Calgary & Strathmore Employment Lawyers Advising Employers on Worker Classification

In Alberta’s evolving business landscape, employers are engaging the services of various workers with different employment classifications. As a result, the lines between an “employee” and an “independent contractor” can sometimes become blurred. This distinction carries significant legal implications for workers and employers alike. Correctly classifying workers protects businesses from unexpected liabilities and ensures the fair treatment of the company’s workforce.

Getz Collins and Associates guides Alberta businesses of all sizes through the complexities of worker classification and advises on the differences (and advantages/disadvantages) of engaging employees and independent contractors.

Independent Contractors vs. Employees in Alberta

Independent contractors are self-employed individuals or businesses operating independently and sometimes offering services to multiple clients. Depending on the circumstances of the particular workplace, they may not be considered part of a business’s core workforce. Independent contractors have considerable control over how they complete their work but fall outside many of the protections of the Employment Standards Code.

Employees work directly for the employer’s business and operate under its supervision and control. Often, the employer sets the employee’s working hours, provides the required tools and equipment, and directs the employer’s tasks and projects. Many employees in Alberta are covered by the various rights set out in the Employment Standards Code (note that some employees fall outside of the code, such as certain federal employees).

Determining Whether a Worker Is an Independent Contractor or Employee

No single factor determines whether a worker is legally considered an independent contractor or an employee (and thus determines what rights and protections they are entitled to). When a dispute arises, courts consider multiple elements of the working arrangement to determine the worker’s classification, including:

• Control: Employees are usually subject to a high degree of control by the employer, while independent contractors generally control how and when they do their work.
• Financial Risk: Independent contractors bear their own profits and losses, while most employees receive a set hourly wage or annual salary.
• Integration: Employees usually perform functions central to the employer’s business, while independent contractors may provide specialized services.
• Tools and Equipment: Employers usually provide employees with the tools and equipment required for the job. By contrast, independent contractors typically bring their own tools.
• Exclusivity: Employees are usually bound by the terms of their employment agreement to work only for one employer, while independent contractors may choose to have multiple clients simultaneously.

Consequences of Misclassifying a Worker

Misclassifying a worker can have serious consequences, both for the worker and the employer. There are several implications of a worker’s classification as an employee or independent contractor, including (but not limited to):

• Tax Considerations: Employers are typically required to deduct and remit income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums on behalf of their employees. Independent contractors are responsible for withholding and remitting their own taxes.
• Employment Standards: Most non-unionized employees in Alberta are covered by the Employment Standards Code, which entitles them to minimum wage, overtime pay, vacation pay, holidays, and reasonable notice of termination. These rights are not typically extended to independent contractors.
• Liability Issues: Employers may be held legally liable for damage or harm caused by their employees on the job, while independent contractors bear the liability for their own actions. If a worker’s classification is not precise, an employer could be held liable for damage caused by a worker previously thought to be an independent contractor.

Best Worker Classification Practices for Alberta Employers

There are several ways Alberta employers can minimize the risk of disputes or liability arising from misclassifying an employee as an independent contractor (or vice versa). The knowledgeable employment law lawyers at Getz Collins and Associates provide support in all aspects of these best practices, including:

• Comprehensive Assessments of Worker Classification: Our employment law team analyzes the working relationship and advises whether a worker or class of workers should be considered employees or independent contractors.
• Clearly Written Employment or Consulting Contracts: Having detailed written contracts outlining the terms of the working relationship can help avoid future disputes or liability for wrongful dismissal, employment standards violations, or other issues. The agreement should set out the nature of the relationship and address factors relevant to an employee’s rights or independent contractor’s status.
• Avoiding “Sham Contracting”: Courts have looked very unfavourably on employers who attempt to disguise an employment relationship as an independent contractor relationship to avoid providing employment standards protections or having tax responsibilities. We can provide clear contracts and take swift, proactive measures to prevent or resolve disputes quickly, should they arise.

Getz Collins and Associates: Advising Calgary & Strathmore Employers on Worker Classification Issues

Based in Calgary and Strathmore, Getz Collins and Associates has built a reputation for exceptional client service and established lasting relationships with businesses and institutions across the province. Our employment law team uses its combined decades of knowledge and experience to provide high-calibre advice and representation to non-unionized employers of all sizes. We proudly serve clients across Alberta, including Airdrie, Cochrane, Okotoks, Drumheller, Chestermere, Hussar, and all surrounding communities. To schedule a consultation, please contact us online or call 587-391-5600.