While there are many benefits to being an independent contractor, it is important that you are effectively considered one by the Canada Revenue Agency to avoid financial penalties and legal consequences being imposed on your client under various laws, including the Income Tax Act, the Employment Insurance Act and the Employment Standards Legislation. Any negative decision by the Canada Revenue Agency that a worker treated as a contractor is in fact an “employee” is supported by the department. Employers must pay part of the payroll tax on workers, while self-employed contractors file their own tax returns. This contract can also be adapted so that the owner retains full ownership of the intellectual property, while granting the company the license to use the material. Based on its understanding of the law, the Canada Revenue Agency lists six factors in determining whether an individual is an independent employee or contractor: employers may be tempted to classify workers as self-employed contractors to avoid overtime, vacation pay and severance pay, and pay transfer obligations. Two recent decisions in the BC courts confirm, however, that the law recognizes a status somewhere between the worker and the self-employed contractor: the salaried contractor. The courts have developed this concept to provide protection to economically vulnerable and dependent workers who are not workers and therefore do not enjoy the legal protection of workers. The Employment Standards Act applies to workers, whether they work part-time, work full-time, fixed-term or permanent. The law does not apply to independent contractors. A person who is an independent contractor is considered independent; i.e.
in business for himself. Determine whether a workforce is an independent contractor or an employee. The tool includes four questions that determine whether an individual is a contractor or whether further assessment is required. Just follow the instructions and keep in mind that while every effort has been made to ensure confidence in such an assessment, this tool cannot provide security. The information on this page is intended to help distinguish the independent contractor from the employee. While the maximum severance pay under the Employment Standards Act is eight weeks, workers and dependent contractors are entitled to much more than the common law. It is not uncommon for a judge to allow up to one month of severance pay for each year of service completed, up to a maximum of 24 months (although the courts have granted as much as 30 to 36 months in some younger cases). The termination of a long-term contractor can therefore have serious consequences if it is established that he is a dependent contractor. The law is designed to protect as many workers as possible. When deciding whether a worker is an independent worker or contractor, one of the most important questions is, “Who is it?” A judicial or arbitrary finding that a licensed contractor was legally a worker could lead to the negative conclusion that the legal norms have been violated, resulting in claims for: there are also considerable benefits for companies to recruit independent contractors.
An employer may prefer to characterize a relationship as an independent contractor, since it allows an employer not to have to make deductions at the source of EI, PPAs, income tax, sickness tax and occupational safety premiums. The following factors alone are not sufficient to demonstrate that a worker is an independent contractor.