Employee vs independent contractor in Canada: the tests that decide
In Canada, a worker's status is decided by how the relationship actually works, not by what the contract calls it. The Canada Revenue Agency weighs control, tools, subcontracting, financial risk, investment and the chance of profit, and provincial employment standards apply their own similar tests. Getting it wrong means unpaid CPP, EI and employment standards entitlements.
Ontario platform workers gain rights whatever their status
What happened
Ontario's Digital Platform Workers' Rights Act, 2022 came into force on 1 July 2025. It covers people who do ride share, delivery or courier work through an online platform, whether they are employees or independent contractors.
What it means for you
Platform operators must pay at least the general minimum wage for work assignments, pay earnings and tips on a regular pay day, and explain any removal from the platform in writing. Calling a worker a contractor no longer takes these duties away.
Dates to know
- 1 October 2026Ontario's general minimum wage, the floor the Act uses, rose to $17.95 an hour.
Source: Government of Ontario. We check this page every week. Last checked .
Canadian law separates a contract of service (employment) from a contract for services (self-employment), and the label the parties choose does not settle which one exists. For Canada Pension Plan and Employment Insurance purposes, the Canada Revenue Agency first asks what the parties intended, then checks that intention against how the work really happens: who controls the work, who supplies the tools and equipment, whether the worker can subcontract or hire helpers, who carries the financial risk, who is responsible for investment and management, and whether the worker has a real chance of profit. The CRA cites the Federal Court of Appeal in Wiebe Door Services v M.N.R. and the Supreme Court of Canada in 671122 Ontario Ltd. v Sagaz Industries Canada, which framed the central question as whether the person is in business on their own account. Contracts formed in Quebec are assessed under the Civil Code of Québec instead. Provincial employment standards laws make their own decision about who is an employee for minimum wage, vacation, holidays and termination pay, and the courts recognise a middle category, the dependent contractor, who is not an employee but can still be owed reasonable notice when the relationship ends because of how economically dependent they are on one client.
How does the CRA decide if a worker is an employee?
For contracts formed outside Quebec, the CRA uses a two-step approach. First it establishes what the worker and payer intended. Then it tests that intention against the facts: control, tools and equipment, the ability to subcontract or hire assistants, financial risk, responsibility for investment and management, and the opportunity for profit. No single factor decides the outcome.
The CRA's guidance draws on Wiebe Door Services v M.N.R. (1986) and 671122 Ontario Ltd. v Sagaz Industries Canada (2001 SCC 59), where the question is whether the person is performing the services as a person in business on their own account. Owning tools does not make someone self-employed on its own, and a short engagement does not either.
Can I get an official ruling on a worker's status?
Yes. A worker, a payer or an authorised representative can ask the CRA for a CPP/EI ruling, which decides whether the employment is pensionable, insurable or both. You can request it through My Business Account or My Account, or with Form CPT1. A request for a given year must be made by 29 June of the following year.
If you disagree with the ruling, you can appeal to the Minister of National Revenue within 90 days of being notified, using Form CPT100 or online. A ruling covers the period and facts it describes, so if the working arrangement changes you may need a fresh one.
Do provincial employment standards use the same test?
They use their own, though the factors overlap. Ontario's guidance says it is the relationship between the individual and the business that matters, and that a signed contract, charging HST, sending invoices or the absence of payroll deductions does not settle the question. A decision by another agency, such as the CRA, does not bind Ontario's employment standards officers either.
Under Ontario's Employment Standards Act, employers are not allowed to treat employees covered by the Act as if they are not employees. An employment standards officer who finds this can issue a notice of contravention, which may lead to a penalty, a prosecution or both.
What is a dependent contractor?
A dependent contractor is a category Canadian courts have recognised between employee and independent contractor: someone who is not an employee but who works exclusively or mostly for one client and is economically dependent on it. Courts can require reasonable notice to end that relationship, so a contractor label does not remove termination exposure.
This is common law, decided case by case rather than set out in a statute, so there is no fixed formula for how much notice a dependent contractor is owed. The longer and more exclusive the relationship, the stronger the claim tends to be.
What does Ontario's Digital Platform Workers' Rights Act change?
Since 1 July 2025, people who provide ride share, delivery or courier services through an online platform in Ontario have minimum rights whether they are employees or independent contractors. These include the general minimum wage for work assignments, a regular pay day, written information about pay and ratings, and written reasons and notice before removal from the platform.
Removal from the platform for 24 hours or more generally needs two weeks' written notice, subject to listed exceptions. Taxicab and limousine services are excluded. The Act sets a floor for platform work without deciding whether the worker is an employee, so the separate employee-or-contractor question still matters for CPP, EI and employment standards.
Hiring in Canada?
What Teamed handles for you when a Canadian contractor should be an employee
The cleanest answer to a misclassification question is to remove it: when Teamed employs your Canadian hire directly, CPP, EI and provincial employment standards apply from the first day, and there is no contractor arrangement for the CRA or a province to reclassify later.
