- Ontario and Canadian courts have long recognized that the employee/independent contractor divide does not capture every real-world working relationship.
- The table below is a general illustration, not a checklist; a worker can look like a mix of these descriptions at once.
- Employers often assume that because a worker is called a "contractor," invoices with HST, and may even bill through their own corporation, the relationship can be ended the same way any…
Most Ontario businesses think about their workforce in two boxes: employees on the payroll, and independent contractors who invoice for their services. Ontario law recognizes a third category that sits between the two — the dependent contractor — and it catches a surprising number of employers off guard, usually at the worst possible moment: when they end the relationship.
A dependent contractor is not an employee in the formal sense, and the parties may never have used that word. But the relationship can still carry some of the legal protections normally associated with employment, particularly around how it can be ended. If your business relies on long-term contractors who work mostly or exclusively for you, this category is worth understanding before a dispute forces you to learn it the hard way.
This article explains where the dependent contractor category comes from, how it differs from a "true" independent contractor, and why it matters when a long-standing contractor relationship ends.
Where the Dependent Contractor Category Comes From
Ontario and Canadian courts have long recognized that the employee/independent contractor divide does not capture every real-world working relationship. Some contractors are economically dependent on one client in a way that looks much more like employment than like running an independent business — even though, on paper, they invoice as a contractor and may even operate through their own corporation.
Courts developed the dependent contractor category to address that gap. It is not a defined term in a specific numbered section of a statute; it is a judge-made classification that sits on a spectrum between "employee" and "independent contractor," and its practical significance shows up almost entirely in termination disputes.
Employee, Independent Contractor, or Dependent Contractor?
No single factor decides which category a worker falls into — courts weigh the whole relationship. The table below is a general illustration, not a checklist; a worker can look like a mix of these descriptions at once.
| Employee | Dependent Contractor | Independent Contractor | |
|---|---|---|---|
| Economic dependence | High — works for one employer | High — works mostly or entirely for one client | Low — has multiple clients |
| Control over how work is done | Employer directs closely | Often significant employer control | Contractor controls own methods |
| Own tools, own risk of loss | Rare | Sometimes | Typically yes |
| Statutory notice protection | Yes, under the ESA | Common-law notice may apply | Generally none, absent contract terms |
The key marker for a dependent contractor is usually exclusivity or near-exclusivity — a contractor who has worked, in substance, only for your business for a long stretch of time looks very different from one juggling several clients.
Why This Category Catches Employers Off Guard
Employers often assume that because a worker is called a "contractor," invoices with HST, and may even bill through their own corporation, the relationship can be ended the same way any commercial contract can be — with whatever notice (or lack of it) the contractor agreement specifies, or none at all if there is no written agreement.
That assumption can be wrong if a court later finds the worker was, in substance, a dependent contractor. The consequences typically surface only when the relationship ends and the contractor pushes back — often through a demand letter or a lawsuit — arguing they were owed reasonable notice of termination, much like an employee would be.
What Termination Looks Like for a Dependent Contractor
A dependent contractor generally is not covered by the Employment Standards Act, 2000 the way an employee is, because that statute applies to employees. But Ontario courts have held that dependent contractors are, at common law, entitled to reasonable notice of termination (or pay in lieu) — the same underlying concept that applies to employees whose contracts do not validly limit notice.
There is no fixed formula for how much notice a dependent contractor is owed; it depends on the specific facts, including how long the relationship lasted and how economically dependent the contractor really was on your business. A written agreement that clearly limits notice can reduce this exposure, but only if it is properly drafted and was in place from the start of the relationship.
Reducing the Risk Going Forward
- Review long-standing contractor relationships for signs of exclusivity or heavy dependence on your business.
- Put a written agreement in place for every contractor relationship, addressing notice of termination directly.
- Avoid treating a "contractor" designation as self-executing protection — the substance of the relationship, not the label on the invoice, is what a court will look at.
- Get the agreement reviewed before a dispute arises, not after a termination letter goes out.
Frequently asked questions
Is a dependent contractor the same as an employee?
No. A dependent contractor is a separate category recognized by the courts, not by the Employment Standards Act, 2000. They generally do not get ESA entitlements like statutory termination pay, but they may be entitled to common-law reasonable notice on termination, which is a related but distinct concept.
Can a written contract prevent someone from being found to be a dependent contractor?
A well-drafted agreement can help manage notice obligations, but simply calling someone an "independent contractor" in a contract does not control the outcome. Courts look at how the relationship actually worked in practice, not just what the paperwork says.
How exclusive does the work need to be for someone to qualify as a dependent contractor?
There is no fixed percentage or bright-line rule. Courts consider the whole economic relationship, and near-exclusivity is one of the strongest indicators, but it is assessed case by case rather than against a set threshold.
What should I do if I am ending a long-term contractor relationship?
Have the relationship and the termination reviewed by a lawyer before you send a termination notice, especially if the contractor has worked mainly for your business for an extended period. Getting this wrong can turn a routine contract termination into a costly dispute.
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