How To Become A 1099 Contractor – If a worker signs some document stating that they are an independent contractor, they are considered an independent contractor under the law.
An independent contractor is a self-employed person. Under British Columbia law, they are treated differently than employees. It’s important to know which category you fall into. The answer affects your legal rights, the steps you can take to enforce those rights, and how you pay your income taxes. We’ll walk you through the factors that determine whether you are an independent contractor.
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“When I first started working as an independent contractor, I learned some important lessons the hard way. One was that I didn’t have the same protections as an “employee.” Now, when I start working with a new client, I Be careful to make sure our protocols don’t fail. As they say, the best offense is a good defense.”
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BC’s Employment Standards Act is the province’s primary legislation to protect workers and applies only to employees. Independent contractors are not covered. This means they are excluded from the basic minimum rights that employees normally enjoy. For example, they are not entitled to holiday pay or job-protected leave.
As an independent contractor, you can still take steps to enforce your rights, but the process is different (and often more difficult) than for an employee. For example, if you don’t get paid for your work, you may have to go to court to get your money. (Employers, on the other hand, simply file claims with the government office that enforces the Employment Standards Act.)
The distinction between employees and independent contractors is also important for tax purposes. Independent contractors can deduct certain business expenses on their tax returns. The CRA provides guidance on how to determine who is an independent contractor for tax purposes.
While the British Columbia Employment Standards Act does not contain a definition of “independent contractor,” it does define “employee.” The definition is very broad and is intended to cover as many employment relationships as possible.
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The Employment Standards Act, meanwhile, defines an employer as a person who has “direction or control over an employee.” This is very important. It is one of the main factors that determines whether you are an independent contractor or an employee. Next we explain the main factors.
The question of whether someone is an employee or an independent contractor can be a tricky one. Several factors are involved.
One is direction and control. Does the employer make the decision or do you? Under the Employment Standards Act, an employer is a person who has “control or direction” over an employee. If the person paying you directs the work and explains how it is done, this tends to view you as an employee.
Independent contractors are less controlled by their employer. Contractors are more likely to set their own hours, determine how the work is performed and provide their own equipment.
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More “yes” answers mean you’re more likely to be considered an employee rather than an independent contractor.
Here are the key factors in the investigation. One way to bottom out is: Whose business is this? If this is your business, you are an independent contractor.
The Employment Standards Agency is the government office that enforces the Employment Standards Act. They provide some scenarios to give you an idea of how these factors can impact the decision of whether someone is a contractor or an independent employee. Below we’ve provided some of our own scenarios to help you understand which category you might fall into.
In British Columbia, workers are protected under the Employment Standards Act, unless exceptions apply. If there is any doubt as to whether an exception applies, it will be resolved in favor of the worker. The Act applies. The aim is to protect as many workers as possible.
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The result: any doubt as to whether a worker is an independent contractor must be resolved in his favor.
The British Columbia courts recently recognized a third category of workers – dependent contractors. This type of employment relationship is between an employee and an independent contractor. Generally speaking, a dependent contractor is an independent contractor who relies primarily (or entirely) on one employer for work.
Like independent contractors, dependent contractors are not protected by BC’s primary employment law, the Employment Standards Act. However, the court said independent contractors should have the same rights as employees when it comes to notice of termination. That is, if your employer fires you, they must provide “reasonable notice.” We explain the rules about how much notice or severance pay you are entitled to receive.
Just because you sign a document stating that you are an independent contractor does not mean that you are one. The court will use your job title to determine whether you are a dependent.
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If you are employed as an independent contractor, you may transition to a more dependent position over time. This happens as you gradually take on more responsibilities within the company.
For example, let’s say you are hired by a company as an independent contractor to do bookkeeping. Initially, you just update your business account. But over time, you’ll become more involved in preparing financial statements and recording transactions. This change in responsibilities may indicate that you have transitioned to an independent contractor.
When you are employed, your employer deducts your share of income tax from your paycheck. If they charge the correct amount, your tax bill should be $0 at tax time. If they deduct too much (meaning you paid more tax), you will get a tax refund from the government.
When you are self-employed, you have full responsibility for paying your tax bill. This means you need to think ahead and set aside enough money in advance.
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Self-employed individuals pay tax on their business income, minus expenses. This means they can deduct certain expenses from their annual gross income. The net amount is the amount they pay in tax. We cover this in detail in our guide to self-employment .
Often, employers prefer to label workers as “independent contractors” rather than “employees.” They may do this to avoid complying with legal rules that apply to employees. But even if your employer calls you an independent contractor (or you sign a document stating that you are), you may still be considered an employee under the law.
If you are starting a new job and are unsure of your employment status, ask your employer. If they call you an independent contractor and you disagree that you are, ask them the question. Addressing the issue immediately can prevent future problems.
There are several key factors that determine whether you are an employee or an independent contractor (see above). To understand how these factors come into play, let’s look at some real-world examples.
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As you read the following scenario, think about your own situation. Choose a few bullet points that apply to your situation. By comparing your history to these, you’ll get a better idea of which category you fall into.
Jeremy is a freelance writer. He was recently hired by a marketing company to write blog posts for their website. Under the contract, Jeremy agreed to publish one blog post per week. Jeremy’s contract with the company is for six months, with the option to renew if the company likes his work. This was his only paid concert.
He works from home on his own laptop three days a week. Another day, he was working in the company’s office and using the desktop computer they provided. When he works from home, he has the freedom to set his own working hours. On days when he was at work, the company required him to work regular working hours (9 to 5).
Shania works for a local food delivery company. When she was hired, she signed an agreement stating she was an independent contractor. The company assigned Shania to a specific area responsible for delivery and sales. It is paid through commission at a rate set by the company. She uses her own car to travel, but the company requires her to display the company’s logo on the car.
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Shania can set her own hours, as long as her delivery times are between 8am and 7pm on weekdays. She uses a company-provided tablet and order form. She also works two to three hours a week at a ride-hailing company.
Andrew worked at a landscaping company during the summers while in college. The company decides which projects Andrew works on and when he must arrive at the workplace. They provide most of the tools and equipment, but Andrew is responsible for his own transportation. He is paid the hourly rate set by the company. When he signed on, his boss told Andrew he was an independent contractor.
It can help you connect with an attorney for a free 15-minute consultation to see if you want to hire them.
We appreciate the work being done on the traditional unceded territories of the xʷməθkʷəy̓əm (Musqueam), Sḵwx̱wú7mesh (Squamish) and səlilwətaɬ (Tsleil-Waututh) Nations, whose peoples continue to live on these lands, working for themselves or for their own heads . A person or entity who contracts as a non-employee to perform work or provide services for another entity. Therefore, independent contractors must pay Social Security and Medicare taxes.
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Additionally, entities that use the services of independent contractors are not required to provide them with employment opportunities
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