How will your business hire staff and find the support necessary to fulfill your labour requirements? Employers have several options for meeting these needs. However, it’s critical to understand the distinct legal classifications of workers. These classifications, which include independent contractors, dependent contractors, and employees, carry different rights, obligations, and tax implications.

Understanding when the Employment Standards Code applies is essential for compliance. Otherwise, businesses may face costly legal challenges. If such challenges arise, finding support from experienced employment and labour lawyers in Edmonton is essential. At Lypkie Henderson, our focus on this area of the law offers a valuable resource for businesses.

With support from our Edmonton employment lawyers, your business can explore the nuances of the law to add staff that meet your specific needs. Let’s explore a quick overview of the different aspects to understand.

What Is an Employee?

Employees are the most common type of worker in most businesses. Individuals classified as employees fall under the coverage of the Employment Standards Code and, as such, are entitled to specific protections and guarantees. However, it is important to keep in mind that merely classifying the worker as an employee is not enough. Whether a worker can be defined as an employee depends on certain factors and the circumstances of their employment. These factors and circumstances can include the following:

• An employee is paid by commission, a wage or salary.
• The employer sets and specifies the individual’s work hours.
• Employers may provide employees with benefits packages paid in full or in part by the employer. These packages may include pension contributions, vacation pay, etc.
• The employer provides training.
• An employee personally carries out the duties of the job and does so under the control and direction of the employer.

If it can be shown that an individual falls in the above definition of an employee, they may be entitled to legal protections that all employees are entitled to, even if that individual was officially hired as a contractor. For example, individuals classified as employees are entitled to receive either severance or notice in lieu of pay when an employer terminates the working relationship without cause. This is not the case for contractors. It is possible for an individual who was hired as a contractor to argue that they are in fact an employee in essence and thus are entitled to severance. It is important to classify each worker properly and to ensure that their job conditions and circumstances do not change that classification.

What Is an Independent Contractor?

Independent contractors can provide a business with flexibility for meeting labour requirements. They are individuals that provide services to the company as a contractor rather than as an employee to the company. Like employees, we identify independent contractors by how they work and the degree of involvement that the contracting company has over their work. Contrast the following with the classification of an employee above.

• An independent contractor has the freedom to choose their hours of work.
• They receive payment through installments or lump sums following invoice submissions.
• They pay for their own training or bring their own skills to the job.
• They do not dedicate themselves to one employer and may subcontract the work.
• They set their own schedule, though employers may set specific deadlines.
• They control their own profits, allowing independent contractors to increase work hours for more money.

Independent contractors are not entitled to the benefits provided by the Employment Standards Code. However, as above, when the independent contractor looks more like an employee in reality, the law can require the employer to provide benefits such as notice or severance.

What Is a Dependent Contractor?

A dependent contractor is a contractor in name. However, in practice, their working arrangements place them closer to the employee categorization. A dependent contractor typically depends exclusively or almost exclusively on a single client business to provide their income. They may maintain some independence in working hours, timelines and other elements. Still, they do not have the level of freedom of an independent contractor. Court rulings and legal interpretations have held that dependent contractors must receive “reasonable notice” or appropriate severance upon termination.

Explore Worker Classifications in Greater Depth

A clear understanding of different worker classifications and their impact on employment relationships is essential for any employer. A clear sense of the law ensures you can appropriately apply the Employment Standards Code when required. Edmonton employment lawyers can offer companies a valuable resource to make sense of these complexities and the requirements for compliance.

At Lypkie Henderson, our experienced labour lawyers in Edmonton can provide clarity on these distinctions and assist you in understanding how best to structure your workforce. Contact our offices today for more information about your next steps.