Contractor or Employee
1. The DebateRead MoreClose
Regrettably, many parents fail to recognize that their home based intervention programs may actually be setting them up as “employers” of their intervention staff, in the eyes of Canada Revenue Agency, Workers Compensation Board, and Employment Standards Act of BC. Because of this risk, the following information is provided as a “discussion point” and is NOT intended to replace legal advice or professional consultation. As such, all parents are encouraged to thoroughly investigate the “Contractor or Employee” debate for themselves.
2. Pivot Point’s EmployeesRead MoreClose
Some of our professional service providers, such as some Behaviour Consultants, Speech Therapists, Occupational therapists, Physiotherapists, and Psychologists are contracted independently to the extent that they maintain substantive business operations outside of Pivot Point, and based on their autonomous working relationship with Pivot Point FGC Inc.
3. How to Tell?Read MoreClose
Please recognize Pivot Point’s own interpretation of the information below has been added in red italics to help make our position clear, and is not associated in any way with the Canadian Federation of Independent Businesses, nor with CRA, WCB, or Employment Standards Act of BC.
Canadian Federation of Independent Business
There is a four fold test that the Canada Revenue Agency uses to help determine whether or not someone is an independent contractor or an employee. The “four folds” include:
- “OWNERSHIP OF TOOLS & EQUIPMENT”
- “RISK OF PROFIT/CHANCE OF LOSS”, and
By merely saying that one party is an independent contractor, or having a lawyer draft an agreement does not legally or conclusively ensure that the party is an independent contractor. The legislation is specific, but due to the many forms of contract work the rulings often fall into very grey areas.
None of the following factors on their own are conclusive, but all contribute to the decision on whether a worker is an employee or an independent contractor.
Note: Throughout this material, the employer is commonly referred to as the payer.
4. Fold 1 – “CONTROL”Read MoreClose
Other control factors include:
Method of Pay. Payment for work by the hour, week, or month as opposed to a lump sum may be considered strong evidence of an employer / employee relationship. (BI’s, CCW’s, and Tutors are typically paid hourly, suggesting employment)
Hours of Work. Specified hours of work is a strong indication that the worker is an employee, and freedom to choose his/her own time of work is an indication that the worker is a contractor.
Traveling Expenses. Payment by the payer of the workers’ traveling expenses and other expenses incidental to the payer’s business can indicate control over the worker.
Employee Benefit Plans. Does the payer contribute on behalf of the worker? Are the plans for the specific benefit of employees? If so, this tends to indicate an employee relationship.
Training. Training of a person by an experienced employee, by correspondence, by required attendance at meetings, or other methods is a factor of control because it indicates the payer wants work performed in a particular manner. An independent contractor generally uses his / her own methods and comes with their own expertise. Therefore, the independent contractor should receive no training from the payer. (In private ‘home based’ programs BI’s often receive required training via the family’s hired Behaviour Consultant on behalf of the client family. This may suggest an employment relationship)
Full-time Service to the Payer. If a worker must devote full time to the business of the payer, the payer then has control over the amount of time the worker spends working and therefore restricts him/her from other gainful work. If a person provides services or represents a number of firms at the same time, it can indicate an independent status. (However, “moonlighting” – holding employment in multiple businesses – should not be confused with providing “independent service” to multiple firms… that person may simply have an “employment relationship” with more than one employer)
Facilities Provided by the Payer. Providing the work space, equipment and the furnishings necessary to the work tends to indicate control on the part of the payer. On the other hand, if the worker has a substantial independent investment (i.e. lease / rent / own) in the facilities used in performing services this tends to show an independent status. (BI’s, CYC’s, and Tutors work in the space provided by the payer, namely, the client’s home. Furthermore, all Program Materials are typically purchased by the payer (that then become the property of the family/payer. This may suggest an employment relationship)
Payer’s Premises. Work done on the payer’s premises is not by itself an indication of control but it does imply that the payer has control especially when work can be done elsewhere. A person working in the payer’s place of business is physically within the payer’s direction and supervision. In addition, the use of desk space, telephones, etc., provided by the payer places the worker within the payer’s direction unless the worker has the option to use other facilities.
