In this blog, I continue my discussion of dentists hiring associates as employees vs. independent contractors.
What the courts have said
The courts have traditionally used a four-part test to determine whether someone is an employee or independent contractor:
- Control (an associate who is supervised and managed by the payor is more likely to be an employee)
- Ownership of tools of production (an associate who owns their own tools is more likely to be an independent contractor)
- Chance of profit (an associate who earns a steady salary is more likely to be an employee)
- Risk of loss (an associate who stands to lose money because of business costs is more likely to be an independent contractor)
While this four-fold test is a good start, the courts have held that it is the TOTALITY OF THE RELATIONSHIP and the intention of the parties (as determined by their agreement and conduct) that will ultimately determine whether the associate is an employee or independent contractor. Unfortunately, the distinction is not always clear, and, as seen below, the courts have had to wrestle with some seemingly difficult cases involving dentists and hygienists.
So let’s take a look at some actual court cases, shall we?
Bradford v. Canada Decision
In Bradford v. Canada (Minister of National Revenue – M.N.R.),  T.C.J. No. 818, the Tax Court of Canada had to decide whether a B.C. dental hygienist was an independent contractor or an employee for tax purposes. The dental hygienist claimed that she was an employee for part of the year, and for the rest of the year, she was an independent contractor. As such, she wanted to deduct certain business expenses against her business income – those expenses related to travel and attending a dental convention outside Canada. However, the government claimed that she was an employee the whole time and wanted to prevent her from deducting those expenses.
The Court held that the dental hygienist taxpayer was an independent contractor.
Taylor T.C.J. examined the TERMS OF THE CONTRACT between the dental hygienist and the dental clinic that paid her and also examined the REALITY of that relationship. With respect to the latter, the Court stated that various FACTORS (based on previously decided cases) pointed to the dental hygienist being an independent contractor and not an employee. Those factors included the fact that the dental hygienist:
- set and maintained her own working hours;
- provided dental hygiene services to patients with little or no instructions or interference from her alleged employer;
- never had her own patients;
- claimed that her client was her alleged employer, not her alleged employer‘s patients; and
- earned gross income and net income, which depended on how often she chose to work and how much expenses she felt it was reasonable to incur.
Taylor T.C.J. commented that the fact that dental hygienists are required by law to be supervised by dentists did not automatically make her an employee: all of the factors in each case must be examined to make that legal determination. Those factors include things like: control over the work (e.g. setting hours, supervision), ownership of the tools of production, ability to make a profit or lose money, integration within the employer‘s enterprise, and economic reality. No one factor is determinative, and the prime factor in the Court’s determination should be the parties’ intention and objectives if clearly and unequivocally stated and agreed upon by the parties.
The bottom line is that, since the REALITY coincided with that AGREEMENT, the court found that the relationship was actually an independent contractor/client instead of an employee/employer. As such, the dental hygienist was allowed to make her business deductions as an independent contractor.