Severance for Contractors...remains a foggy issue
As we have continued to discuss in ongoing Human Resource Management Issues, the ambiguity regarding laws and regulations in the use of Independent Contractors in both the US and Canada remains "foggy". However, there continues to be a push in the legislation to address this issue from both a Tax Compliance 
approach and through ongoing attempts in the clarification of the employement treatment for Independent Contractors.
But is the fog lifting?
- The Fed Ex driver issues which began as a $350MM tax penalty accessed by the IRS to the Memphis based shipping corporation, has now has wittled itself down to a fraction of that intial accessement.
- Canadian CRA and US IRS efforts to ramp up the investigations of misclassified employees is growing every day.
- Courts are ruling on situational occurances.
Last week, the Canadian Law firm of Gowlings Lafleur Henderson LLP's Ross Wells commented on the Ontairo Court of Appeal's decision...
"that an employer who has a long-term relationship with an independent contractor must grant him/her severance payments as he/she is considered an employee of the company: “It leaves no uncertainty of the entitlement of a dependent contractor to pay in lieu of reasonable notice,” Wells said. Furthermore, he finds the need for employers to have written contracts with dependent contractors. Wells represented Elizabeth McKee in the McKee v. Reid’s Heritage Homes Ltd. case.
For the full article, see “Bringing dependent contractors out of the shadows” in the March 1 issue of Law Times.
While this case brings specific case law decision by the Canadian Courts to light, the entire classification rules and laws surrounding these workers continues to remain in the mist and puts employers in a vulnerable position of which there is no clear "right or wrong" answer.
All an employer can do is take precautionary steps to mitigate risk.