Dependent contractor

A dependent contractor is a worker who isn't an employee but relies on one business for most of their income, and may be owed notice when it ends.

Also called: intermediate category worker, economically dependent contractor

What dependent contractor means

"Dependent contractor" is a term Canadian courts use for a worker who sits between an employee and a truly independent contractor. The person invoices you and may run their own small business, but in practice they depend on your business for all or most of their work and income, often over a long time.

Why it matters: if a working relationship like this ends without warning, the worker may be able to claim reasonable notice, much like an employee. A small business that thought it could end a long-standing contractor arrangement at any time can find itself facing a notice claim.

The label matters less than the facts. Courts and other decision-makers look at how the relationship actually worked, especially how dependent the worker was on you.

How it works

The first question is usually whether the person is an employee at all. The CRA's factors, set out in its guide Employee or Self-employed? (RC4110), are a good starting point: control over the work, who supplies the tools, whether the worker can hire helpers, financial risk, investment and management, and opportunity for profit. If the relationship looks like employment, treat it as employment.

If the person really is in business for themselves, the next question is how dependent they are on you. Warning signs include: the person has worked only or mostly for you for years; they cannot easily take other clients because of the time you require; you set their schedule or territory; and they would lose most of their income if you ended the arrangement.

To lower the risk, put a written agreement in place that says how either side can end it and how much notice will be given. Review long-standing contractor arrangements every year or two, and talk with the worker about whether the arrangement still reflects how you work together. If someone has become, in effect, a full-time part of your business, consider whether they should be an employee.

This is an area where outcomes depend heavily on the facts and on court decisions in your province, so get legal advice before ending a long, exclusive contractor relationship.

Is it the same in every province?

The dependent contractor idea comes from court decisions rather than from employment standards laws, so it is not set out the same way in every province. Get advice from someone who knows the case law in your province.

Example: A long-time courier

Mark runs a 20-person pharmacy distribution business in London, Ontario. For eight years, a courier named Dee has invoiced his business every two weeks. She owns her van, but Mark sets her routes and hours, and she has no time for other clients.

When Mark considers switching to a delivery company, he realizes Dee depends on his business for her whole income. Before deciding anything, he gets legal advice on how much notice to give her, rather than simply ending the arrangement at the next invoice.

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Questions about dependent contractor

What is the difference between a dependent contractor and an independent contractor?

An independent contractor has many clients and runs their own business. A dependent contractor is in business but relies on one client for most or all of their work and income, often for years.

Is a dependent contractor entitled to notice?

Courts have found that some dependent contractors are owed reasonable notice when the relationship ends. Whether it applies depends on the facts, so get advice.

Do I have to deduct CPP and EI for a dependent contractor?

Not if they are truly self-employed. If the CRA's factors show the person is an employee, you must treat them as one and make the deductions.

How can I reduce the risk with a long-term contractor?

Use a written agreement that sets out how the arrangement can end and with how much notice, and review long-standing contractor relationships regularly.

Official sources

General information for Canadian employers, not legal advice. Rules differ by province and territory and change over time, so check with your provincial employment standards office (or the federal Labour Program if you are federally regulated) before you rely on it. See employment standards by province.

Checked against official sources on 4 November 2026.