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Risks of Non-Compliance

It is important to properly determine whether a worker should be engaged as an employee or an independent contractor for income tax purposes based on the individual circumstances of each arrangement. Failure of the University to do so can result in costs to the University. The department or Faculty that incurs these financial liabilities will be responsible for the full costs.

  1. Statutory risks for non-compliance:
    1. Income Tax Act (Canada): Failure to deduct and remit required income tax from employment income can result in penalties and interest.  The worker may also be reassessed.
    2. Canada Pension Plan: Failure to deduct and remit required Canada Pension Plan (CPP) contributions can result in the University having to pay both the employee and employer shares, penalties and interest.
    3. Employment Insurance Act:  Failure to deduct and remit required Employment Insurance (EI) premiums can result in the University having to pay both the employee and employer shares, penalties and interest.
    4. Ontario Employer Health Tax Act: Failure to calculate and remit required Employer Health Tax (EHT) premiums can result in the University having to pay any unremitted premiums and penalties.
    5. Workplace Safety and Insurance Act (WSIA): Incorrectly classifying the worker as a contractor can result in the University having to pay any amounts paid to the worker under WSIA in case of an injury, any unremitted premiums and penalties.
    6. Employment Standards Act (ESA): Incorrectly classifying the worker as a contractor may result in non-compliance penalties under the ESA.
  2. Where an employee/employer relationship is determined to have existed, the University may be liable for paying overtime, vacation pay, statutory holiday pay, pay in lieu of notice, or severance.
  3. From the perspective of the service provider, if they are incorrectly paid as an independent contractor, their CPP and EI benefits will be understated. As well, the individual may be penalized for claiming deductions to which they were not entitled.