I’m going to continue my discussion from previous blog posts about what courts have said about the whole independent contractor vs. employee debate when it comes to dentists hiring associates.
Tsimerman v. Canada: 1998 Tax Court of Canada Decision
In Tsimerman v. Canada (Minister of National Revenue – M.N.R.), [1998] TCJ No. 1132, the issue before the Tax Court of Canada was whether an Ontario dentist was required to pay CPP contributions and EI premiums in respect of dental hygienists he had hired. The dentist claimed that they were independent contractors and hence owed nothing, but the government claimed they were employees.
The court agreed with the dentist: the dental hygienists were independent contractors. The court stated that, although the dental hygienists legally had to be supervised by the dentist, that measure of control wasn’t enough for them to be employees. Rather, Hamlyn T.C.J. was more influenced by the fact that the dental hygienists:
- negotiated a per-hour rate with the dentist, which was calculated by factoring in the dental hygienists’ use of the premises, the dentist’s equipment, the receptionist and allocation for the reception area;
- were free to control their activities;
- had no set hours was not supervised and not at all times was the dentist on the premises;
- had no minimum or maximum number of patients to serve or hours to be worked;
- saw other patients who were not patients of the dentist;
- were required to provide their own hand tools, such as scalers;
- had to pay for their own professional liability insurance;
- did not receive professional training from the dentist;
- had to provide for their own uniform;
- did not receive any benefits such as medical and life insurance; and
- were not integral to the dentist’s practice but were a complimentary part of it.
Witherell v. Canada: 2000 Tax Court of Canada Decision
In Witherell v. Canada (Minister of National Revenue – M.N.R.), [2000] TCJ. No. 782, the issue before the Tax Court of Canada was whether a Newfoundland dentist was required to pay employment insurance premiums on behalf of a dental hygienist. The dentist claimed that the hygienist was an independent contractor and not an employee; hence, no employment insurance premiums were owed.
The court agreed: the dental hygienist was an independent contractor. Here’s how the court came to that conclusion. First, the agreement between the dentist and the hygienist was such that the hygienist was her own boss. Although she could be instructed on what to do, she was not instructed on how to do it. The business was hers, was not integral to the success of the dentist’s practice, and only accessory to it. Furthermore, there was nothing preventing her from working with another clinic while engaged with the dentist.
Now, even though these factors of control and integration pointed to the hygienist being an independent contractor, there were other factors that made it appear as though the hygienist was an employee. These factors included: the hygienist did not bring a clientele to the dentist’s practice; the dentist owned the tools used by the hygienist to do the work in her duties; the hygienist was paid by the piece on the basis of 50% of the net billing fee, and the clients did not pay the hygienist directly for her services.
Notwithstanding these things, the court found that the hygienist was an independent contractor. In addition to the reasons already discussed above, the court found that the hygienist actually LOST money because she was reluctant to challenge the dentist when promises were broken. Furthermore, at some point (when another dental hygienist left), the dental hygienist was able to realize more income, be less obstructed in her work, and her client base was clearly established as hers.
TLS Health Services Inc. v. Canada: 2002 Tax Court of Canada Decision
In TLS Health Services Inc. v. Canada (Minister of National Revenue – M.N.R.), [2002] TCJ. No. 631, the Tax Court of Canada in London, Ontario had to deal with the issue of whether a dental hygienist was an employee of a corporation taxpayer; if so, that corporation would be required to pay EI premiums to the government. By means of background, the corporation was created by a dental surgeon in order to provide hygienist services to his patients. Before that corporation was created, all of the hygienists were employees of the dental surgeon; after incorporation, the dental surgeon required them to become independent contractors providing services to the corporation.
Importantly, before rendering its verdict that the dental hygienist was an employee, the court reviewed the various cases which found the opposite. Here’s how the court distinguished those cases from the case before it (starting at paragraph 39):
39 Appellant’s counsel submitted that the courts have consistently held that a dental hygienist is complementary to dental practice and is not necessary to the practice, and consequently is not considered integrated with the practice. He referred me to the following cases: Bradford v. Canada; and Witherell v. Canada.
40 In Bradford, the trial judge found the dental hygienist maintained her own working hours. The dental hygienist testified she selected the most profitable work and places to work. The trial judge was also satisfied that the intentions and objectives of the dentist and dental hygienist were present in their relationship. The contract was not flawed. This is not the situation at bar. In my view, after observing the three witnesses, I prefer the evidence of [the dental hygienist] that [the office manager for the corporation] played a significant role in determining [the dental hygienist’s] hours of work.
41 In Arthur, supra, Ms. Arthur was paid $75 per day in the dentist’s office plus 25 percent of her billings. She was also responsible for 25 percent of bad debts. The appellant in Arthur had the right to adjust the tariff downward. Ms. Arthur received referrals from other dentists. She also promoted herself by giving lectures and giving away toothpaste and dental floss, for example. She also printed her own professional cards for distribution. These facts are definitely not present in the appeal at bar; Ms. Fawcett did not have to seek out patients or promote her activity.
42 In Tsimerman, the dental hygienist had no set hours and had no minimum or maximum hours to be worked. She also saw patients who were not patients of the dentist, which is not the case at bar. The dental hygienist in Tsimerman appears to have had greater freedom than [the dental hygienist in the present case] in choosing and treating patients.
43 Finally, in Witherell, the dentist retained 50 percent of fees earned by the dental hygienist for the facilities and equipment provided to her; the other 50 percent of billing fees were paid to her. She was also guaranteed a sufficient client base to produce a given income. [The dental hygienist’s income in the present case] was not dependent on fees charged to patients, nor did she contribute to the use of equipment and facilities.
