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Is Your Employer Wrongfully Treating You as an Independent Contractor to Avoid Employment Standards?

Originally published May 12, 2011

There’s a story in the Toronto Star this morning about the launch of a campaign called Stop Wage Theft by the Workers’ Action Centre in Toronto.  The Toronto Star piece focuses on the story of a group of workers who claim unpaid wages from a company called Com-Kote Inc.   Com-Kote says it doesn’t have to pay ESA requirements because none of these people are their employees.  They are all “independent contractors”.  They are self-employed painters running their own businesses.  Com-Kote entered into a commercial contract with these other businesses.  So there is no employment contract at all.  And since there is no employment contract, Com-Kote can withhold payment for services performed whenever it decides it doesn’t like the quality of work.

This is a common situation.  Many businesses try to avoid the obligations associated with employing people by treating workers as independent contractors.  It often works, since in most cases the workers will just accept that arrangement in order to get the work, because they like the idea of being in business for themselves, or because they don’t realize that they would be entitled to employment standards protections if they are “employees”.  However, when the workers do challenge the arrangement to obtain their ESA entitlements, they are often successful because many of these arrangements are shams. As the saying goes (sort of), if a person walks like an employee, and quacks like an employee,  they’re probably an “employee”.

The Com-Kote story reminds me of a decision of the OLRB from a few years ago called Ilaris Corp v. Gadzevych.  Ilaris was also in the construction industry, and hired workers and called them “independent contractors”.   In fact, Ilaris had about 45 people working for it yet claimed only 3 were employees:  the owner, and two directors.  Everyone else doing work for Ilaris was in business for him or herself.   After the work was performed, Ilaris withheld payment from some workers because it said the work was unsatisfactory.  Two of Ilaris’s workers filed ESA complaints claiming unpaid wages.  Ilaris argued, just like Com-Kote, that the workers were not their employees and therefore they could withhold payment if they like.

The Labour Board ruled that the two Ilaris workers were “employees” within the meaning of the ESA.   The definition in the ESA is not very helpful.  It says this:

“employee” includes,

(a) a person, including an officer of a corporation, who performs work for an employer for wages,

(b) a person who supplies services to an employer for wages,

(c) a person who receives training from a person who is an employer, as set out in subsection (2), or

(d) a person who is a homeworker,

and includes a person who was an employee;

In the Ilaris case, the Board reviewed the various tests that have been used over the years to decide if workers are employees or independent contractors.  It started by noting that the ESA is intended to be interpreted broadly, so as to include as employees as many people as possible.  A key question is:  Whose business is it?

A person who is self-employed usually looks like they are in business for themselves.  That means, for example, that they get their own customers, they can hire other people to do the work for them, they can do work for various clients, they own their own tools and equipment, they determine how work is performed.  These conditions are not always present, but the more they describe the situation, the more likely the person is self-employed.  In the Ilaris case, the workers showed no indicia of being in business for themselves.  Here’s what the Board ruled:

In my view, it is clear that Mr. Chorikov was not an independent contractor but rather an employee who was being paid on a piece rate basis.  His labour was an integral part of Ilaris’ business.  Ilaris… found the work, bid on the work, and contracted to perform the work.  Ilaris provided the materials.  While Mr. Chorikov was hired for a fixed amount per project, and not on an hourly rate, he was not free to substitute someone else to perform the work.  Indeed, Ilaris… assigned Mr. Chorikov to perform specific tasks.  Mr. Chorikov did not hire or supervise others.  There is no sense in which he can be described as being in business for himself.  Rather, his activities were controlled by Ilaris. Accordingly, I find that he is an employee within the meaning of the Act and not an independent contractor.

If workers are “employees”, then the ESA applies.  That means all wages must be paid, including overtime, holiday pay, and termination and severance pay.  It also means that wages cannot be withheld on the basis that the employer doesn’t like the quality of the work. Section 13 of the ESA prohibits employers from withholding wages for “faulty work” (s. 13(5)(b)).  An employer must pay the wages, but it can dismiss the worker for poor performance.

Note also that a clause in a contract saying “You are not an employee.  You are an independent contractor” usually means very little.  Otherwise, an employer could just call everyone an independent contractor completely avoid employment laws, as the Labour Board noted in another recent case called Greypoint Properties:

an employer cannot decide that a person is an independent contractor, any more than an employer and an employee can agree that the relationship is one of “independent contractor”.  Whether someone is an “employee” or an “independent contractor” is a legal conclusion, based on a determinations made from the factual circumstances, having regard to the purposes for which the question is being asked.

