Canadian businesses sometimes characterize a working relationship as an “independent contractor” arrangement. However, courts and regulatory tribunals will generally look beyond the label to determine the true nature of the relationship. The consequences of getting it wrong can be significant for both parties, although can be greater for the employer or organization.

The Governing Test

The leading authority remains Ontario Ltd. v. Sagaz Industries Canada Inc. , (2001) 2 SCR 983 . In that decision, the Supreme Court of Canada rejected the idea of a single definitive test and instead articulated a contextual, multi-factor analysis to determine whether a particular worker is, in the eyes of the law, a true independent contractor or not.

The main issue in that case was whether Sagaz was vicariously liable for a consultant’s wrongdoing.

The Court held that there is no universally applicable conclusive test to de...