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I was about to ask another question but think I should start at the basics. What exactly does it mean to be working as a contractor? Many jobs require you to sign some contract (e.g. non disclosure agreement, non-compete) but this isn't considered contract work. Also, is a freelancer considered a contractor?

I ask because many (labor) laws are different for regular employees vs contractors. For example in free lance contracts, what's the point of this:

(example from https://www.pandadoc.com/freelance-contract-template)

Independent Contractor. Nothing contained in this Contract shall create an employer and employee relationship, a master and servant relationship, or a principal and agent relationship between Freelancer and Customer. Customer and Freelancer agree that Freelancer is, and at all times during this Contract shall remain, an independent contractor.

What does mean independent with regards to contractor?

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This is a confusing issue in most common law jurisdictions and AFAIK, Canada and Australia still rely on common law definitions of this.

First, any arrangement where someone provides services in return for compensation is a contract. If worker is an employee then the contract is an employment contract and is subject to whatever laws apply to employees (things like, workers' compensation, withholding of tax, superannuation etc.). If the worker is instead operating their own business that is independent of the principal's business they are independent contractors and employee law doesn't apply.

In most cases it is easy to determine if someone is an employee or is a contractor. For example, if your business hires a bookkeeper to work set hours for which they are paid a salary from which you detect and remit tax, etc. then they are clearly an employee. Your external accountant who does your year end taxes, has their own premises and contracts to many other businesses is clearly an independent contractor. However, the dividing line is not clear cut in edge cases.

Using British Columbia as an example:

Calling a person an independent contractor, even if the worker agrees, does not decide the issue.

In order to determine whether a worker is an employee or an independent contractor under the Act, it is important to consider the definitions of “employee”, “employer” and “work”. The Act defines these terms very broadly.

The courts have developed some common law tests that may be useful, but they must be considered in a manner consistent with the definitions and purposes of the Act.

Some of these tests include how much direction and control the worker is subject to, whether the worker operates their own business and has their own clients, whether the worker has a chance of profit or a risk of loss, whether the work they are doing is integral to the business and whether there is an ongoing relationship.

The longer a person works for another, the more closely the worker’s duties are connected to the purpose of the business, the more the person who pays the worker controls the material and tools and directs the activities, the more likely it is that the relationship is one of employer/employee.

So, deciding if a person is an employee or contractor is not up to the worker or the principal and what they may or may not have written on a piece of paper! The entire relationship must be considered.

As an additional complication, legislation is not uniform between state/provincial and federal levels of government and even within the same jurisdiction. For example, in Australia, it is possible that a person is an independent contractor for Federal income tax law but an employee for state workers' compensation law.

  • +1 Good answer. The law in the U.S. would be the same right down to the fine details of different definitions applying for different purposes. – ohwilleke Apr 12 '17 at 1:17
  • Thanks, does the word "independent" mean anything in "independent contractor" or is it redundant? – TwoTwins Apr 13 '17 at 20:37

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