Background
The Tax Court of Canada (“TCC”) has recently found that an office assistant working at a chiropractic clinic for nearly two years was an independent contractor, not an employee.
In Varga v. The King, 2026 TCC 138 (“Varga”), on appeal from the CPP/EI Rulings Division, the TCC was asked to determine whether the Intervenor/Worker had engaged in insurable and pensionable employment under the Canada Pension Plan and Employment Insurance Act.
In examining the status of office assistant Tisha Smith (“Ms. Smith”), the TCC found that all parties mutually understood that Ms. Smith was engaged as an independent contractor, and that Ms. Smith and the Clinic conducted themselves in a manner consistent with an independent contractor relationship, noting that Ms. Smith was not issued any T4s, no deductions were taken for income tax, and she worked with minimal supervision.
Analysis in Focus: Connor Homes
The Tax Court adopted the approach of 1392644 Ontario Inc. (Connor Homes) v. Canada (National Revenue), 2013 FCA 85 (“Connor Homes”), a 2013 decision from the Federal Court of Appeal.
Courts had previously relied on tests such as the four-fold test of control, ownership of tools, chance of profit and risk of loss, and the “integration” test, which asked whether the worker’s services are integral to the payor’s business. In Connor Homes, the Federal Court of Appeal rejected a rigid, test-based analysis in determining a worker’s status and held that no single factor decides the question. Instead, the court adopted a holistic analysis that merged previous approaches of looking at the performance of services and the intention of the parties.
In Wiebe Door Services Ltd. v. M.N.R. (F.C.A.), 1986 CanLII 6775 (“Wiebe Door”), the court framed the four-fold test as a guide to the ultimate question i.e. “whose business is it?” that the worker was serving. The Court determined was that there are no specific and determinative criteria to answer the ultimate question, but instead that the focus should be on the relationship of the parties viewed as a whole. The Supreme Court of Canada adopted the Wiebe Door approach in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59 (“Sagaz”), in asking whether the worker performs services as a person in business of their own account or as an employee.
Connor Homes also adopted the approach of giving weight to the parties’ mutual intentions by addressing the decisions of Wolf v. Canada (C.A.), 2002 FCA 96 (“Wolf”) and Royal Winnipeg Ballet v. M.N.R. (F.C.A.), 2006 FCA 87 (“Royal Winnipeg Ballet”). In those decisions, the Court held that the parties’ intention matters and ought to be given appropriate weight, but cautioned that intention alone cannot determine the question “whose business is it?”. Instead, the courts held that the parties’ intentions must be viewed against an objective reality of the circumstances of the parties’ relationship.
Application to Varga
In Varga, the TCC concluded that the parties mutually intended Ms. Smith to work as an independent contractor. Reviewing the evidence of the parties’ relationship, the TCC found that parties acted in a manner consistent with their intention and that both parties understood their agreement, and their conduct never contradicted their desire that Ms. Smith be an independent contractor.
As per the approach in Connor Homes, the TCC then examined the objective factors from Wiebe Door to determine whether the parties’ conduct aligned with their mutual intention. The court noted that Ms. Smith had scheduling flexibility and was engaged in a steady number of hours per month but with no guarantee of hours or income. Ms. Smith worked with minimum supervision and that she was free to determine how to complete tasks without further direction. Insofar as tools were provided, only the clinic’s computer was used which was critical to maintain data security and client confidentiality. She did not have a presence on the clinic’s website, did not have a uniform, title, business cards, her own desk or telephone number.
In the end, the TCC determined that Ms. Smith did not earn pensionable earnings under the Canada Pension Plan and Employment Insurance Act, and opted to “respect” the parties’ “initial and continuing” contractual intentions.
Takeaway
Varga exemplifies the holistic approach that some courts will take in the worker status cases by weighing the totality of the evidence of the parties’ intentions and conduct, guided by the precedent four-fold control test.
Notably, the TCC confirmed that the “integration” test is truly obsolete. Consistent with its ruling in Insurance Institute of Ontario v. M.N.R., 2020 TCC 69 (“Insurance Institute of Ontario”), the court held that the “integration” test artificially skews the analysis towards a finding of a worker’s status as employee, and unequivocally pronounced it dead.
Lastly, the TCC appeared to offer some encouragement to legislators to clarify worker status for Canada Pension Plan and Employment Insurance Act purposes, observing that “some argue that it might be time for Parliament to revisit the problem of how we determine worker status for CPP and EI Act purposes,” Clarity is always welcome. Regardless, we will keep you posted should Ottawa heed the Court’s call for clarity.
