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Employers beware of ‘Dependent’ Contractors

Whitten and Lublin | Oct 16, 2014

When an employer decides to hire for their business, they can recruit employees, independent contractors or dependent contractors.  Distinguishing the difference can be difficult, and noting the significant advantages and disadvantages can be tricky.  With the right guidance, an employer can avoid many unpleasant surprises, like that in Khan v. All-Can Express Ltd.  Particularly, when paying close attention to drafting an employment contract that relates to the specific relationship between employer and employee, independent contractor or dependent contractor.

Employers must know that the law examines the reality of the relationship, not the words used to describe it.  Employee’s and dependent contractors have some very similar qualities.  The element that stands out most is they are both entitled to reasonable notice of termination.  Unlike independent contractors who can be terminated without, or very little, notice. Employers must ensure that they protect themselves against future dilemmas when recruiting an independent contractor.  They can certainly appreciate the benefits of independent contractors by learning more on the law that surrounds it.

The following are factors to help you beware of misclassification between employees, independent contractors and dependent contractors:

  • The reality of the relationship is key- simply calling someone an independent contractor does not make it true.
  • Employees and dependent contractors are normally entitled to reasonable notice of termination.
  •  A proper contract can eliminate the risk of a large award of pay in lieu of notice of termination for an independent contractor.