The Difference Between an Employee and an Independent Contractor

The Difference Between an Employee and an Independent Contractor

Businesses are typically comprised of different types of workers that are compensated for their labor. 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. For the most part, it is important to understand the difference between employees and independent contractors.

The Employment Standards Act

1. The Employment Standards Act, which provides rights and protections only applies to employees. Section 1 of the ESA defines an employee and those deemed as such have various workplace rights : 

a. Minimum wage;

b. Overtime pay;

c. Public holidays;

d. Vacation with pay; and

e. Notice of termination or termination pay.

The ESA only applies to employees and independent contractors do not have the rights of an employee.

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 are responsible for payroll deductions, while independent contractors have to remit their own taxes.

4. The employer determines the job and pays an employee while independent contractors have flexibility in determining their own work.

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. Lastly, the employer has the right to suspend, dismiss or otherwise discipline an employee, but are unable to discipline a contractor. 

Misclassified Employees

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. However, 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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