(a) No (except for where special rules for certain types of contingent workers (i.e. “gig workers”) apply — see subheading below). However, it is possible for a contingent worker (referred to as an "independent contractor" in Canada) to be found to be an "employee" for the purposes of employment standards legislation (if they file a complaint).

When determining if a contingent worker is an employee, the adjudicator hearing the matter will examine the substance of the worker's relationship with the employer and consider various factors, including the following:

• Control: The degree of control the employer has over the worker's activities
• Ownership of tools: Typically, a contractor provides their own tools, though this can vary by industry norms
• Chance of profit/risk of loss: The financial risk taken by the worker, such as investments in equipment and materials, and the potential for profit
• Integration into the employer's business: How integrated the worker is into the employer's business operations

If the adjudicator finds the worker to indeed be an employee, the worker would be entitled to the same rights and remedies under employment standards legislation as an employee (e.g., termination pay, lost wages, vacation pay, overtime pay, etc.)

It is important to note that such a finding by an adjudicator is distinct from a court's determination in a wrongful dismissal case. However, courts will apply the same test to make their determination.

Gig worker exceptions or special rules

In Ontario and British Columbia, certain laws have been enacted to give rights to 'gig workers,' who would otherwise be treated as contingent workers/independent contractors, such as the following:

1. In British Columbia, effective 3 September 2024, the provincial Employment Standards Act and Workers' Compensation Act were amended to treat gig workers (defined as "Online Platform Workers"), such as app-based ride-hail and delivery services workers, as "employees" for certain limited purposes. This includes entitlements to specified minimum wages, certain termination entitlements, and eligibility for workers' compensation coverage.
2. In Ontario, separate legislation has been introduced for gig workers that gives them certain minimum rights (but does not treat them as "employees") — the Digital Platform Workers' Rights Act 2022. This legislation comes into force on 1 July 2025, the day named by proclamation of the lieutenant governor.

(b) No. However, governmental authorities (i.e., the Canada Revenue Agency) do have the power to find that contingent workers/independent contractors are indeed employees for tax purposes (under the Income Tax Act). If such a decision is made (as described in detail in the sections below), this can make the employer liable for income tax, employment insurance (i.e., social security), and Canada Pension Plan (i.e., CPP) remittances for that worker.

These decisions are appealable to the Tax Court of Canada, which uses the same test that would be used by employment standards adjudicators or other courts in wrongful dismissal cases.

(c) No. See comment in (b) above for Tax.

(a) No.
(b) No.
(c) No. 

The following key developments are coming up:

Ontario: The Digital Platform Workers' Rights Act 2022, which is a new law giving certain rights to digital platform workers/gig workers (e.g., Uber, Lyft etc. drivers, or app-based food delivery workers) comes into force on 1 July 2025, the day named by proclamation of the Lieutenant Governor. Note that this legislation will not deem these workers as employees, but it will give them certain minimum rights, such as rights to a minimum wage, rights to tips and gratuities, etc.

The following key developments have recently been instituted in two major Canadian jurisdictions:

1. Ontario
   1. Effective 1 January 2023, an individual who meets the definition of "business consultant" or "information technology consultant" (IT consultant) does not have rights under the Ontario Employment Standards Act 2000 if certain conditions are met. These conditions do not consider the normal indicia to determine whether or not these "consultants" are independent contractors (i.e., control, ownership of tools, etc.).
2. Federal
   1. Per legislation passed on 20 June 2024, a worker (defined as "a person who is paid remuneration by an employer"), including a gig worker, will now be considered an employee under the Canada Labour Code unless proven otherwise when their classification is contested.
   2. This will not impact the legal framework for determining whether or not a worker is an independent contractor or employee, but creates an onus on the employer to disprove the presumption of employee status if a contractor's status is challenged.

The primary risk of hiring contingent workers is that an adjudicator or court may determine they are actually "employees" in substance. As mentioned earlier, Canadian adjudicators and courts consider various factors in making this determination, with a particular focus on the degree of control the employer has over the worker.

Wrongful Dismissal

Employees in Canada are entitled to reasonable notice of termination. Courts determine the entitlement to reasonable notice based on various factors, including the employee's age, length of service, character of employment, and availability of similar employment. Depending on these factors, reasonable notice entitlements can be as high as 28 months, subject to the employee's duty to mitigate by searching for comparable employment.

If a contingent worker or independent contractor sues the employer for wrongful dismissal and successfully claims that their role was actually that of an "employee" or a "dependent contractor" (a third, middle category recognized by courts), they will be entitled to reasonable notice of termination as if they were an employee. The success of such a claim will depend on the facts of the case, including the language in the contingent worker's contract with the employer.

Additionally, if an employer is found to have misclassified someone who should have been an employee as a "contingent worker" in bad faith, a court could award additional damages against the employer for that misconduct.

Statutory claims

The contingent worker could also file statutory claims under employment standards legislation, alleging that they are indeed an "employee" under those statutes. If the adjudicator hearing the claim determines this to be true, the worker could be entitled to certain statutory rights and payments, including but not limited to minimum wage, overtime pay, vacation pay and statutory termination pay.

A contingent worker/independent contractor could be found an "employee" pursuant to applicable tax laws.

Canada's main tax legislation, the Income Tax Act, requires employers to deduct and remit income tax, employment insurance (social security) premiums, and Canada Pension Plan (similar to a 401K in the US) payments from employees' wages.

If a government body, i.e., the Canada Revenue Agency, determines that a contingent worker or independent contractor should have been classified as an employee, the employer could be liable for failing to make the required remittances during that individual's engagement with the employer, in addition to any applicable fines.

Note that the risks associated with not withholding statutory deductions can be mitigated by requiring the individual to incorporate and pay the corporation instead.

Note on risk rating

Tax fraud is a crime under Section 380 of Canada's Criminal Code, whereas tax evasion is a regulatory offense under Section 239 of Canada's Income Tax Act and Section 327 of its Excise Tax Act.

Typically, an employer's misclassification of a contingent worker or independent contractor (which means the employer failed to make the required tax remittances for that would-be employee) will not result in criminal tax fraud or regulatory tax evasion convictions unless there are underlying facts suggesting that the misclassification was intentional. However, this is a fact-specific analysis that depends on the merits of each individual case.

See comments on tax perspective.

See comments on tax perspective.

See comments on tax perspective as it references payments towards the Canada Pension Plan.

See comments on tax perspective.

A corporation can be charged under the provisions of Canada's Income Tax Act if its misclassification of employees as contingent workers/independent contractors is viewed as an intentional attempt to evade compliance with tax laws. However, if the misclassification was indeed a mistake, such prosecution is less likely.

Note that under the Income Tax Act, corporate directors can be held personally liable if the corporation fails to properly deduct and pay employment insurance, income tax, or Canada Pension Plan (CPP) contributions for employees.

See the section below on criminal sanction risks.

There are no provisions in Canada's criminal law, the Criminal Code, for punishing violations of employment standards laws.

However, while misclassifying an "employee" as a contingent worker or independent contractor typically does not warrant such punishment, an employer can be liable for regulatory punishments under employment standards legislation. At maximum, this could include jail time and/or significant fines (e.g., up to CAD 50,000 in Ontario). That said, such prosecutions are very rare and reserved for extreme cases, and it is unlikely that such quasi-criminal penalties will be pursued in such a worker misclassification matter.

This is a combined risk rating across all areas, including likelihood of challenge, impact of challenge and uncertainty of law.