Establishes Routines and Schedules. If a person must perform work in the order or sequence set out by the payer, it shows the worker is not free to follow his/her own pattern of work, but must follow the established routine or schedule of the employer.
Compliance with Instructions. A person required to comply with instructions about when, where, and how he/she is to work is ordinarily an employee. (Typically, in home-based therapy programs, the BI’s, CCW’s, and Tutors are expected to follow the directives of Behaviour Consultants (and/or other professionals) contracted by the parents. Through this, parents are telling the worker what to do and how to do it. This may indicate an employee relationship)
Oral or Written Reports. If regular reports must be submitted to the payer, it indicates control in that the worker is compelled to account for his/her actions.
Right to Discharge. The right to discharge (AKA, “fire a worker”) is an important factor for indicating control through the ever persistent threat of dismissal. An independent contractor normally cannot have his/her work terminated without liability, as long as he/she produces a result which measures up to the contract specifications. (In other words, contractors have a “contract” and must typically be paid for all work completed under that contract – when done to an acceptable standard – whereas employees may be fired at any time, with severance, if required. If the payer has the right to terminate the working relationship at any time (as opposed to having to “end a contract”, “not renew a contract”, or “terminate a contract”), an employee relationship may exist.
Specific Result acknowledges that an independent contractor is usually hired to do a very specific job. Once completed the business relationship is over. On the other hand, employees are available for a variety of tasks in a continuing relationship. (When hired by families, BI’s, CYC’s, and Tutors are hired for an indefinite amount of time to provide therapy services but with no clear termination or completion criteria; this may indicate an employee relationship.)
5. Fold 2 – “OWNERSHIP OF TOOLS & EQUIPMENT”Read MoreClose
6. Fold 3 – “RISK OF PROFIT/CHANCE OF LOSS”Read MoreClose
7. Fold 4 – “INTEGRATION”Read MoreClose
Integration has to be considered from the point of view of the worker, not the payer. Where the worker integrates the payer’s activities to his own commercial activities, this demonstrates an independent status. The worker is acting on his own behalf, he is not dependent on the payer’s business and he is in business for himself.
Where the worker integrates his activities to the commercial activities of the payer, an employer-employee relationship probably exists. The worker is acting on behalf of the employer, he is connected with the employer’s business and is dependent on it.
8. ProfessionalsRead MoreClose
The manner and degree to which a professional has become integrated into the payer’s operation is a deciding factor. Following are some factors which can be used to establish integration:
- Is the professional restricted from hiring associate professionals or engaging substitutes if he/she is absent from work? (BI’s, CCW’s, and Tutors cannot subcontract their work to another worker, and professionals should have this freedone. Otherwise this may indicate an employment relationship)
- Is the professional permitted to engage in private practice where his/her services can be offered to the public? If so, is there a provision that he/she may not assume outside duties to the detriment of his primary services to the payer?
- Does the professional have to follow a schedule of fixed hours of work which is to be followed without substantial deviation?
- Is the professional subject to the direction and control of the payer? Must he/she comply with the payer’s general policies?
- Is the professional accorded the rights and privileges which the payer has created or established for other employees (i.e. benefit plans, vacation pay, etc.)?
- Does the professional get paid monthly or bi-monthly for the hours of service provided? (Most independent contractors submit an invoice to the payer, which triggers and determines payment, whereas employees typically submit timesheets and the payer determines payment based on “wage X hours”)
Answering yes to most or all of these questions gives Canada Revenue Agency a strong indication of employee status rather than independent contractor status. If you have any questions as to the status of a worker you can contact the following office for advice: Canada Revenue Agency Telephone: 1-800-959-5525.