Employment Contract Defined

The employment relationship is founded in the contract between the employer and employee. Many contractual terms are dictated by statute, and others are negotiated between the parties.

Indefinite vs Fixed Term Employment Contracts

Indefinite Term: The contractual relationship has no fixed end date.

Fixed Term: The parties have agreed to a specific timeframe or task upon which the relationship ends. This distinction is important to determine the employer's statutory and common law obligations at the termination of the relationship.

Independent Contractor vs Employee

The distinction between an employee and independent contractor is not easy to define. Rather, it involves a contextual analysis of the relationship between the employer and the worker.1

There is no conclusive test which can be universally applied to determine whether a person is an employee or an independent contractor.

The Supreme Court of Canada said that the central question is whether the person who has been engaged to perform services is performing them as a person in business on his/her own account.2 To answer this question, consider the following factors:

  • Employee's level of control over the worker's activity;
  • Whether the worker provides his/her own equipment;
  • Whether the worker hires his/her own helpers;
  • The worker's degree of financial risk; and
  • The worker's opportunity for profit.

It is necessary to consider both the contract and the facts of the circumstances to make this determination.

Contract OF Services vs. Contract FOR Services

The Workplace Safety and Insurance Board (WSIB) has published an Operational Policy Manual that lists several characteristics that can be used to determine whether one is a worker or an independent contractor. This policy document indicates that there is a distinction between persons employed under a "contract of services" and persons employed under a "contract for services."

  • Contract OF Services: The foundation of an employer-employee relationship. A worker agrees to work for an employer on a full- or part-time basis in exchange for wages or a salary. The employer has a right to control what work is performed, in what manner, and when.
  • Contract FOR Services: The foundation of a business relationship. One person agrees to perform specific work in exchange for payment. The employer does not necessarily control the manner in which the specific work is done, or the time or place where it is performed.

1 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 59 (S.C.C.).

2 Ibid at 48.,

Go to Part 2 - Employee & Employer Obligations

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.