Employer-Employee Relationship

An employer-employee relationship, in Canadian federal procurement, is a relationship that can arise when a contract for an individual's services is administered in a way that makes the individual function as a government employee rather than as an independent contractor. Federal buyers are expected to prevent it. CanadaBuys buyer guidance tells buyers to assess the circumstances carefully when they contract for the services of individuals, particularly for temporary help.

The term rests on the difference between a contract for services and a contract of employment. It connects to the Public Service Employment Act, common-law principles, the Canada Revenue Agency's analysis of employee versus self-employed status, and the Treasury Board Directive on the Management of Procurement. Both the buyer and the business owner must make sure a contract for individuals' services does not result in this relationship.

Why federal buyers avoid the relationship

CanadaBuys names two reasons for avoiding an employer-employee relationship: compliance with the Public Service Employment Act and compliance with common-law principles. Government hires employees through its staffing rules. A services contract is not meant to be a way around them, so a contractor who is treated like an employee creates a compliance problem for the department.

How the risk is assessed

The risk is assessed against CRA criteria and relevant court rulings. Public Services and Procurement Canada assessor guidance identifies these as the basis for judging whether contracting for services may result in an employer-employee relationship. It also refers buyers to CRA publication RC4110.

The risk can come from how a contract is administered, not only from its written terms. Guidance therefore looks at matters such as:

• supervision of the individual
• control over how the work is performed
• work hours
• the duration of the engagement
• continuity of income
• whether the individual works on government premises

The United States uses a comparable test. The Federal Acquisition Regulation, Part 37 describes the relationship as arising when contractor personnel are subject to the government's relatively continuous supervision and control, whether because of the contract's terms or how it is administered.

Who is responsible under the Treasury Board directive

The Treasury Board directive divides responsibility between business owners and contracting authorities.

• Business owners must ensure that an employer-employee relationship does not form during the contract. They must also keep the contracting authority informed of conditions, or changes in how the work must be performed, that could create one.
• Contracting authorities must make sure business owners understand the risks before and during performance. They must also include contractual terms that prevent the risk, and they monitor the arrangement while the work is under way.

What it means for a supplier

If you supply individuals, such as temporary help or professional-services resources, structure and perform the work as an independent service arrangement. Avoid employment-type language in proposals and contracts. Do not accept government control over the manner in which the work is performed, where that is consistent with the contract.

Tell the contracting authority if working conditions change in a way that could create an employer-employee relationship. Bid teams responding to supply arrangements and professional-services requirements should expect contract terms aimed at preventing the relationship, and should plan their staffing and delivery models to fit them.