October 9th - 2007

Merv’s column: Independent contractor put to test

The issue in this case was whether the mortgage broker was engaged pursuant to a contract of services or a contract for services.

The issue in this case was whether the mortgage broker was engaged pursuant to a contract of services or a contract for services. This issue must be resolved in light of the well known factors, referred to as the four-in-one test, as set out in Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025 and approved by the Supreme Court of Canada in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59 (CanLII), [2001] 2 S.C.R. 983.
 
The factors of this four-fold test are control, ownership of tools, chance of profit, risk of loss and, to a lesser extent, the degree of integration. However a review of the facts as they relate to each of these factors does not guarantee a magic formula where such a determination will always be automatically clear.
 
After reviewing the facts of this particular working relationship the Judge concluded:
 
“I believe the case law is clear that the manner in which individuals choose to characterize their working relationships may not always be determinative. This is certainly the case where the particular facts, analyzed within the four-fold test, point clearly in a direction opposite to the label the parties have chosen to apply to their work relationship. However, I believe that my analysis of the facts in this appeal show that this is a case that is very close to call. Some of the evidence is contradictory but in the end there are arrows pointing almost equally in both the direction of an employee and in the direction of an independent contractor. My assessment, of the total relationship between the parties, provides no clear conclusions and where that is the case then the intent between the parties in negotiating their working relationship must be given more weight than I would give to it in other appeals. Both parties indicated that they intended their work relationship to be that of an independent contractor. In addition the worker was an experienced mortgage broker with industry experience who would possess at least some knowledge and preconceived notion of how she wanted to approach this relationship with the Appellant. I cannot disregard the many areas where they acted and conducted themselves in a manner which would be consistent with their intention.”

MacInnis v MNR TCC 227

Merv's comments
This case indicates another effort by the federal Revenue folks to look closely at the “independent contractor” status of those in the real estate business. Would you pass the four tests?

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