Who is an Employee and Why Does it Matter?

Large Group of Employees and Contractors

The question of whether a worker is considered to be an employee has significant implications on the rights and obligations of both employers and employees. The Courts acknowledge the imbalance of power that exists in employer-employee relationships. As the vulnerable party in such employment relationships, employees are provided a measure of protection through employment law legislation.

What Determines an “Employee”?

At its most basic level, an employer-employee relationship exists where there is a contract of service between the parties. However, a number of other particular and contextual factors are considered when determining whether an individual is an employee. Such factors typically include:

  • the level of control that the employer has over the operations of the employee;
  • the ability of the worker to select and dismiss workers;
  • who pays whom and by what method;
  • who provides the tools and resources to perform the work;
  • what chance for profit the worker has in performing the work;
  • who bears the risk of loss;
  • where and how a person fits into the organization of the company.

The leading case in this area is 671122 Ontario Ltd. v. Sagaz Industries Canada Inc. [2001] 2 S.C.R. 983 in which the Court’s judgment commented:

“The central question is whether the person who has been engaged to perform the services is performing them as a person in business on his own account.”

Relevant Legislation

The employer-employee relationship is characterized by certain rights and obligations. Many pieces of legislation govern these areas, including but not limited to:

  • Employment Standards Act, 2000 (“ESA, 2000“);
  • Canadian Labour Code (CLC);
  • Occupational Health & Safety Act;
  • Retail Sales Act;
  • Labour Relations Act, 1995;
  • Regulations under the Labour Relations Act, 1995;
  • Pay Equity Act;
  • Human Rights Codes (both provincially and federally);
  • Workplace Safety and Insurance Act, 1997;
  • Crown Employees Collective Bargaining Act, 1993;
  • Public Sector Dispute Resolution Act, 1997;
  • Public Sector Labour Relations Transition Act, 1997;

The status of “employee”, however, is not a static determination. A person may be considered an employee for the purpose of the Employment Standards Act, 2000, and yet not be considered an employee under the Ontario Labour Relations Act.

How are “Independent Contractors” Treated?

Although similar in wording to the “contract of service” that characterizes an employer-employee relationship, a “contract for services” does not involve an employment relationship. Rather, the term corresponds to what are commonly referred to as “contract” positions.

One of the prime entitlements owed to employees is the right to reasonable notice in the event of termination of the employment contract. Workers who are considered to be “contractors” rather than “employees” are not statutorily entitled to such provisions

For such contractors, the laws governing the relationship consist of the law of contract rather than employment law. Statutory legislation, such as the ESA, 2000 and the CLC, and the common law relating to employment relationships likely do not apply.

Dependent Contractor Relationships—A New Intermediate Concept

Due to the complex nature of contemporary employment, a new intermediate concept has developed, being that of a dependent contractor relationship. In such cases, a traditional employment relationship does not exist, but the relationship may still include certain implied terms of employment relationships such as the right to reasonable notice.

The laws governing such dependant contractual relationships are the same laws that govern employees.

For related case studies and more information on Employees, search our blog.

More Concepts on Employment Contracts

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