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| You are here: LEGAL ISSUES : Related Article |
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Employed or Contracted?
Employed or Contracted? What is the difference between being employed under an Employment Contract and contracted as an Independent Contractor and why is this important? There are both financial implications and important legal implications arising from your employment status. Sometimes coaches choose to be employed as independent contractors as there can be significant tax advantages. However, along with these advantages come greater legal obligations - including legal responsibility for the consequences of one's own actions.
Coaches who are independent contractors may be held personally liable if their conduct fails to meet the legal standard of care required by the law, which leads to serious injury to an athlete or other person. And even if the coach's conduct has met the legal standard required by the law under the circumstances (that is, the coach's behaviour has not been negligent), this may have to be proved through the legal process at considerable expense to the individual coach. In other words, the coach who is an independent contractor may be required to pay legal expenses as well as any amount of damages that might be awarded by a court should his or her defence be unsuccessful.
On the other hand, if the coach is an employee as defined by the various tests used, and if the coach is acting within the scope of his or her duties, personal liability may not be an issue, even though the coaches actions might have been negligent. A common defence against a claim of negligence is the legal principle of vicarious liability. This principle recognizes that one party can assume responsibility for the actions of another party through a special relationship. Through this principle, an employer becomes liable for the negligence of its employees/coach and the employer's liability insurance would cover the coach's costs as well as any damages awarded.
In some ways, then, a coach may trade off financial benefits for legal considerations when deciding between employee and independent contractor status. Keep in mind, however, that the line between the two is not always clear. Simply having a written agreement which purports to be an independent contractor's agreement may not be sufficient to establish that a coach is, in fact, an independent contractor. That is why various tests are used by the courts.
The purpose of the tests is to determine the true nature of the relationship, regardless of how the coach might be described in a contract, what his or her position is called, or what specific clauses in the contract might actually say. It takes more than simply the term "independent contractor" and a written "contractor's agreement" to make someone a true independent contractor in the eyes of the law. It's all about degree of control and independence.
Here's how it's supposed to work when you are correctly classified as an Independent Contractor:
- Companies are not your employers per se, but your clients. As such, they are not entitled to direct you in your work
- Of course, your clients have a right to say what they expect for the rates they're paying you, but only as it relates to the outcome of the task
- It's your right to decide when, where and how to get the task done.
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