That’s some good news for employees confronted by one of the companies that wants to have no employees.  If an employee is given a contract saying they are an “independent contractor”, and they fear that arguing about it will cause them to lose the job, they can agree to the contract but later file an Employment Standards Act complaint alleging that they are in fact an “employee”.   The fact that the employer would like you to be an independent contractor means nothing.   If you look and feel like an employee, there is a good chance that you are, regardless of what your employer calls you.

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18 Responses to Is Your Employer Wrongfully Treating You as an Independent Contractor to Avoid Employment Standards?

  1. Ed Reply

    January 14, 2013 at 10:58 am

    I read your artical, and I guess I was duped for 5 years and 3 months, believing I was an “Independent Contractor” when in fact I was an employee. I was hired by a person who owned is own bread route, but it was too big for just one person to operate. He hired me as an “Independent Contractor” to run half his route. He supplied the truck I drove, the computer I needed, the uniforms I wore and the bread I delivered. Many times I would have to make extra deliveries, on my days off, and on holidays in which I never got paid a penny, cause it was part of my job. He paid me a weekly wage every Tuesday for 5 years and 3 months. I was allowed to take 2 weeks vacation each year with pay. During the last week of October 2012 he came to my house when I was finished work and informed me he had sold the business. He did not give me a spacific time when my services would no longer be needed. A month had passed and I was still working, so I asked him if the deal fell through on his bread route, he said no it didn’t, the papers were being signed on the last day of November which was only 4 days away, so I asked him when was my last day, and he told me the day after the papers were signed. I cannot collect EI, and I was only given 1 weeks pay, and 1 weeks holiday pay when I finished working for him. I am trying to find work, but in todays market that’s not easy, and I am running out of money. I will never agree to working for someone again as an “Independent Contractor” I still owe on Income Taxes, because I could not claim anything other than my cell phone, because he supplied everything. Let my story be a warning for anyone falling for the same scam!

    • Doorey Reply

      January 14, 2013 at 11:23 am

      Ed, you might want to speak to an employment lawyer.

  2. Josh Reply

    January 16, 2013 at 7:56 pm

    This is not exactly the same thing, but a related issue of an employer seeking to skirt regulations… I work for a ministry of the ON Gov’t in a position covered by an OPSEU CBA. I started in the position in May 2010 for a five month term while working with temporary staffing agency. My term in the position was extended by three months, then given another term, and extended, and this continued without a lapse in employment until May of last year, when I was finally offered, and accepted, a six month contract directly with the ministry as an OPS fixed term employee. The reason I wasn’t hired earlier as a ministry employee instead of kept on through the staffing agency was a government austerity measure related freeze on hiring to fill “full time equivalent” positions in addition to those already existing and budgeted for prior to the freeze. My employment terms were evidently converted from “temporary help” to fixed term contract due OPSEU objection to staffing agency “temporary help” being hired to fill positions doing CBA covered work for long periods of time as a means of circumventing the hiring freeze and create savings by using lower paid workers wihout benefits and not union members. My “fixed term” contract has now been extended to the end of this March, and now a job competition is being run for my position, and I will be required to participate and be the successful candidate if I wish to keep my job. My employment isn’t being converted from a fixed term contract to permanent employment because I haven’t been with OPSEU for at least 18 months (as would otherwise be required by the CBA) since my manager wanted to keep me in the position but could only do so by continually extending my term as a “temporary worker” rather than offering me a fixed term contract or permanent position with OPSEU. Do I have any cause for action? I’ve worked hard in the position and to keep my job, with hope (not without reason from the words and actions of my manager) that I might gain permanent employment. I’ll have been employed in the same position continuously for approximately 2.5 years–at this point how can they not convert my employment to permanent status?

  3. Tara Reply

    February 11, 2014 at 6:51 pm

    My spouse is labelled an “independent contractor” in the construction industry. He is a drywaller. He works for a company, I am not sure if it has legally been set up as a company. The person running this company goes out and prices jobs and contacts would be employers for the people working under him, at which point he also assigns the locations of work and collects all hours worked, submits this to the company they are doing the work for and then pay each “employee/contractor” in turn. My spouse must supply his own materials and pay for his WSIB. This person is now withholding pay and stating he does not owe my spouse anything for 2 weeks of work. He fired my spouse for telling a friend/co-worker that the employer bounced one of his pay cheques causing various bills to bounce. Based on reading and research even though I am still unclear as to whether he is an employee or independent contractor and what rights do we have?

    • Shelley Reply

      April 24, 2014 at 9:51 pm

      Hi Tara

      You should get some legal advice. You can go to the employment standards board or use a paralegal and proceed through small claims court. What has happened is wrong and just accepting it and moving on is how these people get away with it over and over again.

