1. What is a Dependent Contractor?
In an Ontario Court of Appeal decision called McKee v. Reid’s Heritage Homes Ltd., the Court of Appeal made reference to a category of worker known as a “dependent contractor”. The court was clear that this is not a third category along with employees and independent contractors. Workers are either employees or contractors. If a worker is a contractor, in certain circumstances the court will go on to decide if that contractor is dependent or independent. The relevance of this question basically relates to notice upon termination. Where a dependent contractor relationship exists, reasonable notice will have to be provided on termination to the extent that it is not specified in any written agreement. A contractor could be deemed as “dependent” in Employment Court based on the following criteria;
- Control of Work
- Economic Vulnerability
- Ownership of Tools
- Risk of Loss/Profit
2. If I choose to use only PCSI Certified Contractors how is my organization protected from severance obligations associated with Independent Contractors?
The unique PCSI partner model significantly reduces the risk of your contractors being deemed to be “dependent” on your organization and in turn distances your company from a host of severance, potential tax and legal obligations that would otherwise be associated with those contractors.
3. Why am I not protected from the Dependent Contractor or Personal Services Business issues when I use an intermediary or 3rd party recruitment agency that does not leverage the PCSI Solution?
The courts generally ignore the existence of a third party intermediary when examining the relationship between an Independent Contractor and the hiring company. Please contact PCSI directly by calling 403-475-7274 or by emailing firstname.lastname@example.org to learn more.
4. Can we still access the PCSI Solution if we hire contractors through a 3rd party recruitment agency?
Yes, in most cases you can still access the PCSI Solution if you currently use a 3rd party recruitment agency. Please contact PCSI directly by calling 403-475-7274 or by emailing email@example.com to learn more.
5. Can we still access the PCSI Solution if we hire our contractors directly without using a 3rd party recruitment agency?
Yes, you can still access the PCSI Solution if you hire your contractors directly without using a 3rd party recruitment agency. You can contact PCSI by calling 403-475-7274 or by emailing firstname.lastname@example.org to learn more.
6. Why do I need to focus on this now?
Over the last decade, the Canadian courts have created a massive potential severance liability for companies that utilize independent contractors by deeming many of these resources to be “dependent contractors” and therefore entitled to many of the same benefits owed to full-time employees, including severance upon the termination of a contract, legal fees associated with the severance process, and even legacy tax obligations incurred by your dependent contractors.
Over the past few years the Canada Revenue Agency has introduced significant changes to the business criteria and classifications that directly impact Independent Contractors, exposing them to tremendous financial risk upon reassessment. The unique PCSI model eliminates the risk of being reclassified as a “personal services business”. A PSB reclassification results in fewer tax advantages and exposure to reassessments that could amount to as much as $25,000 per year or greater.