CONSIDERATIONS: INDEPENDENT CONTRACTOR AGREEMENT

To schedule an appointment, contact our law firm at 403-400-4092 or Chris@NeufeldLegal.com

When you are looking to securing a particular work assignment that requires your engagement as an independent contractor, the contractual arrangement will differ substantively from an employment agreement. And although the payments that appear in the paperwork might appear signficantly greater than an employment agreement, this can be deceiving, as is the case with many other aspects in the contractual arrangement that you are taking on as an independent contractor.

Among the key factors in an independent contractor agreement that demand appropriate consideration, as well as discussion with a knowledge lawyer such that you might understand its purposes and appropriately address those aspects, including:

A. Misclassification Risk

The biggest concern from the perspective of the hiring company is that the Canada Revenue Agency or a court/tribunal could reclassify the contractor as an employee (or a "dependent contractor," which is an intermediate category that grants some employee-like rights). This can lead to liability as against the hiring company for:

  • Retroactive Statutory Deductions: Unpaid CPP contributions, EI premiums, and income tax withholdings.

  • Employment Standards Obligations: Liability for vacation pay, overtime, minimum wage, and termination pay/severance under provincial employment standards legislation.

From the perspective of the independent contractor, an external determination that one is not an independent contractor, but an employee, can prove advantageous for the party that was misclassified, as a knowledgeable lawyer can effectively parlay that the advantage of the now 'employee' and challenge any adverse implications, given that this was an imposition by the hiring company (now employer) that was operating from a superior legal position and dictating the arrangement as between the parties.

B. Scope, Deliverables, and Payment

Clarity on the actual work and the specific of the payment arrangement, including:

  • Scope of Work (Services): A detailed and specific description of the services to be provided, including clear deliverables, timelines, and performance metrics. Vague or open-ended obligations can hint at an employment relationship.

  • Payment Terms: A clear outline of the compensation structure (e.g., flat fee per project, hourly rate, milestone payments), invoicing procedure, and payment schedule. An explicit statement that the contractor is responsible for their own income tax, CPP, EI (if they choose to opt-in), and GST/HST (if applicable).

  • Expenses: Clearly deliniation, if applicable, as to business expenses that will be reimbursed by the hiring company, and those which are the sole responsibility of the contractor.

C. Protection of Business Assets

To what extent has the hiring party sought to protect what it deems as its confidential information and intellectual property, including:

  • Confidentiality and Non-Disclosure: Protection of sensitive, proprietary, or private business information that the contractor may access during the course of their engagement.

  • Intellectual Property Assignment: Specifics as to the intellectual property (copyright, inventions, designs, etc.) created by the contractor while performing the services that is assigned to and owned by the hiring company.

D. Liability, Insurance, and Indemnity

Addressing risks and financial exposure is critical, as contractors are not covered by the hiring company's Workers' Compensation Board (WCB) or general employment insurance, including:

  • Insurance Requirements: Requiring the independent contractor to obtain and maintain their own adequate liability insurance (e.g., commercial general liability, professional errors and omissions insurance).

  • Indemnification: A clause where the contractor agrees to protect the hiring company from losses or liabilities arising from the contractor's work, negligence, or breach of the agreement.

E. Ending the Relationship

Since an independent contractor is not an employee, the rules for ending the relationship are generally contractual, such that they must be clearly set out in the independent contractor agreement, including:

  • Term and Termination: A clear establishment of the start and end dates of the agreement, as well as specifications as to early termination by either party, outlining required notice periods (which should not mirror employee termination notice periods) and conditions for termination (e.g., for cause, or without cause).

These are but some of the most significant aspects of the independent contractor agreement, with the actual specifics and wording contained in your own agreement demanding specific legal review and assessment, whether at the outset of one's engagement as an independent contractor or when issues arise with the business relationship. For an experienced business lawyer capable of provide you with such legal support and strategic direction when working as an independent contractor, contact our law firm at Chris@NeufeldLegal.com or 403-400-4092 to schedule a confidential initial consultation.

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