If an outside individual was contracted to prepare a course, and the individual worked on their own time, at their office, to prepare a completed product for which you would pay a fixed amount, the individual would be an independent contractor. There is no control of the conduct of the individual's duties or of where or at what time the duties are performed - you look only to the finished product. The individual is at a degree of financial risk. Presumably, a portion of the work could be sub-contracted, and, provided you received that for which you contracted, you would be satisfied.
When guest lecturers or seminar leaders are paid by the University to lecture or conduct short seminars, this does not constitute an employment situation. You are contracting with respect to only the single activity -there is no ongoing relationship with the individual payee, and it is presumed that the seminar or lecture would be the property of the presenter. The timing of the presentation would be mutually agreed rather than at your control, and there would be no control of the manner of the delivery of the seminar.
Contracting with Professional Partnerships and Proprietors
Where a partnership is carrying on a separate business and the University contracts to have the partnership present a course, this should be a contract for services and there should be no withholding taxes. If the University contracted with a particular partnership employee or individual partner to teach a course, it is likely that individual would be a University employee. Where a contract is with a proprietor to teach a course, the proprietor would likely be viewed as an employee of the University unless the course could be taught by the proprietor's organization, i.e. by one or more of the company's employees.
Where a corporation or professional partnership is being contracted to provide part-time teaching services to the University, this should be a contract for services. Where the contract is with a proprietorship whether or not it will be a contract of or for services will depend upon whether the contract is with the proprietor or with the proprietor's organization. For example, the University might contract with an accountant who is a sole proprietor to teach an accounting course. If the contract was, in effect, a contract with the accountant either because that person explicitly was required to teach the course, or implicitly because the accountant had no employees capable and acceptable as teachers or because of an implicit agreement that the accountant would be the teacher, then this would likely constitute an employee relationship with the accountant.
However, if the University contracted with the accountant that his or her organization, which included other acceptable professionals, would teach the course and the course was taught by the accountant and other employees as members of the organization, then this should be a contract for services.
Essentially, the difference is whether you are contracting with an individual or an organization. When contracting with an organization, it should be permissible to specify that a particular employee of the organization will be the teacher. You would look to the organization for performance of the teaching contract and not to its specified employee.
As well, you would pay the organization and not pay the employee: you would have no contract with and thus no control over the specified employee. (An employer making payments to an employee is obligated to deduct amounts at source under the Income Tax Act, the Unemployment Insurance Act and the Canada Pension Plan.)
An independent contractor must structure their situation so as to minimize the risks. Points to consider in structuring an independent contractor's contract for service are:
- A written contract should always be used.
- Any equipment used should be the property of the contractor. Expenses should not be reimbursed but incorporated into the contract price. It may be advisable to have the contractor obtain letterhead and business cards to give legitimacy to an independent contractor argument.
- Compliance with the Goods and Services Tax will be necessary.
- The individual should invoice the University for services provided, on a regular basis but not at payroll periods.
- The University should avoid controlling "what, how and when" in the agreement.
Even with all the above measures, it may not be possible to be an independent contractor. A degree of independence should also exist to begin with. For example, a long-term employee or an employee in management may have a difficult time arguing that they are an independent contractor.
Please contact Paul Manhas at Local 5691 or firstname.lastname@example.org if further clarification or assistance is required.