Just how independent are independent contractors? Plenty of readers want to know
As a labour lawyer who practices across most of Canada, I see a lot of the same concerns come through our office fairly regularly, and those concerns are echoed in the questions I now receive weekly on air. These days, one of the most common question I’m asked on my radio show NEWSTALK 1010 in Toronto is about what constitutes a contractor. That isn’t a surprise considering that contract work is becoming the norm in the workplace.
Following are a few questions I hear regularly, including the above mentioned:
Q: Are most so-called independent contractors really independent contractors?
A: No. A vast majority of Canadian workers who invoice their employers and call themselves independent contractors are actually employees. The tax authorities refer to them as Incorporated Employees. A genuine independent contractor is someone like myself with multiple clients, the ability to turn down work, and no obligation on the client’s part to hire them for the next case or job. A worker who is engaged on a regular basis for the same principal is almost invariably an employee. The fact he or she signed an “Independent Contractor Agreement” and invoice the principal is irrelevant. Both the employer and that worker are at risk if they were ever audited.
Q: How long is a non-competition clause valid for?
A: Most non-competition clauses, prohibiting employees from working in the industry for a certain period, are unenforceable, regardless of their length of time. However, they are enforceable for the most senior executives who could substantially damage the company if they joined a direct competitor. For those few executives, to be enforceable the contract cannot be longer than the time in which the employer can establish irreparable harm if the employee leaves and competes. The court won’t rewrite the contract so, if the duration exceeds the time permitted under that test, it will be struck down by the court.
Q: The company I worked for went under. Will I still receive severance?
A: Other than unpaid wages and vacation pay, employees are unsecured creditors. Most employers who file for Companies’ Creditors Arrangement Act (CCAA), or bankruptcy protection, will not have sufficient assets, after paying preferred and secured creditors, to pay severance claims. Theoretically, the law of wrongful dismissal still applies — but not practically.
Q: The company I work for was sold and I am now working for the purchaser. Do my old terms of employment continue?
A: Unless you sign something new as part of your acceptance of the job with the new owner, the old terms still apply. If the new employer asks you to sign something substantively inferior to your previous terms of employment before agreeing to hire you, you have the right to refuse to accept the new job and can sue your existing employer for wrongful dismissal.
Q: How many written warnings must I provide before I can fire an employee?
It could be none or one, five or 10. If an employee steals or assaults a fellow worker, no warning is required. On the other hand, if an employee is regularly a few minutes late in a position where timeliness is not critical, all the warnings in the world will not provide cause for discharge. Many human resources managers believe in a “three-strikes-and-you’re-out” rule. The courts have no such rule and the number of warnings depends on the nature of the offence, the length of service, and to what extent the employer has made clear continued misconduct will result in their dismissal.
Q: How much notice should I give my employer if I quit?
Just like wrongful dismissal damages, there is no rule. But, like wrongful dismissal damages, there are principles the courts follow. The primary one is the length of time it would likely take the employer to find a suitable replacement.