A recent Tax Court of Canada case considered whether an office assistant (an administrator) was an employee or independent contractor (IC) for multiple chiropractor professional corporations. CRA had determined that the worker was engaged in pensionable and insurable employment and assessed the payers with unremitted CPP and EI. The worker performed services under a verbal IC agreement and invoiced the payers separately for services provided to each.
Taxpayer won in this case. The court focused particularly on how mutual intention fits into the worker-status test, noting that the ultimate question is whether the worker is actually performing services as a person in business on their own account. Mutual intention does not replace that test. Rather, the court explained that intention provides the lens through which the parties’ actual conduct is assessed, and that the terminology used by the parties cannot override the objective reality of their relationship. The court further observed that the weight afforded to intention depends on the circumstances: an informed choice by parties who understand the consequences deserves more weight than a purported agreement involving a worker with limited understanding of employee versus IC status. In this case, both the worker and payers understood the distinction and deliberately chose IC status. Their conduct consistently reflected this intention, which included separate invoices, no source deductions, no T4s or record of employment and no employee benefits.
The court then examined the traditional objective factors through the lens of mutual intention to determine whether these factors contradicted the parties’ chosen relationship. The worker received little supervision (she was an experienced administrator), had discretion over how to accomplish her tasks and enjoyed considerable scheduling flexibility, which supported IC status from a control perspective. The financial risk and opportunity for profit angle pointed toward employment because she had essentially no investment, expenses or financial exposure and could increase earnings mainly by working additional hours. The tools were provided by the payers (work premises, computer and telephones), but the court discounted this factor because patient confidentiality and data security reasonably required use of clinic equipment. The ability to subcontract angle was neutral. The worker did find replacements when needed; however, those replacements were remunerated directly by the payers and not through the worker. Consequently, the objective factors were mixed and inconclusive; however, they were not inconsistent with the parties’ mutual intention. As such, the court concluded that it was an IC relationship, as originally understood by the parties. The payer was not liable for unremitted CPP and EI.
What this means for psychotherapists, social workers and psychologists
Many group practices are set up much like the clinic in this case. A front-desk administrator, and often associate therapists, are paid as independent contractors and send an invoice each month. This decision is a useful reminder that calling someone a contractor is not enough on its own. CRA and the courts look at how the relationship actually works day to day. A clear agreement that both sides understand carries real weight, but only if the practice’s conduct matches it. That means the worker invoices for their services, no tax, CPP or EI is deducted from what they’re paid, they get no T4, Record of Employment or employee benefits, and they have a real say over how and when they do the work.
The case also shows that some factors count for less in a health practice. Requiring the administrator to use the clinic’s computer, phones and records was not held against the clinic, because patient confidentiality reasonably requires it. The same thinking may well apply to the private health information that therapists, social workers and psychologists keep. Still, the stakes are real. If CRA decides a contractor is really an employee, the practice can be assessed for the CPP contributions and EI premiums it should have deducted, both its own share and the worker’s, plus penalties and interest, and it may not be able to recover the worker’s share from them. It can also face penalties for not withholding income tax from the worker’s pay. Before you bring on an administrator or associate clinician as a contractor, put the arrangement in writing, make sure both sides understand what it means, and check that the way you actually work together backs it up.
General information only, not tax advice for your situation.