Casual Legal: What is an Independent Contractor?

DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated. 

By Maddison Croden 

Reynolds Mirth Richards Farmer LLP 

Alberta Municipalities Casual Legal Service Provider  

Many municipalities may use the support of both employees and independent contractors.  

The distinction between employees and independent contractors is important. An independent contractor is a self-employed person or entity who provides services to a client on their own account. They are not an employee. 

As a result, whether a worker is providing services as an employee or an independent contractor affects an employer’s vicarious liability for the actions of the worker, applicability of employment legislation, availability of an action for wrongful dismissal, and the assessment of business and income taxes.  

There is no universal test to determine whether a person is an employee or an independent contractor. The central question is whether the person who has been engaged to perform the services is performing them as a person in business on their own account. In making this determination, the following factors will be relevant: 

• The level of control the employer has over the worker’s activities: Who decides where, when, and how the worker completes their tasks?
• Ownership of equipment: Does the worker provide their own tools, equipment and resources? Or are those provided for the worker?
• Hiring of additional workers: Can the worker hire their own helpers?
• The degree of financial risk taken by the worker: Is the worker responsible for their own business expenses and profits?
• The degree of responsibility for investment and management held by the worker: Is the worker required to make any investment to provide the services?
• The worker’s opportunity for profit in the performance of his or her tasks: For example, if the worker performs their task more efficiently, will this increase the opportunity for profit?  

The parties’ understanding of their legal relationship will also be relevant and may be afforded significant weight where it is clear from the agreement that the parties intended to form an independent contractor relationship, the agreement was entered into with equal bargaining power, and the dispute is between the parties to the agreement with no third-party involved, such as the Canada Revenue Agency.  

Before engaging a party as an independent contractor, it is important to seek legal advice to ensure that the relationship truly resembles an independent contractor relationship as opposed to an employment relationship. A clearly drafted independent contractor agreement can further assist in ensuring the terms of the relationship are clear and weigh in favour of establishing that the worker is an independent contractor. 

To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1.800.661.7673 or email casuallegal [at] abmunis.ca (casuallegal[at]abmunis[dot]ca) and reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please contact riskcontrol [at] abmunis.ca (riskcontrol[at]abmunis[dot]ca), or call 310.MUNI (6864) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.