By Michael Polychuk of Gowling Lafleur Henderson LLP
In January 2011, the Tax Court of Canada (the “TCC”) released two judgments, Prue v. M.N.R (“Prue”) and Smith v. M.N.R (“Smith”) in which it found that the individuals were operating as independent contractors rather than employees. The court examined the intention of the parties, since in both cases the appellants believed that their status had changed from independent contractor to employee over the course of the relationship.
The key question in determining whether an individual is an employee or independent contractor is whether or not the individual was engaged to provide services as a person in business on his or her own account as set out in Wiebe Door Services Ltd. v. M.N.R. (“Wiebe Door”). That case also provided a list of factors that may apply such as: the level of control, the ownership of the equipment, the degree of financial risk and the opportunity for profit. In 2001, the Supreme Court of Canada stated in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., that