Contractor Rights: Severance Packages Explained

Contractor Rights: Severance Packages Explained

What determines whether you’re entitled to a severance package as a contractor?

Just because your contract labels you an “independent contractor” does not mean you will be treated that way if your working relationship is terminated. Courts will look to the substance of a working relationship rather than your mere title to determine if someone is truly an independent contractor, or whether they are an employee or even a dependent contractor. While independent contractors are not entitled to a severance package if terminated, employees and dependent contractors are entitled to a package.

What factors do courts consider in determining your employment status?

Courts will look at a number of factors to determine if someone is truly an independent contractor, with these factors indicative of how much control one has over their work. The more control the company has over them, the more likely they will be considered an employee or dependent contractor. Some of the factors that courts will look at include who sets the person’s working hours, who is responsible for providing the equipment for the role to be completed, if the person is able to work for other companies, and does the person derive most of their income from the company.

A person is more likely to be deemed a “dependent contractor” if they derive the vast majority of their income from that one company. Different court decisions have set different thresholds for what percentage of one’s income needs to come from that company to be considered a dependent contractor as opposed to independent, but it is clear that the person must establish a level of financial dependency on the company. They will have a stronger likelihood of demonstrating they are a dependent contractor – and entitled to a severance package – if they can show that they earned well over 50% of their income from one source.  It could be argued that 50% of their income would be “financially dependent”, but their case is stronger the higher that percentage is.

How can Whitten & Lublin assist contractors in understanding their rights regarding severance packages?

If you are a contractor looking to better understand your rights as to whether you might be entitled to a severance package, we encourage you to seek legal advice on the matter. We at Whitten & Lublin are happy to provide insight and advice into your specific circumstances. If you are looking for employment lawyers and would like more information about what Whitten & Lublin can do for you, please contact us online or by phone at (416) 640-2667 today.

Author – Nasyr Asmi