Guest column — Robert Cronish: Determining independent contractor status for WSIB

By Robert Cronish

Special to Ontario Construction Report

Independent contractor status at page 8, paragraph 51 of the Ontario Workplace Safety and Insurance Appeals Tribunal (WSAIT) defines “independent operator” as “a person who carries out an industry included in Schedule One and Schedule Two and who does not employ any workers for that purpose.”

The Operational Policy Manual Number 12-02-01 entitled Workers Independent Operators sets out the criteria for independent contractor status.

The Policy identifies what is a contract for service i.e. a business relationship is one where a person agrees to perform specific work in return for payment. The employer does not necessarily control the manner in which the work is done or the times and the place where the work is performed. Independent operators, those who work under contract for service, are not automatically insured..Under Bill 119, independent operators are considered to be “workers” and must apply to the WSIB for their own account and optional insurance. The hiring company cannot pay the independent operators’ cost-of-wage assessment.

The WSIB uses the Organizational Test, which recognizes the following factors: control, ownership of tools, equipment, chance of a profit and/or risk of loss and whether the person is part of the employer’s organization or is operating a separate business. Having a HST number and being incorporated assists in establishing more independent from the principal than otherwise. The WSIB has developed a complex test in this policy, which contains a number of questions which determine whether a party is a worker or an independent operator. A questionnaire is necessary to be completed by the independent contractor. There is an industry-specific questionnaire for construction. The questionnaires are available on the WSIB website.

The Tribunal has developed what is called the “business reality test”. This test determines whether the party is a worker or an independent contractor. The business reality test looks at the substance of the relationship, rather than the form.

WSAIT Decision 924/14 is a decision where I acted for the “employer”. The tribunal identified at paragraph 60 the following factors to be considered: One, whether individuals are independent and bear the cost and risk compensation; two, ownership of equipment; three, evidence of control; four, method of payment; five, business indicia; six, the degree of integration, seven, furnishing of equipment; eight, a chance of profit or loss; nine, the parties’ intentions; 10, business or government records which reflect on the status of the parties; 11, whether the individual must supply the personally or can substitute other persons; 12, the economical or business market; 13, the influence of legislative and licensing requirements; and 14, whether this person structures his or her affairs for various purposes if he or she is an independent operator (i.e. incorporation and obtaining HST information.)

In a Supreme Court of Canada case, “67122 Ontario Limited vs. Sagaz Industries Canada Inc. (2001) SCC 59, Justice Major from paragraphs 44 to 55 identifies the factors in determining an independent operator relationship. The court determined the most significant test is the answer to the question of “whose business is it?” The WSIB criteria does not take into account this question. This question is at the heart of whether an individual is a worker and/or an independent contractor.

The court determined that an essential criteria is whether individuals are free to refuse or accept any work offered to them without penalty. If that happened, the court determined the employer would simply move to the next person on the list.

Also of importance is the need for a contract to be signed by the parties; i.e., the employer and independent contractor setting forth the business relationships of both parties. As well, WSAIT decisions highlight the fact that independent contractors are called on an as-needed basis. No statutory deductions are taken from the amounts paid to the independent contractor.

Independent contractors do not wear uniforms or any special identifications suggesting they are employees except, where security is an issue and, the customer requires a photo ID. The employer doe not provide any training on how particular repairs should be performed and the subcontractor can, without permission, substitute other individuals to perform work assigned to them without the employer’s approval. Subcontractors are able to take vacation as needed without prior approval of the employer. Given the forgoing, these are the tests that a contractor must consider when retaining individuals who say they are independent contractors.

The WSIB requires completion of its questionnaire (on its website) and a submission to the Employer Service Centre to obtain an independent contractor ID number. The information in WSAIT decision 94/14 is a leading decision regarding information independent contractor status.

Robert Cronish QC is a lawyer based in North York and can be reached by phone at (800) 281-5038 or by email at rronish@rogers.com. He specializes in appeals to the WSIB regarding independent contractor status and WSIB contest of claims for employers.