Revisiting Intent in Employee/Independent Contractor Determination

Revisiting Intent in Employee/Independent Contractor Determination

By: Michael Thomson and David Piccolo


On January 14, 2014, the Tax Court of Canada released their decision in Paul E. Mallon v. M.N.R.  The case is another in a long line of cases regarding whether an individual was an employee or an independent contractor.  However, in his decision, Justice Campbell Miller provided some commentary on the recent approach that the Federal Court of Appeal has taken to integrate intention within the traditional test to determine an individual’s employment status.


Mr. Mallon had worked for Honeycomb Worldwide Inc. (“Honeycomb”) since July 2011 as a commissioned salesperson with the title of Director or Vice-President of Business Development. It was Mr. Mallon’s job to find customers who would sponsor webinars that Honeycomb ran.

Mr. Mallon expressed to the C.E.O of Honeycomb that he wanted to be an independent contractor and an agreement to that effect was entered into.  Though Mr. Mallon was the only salesperson who entered into an independent contractor relationship with Honeycomb, he was compensated in the same manner as the other employed salespeople – with a mix of base salary and commissions.  Mr. Mallon performed his work at Honeycomb’s office using their computers and phones.  There were no formal performance reviews, formal vacation times and Mr. Mallon would consult with Mr. Hughes when negotiating rates with customers. He would provide no invoices to Honeycomb nor charge Goods and Service Tax (“GST”) to Honeycomb.  Mr. Mallon acknowledged that Mr. Hughes was ultimately the face of Honeycomb.

The Minister took the position that Mr. Mallon was an employee of Honeycomb from July 5, 2011 to October 3, 2012.  Mr. Mallon took the position that he was an independent contractor of Honeycomb during that period.


Prior to conducting the analysis of the relevant facts of the case, Justice Miller commented that the case at bar highlights what is often the crux of employee versus independent contractor cases – the involved parties’ belief that they can choose to opt in or out of an employee or independent contractor status simply by contract. It is for this reason that Justice Miller cautioned placing too much reliance on intention in determining the employment status of an individual.

In 1392644 Ontario Inc. v. Canada [2013 FCA 85], the Federal Court of Appeal attempted to integrate intention in the traditional Wiebe Doors test by creating a two-step approach – first, determine the subjective intent of the parties and then determine whether the parties’ actions sustains that subjective intent.

Miller J. stated that the Federal Court of Appeal’s guidance in 13926644 Ontario Inc. places too much emphasis on the subjective intention of the parties, which is open for manipulation by the parties with no regard for the true status of the working relationship.

However, Justice Miller is bound to follow that decision and found that the actions of the parties did not support their subjective intention as described in their Consulting Services Agreement.  Specifically, Justice Miller found that the traditional Wiebe Doors factors – control, ownership of equipment, chance of profit, and risk of less – pointed to a reality that was opposite to what was described in the Consulting Services Agreement.


This case provides another example of the problem that the courts have faced in integrating the role of intention into the test for determining the employment status of individuals.  Since the Federal Court of Appeal’s decision in Wolf, the courts have been placing greater emphasis on intention. However, as highlighted in his commentary, the courts are not unanimous of how heavy an emphasis to place on it.

However, in light of the increasing role that intention appears to play in the test, taxpayers should continue to note that the courts have largely been consistent on the idea that the intention of the parties must be demonstrated in their actions. As demonstrated in this case, simply creating an independent contractor agreement is not sufficient to establish an independent contractor relationship for tax purposes.