Background
The Canada Revenue Agency determined that office assistant Tisha Smith had been engaged in pensionable and insurable employment by chiropractor John Varga and Kirsten Thomas Chiropractic Professional Corporation from January 1, 2022, through November 21, 2024. The two payers appealed under the Canada Pension Plan and Employment Insurance Act, and Smith intervened.
Smith separately performed administrative work for each chiropractor under verbal agreements, invoiced them for their respective tasks, and generally worked about 17 hours per month with no guaranteed hours. All parties understood from the outset that she was an independent contractor: no income tax, CPP, or EI amounts were withheld, and she received no T4 slips, record of employment, benefits, bonuses, or vacation-leave credits. Smith had substantial discretion over when and how she completed the work, although the clinic supplied the principal equipment and she had no significant investment, financial risk, or opportunity for profit beyond working additional hours.
The Court’s Holding
The Tax Court allowed both sets of appeals and held that Smith was not engaged in pensionable or insurable employment with either appellant during the period at issue. It therefore rejected the CRA’s employee classification. No costs were awarded.
Justice Sorensen applied the two-stage approach under which the court first identifies the parties’ mutual intention and then considers whether the objective circumstances are consistent with it. The parties knowingly and continuously intended a contractor relationship, and the usual factors did not contradict that intention: control favoured contractor status, financial considerations favoured employment, the tools factor carried reduced weight because patient confidentiality required use of clinic equipment, and the evidence concerning substitution was neutral.
The Court emphasized that intention is not conclusive and cannot override the relationship’s objective reality. Here, however, the conventional factors were inconclusive rather than incompatible with contractor status, so the parties’ informed and consistently implemented choice was respected. The Court also confirmed that “integration” is no longer a separate factor in the employee-versus-contractor analysis.
Key Takeaways
- A mutual, informed intention to create an independent-contractor relationship can carry substantial weight when the objective circumstances are not inconsistent with that intention.
- No single factor controls worker classification; courts assess the overall relationship, including control, tools, opportunity for profit, risk of loss, and the ability to hire helpers.
- Use of a payer’s equipment may receive limited weight where operational necessities such as patient privacy and data security require work to be performed on site.
Why It Matters
The decision illustrates how the Tax Court approaches close CPP and EI classification disputes when the traditional factors point in different directions. A contractor label alone is insufficient, but a knowledgeable worker’s informed agreement—supported by the parties’ conduct—may resolve an otherwise inconclusive analysis.
Businesses and workers should ensure that their actual practices align with their intended relationship. Courts will respect genuine arrangements between arm’s-length parties only where the objective reality does not undermine the status they selected.