The question of whether a person is in a business relationship (self-employed independent contractor) or in an employee-employer relationship is not one that is always easy to answer. There have been many court cases on this subject. The courts generally look at the following criteria in making their decisions:
- control – more control is generally exercised by an employer over an employee than by a client over a self-employed person
- chance of profit/risk of loss – self-employed persons usually have some degree of financial risk, and more opportunity for profit than employees
- integration – an employee’s job will be an integral part of an employer’s business, where the tasks performed by a self-employed person will likely be less integrated with the client’s business
- tools and equipment – self-employed persons are more likely to be supplying their own tools and equipment, as well as being responsible for their maintenance
These topics are further explained in the CRA publication RC4110 Employee or self-employed. A comprehensive checklist is also provided in this publication. This checklist is useful for a worker or a payer (employer/client) to help determine whether their relationship is a business relationship or an employer/employee relationship.