20 December 1995 Internal T.I. 9524426 - BC DEPENDANT CONTRACTOR, EMPLOYEE STATUS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Can a BC Dependant Contractor which is an employee for purposes of Labour Code of British Columbia be considered an employee for purposes of the Act?

Position:

Question of Fact but probably not.

Reasons:

Each contract would have to be reviewed on a case by case basis.

							December 20, 1995

HEADQUARTERS HEADQUARTERS
Registered Plans Division M.P. Sarazin
Stella M. Black (613) 957-3499
Director
Attention: J. Hollinger
952442

Dependent Contractors

This is in reply to your memo of September 11, 1995 requesting our opinion on whether dependent contractors considered "employees" for purposes of the "Labour Code of British Columbia" (the "LCBC") would also be considered "employees" for the purposes of accruing a pension benefit in a registered pension plan. "Registered pension plan" has the meaning assigned by subsection 248(1) of the Income Tax Act (the "Act").

Facts

XXXXXXXXXX

pursuant to the LCBC, an "employee" is defined to mean a person employed, and includes a dependent contractor, and an "employer" is defined to mean a person who employs one or more employees or uses the services of one or more dependent contractors. "Dependent contractor" is defined to mean a person, whether or not employed by a contract of employment or furnishing his or her own tools, vehicles, equipment, machinery, material, or any other thing, who performs work or services for another person for compensation or reward on such terms and conditions that he or she is in relation to that person in a position of economic dependence on, and under an obligation to perform duties for, that person more closely resembling the relationship of an employee than that of an independent contractor (emphasis added). Consequently, it is their view that dependent contractors that are employees for purposes of the LCBC should also be employees for purposes of the Act.

You have requested our views on whether the dependent contractors would be considered employees for the purpose of the Act and the Income Tax Regulations (the "Regulations").

Comments

For purposes of the Act, the determination of whether there is an employee/employer relationship can only be determined on a case by case basis and such a determination would include a review of all of the relevant contracts. The fact that a contractor may be considered an employee for purposes of the LCBC would not necessarily result in the contractor qualifying as an employee for purposes of the Income Tax Act.

The Department would rely on the basic tests developed by the courts and the Tax Review Board in deciding whether a particular contract is a contract of services (employer/employee relationship) or a contract for services (client and independent contractor relationship). However, we are of the view that if an employer/employee relationship does in fact exist then the contractor would be considered an employee for purposes of the Act and he or she would be eligible for participation in the SMEP. Conversely, where an independent contractor relationship does in fact exist, the contractor would not be an employee for purposes of the Act and he or she would not be eligible for participation in the SMEP.

We trust the above comments will be of assistance to you.

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch