Legal Differences Between Employees and Independent Contractors

4 May 2021 Legal Services

Though employees and independent contractors can be hired to perform the same job, they are classified and treated differently under the law in British Columbia. For example, the Employment Standards Act (the “ESA”) only applies to employees, not independent contractors. Proper classification of all workers within a company is crucial for ensuring legal compliance.

To ensure proper classification of workers, it is important to know the legal differences between employees and independent contractors. As experts in employment law, the legal professionals at Linley Welwood have provided some important distinctions between employees and independent contractors.

Employees

By definition, an employee is a person that an employer allows, directly or indirectly, to perform work and receive wages. Employers have control or direction of an employee and are responsible for outlining their work responsibilities for their employment. The term “employee” refers to all full-time, part-time, temporary, and permanent workers.

Employees:

• Have rights as an employee that are protected under the ESA. This covers elements like minimum wage, holidays, overtime, termination, and notice.
• Generally have an exclusive working relationship with their employer. This means that they cannot be employed with another company during their employment.
• Will typically have income tax, Canada Pension Plan, and Employment Insurance payments deducted from their paycheque and remitted on their behalf unless otherwise requested.
• May receive employer-paid benefits such as health care, sick leave, pension plans, professional development, parking, and gym memberships.
• Typically, cannot claim tax benefits (e.g. deductions for work-related expenses). Employees that work from home may be able to claim some related expenses.

Independent Contractors

An independent contractor typically operates as an independent business and may perform work for multiple clients at the same time. Most independent contractors submit an invoice for the work they perform and provide their own tools to perform a job. Independent contractors:

• Are considered self-employed and are not covered by the ESA.
• May have to arrange and pay for their own work-related accident compensation and sick leave.
• Are free to work for other organizations. Some contractors perform work for multiple companies at the same time.
• Do not have statutory deductions applied to their pay. They must provide their own tax, Canada Pension Plan, and Employment Insurance payments to the government.
• Will likely need to pay for their own health benefits.
• Can claim most reasonable business expenses as deductions on their yearly income tax returns (tools, gas, materials, etc.).

To learn more about the legal differences between employees and independent contractors or for assistance with employment law, reach out to the professionals at Linley Welwood. Their team can be reached by phone at 604-850-6640 and will be happy to assist you.