Contractor or Employee

Perhaps one of the most controversial dynamics to emerge with the “fee-for-service” social service industry created by the Autism Funding of BC is the debate about the “status” of the workers performing autism interventions. This discussion harbours many participants ranging from parents who “hire” professionals and front-line staff as independent contracts, to service providers who wish to be treated as independent contractors, to workers who wish to be treated as employees, to agencies providing a list of service providers to be “contracted” by the parents, to agencies who hire service providers as employees.

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.

Based on our interpretation of the information below (as well as on considerable additional materials), Pivot Point believes that all front-line service providers must be employees. As such, all Behaviour Interveners, Child Care Workers, Tutors, and Respite & Rec Workers at Pivot Point are hired as employees. This lets us properly manage all WCB and Commercial General Liability Insurance, all EI/CPP and Income Tax implications, as well as all Employment Standards requirements (such as compulsory 4% vacation pay, twice monthly payment, etc.), so that parents do not need to become employers.

Some of our professional service providers, such as some Behaviour Consultants, Speech Therapists, Occupational therapists, and Counsellors 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.

The information below is based on the Canadian Federation of Independent Business – CFIB (Produced and verified: 2006-05-25). It is presented here to help inform consumers in the autism community about some of the issues related to hiring their own staff to work in a home-based autism program.

Please recognize Pivot Point’s 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:

“CONTROL”
“OWNERSHIP OF TOOLS & EQUIPMENT”
“RISK OF PROFIT/CHANCE OF LOSS”, and
“INTEGRATION”

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.

The main difference between employees and contractors is the payer’s authority to exercise control over not only what work will be done, but the manner in which it is done. Even if the control is never exercised, this factor is strong evidence that an employer / employee relationship exists. Similarly, with an independent contractor the employer is entitled to stipulate what is done or what result is achieved but not the manner in which it is completed.

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. (Privately hired BI’s, CCW’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 (or residence) 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 lead 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 (to the payer), 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, CCW’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.)

Where the payer supplies tools, equipment, materials, etc., it is indicative of control over the worker. (In nearly every situation where a family hires a private BI, CCW, or Tutor, the family purchases all of the Program Supplies required for the child’s program. BI’s, CCW’s, and Tutors are not normally expected to purchase these supplies on their own for use with the client.) It also indicates a substantial investment in the business on the part of the payer. This supports an employer/employee relationship. Alternatively, where the worker provides the tools, equipment, materials, etc., it indicates a lack of control by the payer. This also indicates (depending on the size of the investment) that the worker is in the business as a self-employed contractor with an investment into that business. However, this does not necessarily apply to occupations where it is customary for employees to use their own hand tools (i.e. mechanics). (The home computers, cell phones, and cars of BI’s, CCW’s, and Tutors would not normally constitute “equipment” required FOR their work as they are not essential for the service of therapy.)

This indicates that a person is in the business to make money and is at risk of losing money as opposed to earning a fixed wage / salary or ongoing commission. (Because BI’s, CCW’s, and Tutors work for a fixed wage, they cannot increase their profit by working faster or smarter; nor are they at risk of loss by not being able to provide a specific result in a specified amount of time). In contrast, Behaviour Consultants working as independent contractors could negotiate a specific amount of hours in which they will deliver their specific results.. thereby increasing their potential profit.

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 or her own commercial activities, this demonstrates an independent status. The worker is acting on his or her own behalf, is not dependent on the payer’s business and is in business for him/herself.

Where the worker integrates his/her activities to the commercial activities of the payer, an employer-employee relationship probably exists. The worker is acting on behalf of the employer, is connected with the employer’s business and is dependent on it.

Professionals (i.e.: Lawyers, Doctors, Accountants, Engineers, etc.) (And by extension, Behaviour Consultants, Speech Therapists, Occupational Therapists, Counsellors – these workers provide good examples of “independent contractors” as they come with their own skills and tools, are not instructed on what or how to do the work, can subcontract the work you’ve hired them to do, do their work for you on their own schedule and often in their own “place of work”, and adhere to standards of practice established by their professional communities rather than being told how to do their work)

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 [potentially while making a profit], and professionals should have this freedom. 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.

Contractor or Employee

1. The Debate

2. Pivot Point’s Employees

3. How to Tell?

4. “Control”

Other control factors include:

5. Ownership of Tools & Equipment

6. Risk of Profit/Change of Loss

7. Integration

8. Professionals