In Part 1 last month we discussed the factors used for Non-Quebec contracts. In Part 2 we will continue the discussion for contracts in Quebec.
Why is this important to know? If Canada Revenue Agency (CRA) audits your company & determines the contract workers you have employed are to have been treated as employees, than you are responsible for paying all source deductions (CPP/QPP (Canada Pension Plan), EI/QPIP (Employment Insurance), EHT (Employers Health Tax) & WSIB/CSST (Worker’s Comp)) employer & employee portions with late penalties & interest. The main difference to the employer between a contract worker (self-employed) & an employee is the employer cost of taxes & benefits.
Canada Revenue Agency (CRA) has published RC4110 defining a list of factors to assist in determining the status of a person working for you. The first factor is the province the contract is formed in. There are different factors to consider when the contract is formed in Quebec or the contract states in the event of a disagreement to interpret using Quebec law.
Determining a worker’s status in Quebec:
The key question is whether the person is engaged to perform services as a person in business on his own account or as an employee. The total relationship between the worker & the payer is done using a three-step approach.
Step 1 – What was the intent of the working arrangement
Did the two parties intend to enter into a contract of service (employer-employee relationship) or did they intend to enter into a contract for services (business relationship)? Workers and payers can set up their affairs as they see fit; however, they have to ensure that the status they have chosen is reflected in the actual terms and conditions of the working relationship.
Step 2 – Definition of Employment
Does the employment meet the definition of a contract of employment or of a business contract (contract for services) defined in the Civil Code of Québec by considering the following 3 factors:
- Performance of work
- Relationship of subordination
The responses to each factor are analyzed based on the specific context of the employment & the intent of each party involved.
Step 3 – Verification of the working relationship & intent of the parties
Minister of Revenue du Québec (MRQ) compare each party’s intentions with their actual working relationship. They determine whether the conditions of the working relationship represent the status that the parties have chosen and that they are consistent with the definitions of the Civil Code of Québec.
For more detailed explanation of the factors and process to request a ruling can be found using the below link.