Employment Relationship — Ontario Employment Law
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About Employment Relationship
What defines an 'employment relationship' in Ontario? The answer is more complex than simply having a job. This legal concept is the foundation upon which most workplace rights are built, and understanding it is crucial for anyone working in the province. The distinction often comes down to whether you are considered an 'employee' or an 'independent contractor.'
While a contract might label you one way, Ontario courts and the Ministry of Labour look at the actual substance of the working arrangement. They apply a multi-factor test to determine the true nature of the relationship. Key questions include: Who controls the work (when, where, and how it's done)? Who owns the tools and equipment? Does the worker have a chance of profit and a risk of loss? How integrated is the worker into the company's operations? This approach, often called the 'Sagaz test' in common law, was notably applied in cases determining the status of workers from Uber drivers to financial agents, emphasizing that the reality of the situation trumps the labels used in an agreement.
Why does this matter? Your status determines your rights. Only 'employees' are covered by most provisions of the Ontario Employment Standards Act, 2000 (ESA), which governs minimum wage, overtime pay, vacation, and termination pay. Independent contractors, on the other hand, are considered to be running their own business and are not entitled to these protections.
There is also a middle category known as a 'dependent contractor.' This is a worker who is not an employee but is economically dependent on a single client. While they are not covered by the ESA, courts have recognized that they are owed reasonable notice of termination, similar to an employee. Given the significant impact on your rights and entitlements, correctly identifying your working relationship is a critical first step in any workplace issue. The nuances are many, and an assessment often requires a careful look at the specific facts of your arrangement.
Frequently Asked Questions
My contract says I'm an independent contractor. Does that mean I am one?
Not necessarily. Ontario courts and the Ministry of Labour look past the title in your contract to the reality of your working relationship. Factors like control, tool ownership, and financial risk are more important than the label you are given.
What is the main difference between an employee and a dependent contractor?
An employee has rights under both the Employment Standards Act, 2000 and common law. A dependent contractor is not covered by the ESA but is still entitled to reasonable notice of termination under common law because of their economic dependence on one company.
Why is it so important to establish an employment relationship?
Establishing an employment relationship is the gateway to fundamental rights like minimum wage, overtime pay, vacation, public holidays, and notice of termination under the ESA. Without it, you are generally considered a self-employed business owner with far fewer protections.
How long do I have to make a claim if I think I've been misclassified as a contractor?
It depends on the claim. For unpaid wages or other entitlements under the ESA, you must file a claim with the Ministry of Labour within two years of the violation. For a wrongful dismissal claim in civil court, you generally have two years from the date of termination under the Limitations Act, 2002.
Can my employer just decide to change my status from employee to contractor?
No, an employer cannot unilaterally change your status without your genuine, informed consent and a corresponding real change in the nature of the work. Forcing such a change could be considered constructive dismissal.
When should I get legal advice about my employment relationship?
You should consider seeking legal advice if you've been terminated and believe you were misclassified as a contractor, or if your employer is pressuring you to sign a contractor agreement for work you are already doing as an employee. An expert can help assess the true nature of your relationship and explain your rights.
Common Scenarios
- A gig-economy driver is classified as an independent contractor but must follow the company's app-based rules on pricing, routes, and customer interaction.
- A long-term IT consultant works 40 hours a week for one company, has a company email address, and is supervised by a manager, but invoices for their services and receives no benefits.
- A construction worker provides his own basic tools but works exclusively for one builder who sets his schedule and directs all his tasks on the job site.
- After being laid off, a marketing manager is offered a contract to do the same work for her former employer, but this time as a 'consultant' with no vacation pay or termination rights.
What You Should Know
- Keep records that show the level of control your employer has over your work, such as emails with specific instructions, mandatory meeting schedules, and performance reviews.
- Review any agreement you are asked to sign, but remember that the label 'independent contractor' is not definitive. The law focuses on the substance of the relationship.
- If you believe you have been misclassified and your employment ends, be mindful of the strict deadlines for filing claims, which differ for Ministry of Labour complaints and civil lawsuits.
- Before agreeing to switch from an employee to a contractor, consult with an employment law expert to understand the significant rights and protections you would be giving up.
Featured Cases
Heller v. Uber Technologies Inc.
2023 ONSC 1942 (CanLII) · 2023-03-27Uber Class Action: Employment Relationship and Arbitration Clause
A class action case where plaintiffs alleged they were employees of Uber and sought to challenge the enforceability of the Class Action Waiver and Arbitration Clause in Uber’s Service Agreements. The court determined whether the relationship between the parties is governed by employment law and whether the claims were statute-barred under the two-year limitation period.
