Employee or Independent Contractor? The Sagaz Test and Why It Matters in Ontario
Whether you are classified as an employee or an independent contractor in Ontario has enormous consequences — ESA protections, wrongful-dismissal rights, tax...
Frequently Asked Questions
My contract calls me an independent contractor. Does that settle it?
No. Ontario courts look at the substance of the relationship, not the label. A contract calling the worker an independent contractor is one factor, not the only factor, and not decisive.
What is a dependent contractor?
A dependent contractor is a self-employed worker who is so economically dependent on a single principal that the relationship resembles employment. Dependent contractors are entitled to reasonable notice on termination — the same Bardal framework as employees.
How are the Sagaz factors weighed?
No single factor is determinative. Courts look at control, ownership of tools, chance of profit and risk of loss, integration, and the ability to hire helpers holistically, asking whether the worker is in business on their own account.
What if I have been misclassified for several years?
You may be entitled to retroactive ESA minimums (vacation pay, statutory holiday pay, overtime), and a wrongful-dismissal claim using the entire period of service. The relevant limitation periods apply, so don’t delay.
Is the CRA tax classification the same as the wrongful-dismissal classification?
The tests are similar but not identical. A CRA ruling that you were an employee is helpful evidence in a wrongful-dismissal claim but is not binding on a court.
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