The Role of Intention in Characterizing a Worker

In determining whether a worker is an employee or an independent contractor, what role is played by the common intention of the parties as opposed to the Wiebe Door (87 DTC 5025 (FCA)) factors of control, integration, ownership of tools, and financial risk? Five years ago, one commentator noted that common intention "has emerged as a significant and in some cases almost determinative factor" (Wintermute, 2007 Conference Report, 34:1-37), most notably in Royal Winnipeg Ballet (2006 FCA 87). Recent case law seems to give less weight to common intention, although not in any clear or consistent way.

If there is no evidence of intention (North Delta Real Hot Yoga Ltd., 2012 TCC 369, and Dean, 2012 TCC 370) or if there is conflicting evidence of intention (A&T Tire & Wheel Limited, 2012 TCC 150, and 875527 Ontario Inc., 2012 TCC 214), the courts base their analyses solely on the four Wiebe Door factors. The critical question is how to deal with situations in which there is evidence of common intention.

In TBT Personnel Services Inc. (2011 FCA 256), the status of 93 workers was at issue. The court divided the workers into two groups: those who signed a written agreement with the taxpayer prescribing independent contractor status and those who did not. For the first group of workers, the court found that the Wiebe Door factors outweighed the common intention of independent contractor status, and it characterized the workers as employees. For the second group, the court found no common intention and thus characterized the workers as employees based on the Wiebe Door factors alone. The court stated its view of the relative weight of common intention:

Such intention clauses are relevant but not conclusive. The Wiebe Door factors must also be considered to determine whether the contractual intention suggested by the intention clauses is consistent with the remaining contractual terms and the manner in which the contractual relationship operated in fact.

Subsequent to TBT, in Integrated Automotive Group (2011 TCC 468), the court found that both common intention and the four Wiebe Door factors led to a conclusion of independent contractor status, but the decision was based on the four factors alone. The court suggested an ordering rule, with the Wiebe Door factors taking precedence:

[W]hile the declaration of the [parties'] intentions is a factor to consider, such factor will only be given weight if the analyses of the four-in-one test factors of control, ownership of tools, chance of profit and risk of loss do not yield a result first. This is more in keeping with a secondary factor to consider after consideration of the primary factors.

In Zoltan (2012 TCC 286), the court seems to have taken a different approach. After noting the parties' common intention to establish independent contractor status, the court applied the Wiebe Door factors: "control" indicated that the worker was an independent contractor; "ownership of tools" was neutral; and "chance of profit/risk of loss" indicated that the worker was an employee. The court took the view that "[the parties'] intention should be respected unless the application of the Wiebe Door factors shows that the facts are inconsistent with that intention." Thus, the court held that the worker was an independent contractor.

The FCA's decision in TBT, applied in the TCC's subsequent decision in Integrated Automotive Group, has de-emphasized the importance of common intention in determining the status of a worker; however, Zoltan tilts the balance in the other direction. Therefore, taxpayers should expect that both intention and the Wiebe Door factors will be applied in every case--though it is not entirely clear which will predominate in any particular decision.

Nabeel Peermohamed

Canadian Tax Focus
Volume 3, Number 1, February 2013
©2013, Canadian Tax Foundation