Associates, Staff, or Dental Hygienists: Independent Contractors vs. Employees?
Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice, you should seek professional assistance (e.g. make a post on Dynamic Legal Forms). We have Toronto, Ottawa, Hamilton, Mississauga, Brampton, and other Ontario business lawyers registered on the website who can answer your questions or help you. I should know – I’m one of them and you can contact me directly (firstname.lastname@example.org).
So, in the next series of blogs, I’m going to be reviewing and summarizing some Ontario cases where courts have had to deal with the issue of whether a dental hygienist is an independent contractor or an employee. The bottom line is that it doesn’t really matter whether a dentist is hiring an associate, administrative assistant, or dental hygienist to provide services; what matters is how they structure the relationship and what the LEGAL consequences are of improperly structuring it.
The situation typically arises as follows: a dentist has a service corporation. That corporation hires the dental hygienist to provide services to the dental clinic’s patients. The relationship is structured as an independent contractor / client. This means that the client corporation doesn’t withhold, deduct and remit taxes for the dental hygienist. Nor does the client corporation make Canada Pension Plan contributions or Employment Insurance premiums on behalf of the dental hygienist. The dental hygienist may be carrying on business through their own corporation, through a partnership, or a sole proprietorship. So what could go wrong, you ask?
Well, the Canada Revenue Agency may allege that the dental hygienist is legally an employee. As such, the employer corporation would have to pay for his or her taxes, CPP, and EI. Ouch! And this may be for a number of years, with interest and penalty adding up quickly.
So you can see that the implications of being an independent contractor vs. an employee are significant to the employer / client. So how do you know if the relationship is legally an independent contract / client or an employee / employer? Well, the courts have developed a number of tests and criteria to make that determination. We’ll get into those criteria in the next blog, but for now, lets take a look at how the courts got there… We’ll start in chronological order, shall we?
Bradford v. Canada – Was the dental hygienist actually an employee? Nope!
In Bradford v. Canada (Minister of National Revenue – M.N.R.),  T.C.J. No. 818, the issue before the court was whether a B.C. dental hygienist was an independent contractor or an employee for tax purposes. The dental hygienist claimed that, for part of the year, she was an employee and for the rest of the year, she was an independent contractor. As such, she was allowed to deduct certain business expenses against her business income – those expenses related to travel and attending a dental convention outside Canada. The government claimed that she was an employee the whole time and wanted to prevent her from deducting those expenses.
The Court rules in favour of the dental hygienist taxpayer as an independent contractor. Taylor T.C.J. examined the TERMS OF THE CONTRACT between the dental hygienist and the dental clinic that paid her and also examined the REALITY of that relationship. With respect to the latter, the Court found that various FACTORS (based on previously decided cases) helped prove that the dental hygienist was legally an independent contractor and not an employee. Those factors included the fact that:
- The dental hygienist set and maintained her own working hours;
- The dental hygienist provided dental hygiene services to patients with little or no instructions or interference from her alleged employer;
- The patients were never the dental hygienists;
- The dental hygienist claimed that her client was her alleged employer, not her alleged employer’s patients.
- The fact that dental hygienists are required by law to be supervised by dentists is NOT determinative; and
- The dental hygienist’s gross income and net income depended on her deciding on how many hours a week or days she could work, and on how much expenses she felt it reasonable to incur in earning that income
The court found that it must look at all of the factors to determine in each case whether a person is an employee or independent contractor. Those factors include things like: control over the work (e.g. setting hours, supervision), ownership of tools, ability to make profit or lose money, integration within the employer’s enterprise, and economic reality.
The bottom line is that no one factor is determinative and that the “prime factor in the determination of the Court” should be the intention and objectives of the parties, if clearly and unequivocally stated and agreed upon by the parties. So long as the REALITY coincides with that AGREEMENT, courts should find that the relationship was actually an independent contractor / client instead of an employee / employer. As such, the dental hygienist was allowed to make her business deductions.
In the next case, I’ll review Carovar Ltd. v. Canada (Minister of National Revenue – M.N.R.), where the Court came to the OPPOSITE conclusion from Bradford: the orthodontist and dentist were NOT independent professionals but were employees and liable to pay Employment Insurance!