The Difference Between an Employee and an

Independent Contractor

Businesses are typically comprised of different types of workers that are compensated for their labour. There can be employees or independent contractors completing work for an individual or company, and it is important not to confuse the two. Keep reading this post to learn more about the differences between an employee and an independent contractor!

Employees are individuals that are hired for either fixed or indefinite periods of time, while independent contractors are self-employed workers that are hired to perform a specific type of work or task. It is important to understand the difference between employees and independent contractors, as each category has different rights afforded to them under the law. Some of these differences include:

1. The Employment Standards Act, which provides rights and protections only applies to employees. Section 1 of the ESA defines an employee and individuals who are found to be an employee per the definition are entitled to various rights from their employer, such as:

a. Minimum wage;

b. Overtime pay;

c. Public holidays;

d. Vacation with pay; and

e. Notice of termination or termination pay.

It is important to note that since the ESA only applies to employees, independent contractors do not have the benefit of the rights provided to individuals who are classified as employees under the ESA.

2. Employees are paid wages or a salary regardless of how profitable the business is. On the other hand, independent contractors run their own business and assume the risk of financial losses.

3. Employers handle payroll deductions such as CPP, EI and Income Tax when they are paying their employees. Conversely, independent contractors invoice businesses for their work and remit their own taxes to the government. Additionally, independent contractors have their own business and can deduct business expenses from their income.

4. The employer decides what the employee’s job will be, how much they will be paid and where and when the work will be performed. Conversely, independent contractors have the ability to create their own working arrangements and control the way they choose to carry out the duties of their job.

5. Employees also cannot hire someone else to do their work, whereas independent contractors can subcontract employees to do the work for them.

6. The employer provides employees with all the tools, equipment and materials necessary to perform their work, such as cellphones and uniforms. On the other hand, independent contractors must acquire all of the tools they need to perform the services for the business.

7. The employer has the right to suspend, dismiss or otherwise discipline an employee, but are unable to discipline an independent contractor. Businesses can, however, end an individual contractor’s contract for services if they are unsatisfied with the work being conducted.

Workers who fit into the definition of employees under section 1 of the Employment Standards Act (“ESA”) are sometimes misclassified by their employers as independent contractors. Misclassification typically happens because businesses that deem individuals to be independent contractors instead of employees can avoid the financial costs of having to provide workers with rights afforded under the ESA such as minimum wage, vacation pay, etc.

Under the ESA, employers are not allowed to treat employees as if they are not actually employees. If an employer misclassifies an employee, an employment standards officer can issue a notice that can result in penalties and prosecution against the employer.

Whether you are an employee, employer or an independent contractor, if you are looking for more information, do not hesitate to contact us and our specialist Employment Lawyers can discuss your matter in more detail over a free consultation. You can reach our office at 905-366-0202 or contact us through our website here.

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