Hiring Associates, Staff, or Dental Hygienists as Independent Contractors vs. Employees (Part 2)…

Dentist hiring staff…Independent Contractors vs. Employees?

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This is the second of a series of blogs I’m writing for dentists about hiring staff (e.g. associates, dental hygienists, etc.). In my first blog, I briefly examined the case of Bradford v. Canada (Minister of National Revenue – M.N.R.), [1988] T.C.J. No. 818, where the court found that a dental hygienist was an independent contractor and, as such, entitled to deduct certain business expenses. Now, I’m going in chronological order, so the next case I’m going to discuss case out a few years later; and the court held in this case that the dentist and some orthodontists were actually EMPLOYEES and NOT INDEPENDENT CONTRACTORS. So lets get to it, shall we?

Carovar Ltd. v. Canada

In Carovar Ltd. v. Canada (Minister of National Revenue – M.N.R.), [1989] T.C.J. No. 405, the tax court of Canada was dealing with the issue of whether a corporation owed money for insurance premiums on the basis that it had hired employees instead of independent contractors (which the corporation claimed). The corporation was owned by an orthodontist and his wife to provide management and administrative services ancillary to his practice. The corporation leased office space, owned the instruments, billed patients on behalf of the orthodontist for treatments administered in his office, paid all other accounts payable, and in return charged the orthodontist an amount equal to its operating cost plus a 10-15% mark up. The corporation received money from the orthodontist, who in turn received payments from patients as billed, retained a fixed monthly draw for his own purposes, and transferred the balance to the corporation’s accounts.

Now, importantly, the company hired associates (a graduate dentist and recent graduates in orthodontics). The question before the court was whether those associates were employees or independent contractors? If they were employees at law, then the company would owe Employment Insurance premiums for those employees over the course of 3 years: 1984-1986.

The Court found, after considering all the factors, that they were employees and that Employment Insurance premiums were owed. Here’s Millar D.J.T.C. came to that conclusion.

The Agreement:

First, when it came to the contract between the company and the employees, it was oral. It was agreed that they were to be paid the standard dental profession commission of 40% of fees earned. There were no fixed or minimum salaries. No notice was required for either side to disengage each other. Associates received no benefit, nor was remuneration subject to deductions. This was totally different from the receptions, dental assistants, and dental hygienists – who were staff employees. Now, at first glace, this makes it appear as though the corporation was employing independent contractors and not employees. But the court had to consider all of the relevant factors; in other words, the terms of the ORAL AGREEMENT were NOT DETERMINATIVE.


On the issue of control, there was no supervision, the orthodontist who owned part of the corporation was regularly absent when new patients presented themselves, he gave no instructions on how the associates were to proceed, etc. The associates set their own fees covering services to patients and instructed the receptionist as to the amounts to be billed. So once again, it seems as though the associates are independent contractors on the basis that the orthodontist did not control the manner in which they provided services (as an employer would).

Opportunity for Profit

The court held that there wasn’t a real opportunity to make profit since the associates were simply paid on a piece work or hourly basis for the services which they performed. They didn’t operate their own practice whilst engaged for the orthodontist and therefore the profit factor (again in the entrepreneurial sense) was missing with respect to such work. Hence, they now appeared to be employees.

Risk of Loss

Here, the court held that it was the orthodontist who bore the risk of loss, not the associates, while treating patients. Hence, they were more like employees.

Ownership of Tools of Production

On the issue of who leased the premises and who owned the equipment, it was the orthodontist, not the associates. Hence, they resembled employees again.


Here, the court held that the work performed by the associates was repetitive and routine tasks; they were in no way performing work that was integral to their own practices but merely providing services to the orthodontist’s patients.

The court ultimately held, on a balance of probabilities (meaning 50% + 1% chance) that it was more likely that the associates were employees instead of independent contractors.


Based on Bradford and Carovar Ltd., it is becoming clearer what the courts will look at in determining whether a staff member (associate, dental hygienist, receptionist, dental assistant, etc.) is in reality an employer instead of an independent contractor: control, ownership of tools of production, ability to make profit, chance of loss, economic reality, and integration.

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