Goberdhan v. Knights of Columbus
2022 ONSC 3788 (CanLII) · 2022-06-27Employee vs Independent Contractor: Arbitration Agreement Validity
A court case determining whether a field agent working for the Knights of Columbus was an employee or an independent contractor. The court applied the Sagaz test and found the plaintiff to be an employee. The case also addressed the validity of arbitration agreements in employment contracts, finding them invalid due to lack of consideration.
Currie v. Nylene Canada Inc.
2021 ONSC 1922 (CanLII) · 2021-03-1639-Year Employee Awarded 26 Months Notice After Termination
A 39-year employee was terminated without cause and awarded 26 months' notice due to exceptional circumstances. The court also dismissed a discrimination claim based on sex, finding no prima facie case.
Heller v. Uber Technologies Inc.
2018 ONSC 718 (CanLII) · 2018-01-30Uber Class Action: Arbitration Clauses and Employment Standards
A class action case where Uber drivers alleged they were employees entitled to Employment Standards Act protections. The court ruled that arbitration clauses did not violate public policy and that the International Commercial Arbitration Act applied. The court also upheld the arbitrator's jurisdiction to determine their own competence.
Gholami v The Hospital for Sick Children
2017 ONSC 1200 (CanLII) · 2017-05-02Wrongful Dismissal: Physician's Employment Status and Duty of Good Faith
A wrongful dismissal case involving a physician employed by the Hospital for Sick Children. The court found that the termination of the plaintiff's employment was in accordance with the contractual terms and did not constitute a wrongful dismissal. The case also addressed the employment status of the plaintiff and the alleged breach of the duty of good faith and fair dealing.
Benson v. Bird Mechanical Ltd.
2013 ONSC 5375 (CanLII) · 2013-08-20Employment Contract Dispute: Bonus Determination and Summary Judgment
A case involving the interpretation of bonus provisions in an employment contract, the application of the Limitations Act, 2002, and the test for fraudulent concealment. The court is also considering a motion for partial summary judgment on the issues.
Patterson v. Lee Munro Chevrolet Ltd.
2009 CanLII 23113 (ON SC) · 2009-05-08Constructive Dismissal: Employee Awarded $67,697.68 in Damages
A wrongful dismissal case where the plaintiff alleged constructive dismissal after his employer advertised his position while he was on medical leave. The court found that the employer's conduct rendered continued employment untenable, entitling the plaintiff to damages for wrongful termination. The employer also claimed cause for dismissal based on performance and insubordination, but the court found these insufficient. The plaintiff was awarded $67,697.68 in damages for salary, commissions, and benefits.
McIntyre v. Connolly
2008 CanLII 12496 (ON SC) · 2008-03-12Employment Claims Dismissed: Vexatious Litigant Deemed for Abuse of Process
A merits decision involving a plaintiff's claims against School Board defendants, which were dismissed for lack of jurisdiction due to a collective agreement governing the employment relationship. The court struck the statement of claim for disclosing no reasonable cause of action, and the claims were deemed frivolous, vexatious, and an abuse of process. The plaintiff was declared a vexatious litigant under section 140 of the Courts of Justice Act.
Kent v. Stop 'N' Cash 1000 Inc.
2006 CanLII 22660 (ON SC) · 2006-06-27Wrongful Dismissal: Employee Aged 59 Awarded 6 Months Notice After 6 Years of Employment
A wrongful dismissal case where the plaintiff, aged 59, was dismissed without cause after six years of employment. The court applied the Bardal factors to determine a reasonable notice period, which was reduced to six months due to the plaintiff's failure to mitigate damages. The case also addressed whether the plaintiff was an employee of multiple related corporations under the common employer doctrine.
Davidson v. Walden
2005 CanLII 47725 (ON SC) · 2005-12-20Wrongful Dismissal: Golf Course Superintendent Dismissed for Insubordination
A wrongful dismissal case involving a golf course superintendent who was dismissed following disputes with a manager. The court examined whether the plaintiff's insubordination and conduct justified summary dismissal, ultimately finding that the plaintiff's persistent defiance and deliberate collision with the manager's golf cart constituted irreconcilable behavior, thereby justifying the dismissal.
McCulloch v. Iplatform Inc.
2004 CanLII 48175 (ON SC) · 2004-12-16Wrongful Dismissal: 105-Day Employee Awarded 3 Months Notice and Wallace Damages
A wrongful dismissal case where the plaintiff was employed for 105 days and dismissed without just cause. The court found that all named defendants were jointly and severally liable as the plaintiff’s employer under the common employer doctrine. The plaintiff was awarded three months’ reasonable notice and three months’ Wallace damages for employer misconduct during the dismissal process.
