Why independent contractors likely deserve severance pay
Glynis Ratcliffe, Special to CP24.com
Published Wednesday, May 3, 2023 6:00AM EDT
Last Updated Tuesday, September 5, 2023 5:22PM EDT
When is an independent contractor not an independent contractor? When they’ve been misclassified and are actually an employee. And it happens far more frequently than you might expect.
“Misclassification is so common. I see this every day, without exception,” notes Lior Samfiru, Toronto employment lawyer and co-founding partner of Samfiru Tumarkin LLP. Common jobs that tend to misclassify people as contractors include roles like real estate agents, sales representatives and truck drivers.
There’s a lot of confusion and misinformation surrounding this issue, particularly when an employer decides to terminate the working relationship. Knowing which category you fall into could be the difference between receiving tens of thousands of dollars in severance pay and receiving nothing at all.
The law dictates whether you are an employee or a contractor
You may have been hired by your employer as an independent contractor, and it may even be stated in your contract, but in the end, none of that really matters. An employment contract can’t bypass your rights if the law considers you to be an employee.
“Remember, it doesn’t matter what you believe you are, it doesn’t matter what the company that you work for says that you are, it doesn’t matter what piece of paper you’ve signed,” Samfiru, who heads the firm’s Labour & Employment Law Group, explains.
How to determine which category you fall into
It’s not always easy to make the distinction between the two categories of contractor and employee, but there are guidelines that can clarify.
Independent contractors own their own tools and equipment necessary to do their work, set their own hours and pay, generally have more than one client, and take on the financial risks of completing a job. If something goes wrong, they bear the costs.
“The plumber who goes from house to house, client to client, is a contractor,” notes Samfiru, who discusses the topic often on Ask a Lawyer on CP24. “If you have several clients, you’re probably a contractor.”
In contrast, employers decide how much to pay their employees, when they work, and the company owns any equipment its employees use.
“I like to look at the ‘looks like a duck, quacks like a duck’ example,” he adds. “If you look like an employee and act like an employee, you are an employee.”
However, if you’re still unsure, Pocket Employment Lawyer is a virtual tool that’s free and anonymous and can give anyone a better idea of which category they’re in.
When you might be owed a severance package
During rocky financial times, when no one is sure whether or not the country will go into a recession, an unexpected contract termination by your employer can be a huge source of anxiety. As an independent contractor, there’s not much you can do when it happens, but anyone whom the law has deemed to be an employee is entitled to severance pay.
“It can literally be the difference between two years’ severance pay and nothing,” Samfiru notes. “I’ve had people contact me after working for many years as an independent contractor where they were let go and it turned out they were owed many months of pay, but the company thought they didn’t owe them anything.”
Employers can’t refuse to pay severance if you’ve been misclassified, and they also can’t set deadlines on severance offers. Independent contractors may be owed as much as 24 months’ pay, and you have two years from the moment you lose your job to pursue a claim for full severance pay in Ontario and other provinces. That’s why it’s best to speak with an employment lawyer if your employer has ended your contract.
You also have rights if your employer makes significant changes to your job, such as cutting your pay or changing your work location, hours, or duties. You can file a claim for constructive dismissal and receive proper compensation.
“If they change your job, your compensation – the company may think they can do that because you’re not an employee,” notes Samfiru. “But if you’ve been misclassified, then no, they can’t do that.”
You may be missing out on rights and benefits
There’s a certain freedom that many people believe comes with being an independent contractor. Still, if you’ve been misclassified, you’re missing out on a number of important legal rights as an employee. For instance, contractors do not have to be paid minimum wage or overtime.
“An employee has certain rights, over time,” explains Samfiru. “Vacation pay, holiday pay, not to mention severance. A contractor doesn’t have those rights, so if you’ve been misclassified, you’re giving up those rights.”
When to speak to an employment lawyer
Do you think you have been misclassified as an independent contractor? It’s important that you know which category you fall into when you face unexpected developments with your job. Seeking the advice of an experienced employment lawyer can provide essential clarity on your employment status and whether you are rightfully identified as an employee.
That’s exactly what Samfiru’s recent client did when his employer of over five years, a tow truck company operating in Ontario, fired him over the phone without explanation. His former employer argued that he was an independent contractor because they paid him through his company and he required minimal supervision. Ontario Superior Court ultimately sided with the 44-year-old tow truck driver because he drove the company’s truck, used their tools, wore their uniform, was monitored through their GPS tracker, and was paid an hourly wage set by the employer. Samfiru Tumarkin LLP secured six months’ pay for their client, resulting in tens of thousands of dollars in compensation. The company was also required to cover the driver’s legal fees.
This case was a clear example of how the misidentification of your employment can have serious financial consequences, and how important it is to fight for your rights if you believe you have been misclassified.
“Our team was proud to have helped our client get the compensation he was owed, and we continue to help others in similar situations fight for their rights and get the justice they deserve,” Samfiru says. “It is extremely rare for these matters to end up in a courtroom, and they are often resolved quickly with maximum results.”
Contact employment lawyer Lior Samfiru, co-founding partner at Samfiru Tumarkin LLP, to get the advice and compensation you need by calling 1-888-861-4555, emailing Ask@EmploymentLawyer.ca or filling out an online contact form.
His law firm specializes in employment law in Ontario, Alberta and B.C., and long-term disability claims across Canada (except Quebec).