THE QUESTION
I have been working for 13 years as a contractor, but have been treated like an employee. Based on my research, I should be deemed an employee by law. My employer sets my wage, gives or deducts bonuses based on work performance and provides training and all the equipment needed to complete the job. I'm not allowed to work for any other company, and supervisors come and check my work. I do end up paying less tax. This is my concern: If this thing blows up and I'm fired, will I be entitled to severance? Also, if the government gets involved, would I be liable for EI and other deductions?
THE FIRST ANSWER
Daniel Lublin
Partner at Whitten & Lublin employment lawyers, Toronto
Many workers with only one employer will be viewed by regulators and the courts as "employed" – even if the company and the worker call it something else. Although both sides may benefit from characterizing the relationship as something other than employment, it is no surprise that severance disputes arise when that relationship ends. In these disputes, court and provincial ministries of labour focus on the financial dependency and permanency of the relationship. Individuals engaged with only one employer will likely be viewed as employees for the purposes of severance. In your case, this is what I expect would occur.
Both sides have risk if the Canada Revenue Agency ever audits the relationship and finds that it was truly one of employment. The employer may be required to pay penalties and payroll remittances that should have been made on your behalf. You could be held responsible for any unpaid income taxes that were not remitted, based on a different tax rate than what you were reporting on your own.
THE SECOND ANSWER
Eileen Dooley
Vice-president, VF Career Management, Calgary office
Contract opportunities can be a flexible, transitional move for workers, especially for someone out of work. A contract can provide some fast income with clear expectations on the start and stop of work. For some, it is a preferred way of working; however, the person needs to be mindful of what they can expect from the company and what they in turn need to provide. For example, will the contract include equipment such as a computer? Will the company provide office space? Or is there an expectation to work from home? These can be a huge factors when quoting an hourly, daily or project fee.
Any out-of-pocket costs the contract does not include need to be filed as part of the person's income tax as expenses, thereby minimizing tax implications. So the contractor needs to keep all their receipts and record work-related mileage. In addition, as the contract comes to an end, the person should be inquiring about an extension; if the contract won't be extended, they need to alert companies they will be available for work in the coming weeks. In other words, contractors needs to look out for themselves, as their relationship with the company is defined differently than that of an employee.
Daniel Lublin
Eileen Dooley