How Can I Ensure That Independent Contractors are Not Employees
When you own a business, navigating the differences between employees and independent contractors can sometimes feel confusing. Many business owners like the idea of working with independent contractors rather than hiring employees as it allows them to use contractors as needed rather than having regular employees. It often also means that employers will not be required to offer independent contractors the same number of benefits as they would an employee.
In a recent interview with The Globe and Mail, Rahul Soni of Soni Law Firm answered a question about how a business owner could ensure that independent contractors remained contractors and did not cross over into becoming employees. His answer covered the differences between employees and independent contractors. In the Globe and Mail article, Rahul Soni states the following,
Many employers incorrectly assume that having an independent contractor agreement is enough to clarify their workers’ status. If you want to hire workers as independent contractors, be sure their nature of work is that of an independent contractor and not of an employee.
The court determines whether someone is an employee or independent contractor by using a holistic approach and looking at various factors including the level of control the employer has over the worker’s activities; whether the worker provides his or her own equipment; whether the worker hires his or her own helpers; the degree of financial risk taken by the worker; the degree of responsibility for investment and management held by the worker; the worker’s opportunity for profit and loss in the performance of his or her tasks; and the worker’s agreement to provide any exclusivity.
Independent contractors are not classified as contractors just because the agreement between them and the business owner says so. The nature of the relationship goes beyond what is said on paper and includes how the contractor and employer relationship functions. If a business claims that someone is an independent contractor yet sets their hours strictly, demands they work in an office and does not allow them to work for other companies this person is being treated as an employee and would be classified as one despite what the employer says.
To help clarify the differences between employees and independent contractors consider the following characteristics of the two types of employment.
- Sets their own hours
- Invoices for their services
- Possibly works for more than one company
- Uses their own equipment and software
- Works only for one company
- Uses the company’s equipment and software
- Receives a fixed salary
- Potentially works in a supervisory role within the company
- Does not necessarily set their own hours
If you are looking to protect yourself as an employer, it may be a good idea to consult with an employment lawyer or a contract lawyer to understand your rights and responsibilities as an employer. If you are treating an employee as if they are an independent contractor, you may be denying them rights and entitlements which could cause issues for you in the long run. It may be a better choice to formally hire employees in some circumstances.
The experts at Soni Law Firm are here to answer your questions and help you understand your role as an employer. Book a free consultation today and see how we can assist you in developing employment contracts or contracts with independent contractors that ensure your responsibilities are upheld.