      Good Luck

  4. Kira Reply

    March 22, 2014 at 5:25 pm

    I was hired as a facilitator to work in a family centre. My boss, who was the exec director, informed me and my co-worker that as independent contractors, we were responsible for our own pay deductions and would not receive a t-4. She still subjected us to a probationary review after three months. I never thought to ask her why she felt this was necessary if we were hired on as independents, since if she didn’t like our performance, she could simply dismiss us as contractors. I have a feeling it was more a way for the facility to avoid paying tax, since she treated us like employees, meddling in everything we did and imposing rules as she felt it suited her. I should have terminated my services with the place sooner, but I didn’t know I had that option.

  5. Michelle Reply

    October 14, 2014 at 4:28 am

    My husband works in the Oil and Gas industry in Alberta and he is labeled as a “contractor”. However they have not given him a written contract to agree too. The company he is “contracted” too provides him with the jobs they have contracted, while proving his own insurance, WCB, and all the other necessities of being incorporated business. He does not have control over his schedule, they tell him how long he is going out of town for work unless he requests time off. But the big concern is that the company is saying they will not pay him till 15 days after the job is complete, which means the job may take a month to complete and he will not get any renumeration for the services he already performed for a month and a half from his start date. I have spent many hours researching this but have yet to come up with a conclusion. I know Canada’s standard payment period is 30 days from the date the invoice is accepted, and as an employee you have to be paid at least once a month, but I am not sure where he falls. Any help would be greatly appreciated :)

  6. Donna Reply

    November 30, 2014 at 2:21 am

    I work for a private school, with far fewer than 50 employees, and have an independent contractor contract. Does this mean I am not entitled to pay on stat holidays? I would also like to know if there is some way for me to claim some sort of sick pay as I have had an operation recently and might need another soon. Despite the type of contract I have, I am listed as Academic Director, which sounds like “employee” to me. Is all this legal?

  7. Radu Reply

    December 10, 2014 at 12:42 am

    I’m considered a contracted worker by my boss. I work in a gym, paid only for the hour that I’m with a paying client or commission on a sale and not paid otherwise. So any gaps between clients aren’t paid. I’m under the impression that as being an independent contractor, I should have the flexibility of my hours, so long as my clients are still serviced. My ‘boss’, however, does not allow me to control my schedule, or change my hours, or work on my own terms (even though I’d still be servicing my existing clients). I wish to reduce my work days and hours around my clients only, and be in control of the rest of my time. How can I go about this?

  8. Ivy Reply

    February 13, 2015 at 2:52 pm

    Over four years ago, i was hired as a property manager of two apartment buildings. My employer informed me that it was contract work and that the position included a two bedroom unit plus a salary of $500.00 per month. From day on he kept promising to draft up a contract for me to sign which to date I have not received. Recently I decided to do some research on Contract vs employee and discovered that I am more of an employee than under contract. He pays me a salary at the end of every month at a set amount, if I do more work than expected for that month I do not receive any extra monies. He phones me at the drop of a hat to tell me to do extra work. He supplies all the equipment, tools and cleaning products that I need to perform my job. I am on call 24-7. During the first few years I was not permitted to go on holidays and when I started demanding that I do take a week off he would deduct a weeks pay from my salary. I started getting family members to clean my buildings for me while I was on vacation as a favour to me so that he would not deduct a weeks pay from me.

  9. Doorey Reply

    February 25, 2015 at 1:12 pm

    Jill, sounds like a pretty strong case that you are an “employee” under Employment Standards legislation. Information on how to do that is here: http://www.labour.gov.on.ca/english/es/forms/claim.php You may want to contact an employment lawyer, but it is not required that you do so. You can submit an application for severance and notice directly on-line.

  10. Tim Reply

    December 17, 2015 at 12:26 pm

    I was hired hourly in garbage removal.
    Can they force me to switch to a route rate?
    Also they route rate doea not match the hours actually worked in the previous year.
    What should i be doing?

  11. Mosiegirl Reply

    January 23, 2016 at 5:49 am

    I work as an Independent Contractor for a retail insurance company. I have been with them since 2010, and was offered an Ontario hourly wage of $10 per hour. At that time, back in 2010 that was above minimum wage. But now, it’s below. I’ve asked my Client if they will be raising up my hourly wage and was advised no. That because I am an Independent Contractor, its up to me to continue accepting that wage, or I could leave if I was no longer happy there. Is this fair? I’ve given them 6 yrs of hard work.

  12. Achtee Reply

    April 5, 2016 at 7:26 pm

    I am one of a fleet of independent contractors that provides food delivery via bicycle or car. Whenever I go over the checklist of things I tend to think we’re actually employees and not contractors.

