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The question:

My employer has technically classified me as a contractor, but the contract I have is a letter of understanding as opposed to a real contract, and it was signed 12 years ago under another owner.

Recently I have been subject to bullying, demotion, humiliation and loss of wages from my employer, and for no real reason as I am highly competent. He has told me that I am the highest earner in my position, as if this bothers him.

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I have been billing him for HST since last year ever since Revenue Canada informed me that I was required to. I file my income taxes as if I were self employed. He verbally agreed last year he would only pay 6.5 per cent of the HST as we did not have any previous agreement, and recently he did not pay the HST at all.

I feel that based on my letter of understanding that I am more an employee and not a contractor, but I am treated like a contractor.

I am sensing a lot of negative actions from my boss and I fear that I am being set up to lose my job. I have suffered mental distress from his weekly harassment. If so, what can I do?

The answer:

Defining whether a worker is a contractor versus an employee is one of the few areas in workplace law where the courts, labour tribunals and government agencies consistently look beyond what was agreed to in writing to how the individual and the employer actually behaved. This is because many employers and employees deliberately declare that their relationship is independent from employment in order to take advantage of more lenient tax and regulatory rules. Therefore, a written contractor agreement or letter of understanding, by itself, does not demonstrate that an individual is truly a contractor or an employee.

There are different tests to establish when a worker is a contractor or an employee, but most ask the following questions: Does the employer control the worker's day-to-day tasks, or is he or she given a general job to complete? Who owns and provides the tools? Does the worker have a chance of profit or a risk of loss if the business is not successful? Can the worker hire other contractors? Can the worker work for other employers? Who is liable for the quality of the work? Does the worker receive benefits, vacation days and is he or she subject to the same policies and procedures as other employees of the business? Are statutory deductions made from the worker's pay?

In your case, your 12 years of tenure for this company, assuming you have not worked for others during this time, means you will probably be viewed as closer to an employee than a contractor for the purposes of assessing your workplace rights. This characterization will likely be made despite your letter of agreement and how your taxes are deducted and paid. Courts focus on permanency and dependency of a worker's job. The longer you work for one employer and the more dependent you are on this job, the more likely the relationship is akin to employment.

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Being characterized as an employee is important for most of your concerns about your treatment. As an employee, you cannot be unfairly demoted or disciplined, and your employer cannot reduce your wages. If this treatment became intolerable, you could claim it amounts to a constructive dismissal, leave, and then sue for severance, a remedy only made available to employees.

Daniel A. Lublin is a workplace lawyer and a partner at Whitten & Lublin.

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