Many employers and workers in British Columbia are familiar with the distinction between employees and contractors. But under B.C. employment law, there are actually two categories of contractors: independent contractors and dependent contractors.
Independent and dependent contractors are similar but exist on a spectrum between true independent contractors and employees. Some may fall into a middle ground and have entitlements that independent contractors do not necessarily receive. It’s important to understand the difference before hiring contractors to ensure that your workers are being treated lawfully.
This guide breaks down what each category means, how to tell them apart, and why getting it right matters.
What is a dependent contractor?
A dependent contractor is a contractor who relies primarily (or even entirely) on a single employer for their income. As the name would suggest, they are usually more “dependent” on an employer (or client) than independent contractors, who are expected to have more control over their hours, equipment, and place of work, and may engage multiple clients at one time.
Dependent contractors often:
- Work exclusively (or almost exclusively) for one organization
- Follow direction or guidelines similar to employees
- Perform work that is integrated into the business
- Lack the autonomy normally expected of a self-employed individual
They occupy a grey area between an employee and an independent contractor, and the distinction can be nuanced. Even if a worker signs an “independent contractor agreement,” their day-to-day reality may place them in the dependent category.
Understanding the differences between dependent contractors, independent contractors, and employees
Most employers are familiar with the differences between independent contractors and employees. If you’re not quite sure, we encourage you to check out some of our previous content on the difference between employees and independent contractors.
As the B.C. Government website succinctly puts it, “[w]hen deciding if a worker is an employee or an independent contractor, one of the main questions to ask is “whose business is it?” Independent contractors are usually sole proprietors who perform work for clients as their business. Independent contractors are usually expected to use their own equipment and invoice their clients for the work performed.
An employee, on the other hand, is a worker hired to perform work for an existing business. They may be paid an hourly wage or annual salary, and they are entitled to additional benefits such as paid vacation and sick leave, overtime, healthcare benefits, and protections from wrongful termination.
Independent contractors, since they are running a business, are normally expected to account for their own healthcare and vacation expenses. A business relationship with a client may be terminated at any point because the assumption is that the contractor is not dependent on that client for their livelihood.
A dependent contractor, then, lies somewhere in between an employee and an independent contractor.
Determining whether a contractor is dependent or independent
While there are a few “tests” that employers can consider in determining whether a worker is an employee or a contractor, these are not exhaustive, and contractor status needs to be determined on a case-by-case basis.
Questions to ask include:
- How exclusive is the relationship?
Does the contractor work for one client or several?
- Who provides the tools and equipment?
This includes computers, software, office space, or vehicles.
- How integrated is the contractor into the business?
Do they attend staff meetings, appear on directories, or perform core business functions?
Dependent contractors are not salaried, permanent employees, but they are more beholden to their employer’s guidance than an independent contractor. Dependent contractors are also likely to be dependent on a single employer for most or all of their income.
What rights are dependent contractors entitled to?
Dependent contractors have more protections than independent contractors, especially when it comes to termination.
A dependent contractor may be entitled to:
- Reasonable notice of termination or pay in lieu
- Protection from wrongful dismissal
- Workers’ compensation coverage through WorkSafeBC
- ESA protections if the worker is determined to be an employee under the Act
Failing to correctly identify a dependent contractor can result in significant liability for employers.
Why proper classification matters
Correctly classifying workers is essential for employers to meet their legal obligations under the Employment Standards Act, avoid wrongful dismissal claims, and reduce the risk of contractor misclassification. Clear and accurate classification also helps ensure that contracts are enforceable and that working relationships are structured fairly from the outset. Because worker misclassification is one of the most common sources of employment disputes in B.C., getting it right from the beginning is critical.
If you have questions about contractor classification or need guidance on structuring your working relationships, contact our team – we’re here to help!
