over a worker and the worker is otherwise treated as a full-time employee, just because a worker may be called a “contractor” doesn’t make it true. The company should consider acknowledging that the relationship is one of employment, and build in parameters to limit exposure to various employment standards and common law obligations.
The main takeaway: If it looks like a bird, smells like a bird, and otherwise is treated like a bird, chances are that an adjudicator probably won’t determine that it’s a plane.
[i] Dibble v Creative Music Therapy Solutions Inc., 2024 BCSC 1066 (CanLII)
