Are You Legally an Employee or Contractor? Why It Matters in Employment Disputes

One of the most common issues in employment law is whether a worker is legally an employee or contractor. The difference is not just about job titles or contracts, it can determine rights, protections, and what happens if the relationship ends. Misunderstandings or misclassifications in this area often lead to serious disputes between workers and employers.

Employees and Their Rights

Employees are protected by laws such as the Employment Standards Act, the Canada Labour Code, and the common law. These laws provide employees with important rights, including vacation pay, overtime pay, sick leave, and maternity or parental leave. Employees are also entitled to termination pay or severance when their employment ends, and they can access employment insurance more easily than contractors.

Most importantly, employees have legal avenues to enforce their rights, such as filing claims with the Ministry of Labour or bringing disputes before the courts. This protection is a major advantage that employees hold over contractors.

Independent Contractors and Flexibility

Contractors are considered independent. They run their own business, set their own schedules, and can often work for multiple companies. Contractors are not entitled to vacation pay, overtime, or severance, but they may have greater control over their work and the potential to earn more.

However, many disputes arise because companies misclassify workers as contractors when, in reality, they meet the legal definition of employees. In these situations, workers often lose out on benefits and protections they were entitled to all along.

The Grey Area Between Employee or Contractor

Not all contractors are truly independent. Some fall into a category known as “dependent contractors.” These workers rely heavily, or even exclusively, on one company for their income. Even though they are not considered full employees, the law recognizes that they are in a vulnerable position. Because of this reliance, dependent contractors may be entitled to notice, termination pay or severance if the company ends the relationship.

It is also important to understand the difference between fixed-term contracts and open-ended contracts in Ontario. Working under an open-ended or “indefinite” employment contract means the job has no set end date and continues until either the employer or employee ends it. This type of contract is the most common form of employment and comes with rights and protections under provincial employment laws, such as vacation pay and statutory holidays. If a worker in this situation is not an independent contractor, they are legally entitled to the same protections as other employees.

When Misclassification Between Employee or Contractor Leads to Disputes

Misclassification is at the heart of many employment disputes. A worker may be treated as a contractor for years, only to discover they were legally an employee the entire time. This can create major financial consequences for both sides.

For workers, it often means they are owed unpaid vacation, overtime, or even years of severance. For employers, it can mean owing back payments for EI and CPP, as well as significant liability if contracts are unenforceable. Fixed-term contracts in particular can create substantial severance obligations when termination clauses do not hold up in court.

These disputes often end up before the Ministry of Labour, the Labour Board, or the courts, where a judge or adjudicator will look at the reality of the relationship, not just what the contract says.

Why You Need Legal Support in an Employment Dispute

Employment disputes involving employee versus contractor status can be complicated. The law looks at many factors, such as who controls the work, who provides the tools, and whether the worker can hire others or take financial risks. It is rarely as simple as what the contract says.

For employers, misclassification can lead to serious liability that grows the longer the relationship lasts. For workers, being wrongly classified as a contractor can mean losing out on thousands of dollars in benefits and severance.

Speaking with an experienced employment lawyer can help resolve these disputes and ensure rights are protected. A lawyer can review contracts, assess the true nature of the working relationship, and fight for fair compensation when misclassification occurs.

The Experienced Employment Lawyers at Gionet Fairley Wood LLP Can Determine Your Rights Whether You Are an Employee or Contractor

At Gionet Fairley Wood LLP, we understand the challenges that come with employment disputes. Whether you are an employer facing a potential claim or a worker who has been misclassified, we can help you understand your options. Our team focuses on litigation, mediation, arbitration, and negotiation to achieve fair outcomes.

If you are involved in an employment dispute about your rights as an employee or a contractor, legal advice can make all the difference. Contact us to discuss your situation at (705) 468-1088 or visit our website to schedule a consultation.

***The information provided in this blog is for general informational purposes only and should not be construed as legal advice. If you have legal questions, we strongly advise you to contact us.