Purpose

To provide guidance on determining whether an Individual or Business Entity providing services to the University should be classified as an Employee or an Independent Contractor, and to support compliance with applicable statutory, taxation, payroll, and related regulatory requirements.

Scope

This policy applies to Individuals and Business Entities that receive payment from the University for services they provide, and particularly where a determination is required is to whether an Individual or Business Entity is an Employee or an Independent Contractor.

Definitions

Business Entity — A Corporation, Partnership, or Sole Proprietorship.

Business Income — Payments made to an Independent Contractor. Business Income is not subject to any deductions at source. Business Income is reported on a T4A form. HST may be applicable and is calculated and paid based on the invoiced amount.

Canada Revenue Agency (CRA) — An agency of the Government of Canada responsible for administering tax laws, including tax legislation related to employee and independent contractor status. 

Corporation — A legal entity incorporated under federal or provincial law. The Corporation is usually identified by an operating name followed by the words "limited", "corporation", or "incorporated". 

Employee — An Individual who performs services for the University under a contract of service to whom payments from the University are classified as Employment Income.

Employment Income — Payments made to an Employee in the course of an employment relationship. Employment Income is subject to income tax deduction at source, as well as deductions for Canada Pension Plan ("CPP") and Employment Insurance ("EI"). Employment Income is reported on a T4 form.

Human Resources Designate(s) — Senior administrator who has authority in certain human resources policy decisions. The policy Authority assigns the Human Resources Designate(s) as required.

Independent Contractor — An Individual or Business Entity who performs services for the University under a contract for services to whom payments from the University are classified as Business Income.

Individual — A natural person

Partnership — A partnership is an association or relationship between two or more individuals who join together to carry on a trade or business.

Sole Proprietorship — An unincorporated business that is owned by one Individual and can operate as an individual or as a registered unincorporated business. A Sole Proprietorship does not have limited liability and is not a separate legal entity.

Unit Head — For the purposes of this policy, unit head is the term used to mean Deans, Department Heads, Division Heads, Heads of Schools, Directors, Executive Directors, the University Librarian, the University Registrar, Associate Vice-Presidents, Deputy Provosts and Vice-Presidents, as applicable.

University — Memorial University of Newfoundland.

Policy

The University determines whether an Individual or Business Entity that provides services to the University should be classified as an Employee or an Independent Contractor for payment purposes. This determination must be consistent with applicable CRA guidance respecting employment status and worker classification. The Human Resources Designate has the authority to determine the status of an Individual or Business Entity in accordance with this policy and related procedures. This authority may be delegated in writing. Classification determination under this policy must be supported by appropriate documentation, including completion of required assessment forms and related records in accordance with University procedures. 

Where a relationship is determined to be one of employment, the Employee is hired in accordance with University policies, procedures and collective agreements (where applicable) and the payment is classified as Employment Income. The Department of Human Resources withholds, at source, all applicable federal and provincial taxes and contributions. Where an Employee is eligible to participate in the University’s pension and benefit programs, the University withholds directly from the Employee’s remuneration any premiums which the employee is responsible to pay.

Where a relationship is determined to be one of Independent Contractor, the services of the Independent Contractor are retained through a contract for the services that is drafted, reviewed, and executed in accordance with applicable University policies, procedures, contract requirements and signing authority requirements. Payment is classified as Business Income. Independent Contractors are not covered by any of the University's benefit programs. No deductions are withheld for income tax, CPP or EL.  The Independent Contractor is not covered under the University's workers' compensation policy and does not participate in the University's pension, group insurance or other benefits, unless otherwise required by law or determined by the CRA. An Independent Contractor may be required to provide proof of liability insurance and worker's compensation coverage prior to commencement of work.

Once a classification determination has been made under this policy, the University will not retroactively change the classification of an Individual or Business entity from Employee to Independent Contractor or vice versa for any reason other than an assessment from the CRA. All non-remitted amounts assessed including income taxes, CPP and EI premiums, as well as any fines, penalties or retroactive changes are the responsibility of the hiring unit and the Employee as required by the relevant statute.

Adjudication Process

If an Individual or Business Entity receiving payment disagrees with the University’s assessment of their status, the Individual or Business Entity may request that the Human Resources seek out a ruling from CRA to have their status determined. Refer to the CRA website, Request for a Ruling as to the Status of a Worker under the Canada Pension Plan or Employment Insurance Act. The individual or Business Entity may coordinate of a request for a ruling with the responsible unit and completed documentation is to be forwarded to the Department of Human Resources for submission to the CRA. Payment(s) will continue to be made in accordance with the University’s classification determination under this policy until the ruling is received from CRA.

Related Documents

Independent Contractor - Standard Agreement
Request for a Ruling as to the Status of a Worker under the Canada Pension Plan or Employment Insurance Act, CRA
Assessment of Status Checklist

Procedures:

There are no procedures associated with this policy.