In Quebec, the distinction between an employee and an autonomous worker finds its importance in the application of fiscal laws and of the diverse laws protecting employees (Labour Standards Act, Industrial Accidents and Occupational Diseases Act (CSST), Employment Insurance Act, etc.). Erroneously qualifying a worker can have grave consequences not only for that worker, but also for the employer. Furthermore, we recently noticed that the fiscal authorities seem to take an increasing interest in this question, all in the name of public finances! It appears that the government prefers to periodically perceive sums deducted at source by the employer.
The diverse administrative and governmental instances, which including the fiscal authorities, the Labour Standards Commission, the C.S.S.T. and the Employment Insurance Commission of Canada, may retroactively revise a worker’s status; thus the importance of appropriately qualifying the labour relation from the start. Furthermore, the worker could himself require to be deemed an employee, if he would so gain an advantage. Such advantages are numerous: severance pay, employment insurance payments, indemnities for injuries resulting from work-related accidents, etc.
It is not sufficient for a contract to declare that the worker is independent for his to be deemed so. Hence, it is primordial for the employer to appraise the factual nature of the work relation. Throughout the years, the tribunals have developed multiples criteria distinguishing the employee from the autonomous worker. These criteria can be classified in four (4) broad categories: 1) effective control; 2) economic reality; 3) integration, and 4) attitude of the parties toward their relationship.
A worker is deemed an employee when he labours under the effective, factual control of his employer. The following questions are useful to appraise the degree of control exercised by the employer over the worker:
- Who is in charge of planning out the work to be carried out?;
- Who establishes the sum and frequency of remuneration?;
- Who establishes the methods and procedures used to carry out the work?;
- Who assigns and supervises tasks?;
- Can the worker be substituted by a person of his choice whenever he wants?;
- Who establishes the hours during which the work must be carried out?;
- Who establishes the deadlines?
If the answer to the majority of these questions is “the employer”, it indicates that said employer holds effective control over the worker’s activities. In such a case, chances are that the worker can be deemed an employee.
In an employer/employee relationship, the employer usually takes upon himself the risks of pecuniary loss, supplies all equipments and tools used by the employee, and gains all the profits generated by the work carried out. The following questions are useful to better define the relationship between the employer and the worker:
- Who owns the tools and equipments necessary for the worker to carry out his work? ;
- Who pays the maintenance costs for those tools and equipment? ;
- Who takes upon himself the costs related to bad debts and the risks of pecuniary losses pertaining to the business’ exploitation? ;
- Who assumes the expenses generated by the execution of the worker’s tasks? ;
- Who benefits from the profits generated by the enterprise?
Once again, if the answer to most questions is “the employer”, it tends to indicate the existence of an employer/employee relationship
If the analysis of the work conditions in light of the first two criteria did not establish clearly the nature of the work relationship, the criterion of integration should settle the issue.
The notion of integration is analyzed from the worker’s viewpoint, not the employer’s. In a nutshell, the question is whether the worker integrates the employer’s activities within his own or if he integrates his own activities within the employer’s. As the distinction is rather subtle, the following questions are useful to the analysis:
- Is the work carried out necessary to the good operation of the employer’s business? ;
- Does the worker have other income sources that grant him financial freedom from the employer’s business?
The worker who integrates his employer’s activities within his own is autonomous from the employer’s business. Thus, the relationship is deemed a business relationship rather than one of employment.
Attitude of the Parties toward their Relationship
This last criterion takes in account the material conduct of the parties. The contract in whole, the behaviors of both the worker and the employer at the time of the contract’s renewal or end, as well as all written communications between the parties are analyzed so as to establish the real nature of the relationship. The simple mention on the contract that the worker is autonomous does not suffice; the actual relationship between the employer and the worker must reflect in facts this autonomy. Thus, for the fiscal authorities, the nature of the work relationship is a question of facts, rather than of textual definition by the parties.
Finally, one must remember that the various governmental and administrative authorities (federal and provincial Ministries of Revenue, Labour Standard Commission, C.S.S.T., and Employment Insurance Commission of Canada) are not bound by the definition given by the parties to the worker’s status. Those agencies will appraise the work relationship in accordance to its factual context, via the four aforementioned criteria.
Moreover, even if a worker accepts or desires the status of an autonomous worker, and this way gains certain fiscal advantages, nothing bars him form changing his mind. He can himself request a new qualification of his work relationship and demand the retroactive application of the various employee-protection regimes granted by law.
When it is the desire of the parties to enter an employee-autonomous worker relationship, they must make provisions accordingly. The relationship must be built on sound bases and the parties must insure that the four criteria are met. Also, it is primordial to conclude a written agreement to govern their relationship in a precise fashion. In short, the contract’s text should unambiguously convince the reader that the worker is autonomous in light of the four criteria. To attain this, it is judicious, if not essential, to retain professional counsel.
Last update: February 2006