A Subjective Test for Self-Employment

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In a new FSCO arbitration, the new statutory definition of “Self-Employed Person” gets boiled down to a subjective test.

The Applicant was injured in a motor vehicle accident on November 11, 2014 and sought accident benefits from Aviva. The Applicant worked as a driving school instructor since 2013. There was no contract between the school and the applicant. The owner of the driving school testified that the Applicant was an independent contractor. He was expected to pay his own vehicle expenses, and would be assigned certain students for which he would be paid on an hourly basis. He was paid on a gross basis, with HST added. There were no statutory deductions. The Applicant had little control over his working hours. It was expected that the Applicant would not work for any other company as a driving instructor.

The Applicant accounted for his income as a driving school instructor in his income tax returns as “business income” including a Statement of Business or Professional Activities.

Arbitrator Mongeon found that the inclusion of a definition of “self-employment” no longer required the application of the test for self-employment laid out in the case law, including the Supreme Court’s Decision in Sagaz Industries. 

 Section 3(1), of the SABS states:

“self-employed person” means a person who,

(a) engages in a trade, occupation, profession or other type of business as a sole proprietor …

According to Arbitrator Mongeon, this creates a subjective test:

…[T]he fact is clear that the Applicant never considered himself employed. The definition in the Schedule is clear. It is not factual indicia that make someone self-employed—rather, it is actually engaging in an occupation as a sole proprietor that provides so.

…[T]he Applicant clearly engaged in his occupation as a sole proprietor. He is self-employed. Although the self-employment tests might be useful in cases where it is not obvious, in this case, the critical fact is clear.

While the previous case law had produced a non-exhaustive list of objective measures of self-employment, there is some draw to a subjective test; an adjuster, upon receiving a claim can ask the Claimant if they are self employed, or look at how the income was reported and make a decision. There would be no revisionist history of going back and claiming that the income wasn’t from self employment due to nebulous factors like “control over working hours” or “risk of profit or loss.”

There are many situations where the claimant has been told by their employer that they are contractors for liability reasons, or to shirk responsibilities that an employer would otherwise face as a result of the Employment Standards Act or Workplace Safety legislation. Will it be so obvious that they aren’t self employed in those situations? Would an insurer be lulled into calculating an IRB payment based on false or misleading information? 

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