Independent Contractor or? Dependent Contractor
16Jan

Independent Contractor or Dependent Contractor in Ontario Explained

Are you hiring contractors or working as a freelancer in Ontario? Correctly classifying a worker as an independent contractor, dependent contractor, or employee is critical. Misclassification can expose employers to costly claims under the Employment Standards Act, 2000 (ESA), disputes under the Workplace Safety and Insurance Act (WSIA), and liability under health and human rights legislation.

This post explains:

  • What independent and dependent contractors are in Ontario
  • How courts and regulators determine proper classification
  • The legal rights and obligations that flow from each status
  • Practical steps employers and workers can take to reduce risk

🔎 Quick Fact

In Ontario, the wording of a contract is not decisive. Courts and adjudicators focus on how the work is actually performed when determining legal status.

What Is an Independent Contractor?

An independent contractor is genuinely self-employed and operates an independent business providing services to clients.

Common characteristics include:

  • Control over hours, methods, and location of work
  • Financial risk and opportunity for profit
  • Ownership of tools, equipment, and insurance
  • Ability to work for multiple clients
  • Invoicing for services rather than receiving wages

Legal significance
Independent contractors are generally excluded from ESA protections, including:

They are also responsible for their own tax obligations and, in most cases, their own WSIB coverage.

📌 Important Note

Calling someone an “independent contractor” does not make it so. Control, economic dependence, and integration into the business are decisive.

Christopher Achkar - Employment Lawyer

As Christopher Achkar, employment lawyer and founder of Achkar Law, explains:

“Misclassifying a worker as an independent contractor when they are legally a dependent contractor can trigger significant financial and legal consequences for both sides. Getting this distinction right is critical, before you sign a contract or restructure a working relationship, speak with an employment lawyer to understand where you truly stand.” 

What Is a Dependent Contractor?

A dependent contractor occupies a middle ground between employee and independent contractor. In Ontario, a dependent contractor is not an employee, but is economically dependent on one primary client and lacks true independence.

Dependent contractors often:

  • Work primarily or exclusively for one company
  • Operate under significant direction or control
  • Have limited ability to generate profit independently
  • Lack meaningful bargaining power

Legal significance
Under Ontario law:

  • Dependent contractors may be entitled to ESA termination pay
  • They may also be entitled to common-law reasonable notice on termination
  • They may qualify as “workers” for WSIB purposes in some circumstances

🔎 Quick Fact

If most of your income comes from one company and you cannot freely take other clients, Ontario law may treat you as a dependent contractor even if your contract says otherwise.

Dependent Contractor vs. Independent Contractor: Key Differences

Factor Independent Contractor Dependent Contractor
Control Sets own hours and methods Company exercises significant control
Financial Risk Bears profit/loss risk Limited risk; income often predictable
Integration Operates outside core business Integrated into business operations
Exclusivity Multiple clients Relies primarily on one company
ESA Coverage Generally excluded May qualify for termination pay

Practical Examples

Worker Example

  • Independent Contractor: A freelance designer works for several clients, sets her own hours, and supplies her own tools. ESA protections generally do not apply.
  • Dependent Contractor: A delivery driver works almost exclusively for one platform, follows set schedules, and relies on that company for most income. ESA termination pay may apply.

Employer Risk Example
A company classifies a full-time IT professional as an independent contractor. The worker follows company schedules, uses company systems, and works almost exclusively for that business. If challenged, the company may face:

  • ESA termination pay claims
  • WSIB coverage disputes
  • Potential penalties for misclassification

Employer Obligations and Legal Risks

1. Employment Standards Act (ESA)

  • Dependent contractors may be entitled to termination pay and, in some cases, severance pay
  • Misclassification can result in retroactive liability, interest, and penalties

2. Occupational Health and Safety Act (OHSA)

  • Employers may owe health and safety duties to dependent contractors working on their premises

3. Workplace Safety and Insurance Act (WSIA)

  • Dependent contractors may qualify as “workers” for WSIB purposes
  • Misclassification can result in premium reassessments and penalties

4. Human Rights Code

  • Dependent contractors may bring claims for discrimination or harassment

5. Labour Relations Act (LRA)

  • Dependent contractors may, in limited circumstances, have collective bargaining rights
  • True independent contractors generally do not

⚠️ Risk Alert

Misclassification can trigger multiple overlapping claims, not just ESA exposure.

Best Practices for Employers

  • Audit contracts and working arrangements regularly
  • Assess control and economic dependence, not just job titles
  • Avoid imposing employee-style rules on contractors
  • Document invoices, schedules, and communications
  • Seek legal review for roles that resemble ongoing employment

Employer Self-Check

  • Does the worker rely financially on your company?
  • Do you control hours, tools, or methods?
  • Are they integrated into your core operations?
  • Does the contract reflect reality?

Practical Guidance for Workers

  • Independent contractors should manage taxes, insurance, and WSIB coverage carefully
  • Dependent contractors may have termination rights under the ESA
  • Keep detailed records of hours, communications, and invoices
  • Seek legal advice before signing agreements or accepting termination

📌 Worker Tip

Your legal status depends on reality, not labels.

When Legal Advice Is Strongly Recommended

Legal advice should be obtained when:

  • Worker classification is unclear
  • A contractor relationship is ending
  • ESA, WSIB, OHSA, or human rights issues may apply
  • A contract may not reflect the real working relationship

Bottom Line

In Ontario, the distinction between independent and dependent contractors is fact-specific and heavily enforced. Courts and regulators focus on control, economic dependence, and integration, not contract wording.

Key Takeaway
You cannot contract out of legal reality. How the work is structured matters more than what the agreement is called.

Contact Achkar Law

Misclassifying a worker can expose employers to significant financial liability, and leave workers without the protections they are legally entitled to.

Achkar Law advises Ontario employers and contractors on:

  • Contractor and dependent contractor classification
  • ESA, WSIB, OHSA, and human rights compliance
  • Contract audits and risk assessments
  • Dispute resolution and termination planning

If you’re unsure whether a working relationship is properly classified, get legal advice before a claim arises.

Early guidance can prevent costly disputes and protect your business or livelihood.

The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Achkar Law Professional Corporation and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Achkar Law Professional Corporation. ©