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Employees vs. Independent Contractors

Calgary Employment Lawyers Advising on Employee and Independent Contractor Status

Employees and independent contractors may perform similar roles within the same workplace but have very different rights at law. Employees have less independence in their work, as their employer usually has a high degree of control over their work performance. However, employees enjoy rights and protections under employment standards laws that are not available to independent contractors.

Independent contractors have more flexibility and authority over the way they complete their work and may not be bound to work for only one employer. However, independent contractors bear more responsibility and risk than employees. They are not entitled to the same rights under employment legislation.

Worker classification can be nuanced and legally complex, and misclassifying a worker’s status can have serious legal and financial consequences. At HMC Lawyers, our employment lawyers advise employers and workers at all stages of their relationship to ensure a worker’s classification properly reflects their legal status.

Employee vs. Independent Contractor

A worker’s classification is dictated by their role, duties, and status under employment legislation and the common law, regardless of the terms of their employment contract. The entire nature of a working relationship must be considered when determining a worker’s employment status. The factors affecting worker classification relate to the worker’s independence. These factors include:

  • The degree of employer control over the worker and how they perform their work
  • Ownership of the work tools, resources, and facilities
  • The worker’s responsibility for the financial risk or chance of profit
  • The length of the working relationship
  • Whether the worker was hired to perform a specific task or objective
  • Whether the worker is integral to the employer’s business or can be easily removed or replaced
  • The ability of the worker to work for multiple employers at the same time

Benefits of Employee Status

Employees governed by the Alberta Employment Standards Code are entitled to certain statute-mandated benefits. One of the most important protections under the Code is the requirement for an employer to provide reasonable notice (or pay in lieu of reasonable notice) when terminating an employee. This provides employees with financial security while they look for new employment.

Other employee rights under the Code include a guaranteed minimum wage, paid holidays and vacation, overtime pay, mandated work hours, and paid leaves of absence, including maternity/parental leave, bereavement leave, or compassionate care leave. Employees may also receive optional benefits from their employer, such as supplemental health insurance or a pension plan. Employers must withhold deductions from their employees’ pay for taxes, pension contributions, and employment insurance, which saves the employee from managing this aspect of their income.

Employees are not responsible for the financial risk or chance of profit associated with their employment. In turn, the employer enjoys a high degree of control over an employee’s work performance. Employees are not usually permitted to work for multiple employers, resulting in a dedicated working relationship with their employer.

Benefits of Independent Contractor Status

Independent contractors enjoy more independence and control over their working conditions than employees. They operate with less supervision from the employer and set their day-to-day schedule. As independent contractors usually provide their own tools for completing the work, they are eligible for certain tax incentives and deductions not available to employees.

Although independent contractors are not entitled to the benefits under the Employment Standards Code, they receive financial stability through their ability to work for multiple clients simultaneously.

Importance of Proper Worker Classification

Worker misclassification can expose employers to liability for wrongful dismissal claims from terminated employees. This can occur when an employee was improperly classified as an independent contractor and was terminated without reasonable notice (or pay in lieu thereof) as required by the Employment Standards Code.

When an employer wishes to exert a particular amount of control over a worker’s performance, they should ensure the worker is classified as an employee. If the worker is not required after completing a particular project or timeline, the employer may prefer an independent contracting relationship as reasonable notice or termination pay is not required when the contract ends.

A worker’s status can change over time, particularly when an independent contractor has worked under multiple consecutive agreements with the same employer. Both workers and employers benefit from continued legal advice to ensure the worker’s classification remains accurate throughout the working relationship.

At HMC Lawyers, we advise employers and workers about worker classification at the outset of an employment relationship. We draft employment agreements that ensure the worker’s status meets our client’s needs and can withstand judicial scrutiny. Our team also provides advice over the life of the working relationship to make sure the agreement continues to properly represent the true nature of the worker’s employment. Upon termination, we review whether reasonable notice or termination pay is required to minimize the risk of wrongful dismissal disputes.

Contact HMC Lawyers in Calgary for Advice on Employee and Independent Contractor Status

The experienced employment law lawyers at HMC Lawyers represent both employer and employee clients in Calgary and throughout Alberta. We advise clients at all stages of employment matters to ensure the nature of a worker’s status is correctly documented throughout the working relationship and represented in their duties. For experienced advice and guidance on employee and independent contractor status, call us at 1-800-480-3534 or reach out online.

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Contact HMC Lawyers for Exceptional Legal Guidance

At HMC Lawyers, we offer strategic legal advice. Our breadth of practice experience allows us to promptly handle almost every litigation-related legal issue that may arise, and anticipate potential roadblocks that may delay its resolution. To make an appointment with a member of our team, contact us online or call 403-269-7220

For articling student inquiries please contact Sean Jeffers at 403.261.3329 or sjeffers@hmclawyers.com

HMC Lawyers LLP
#1000 903 8th Ave SW
Calgary, AB
T2P 0P7

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