Is a dependent contractor an employee?

No. A dependent contractor remains self-employed and invoices for their work. They are not on payroll and do not receive the full set of employee rights. What they gain is a limited layer of protection, chiefly reasonable notice of termination, because they depend economically on a single client.

Does every country recognise dependent contractors?

No. The category is well developed in Canada and appears in some other systems, but many countries, including at US federal level, use only a two-way split between employee and independent contractor. Where the intermediate status is not recognised, a dependent worker is likely to be found to be an employee instead.

How much exclusivity makes a contractor dependent?

Canadian courts look for near-complete exclusivity, meaning the contractor earns substantially more than half of their income from the one client. There is no single fixed percentage, but the closer the relationship is to full exclusivity, the more likely it is to be treated as dependent rather than independent.

How can a business reduce the risk of a dependent contractor claim?

Keep genuinely independent relationships independent: avoid demanding exclusivity, let the contractor serve other clients, and review long-running engagements. Where the work is really ongoing and exclusive, employing the person, through a local entity or a global employment platform, is often cleaner than stretching a contractor arrangement.

Glossary

Dependent Contractor

A dependent contractor is an intermediate work status, recognised in Canada and some other jurisdictions, for a self-employed person who works almost exclusively for one client and is economically dependent on it, earning some employment protections such as reasonable notice on termination.

Reviewed by Teamed's in-house employment-law team·Last updated 28 July 2026

Also known as: economically dependent contractor

What is Dependent Contractor?

A dependent contractor sits between an employee and an independent contractor. Like an independent contractor, the person is self-employed and invoices for their work rather than being on payroll. Unlike one, they rely on a single client for most or all of their income, which the law treats as a form of economic dependence deserving of some protection.

The category is best known in Canada, where courts have held that a contractor who works with near-complete exclusivity for one business is owed reasonable notice, or pay in lieu, when that relationship ends. It is a middle ground: not the full protection an employee receives, but more than a genuinely independent contractor can claim.

The practical risk for businesses is that a long, exclusive contractor relationship can quietly become a dependent one, creating notice obligations that were never in the contract. Getting the classification right at the outset, and reviewing it as the relationship deepens, is the way to avoid an unexpected liability.

How is a dependent contractor different from an independent contractor?

The difference is economic dependence. An independent contractor typically serves several clients and carries genuine business risk. A dependent contractor looks similar on paper but works almost entirely for one client, so the law steps in to give them limited protections, most notably reasonable notice before the relationship can be ended.

Which protections does a dependent contractor get?

Fewer than an employee, but more than an independent contractor. The headline protection in Canada is reasonable notice of termination, or pay in place of it. Dependent contractors generally do not gain the full suite of employee rights, such as statutory severance or benefits, unless a court finds they were really employees.

How do businesses end up with a dependent contractor by accident?

It usually happens over time. A contractor is engaged for a project, the work continues year after year, and the contractor gradually stops taking on other clients. Once that exclusivity sets in, a relationship that began as genuinely independent can meet the test for dependence, bringing notice obligations the business did not plan for.

Key facts

Canada dependent contractor authority: McKee v. Reid's Heritage Homes Ltd., 2009 ONCA 916The Ontario Court of Appeal confirmed that a dependent contractor is an intermediate category between employee and independent contractor, marked by exclusivity and economic dependence, and owed reasonable notice on termination.Source: Court of Appeal for Ontario (via CanLII Connects)· verified 2026-07-28

Employee vs dependent contractor vs independent contractor

	Employee	Dependent contractor	Independent contractor
Works mainly for one client	Yes	Yes	No, usually several
Reasonable notice on termination	Yes	Yes	No
Full employee rights	Yes	No	No
Paid via	Payroll	Invoices	Invoices

Frequently asked questions

Is a dependent contractor an employee?
No. A dependent contractor remains self-employed and invoices for their work. They are not on payroll and do not receive the full set of employee rights. What they gain is a limited layer of protection, chiefly reasonable notice of termination, because they depend economically on a single client.
Does every country recognise dependent contractors?
No. The category is well developed in Canada and appears in some other systems, but many countries, including at US federal level, use only a two-way split between employee and independent contractor. Where the intermediate status is not recognised, a dependent worker is likely to be found to be an employee instead.
How much exclusivity makes a contractor dependent?
Canadian courts look for near-complete exclusivity, meaning the contractor earns substantially more than half of their income from the one client. There is no single fixed percentage, but the closer the relationship is to full exclusivity, the more likely it is to be treated as dependent rather than independent.
How can a business reduce the risk of a dependent contractor claim?
Keep genuinely independent relationships independent: avoid demanding exclusivity, let the contractor serve other clients, and review long-running engagements. Where the work is really ongoing and exclusive, employing the person, through a local entity or a global employment platform, is often cleaner than stretching a contractor arrangement.

Related terms

Note

This is general information, not legal advice. Statutory rules vary by country and change over time.

Glossary

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Last verified 2026-07-28