Independent Contractor or Dependent Contractor – The Current State
The distinction between independent contractors and dependent contractors was further clarified in the Court of Appeal’s recent decision in Thurston v. Ontario (Children’s Lawyer). In this case, a lawyer performed services for the Defendant under a fixed term contract over a period of 13 years. Each contract that she signed required the Plaintiff to apply for reappointment upon expiration of the contract. Following the expiration of her final contact, which was not renewed, the Plaintiff brought a claim forward alleging that she was, in fact, a dependent contractor and was therefore entitled to a twenty (20) months’ pay in lieu of notice.
It is important to note that while employees and individuals deemed ‘dependent contractors’ have rights under the Ontario Employment Standards Act, 2000 – independent contractors do not. The courts have consistently affirmed that the “hallmark” of a dependent relationship is in relation to the exclusivity of the relationship between the parties. A dependent contractor is typically found to be a contractor that is economically dependent on a single client. However, in Thurston, the court held that the Plaintiff, who only received an average of 40% of her income from the Defendant was not economically dependent. In this regard, the court clarified that “‘near-exclusivity’ requires substantially more than 50%” of one’s business.
The Defendants in this case were lucky to avoid massive cost consequences relating to the ambiguous classification of the Plaintiff. However, this case illustrates that employers must exercise caution and seek professional legal advice when unsure of the true classification of an external service provider. Taking proactive steps today could save you significant cost and liability down the road.