written on behalf of Feigenbaum Law
In a previous blog post, we discussed a decision from the Tax Court of Canada in which the Minister of National Revenue (the “Minister”) had determined that an individual who performed work for the appellant company was considered an employee rather than an independent contractor, as the company considered him to be.
This blog post will summarize a new decision from the Tax Court of Canada in which the Minister of National Revenue believed that a worker was an employee, despite conflicting claims from the worker’s employer regarding his status as an independent contractor.
Teacher worked for an insurance company during the summer
In the case of Co-Operative Hail Insurance Company Limited v. M.N.R, the appellant insurance company had hired a worker from April 1 to September 30, 2016. The worker was a licensed crop hail adjuster and was responsible for inspecting and assessing hail damage to crops before obtaining the crop producer’s concurrence as to the loss, after which the insurance company would provide payment for.
When the Minister confirmed the decision of the Canada Revenue Agency (“CRA”) which determined that the worker was an employee, the employer found itself in violation of both the Canada Pension Plan as well as the Employment Insurance Act. The employer appealed the CRA’s decision and brought the matter before the Tax Court of Canada.
During the hearing, it was established that the worker was employed full-time as a secondary school teacher and a vice-principal throughout the school year. Due to his ability to pursue other work opportunities in the summer months, the worker obtained his license as a crop hail adjuster in 2012 and worked in the insurance industry during summer break.
Employment contract classifies worker’s position as an independent contractor
When determining whether a worker is an employee or an independent contractor a variety of factors must be considered, including:
- whether the worker provides their own equipment;
- whether they hire their own helpers;
- the degree of financial risk taken by the worker;
- the degree of responsibility for investment and management;
- the opportunity to profit in the performance of their tasks; and
- intention of the parties.
The worker and insurance company entered into an agreement in 2016, which was titled “Independent Hail Adjusting Contract Agreement.” The agreement specifically stated that the worker was an independent contractor who performed work for the employer. The agreement provided that:
- there were no guarantees as to how much work would be available to the worker;
- the worker was responsible for paying his own income taxes and making Canada Pension Plan (“CPP”) contributions;
- the company would not oversee the work being done by the worker or instruct him in how to do his job; and
- the worker was allowed to decide which adjusting methods he would follow and was to do so within the requirements of his provincial adjusting license.
Agreement terms provide worker with flexibility
In terms of performing the work required under the agreement, the worker was able to decide whether he would accept or decline the assignments presented to him. The worker indicated that he tended to accept work assignments which allowed him to remain close to his home and did not interfere with his family’s summer schedule.
In determining the worker’s employment status, the Court also considered how the worker was paid and whether he was provided with any company equipment to perform his work. The worker accepted the insurer’s payment terms, which included a daily flat rate pay and a flat rate to cover accommodations, lodging and telephone if he was required to stay overnight to complete a work assignment. The worker was also expected to use his own vehicle to facilitate travel to and from the work assignment locations, for which he was compensated at a flat rate per kilometre. Further, the worker could accept work assignments from other insurance companies.
Court deems worker an independent contractor
After considering the above factors, the Court also looked at the “opportunity for profit in the performance of tasks”. It determined that the amount of profit the worker could make was entirely based on his willingness to accept more work. There was, however, no risk of loss beyond refusing work that was offered to him.
In conclusion, the Court determined that the worker was an independent contractor instead of an employee. The Court allowed the insurance company’s appeal, thereby removing the worker’s responsibility for employment insurance and CPP contributions.
Feigenbaum Consulting helps employees and employers understand their tax obligations
The skilled tax lawyers at Feigenbaum Consulting help clients work through various tax and legal issues. Our team provides comprehensive advice on various issues, including corporate tax compliance in Canada and the United States and strategic solutions for those looking to expand their business across the border. To arrange a confidential consultation with a member of our team, contact us online or call us at (416) 468-7298.