Dependent Contractor vs Employee in Ontario: Are You Owed Severance?
There is a middle category between employee and contractor. Dependent contractors are economically tied to one client and are owed reasonable notice when they are let go.
Key takeaways
- Ontario has three categories: employee, dependent contractor, and independent contractor.
- A dependent contractor is economically tied to one main client.
- Dependent contractors are owed reasonable notice on termination, like employees.
- Exclusivity or near-exclusivity is the central factor.
- The label in your contract does not decide it; the reality does.
In this article
If you work as a contractor but really for just one company, you may not be the independent contractor your agreement calls you. Ontario recognizes an in-between category, the dependent contractor, and it comes with a valuable right: reasonable notice when the relationship ends. Here is how to tell where you fall and what you are owed.
✅Quick answer. Ontario law recognizes three categories, not two: employees, dependent contractors, and truly independent contractors. A dependent contractor is someone who is technically self-employed but works predominantly or exclusively for a single client and is economically dependent on it. That middle category is entitled to reasonable notice of termination, similar to an employee, even though the contract calls them a contractor. The key factor is exclusivity: the more your income depends on one client, the more likely you are a dependent contractor with notice rights.
The three categories
- Employee: integrated into the business, controlled by it, entitled to the full range of ESA and common-law protections including reasonable notice.
- Dependent contractor: self-employed in form, but economically dependent on one client, usually working exclusively or near-exclusively for it. Entitled to reasonable notice on termination.
- Independent contractor: genuinely in business for themselves, multiple clients, real independence. Generally not entitled to notice.
Why exclusivity is the key
The dividing line between a dependent and an independent contractor is largely about economic dependence, and exclusivity is the strongest signal of it. If you have worked mainly or entirely for one company, especially over a long period, using their systems and integrated into their operations, you look a lot like someone the law will protect. Courts also look at how long the relationship lasted, how integral you were, and who controlled the work. High exclusivity plus long duration points strongly to dependent contractor status.
The contract label does not control
It does not matter that your agreement says independent contractor, that you invoiced with HST, or that you had a corporation. Courts look at the substance of the relationship, not the paperwork. Many people who believe they have no termination rights because they were called contractors are actually dependent contractors, or even misclassified employees, and are owed significant notice. This connects to our guide on contractor misclassification.
What a dependent contractor is owed
A dependent contractor who is terminated is generally entitled to reasonable notice or pay in lieu, assessed much like an employee's, considering the length of the relationship, the degree of dependence, and the difficulty of replacing the income. For a long-serving, exclusive contractor, that can be a substantial amount, often a genuine surprise to both sides given the contractor label.
What should you do if your contract ends?
- 1.Assess how exclusive the relationship was: what share of your income came from this one client.
- 2.Gather your history: how long you worked for them, how integrated you were, who controlled the work.
- 3.Do not accept that being a contractor means no notice; the reality may make you a dependent contractor.
- 4.Get advice, because dependent contractors can be owed meaningful severance that is easy to miss.
The contractor label hides a lot of entitlements. See contractor misclassification and severance pay in Ontario, and if a long, exclusive contract just ended, a severance review can tell you whether you are actually owed notice.
Frequently asked questions
What is a dependent contractor in Ontario?
It is a middle category between employee and independent contractor: someone self-employed in form who works predominantly or exclusively for one client and is economically dependent on it. Dependent contractors are entitled to reasonable notice on termination.
Do dependent contractors get severance?
Yes, in the form of reasonable notice or pay in lieu, assessed much like an employee's based on the length and exclusivity of the relationship. For a long-serving exclusive contractor, that can be a substantial amount.
My contract says independent contractor. Does that settle it?
No. Courts look at the substance of the relationship, not the label. Invoicing with HST or having a corporation does not decide it. If you worked mainly for one client, you may be a dependent contractor, or even a misclassified employee.
What is the main factor?
Economic dependence, signalled most strongly by exclusivity. The more of your income came from one client, and the longer and more integrated the relationship, the more likely you are a dependent contractor with notice rights.
Marcus Bello
Legal Writer, Mirza Law
Marcus Bello is a legal writer at Mirza Law in Toronto.
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