11 Independent Contractor or Employee

It is common for workers in the trades industry to be either a self-employed independent contractor or an employee of an organization.  It is not always clear of whether a person is in a business relationship (self-employed independent contractor) or in an employee-employer relationship.  It is important to establish and understand what type of contractual relationship a trades worker has with the paying agency to ensure the duties that one is contractually obligated to perform and is being paid correctly.

Generally, there are four primary criteria that are looked upon in establishing the type of employer or business relationship:

• Control – more control is generally exercised by an employer over an employee concerning the manner in which the work is done and what work will be done. The self-employed worker may be given blueprints or other specifications to complete a specific contract; however, this does not indicate control over the way the work is to be done.
• Financial Risk – self-employed individuals usually have a chance of profit or risk of loss. Employees usually will not have any financial risk as any expenses are reimbursed, and they will not incur fixed ongoing costs.
• Integration – An employee does not normally have the ability to hire and send their own replacement. Employees must normally render the work services personally.  An employee is not perceived as operating their own business, but rather as an integral part of the payer’s business.
• Tools and equipment – self-employed individuals usually provide their own tools and equipment and are responsible for its cost of replacement, repair, and insurance.  The fact that a worker is required to supply their own hand tools does not indicate the worker is self-employed.

Workers in the Construction Industry

For workers in the construction industry, the continuum of being an employee vs. independent contractor is not always easy to decipher.  Canada Revenue Agency has established increased guidance for this industry.

Almost all trade apprentices are considered to be employees.  This is due to the fact that apprentices need to be supervised under a certified journeyperson (or equivalent) so they do not have much control how or when the work is to be performed.  Trade apprentices usually also do not take on any financial risk.  Therefore, the scope of this resource handbook will focus on ‘Understanding Your Pay’ as an employee.