Casual Legal: Independent or dependent contractor?

By Andrew Skeith
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider

Employers often retain the services of individuals as independent contractors instead of employees for a variety of reasons. One of the differences between a contractor and an employee is that none of the standards and requirements applicable to employees set out in the Employment Standards Code apply to a contractor, including the obligation to provide termination pay upon termination of that individual’s services. Similarly, if an individual is an independent contractor, they do not have a right to common law reasonable notice of termination, as an employee would.

However, Courts have recognized an intermediate classification between an employee and an independent contractor: that of dependent contractor. A dependent contractor is essentially an independent contractor who works almost entirely or exclusively for a single entity. If the employer and this contractor have signed a standard contractor agreement, but the contractor is required to work a 9-to-5 workday for the employer and not work for any other entity, that individual is almost certainly a dependent contractor.

The main risk with dependent contractor status is that they are entitled to some degree of common law reasonable notice, just as an employee would. If that is the case, the dependent contractor could, depending on how long they provided services to the employer, have a claim for a significant amount of pay in lieu of reasonable notice in the event the relationship is terminated by the employer.

If you are thinking of hiring a contractor, it is extremely important to have a properly drafted contractor agreement to reduce the likelihood of a finding of a dependent contractor, or worse, a finding of an employment relationship that was not intended, which can lead to significant, and unforeseen, added costs for employers.

To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1-800-661-7673 or send an casuallegal [at] abmunis.ca (email) to reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please call 310-MUNI (6864) or send an riskcontrol [at] abmunis.ca (email) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.

DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.