Linklater v. Fort Albany First Nation
2004 CanLII 10975 (ON SC) · 2004-05-20Wrongful Dismissal: Deputy Chief of First Nation Seeks Employer-Employee Status
A wrongful dismissal case involving a deputy chief of a First Nation who was terminated by the council under a custom governance code. The court considered whether the relationship between the deputy chief and the First Nation constitutes an employer/employee relationship, applying the test for employment relationships and evaluating factors such as control, remuneration, and tools of employment. The motion for summary judgment was dismissed with costs awarded to the plaintiff.
Stoody v. Kennedy
2003 CanLII 18765 (ON SC) · 2003-11-05Employment Relationship and Commission Entitlement Case
A case involving the employment relationship between a plaintiff and a subsidiary, where the parent company was found to be a common employer. The plaintiff also disputed commission entitlement and sought unpaid wages, with directors held liable under the Manitoba Corporations Act. The court ruled on issues of common control, commission interpretation, and liability for unpaid wages.
Alleyne v. Gateway Co-operative Homes Inc.
2001 CanLII 28308 (ON SC) · 2001-10-29Wrongful Dismissal: Sexual Harassment Allegations and Just Cause Determination
A wrongful dismissal case involving allegations of sexual harassment by a subordinate against a supervisor. The court examined whether the employer met the burden of proving just cause for dismissal and whether the plaintiff's conduct constituted sexual harassment under workplace standards. The case also addressed whether the plaintiff was entitled to progressive discipline before dismissal and whether the conduct violated the obligations inherent in the employment relationship.
Gilbert v. TS Realty Inc.
1996 CanLII 8160 (ON SC) · 1996-09-10Wrongful Dismissal: Employee Awarded Six Months Notice and Damages
A wrongful dismissal case where the plaintiff was terminated without warning or pay in lieu of notice. The court found six months’ notice to be reasonable and awarded damages for general, aggravated, and punitive damages. The case also involved a contract renewal and breach of warranty claims.
Cloutier v. Science Council of Canada
1995 CanLII 10661 (ON SC) · 1995-01-24Wrongful Dismissal: 23-Year Employee of Crown Corporation Terminated Without Notice
A wrongful dismissal case involving a plaintiff employed by the Science Council of Canada for 23 years, who was terminated without notice following the withdrawal of government funding. The court examined whether the plaintiff was an employee of the Crown or a Crown agency and whether the Science Council was required to provide reasonable notice or pay in lieu of notice under common law and statutory obligations.
Jaremko v. A.E. LePage Real Estate Services Ltd.
1987 CanLII 4428 (ON SC) · 1987-05-28Wrongful Dismissal: Real Estate Agent Awarded 7 Months Notice
A wrongful dismissal case involving a real estate agent who was dismissed for failing to disclose a personal interest in a property transaction to their employer. The court found that the employer failed to establish cause for dismissal and awarded the plaintiff damages for seven months’ notice. The case also determined that the plaintiff was an employee despite commission-based remuneration and tax filings as an independent business, due to the employer's substantial control over operations.
Re Canadian Corps of Commissionaires (Toronto & Region) and Barnard et al.
1986 CanLII 2475 (ON SC) · 1986-07-03Human Rights Employment: Citizenship Requirement Found Discriminatory
A human rights case involving the Canadian Corps of Commissionaires, which required members to be Canadian citizens or British subjects. The case examined whether this requirement constituted discrimination on the basis of nationality under the Ontario Human Rights Code, particularly in light of the Corps' role as an employer and its primary objective being employment rather than fraternal or social purposes.
Re Kaszuba and Salvation Army Sheltered Workshop et al.
1983 CanLII 1795 (ON SC) · 1983-02-24Sheltered Workshop Employment: Determining Employment Relationship Under ESA
A merits decision addressing whether individuals working in a sheltered workshop are considered to be in an employment relationship under the Employment Standards Act. The court determined that if the relationship is primarily rehabilitative, the Act does not apply.
Travel Machine Ltd. v. Madore
1983 CanLII 3058 (ON SC) · 1983-02-03Employment Contract: Oral Guarantees and Statute of Frauds
A case involving an employment relationship where a travel consultant issued oral guarantees for ticket payments contrary to employer policy. The court examined whether such guarantees are excluded from the Statute of Frauds and whether they are enforceable under the broader commercial or employment relationship.