Common Intention An Important Factor In Determining Independent Contractor Status, Tax Court Rules

• Published date: 13 August 2020
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Trials & Appeals & Compensation
• Law Firm: Stikeman Elliott LLP
• Author: Mr Gary Clarke, Julie D'Avignon, Maja Blanchette and Gordon Masson

Tax Court of Canada clarifies that in situations where a payor and a worker share a common intention regarding the classification of their relationship, their relationship will be the relationship that they intended, even if the objective indicia are inconsistent with that common intention, provided that the parties act and carry on their relationship in a manner that is similar to what one would expect from their intentions: Insurance Institute of Ontario v. M.N.R., 2020 TCC 69.

The Tax Court of Canada has recently rendered a decision clarifying the role that an employer's and a worker's subjective intentions will play in the test used to determine the nature of the relationship (i.e., whether the worker is an independent contractor). In particular, in circumstances where the parties share a common intention that is inconsistent with the objective indicia of the intended relationship, the parties subjective intentions will be relevant if the parties act in a manner that is similar to what would be objectively expected.

Facts

The Insurance Institute of Ontario (the "Institute") entered into a series of contracts with PB regarding his work as an instructor with the Institute. The contracts clearly stated that the Institute and PB intended that PB would be an independent contractor. The Minister of National Revenue (the "MNR") disagreed that PB was an independent contractor and classified him as an employee. The Institute appealed the ruling. The main issue in the appeal was the application of the second step of the two-step test set out by the Federal Court of Appeal in 1392644 Ontario Inc. (Connor Homes) v. Canada (National Revenue) 2013 FCA 85, as outlined below.

Both the Institute and the MNR agreed that the question of whether PB was an independent contractor or an employee had to be addressed in accordance with the test set out by the Supreme Court of Canada (the "SCC") in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc. 2001 SCC 59. In Sagaz, the SCC concluded that although there is no universal test for determining whether a person is an independent contractor or an employee, the "central question is whether the person who has been engaged to perform the services is performing them as a person in business on his own account".

The parties also agreed that the central question, as set out in Sagaz, was to be answered in accordance with the two-step test set out by the Federal Court of Appeal in Connor Homes. The first step of the Connor Homes...