Pizzadrivers.ca

DELIVERING YOUR PIECE OF THE PIE

FOR MANAGEMENT

In recent years Courts and Tribunals have found many workers to be employees despite the fact there existed an agreed contract between the parties. The factual conditions of the workplace have become more important in determining the relationship. Clauses in the contract that when questioned by Courts and Tribunals are found to be not the actual conditions of the workplace have been ruled void. This must concern management. Agreements to circumvent the Law have been ruled void. You cannot operate illegally because the parties agree. The result has been costly settlements and penalties. 

There are many parties that may be interested in the status of your delivery drivers, not the least, the drivers themselves.

Canada Revenue Agency.

If CRA suspect a loss in tax revenue due to the misclassification of your drivers, they may take an interest in the situation. 

E.I and CPP 

Canada Revenue Agency, Human Resources, responsible for EI and CPP, have a large stake in the worker’s status.  They have a full department assigned to investigating and determining the status of a worker. Check out the Federal Government’s criteria for employee or independent contractor at:

http://www.dg.ca/Employers/Resource-Library-Clients/Resource-Library.htm  

Note the following text from this CRA website:  

Considerations for the Payer

Payers take a significant risk in paying individuals as independent contractors where it is possible that the individuals are employees. If CRA subsequently determines that an individual was an employee, the payer could be forced to pay:

    * Interest and 10% penalty for failure to withhold income taxes

    * Both the employer's and employee's EI plus interest and penalties

    * Both the employer's and employee's CPP plus interest and penalties

    * The payer could be assessed for these amounts for up to four years. Under the CPP and EI Acts, it may be possible to recover a portion of the employee's share of EI and CPP from the employee but only up to 12 months.

Practically, CRA often becomes aware of the arrangement when a terminated contractor applies for EI benefits. The other major risk is a CRA payroll audit.

 Worker’s Compensation Board (Ontario)

Worker’s Comp. also have a team of investigators interested in your pronouncement that your drivers are independent contractors. More red-tape and costs for your company should they decide to investigate your drivers arrangement. This could happen if a driver is injured in a car accident or at the workplace.

Provincial Governments

Concerns of potential tax loss can bring their attention to your working arrangement with your drivers. 

Provincial Labour Boards

A complaint to the Ontario Labour Board, or other provincial Labour Boards, by drivers who believe they are being short-changed by their employers, will launch investigations into their status.  

Liability

Perhaps more serious, the criteria adopted in common law also allows that an employer can be held liable for the acts of their drivers. There are very few drivers that carry business insurance on their vehicle. This opens up the potential of third party claims against the companies the drivers work for, if they can be shown to be employees. The larger entity can be perceived to have deep pockets and a competent lawyer may challenge the status of the driver to recover losses. These losses may not be covered in your current liability policy.  The same might apply if a driver is injured in the workplace.

The risks incurred by companies whom unwittingly or otherwise, (attempt to) circumvent the determinations of the Courts are considerable. A full understanding of the rules may avert unnecessary hassle and considerable costs to your company.  

What can the payer do to protect itself?

Where the status of the individual is uncertain, the payer can request a ruling from CRA on CPP and EI. Alternatively, the payer can require that the individual provide services through a corporation. If the corporation contracts to provide services to the payer, and the payer pays the corporation for the services, the payer is relieved from any obligations with respect to income tax withholding, CPP and EI. However, the payer must ensure the individual continues to maintain the status of the corporation such as annual registration and filing.

For more information, visit the Canada Revenue Agency (CRA) website or see the following booklet "Employee or Self-Employed" published by CRA. We will also be glad to provide you with a copy.