What are the risks of using the wrong label?
If
a payer treats a worker as an independent contractor and some legal
forum determines otherwise, the financial liability could be enormous.
- The
payer will be forced to remit to the government all the deductions
it should have made from the employee’s pay (e.g., Employment
Insurance, Canada Pension Plan, income tax), plus any interest
and penalties that apply.
- If
a payer incorrectly describes many employees as contractors and
the workers successfully complain to the Employment Standards
Tribunal, the payer will owe these workers additional payments
for such items as overtime and vacations, plus any penalties imposed.
If
a worker believes s/he is a contractor and finds out later that
s/he was an employee, the worker may have to resubmit applicable
income tax returns and may owe monies, including penalties. For
example, the worker may have deducted numerous expenses that an
employee is not permitted to deduct.
Note:
An agreement that labels a worker as either an employee or an independent
contractor is not binding on the government or any other legal forum.
The tests discussed earlier provide some guidance but these issues
are often not clear-cut.
WARNING:
The contents of these FAQs are intended as general legal information
only.
If
you have a personal problem, please consult a lawyer.
May
2008 |
