What do you mean you are what?
BusinessIndependent Contractors: An Employer’s Perspective
“What do you mean you are filing a UI claim? You signed a contract that states that you are not an employee and that our organization would not make UIC deductions from your earnings.”
Believe it or not, some independent contractors (or consultants) tell UIC officials that they were employed even though they signed a contract clearly stating that they are not employees and even though they tell Revenue Canada that they work. on your own based on your income. tax returns. And in some cases, the judge hearing the claim will find that the person was actually employed.
For some functions, particularly those that are not an integral part of an organization’s business, entering into an independent contractor agreement can be a very good idea.
If structured properly, the benefits of an independent contractor agreement can increase for both the employer and the independent contractor.
The employer avoids the cost of expensive employee benefits and is not required to pay various payroll taxes such as UIC, CPP, workers’ compensation, and employer health tax. The employer also avoids having to deal with employee complaints filed with government agencies such as the Ministry of Labor and the Human Rights Commission. On the other hand, the independent contractor does not have to pay UIC and can write off certain contract-related expenses, such as a home office and car expenses.
In deciding whether a true independent contractor relationship exists, the courts (and government agencies) look at the substance of the relationship to determine whether an independent contractor or employment relationship exists. Often the following factors are considered in making this determination: control (ie, does the consultant work a specific number of hours each week); property of tools; profit possibility; and risk of loss (i.e., does the consultant pay for contract-related expenses, such as office expenses, telephone charges, gas costs, etc.)
If the relationship is not carefully structured, this type of arrangement can result in significant legal exposure to the employer if the individual (or a government agency) later claims they were an employee.
Here are some situations in which a consultant may assume the position that he is an employee and what this means for the employer:
o The consultant is injured in an occupational accident, the Occupational Safety and Health Branch of the Ministry of Labor investigates the accident and accuses his organization of a violation of the Occupational Safety and Health Law. If the consultant is determined to be a worker and the violation is proven, the organization could be liable for a fine of up to $ 500,000.
o The consultant’s contract is terminated without notice and he files a complaint under the Labor Standards Act and / or wrongful termination lawsuit. If the consultant is determined to be an employee, a Labor Standards Officer may order the employer to pay the consultant monetary damages, including severance pay, increased vacation pay, overtime pay, and / or severance pay. Similarly, a court could order the employer to pay the consultant compensation for failing to provide reasonable notice of termination.
Even though a person agrees in writing that they are an independent contractor, they can still claim later that they are in fact an employee and enforce all of an employee’s rights. If the employer exercises a significant amount of control over the person, then a judicial or administrative court can and has agreed with the person. So, if you are considering hiring an independent contractor, speak with an attorney about how you can structure the relationship to minimize your organization’s legal exposure.
Independent Contractors: A Contractor’s Perspective
If you want to be paid as an independent contractor (or consultant) in order to claim certain expenses, such as a home office, a car, etc., you must carefully structure the agreement and enter into a written contract to ensure that it can withstand the scrutiny of Income. Canada or the courts.
However, you should know that organizations often propose this type of arrangement because it saves the organization money by avoiding payroll taxes and costly employee benefits, and because this arrangement denies you certain legal rights that you would have as an employee. . For example, as an independent contractor, you are not entitled to overtime pay, holidays, or vacation pay under the Labor Standards Act; your income is not insurable income under the Employment Insurance Act; and you have no rights under the Ontario Human Rights Code if you are discriminated against.
Until recently, if both parties wanted to create an independent contractor relationship, it was usually no problem. Now, however, Revenue Canada is studying these types of agreements as part of its audit function and, in some cases, concludes that the independent contractor is in fact an employee even if the parties have agreed in writing that a contractor relationship exists. Independent.
In deciding whether an independent contractor relationship exists, adjudicators look at all of the circumstances surrounding the relationship, including the following factors: control; property of tools; profit possibility; and risk of loss.
I would like to thank Christine for helping me with this article. Christine has many years of WSIB and MOL experience and has countless hours as a consultant. It is an independent company that implements the correct best practices policies, procedures and documents for companies. Christine would be happy to assist with any director, manager, and supervisor training related to human rights, conflict, focused training, harassment, written reports, and employment issues, among others. Send me a message and I’ll get in touch with Christine.