    - We choose our own hours but have a minimum time commitment each week, if it is not met we can be removed from service
    - We own our own bikes or cars and phones to use the app but the company controls the flow of delivery work through their application
    - the company owns the bags and the chargers but we need to pay for replacements when lost or stolen
    - we are paid per job but can not refuse jobs at will even if it diminishes our earning capacity, in fact, delivery location until after we pick up the item.
    - we can not hire helpers or give our shifts to someone we hire ourselves
    - we pay penalties for late starts or missed shifts
    - we have no idea what we are making per order as it happens, but we get a weekly summary with our direct deposited pay

    I feel like this is a real grey area because we tick off more employee boxes than contractor boxes but it’s impossible to know.

  13. Matt Reply

    September 13, 2016 at 10:44 am

    I was just let go from a position as a live-in superintendent for a large property of townhome condos. I finally feel like now that I don’t have to worry about losing my job I can finally come forward and do something about their extreme disregard for the law.
    I too was told I was an independent contractor, but I was required to live on-site and work 8am-6pm, and carry a work phone that they provided to be on call 24-7.
    I was assigned much of my work, I was not allowed to make any type of executive decision. I was told how the work should be done, when it should be done, and was provided with supplies/tools when necessary.
    They didn’t pay me a normal paycheque however, I was required to “invoice” them for 400$ every two weeks and additionally invoice for any repair work i did for them, but I was TOLD how much I was to write down for payment on every invoice.
    $800 a month was not enought to even break even when accounting for electricity costs, gas (furnace and waterheater,) car insurance, (was required to drive to the bank to deposit rent every other day), water heater rental, food. To consider any sort of leisure expense,new clothes,cable,internet connection is laughable I simply did not have the money.
    Even though 8am-6pm were my scheduled hours, I was on call 24-7 with absolutely no relief, the phone rang constantly, and I was expected to tend to whatever the problem may be.
    They advised I would get 1 week unpaid vacation a year, but upon requesting a week off, I was told I would need to find someone to cover for me while I was gone, however I had no coworkers and they indeed knew that there was no one to cover for me for a week unless I were to hire someone, which would be a pretty expensive unpaid vacation, so I never took one for 3 years straight.
    Having to move into their property is what has trapped me here, I was told if I was fired that I would have 7 days to vacate my home, which according to the landlord and tenant board of ontario is fair. This kept me in fear of losing my job/home constantly and because i was paid so little I could never afford paying first and last month rent on a new place, I could never quit and find a new job and make enough to pay rent in 7 days let alone finding a new place/moving etc all in 7 days.
    After 3 years they fired me, but said that I can continue to live in the condo.. I’m just waiting for the eviction notice for unpaid rent.

  14. Ed Bouman Reply

    October 1, 2016 at 12:46 pm

    I left a post on here, about working for a guy who owned a Bread Route, and how I was deemed an Independent contractor! I did some research and I found that Canada Revenue, will do a ruling, if you are in this situation. I sent them all my information, and copies of checks I received from the guy I worked for, with in 26 days I had my ruling, and they said I was an employee, not an independent contractor. This allowed me to collect Unemployment Insurance. I suggest anyone who is classified as independent contractor, but is treated like an employee to do the same thing I did!

  15. Dylan Passey Reply

    May 29, 2017 at 5:32 pm

    Got a question I work for this roofing company in canada and he pays me cheque but fills out sub work and doesn’t take taxes off or anything and he says it’s under the table… but it’s paid through cheque and written sub on the pay with the company I work for but I am clearly not a sub contractor I work with him everyday and he has all the tools and I don’t supply anything and we have a crew of like 4 of us everyday and we are treated just like a employee it’s real shady I’m just wondering if this is legal that he can get away with not paying cpp or anything tax wise and we got not Wcb or anything if something goes wrong wondering if someone could give me light on this situation seems shady as hell

  16. Gennell F Grant Reply

    June 18, 2018 at 4:06 pm

    I worked for a mobile massage company in which request came through an app. I have great reviews and high ratings as well as clients prioritizing my services. This company not only controls who gets a bid that comes out, but they also stopped me from making money by lying to clients who asked for me and telling them I wasnt available to get new therapist bids. We have to wear a company shirt and can not solicitude or hand out our own business cards at chair massage events or if a client ask for our personal number we can not give it to them and are told we can be sued if we do take the clients on a more personal basis. We also have to wear their business shirts that they provide for us and can get in trouble if we wear anything else beside a black shirt if we dont jave a clean shirt. My contract was terminated after I caught them lying to clients about my availability. I never received any information in the mail or anything about the contract being terminated but they logged me out of the app in which we receive request.

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