These sit with us
- A genuine contract of service under the right provincial law
- CPP and EI deductions and employer contributions from the first pay run
- Provincial employment standards entitlements built into the contract
- No dependent contractor notice exposure on a contractor relationship
You keep
The role, the budget and the day-to-day management of your people. We carry the employment duties that come with being the legal employer.
A CPP/EI ruling looks backwards at how the work was done. Employing the person correctly from the start means there is nothing to look back at.
Key figures
| Detail | Value |
|---|---|
| CRA two-step approach, contracts formed outside Quebec | The CRA examines the whole relationship between worker and payer using a two-step approach: first the parties' intention, then factors that test whether the relationship reflects that intention. The factors are control, tools and equipment, subcontracting work or hiring assistants, financial risk, responsibility for investment and management, and opportunity for profit, plus any other relevant factors such as written contracts. (source) |
| Quebec contracts use a civil law test | Contracts formed outside Quebec are assessed with a two-step approach based on common law principles and jurisprudence. Contracts formed in Quebec are assessed with a three-step approach under the Civil Code of Québec. A contract is generally formed where the offeror, usually the payer, receives the acceptance, unless the contract says otherwise. (source) |
| Leading cases the CRA relies on | The CRA's employment status guidance cites Wiebe Door Services Ltd. v M.N.R. [1986] 3 F.C. 553, 671122 Ontario Ltd. v Sagaz Industries Canada Inc., 2001 SCC 59, and 1392644 Ontario Inc. (Connor Homes) v Canada (National Revenue), 2013 FCA 85. (source) |
| Form CPT1: requesting a CPP/EI ruling | Form CPT1, Request for a CPP/EI Ruling, Employee or Self-Employed, is completed by a worker, a payer or an authorised representative to ask whether a worker's employment is pensionable and/or insurable. Payers can also request a ruling online through My Business Account. (source) |
| Deadline to request a ruling | To request a CPP/EI ruling for a given year, the request must be submitted by 29 June of the following year. (source) |
| Appealing a ruling: Form CPT100, 90 days | A CPP/EI ruling or payroll source deductions assessment can be appealed to the Minister of National Revenue within 90 days after being notified of it, using Form CPT100, Appeal of a Ruling under the Canada Pension Plan and/or Employment Insurance Act, or online through My Account. (source) |
| Ontario ESA: the relationship decides, not the paperwork | Ontario's guidance says it is the relationship between the individual and the business that matters. A signed contract, charging HST, invoicing, using one's own vehicle or the lack of statutory deductions does not settle status, and neither does another agency's decision. Employers are not allowed to treat employees covered by the Act as if they are not employees, and an officer can issue a notice of contravention leading to a penalty, prosecution or both. (source) |
| Digital Platform Workers' Rights Act, 2022 in force | The Act came into force on 1 July 2025. It covers workers who provide ride share, delivery or courier services for payment through an online platform, regardless of whether they are employees or independent contractors. Taxicab and limousine services are excluded. (source) |
| Platform worker rights under the Act | Platform workers are entitled to at least the general minimum wage under the Employment Standards Act, 2000, assessed per work assignment or per pay period with tips excluded; a regular pay period and pay day with all earnings and tips paid by it; written information about pay, tips, ratings and work offers; a written explanation for removal from the platform; and two weeks' written notice of a removal lasting 24 hours or more, subject to listed exceptions. (source) |
| Ontario general minimum wage from 1 October 2026 | $17.95 an hour from 1 October 2026 to 30 September 2027, up from $17.60 an hour from 1 October 2025 to 30 September 2026. This is the floor the Digital Platform Workers' Rights Act applies to work assignments. (source) |
Frequently asked questions
Does a signed independent contractor agreement protect us?
Not on its own. The CRA starts with the parties' intention but then checks it against how the work is really done, and Ontario's guidance says a signed contract, HST charges or invoices do not settle a worker's status. If the facts look like employment, the label gives way.
What happens if we misclassify an employee as a contractor?
The CRA can rule that the work was pensionable and insurable, which brings unpaid CPP and EI contributions into question, and a province can find that employment standards entitlements such as vacation pay, public holiday pay and termination pay were owed. In Ontario, treating an employee as a non-employee is itself a contravention of the Employment Standards Act.
Is a CRA ruling binding on the provinces?
No. A CPP/EI ruling decides pensionable and insurable employment for federal purposes. Ontario's guidance says another agency's decision does not settle status under its Employment Standards Act, which applies its own assessment.
Do contractors in Canada have to be given notice?
A genuine independent contractor is owed whatever notice the contract provides. A dependent contractor, someone economically dependent on one client, can be owed reasonable notice under common law even though they are not an employee, so the contract alone may not be the end of the story.
Canada has fourteen sets of employment standards, one federal and one for each province and territory. When Teamed is your legal employer, we apply the right one for where each person works and update your contracts, policies and payroll as the law changes, so you never have to read a statute to stay compliant.
