Employee misclassification (independent contractor vs employee)

The CRA says employment status affects entitlement to benefits, withholding responsibilities and tax obligations, so status is worth checking in a business that relies on contractors. In its guide to employee or self-employed status, the CRA says it looks at the level of control the payer has over the worker’s activities, among other factors, and whether the worker or the payer provides the tools and equipment. It also says all of the facts, including the actual terms and conditions of employment, determine status, not just the intention. See the employee classification risk when buying a business.

Checking and rulings

The CRA says that if a worker or payer is unsure of the worker’s status, either can ask the CRA for a CPP/EI ruling. Separately, Ontario ESA s.5.1(1) says an employer shall not treat an employee as if the person were not an employee under that Act. That prohibition is Ontario’s; other provinces differ.

• Ask for each contractor agreement and how the work is actually directed
• Ask whether any contractor works only for the business, with its tools or on its schedule
• Ask whether the CRA has issued a ruling on any worker