In British Columbia, we have three categories of workers: employees, independent contractors and dependent contractors.

Employers often do not, but should, understand the legal concept of a dependent contractor. Complications can arise if employers misrepresent the working relationship by not identifying if the worker is a dependent contractor. Unlike an independent contractor, dependent contractors may be entitled to reasonable notice of termination (similar to an employee).

What is a Dependent Contractor?

A dependent contractor is a classification of a worker. It falls in a grey area between employee and independent contractor. Essentially, a dependent contractor has some sort of dependence on the employer unlike an independent contractor who acts as their own entity. While a dependent contractor is not exactly an employee who solely relies on the employer, they are similar in the sense that they have a level of dependence on the employer.

Test for Dependent Contractor

When testing to determine whether your worker is a dependent or independent contractor, finding the level of control an employer has over that contractor will be the main determinant. Simply calling someone an independent contractor does not make them so. The nature of the working relationship must be fully assessed. Some considerations include the following:

• • • Was the worker exclusively limited to the employer.
    • Was the worker under the control of that employer? Did the employer control what, how, and when duties where performed.
    • Did the employer control or provide the tools and equipment needed by the worker to complete the work.
    • Was the risk to the worker for financial loss, risk, or additional gain of profits (in excess of the worker’s normal remuneration) minimal?
    • Was the worker involved/integrated in the employer’s business.
    • Was the relationship long lasting and/or permanent.
    • Did both the worker and employer coordinate and rely on each other.
    • Did the employer pay for the worker’s insurance, WorkSafe BC coverage, and other statutory deductions; and
    • Did the employer limit the worker’s ability or discretion to hire additional workers, often known as subcontractors?

From this test, an employer must objectively determine if the worker had a level of dependency on the employer. The more questions answered “yes” above, the more likely that the worker was a dependent contractor.

Risk of Potential Liability

If an employer does not classify their worker correctly, they could face a number of potential liabilities, including a wrongful dismissal claim, penalties for breach of the Employment Standards Act, and penalties for failing to properly withhold taxes.

We often strategize with our clients who hire contractors to ensure they are classified how the parties intend and ensure that all legal requirements that support the classification are met.

Employers should contact our Workplace Law team if they are unsure of their working relationship. Doing so will help reduce the risk of liability and disruptions to an employer’s workplace.