Can a Contractor Paid Through a Corporation Still Be an Employee in Ontario?

Can a Worker Paid Through a Corporation Still Be an Employee in Ontario?

Yes — the way pay is structured does not determine employment status on its own. Ontario courts look at the real nature of the working relationship, not just the payment method. In Brunette et al. v. Guycan Ltd., 2026 ONSC 5209 (CanLII), the Superior Court of Justice found that a worker invoicing through a personal corporation was nonetheless an employee, with significant consequences for how commissions and other entitlements were calculated.

If you work through a corporation or have workers who do, understanding how courts assess employment status matters — both for what you are owed and for what obligations apply.

What Factors Do Ontario Courts Use to Determine Employment Status?

Ontario courts apply a multi-factor test asking, at its core, “whose business is it?” The leading framework comes from the Supreme Court of Canada’s decision in Sagaz Industries Canada Inc. v. 671122 Ontario Ltd., and courts have applied it consistently ever since.

In this case, the court looked at several key facts. The worker received a base salary. The employer supervised the work closely. The employer — not the worker — controlled pricing decisions. And the worker bore no meaningful risk of financial loss. Taken together, those facts pointed clearly to employment, even though the pay flowed through a corporation. The corporate structure was a payment mechanism, not evidence of an independent business.

What Happens When an Employee Resigns — Can They Still Claim Constructive Dismissal?

Constructive dismissal requires proof that the employer made a substantial, unilateral change to a fundamental term of employment — essentially forcing the employee out without formally firing them. Simply being unhappy at work, or choosing to leave, is not enough.

In this case, the worker sent a text message giving two weeks’ notice and followed up with communications consistent with a genuine resignation. The court found no evidence that the employer had imposed significant changes to the working relationship. Because the resignation was clear and unequivocal, the constructive dismissal claim was rejected — and with it, any entitlement to pay in lieu of reasonable notice.

How Are Commission Disputes Resolved When the Contract Language Is Unclear?

When commission clauses are ambiguous, Ontario courts interpret them using the principles from Sattva Capital Corp. v. Creston Moly Corp. — meaning the words are read in context, with attention to the surrounding circumstances at the time the contract was made. The goal is to find a commercially reasonable meaning, not to adopt whichever interpretation one party now finds convenient.

Here, the contract referred to concepts like “Gross hard cost” and a “standard pricing model.” The employer’s preferred interpretation — based on actual profit — was rejected because it produced a result that was not commercially reasonable given how the parties had actually operated. A pricing calculator both sides used at the time of contracting was treated as important surrounding context. The court found the worker had been underpaid and awarded additional commissions and an overage amount.

Is There a Time Limit on Claiming Public Holiday Pay in Ontario?

Yes — the Limitations Act, 2002 and pandemic-related suspension rules both affect how far back an employee can claim statutory entitlements like public holiday pay. The court in this case applied those rules carefully and restricted recovery to a defined period rather than awarding the full amount claimed.

The entitlement itself came from the Employment Standards Act, 2000, which sets out minimum rights for most Ontario employees. But the window for recovering past amounts is not unlimited. Workers who believe they have been underpaid statutory entitlements should be aware that delay can reduce or eliminate what they can recover.

Does Routing Pay Through a Corporation Protect an Employer From Employment Claims?

Not automatically. This decision is a clear example of a court looking past the corporate structure to assess the real relationship. If the day-to-day reality of the work looks like employment — supervision, set salary, employer-controlled pricing, no financial risk — a court may well find that it is employment, regardless of how invoices are issued.

For employers, this means that using a personal corporation as a payment vehicle does not reliably convert an employment relationship into an independent contractor arrangement. For workers, it means the corporate structure alone does not disqualify you from employment protections. Our Ontario employment lawyers regularly advise both workers and businesses on how to assess and document these relationships properly.

If you are dealing with a commission dispute specifically, it is worth knowing that the interpretation of commission clauses — including what counts as the base for calculating a percentage — is a common source of litigation. A careful review of the contract language, and the context in which it was signed, is essential. You can learn more about how these issues arise in wrongful dismissal contexts on our wrongful dismissal page.

Questions and Records to Discuss With a Lawyer

• What documentation exists about how the working relationship was structured — including supervision, pricing authority, and financial risk?
• Are there written commission agreements, and what surrounding materials (such as pricing tools or internal communications) existed when the contract was signed?
• Was there a resignation, and what was said or written at the time — including any text messages or emails?
• Have statutory entitlements like public holiday pay been calculated and paid correctly, and for how long has any underpayment been occurring?
• How long ago did the employment relationship end, and could limitation periods affect what can be recovered?

If questions like these apply to your situation, the team at UL Lawyers is available to discuss your circumstances. Reach out through /connect to start a conversation about your options.

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This article is automated commentary on a public court decision and is for general information only — not legal advice. Decisions rely on facts unique to each case. If you are affected by a similar issue, contact a lawyer for advice specific to your situation.