Misclassified Worker

Here is another great example of a misclassified worker, which resulted in penalties for the employer. The scenario is a common one and very relevant to many families. HR Options works with small to mid-sized businesses to create solutions around misclassified workers.

(The following article is from Howard Halpern CA, CPA (USA), CFP, TEP.)

Child Care

In a May 30, 2012 Tax Court of Canada case (2011-2152 (EI)), Philippe Francois-Cloutier and Julie Farley, parents of children, had a nasty surprise and were forced to pay a significant amount of money to the government because of their costly mistakes. These parents had been paying their children’s child-care provider as an independent subcontractor instead of as an employee and therefore they never remitted EI Employment Insurance premiums on behalf of their nanny. The Court’s issue was whether their nanny, Carolle, was an employee of the parents or self-employed.

The Court found that their nanny was an employee because of her regularity, continuity and permanent work; supervision; and the beginning and end of work decided by the parents. Also the form of compensation and inequality of their contractual relationship all indicated an employment relationship. The parties were not equal in negotiations.

On the other hand, there were individual elements in this case that would successfully support the argument the nanny was self-employed and hence the parents would not have been required to withhold and remit EI Employment Insurance premiums. However, cumulatively they became sufficient for the Court to conclude she was an employee.

The Court might have found the nanny to be self-employed if the parents had had a proper contract in place with her which they did not. Also unfortunate was the fact that the Court noted the parents and the nanny each presented conflicting testimony which certainly did not help. Therefore, the parents had to remit EI Employment Insurance on behalf of their nanny employee and the nanny was then entitled to apply for EI Employment Insurance.

Howard Halpern CA, CPA (USA), CFP is a Chartered Accountant (Canada), Certified Public Accountant (USA), Certified Financial Planner and Business Advisor. We are a full service accounting firm and provide a wide range of business advisory services to many leading companies and individuals.

www.howardhalpern.com

905-709-HELP

hhcacpa@rogers.com