A Guelph Clinic's Contractors Were Ruled Employees After All

The situation

Heather had built her physiotherapy clinic in Guelph the way many small healthcare practices grow: one treatment room at a time. She started as a sole practitioner, then began bringing in other physiotherapists to see patients under the clinic's roof once her own schedule filled up. Four of them, including a physiotherapist named Natalia, worked there as independent contractors. They set their own hours, could turn down patients, invoiced the clinic monthly for a share of the fees they billed, and covered their own professional insurance and continuing education. Heather's spouse Craig, a pharmacist, had no role in the clinic itself, but the household's finances were built around the assumption that the business was stable and reasonably low-risk.

The contractor arrangement was not unusual in the profession. Heather had seen similar setups at other clinics, and an accountant had helped her draft the contractor agreements years earlier. Each physiotherapist, including Natalia, signed an agreement describing themselves as an independent contractor responsible for their own taxes, with no vacation pay, no benefits, and no employer contributions withheld from their invoices. The arrangement kept the clinic's overhead predictable and let each physiotherapist bill according to how many patients they actually treated, which suited both sides while the clinic was small.

The trouble started when one of the contractors left the clinic and applied for Employment Insurance benefits between jobs, listing the clinic as a former employer. That application flagged the file for a payroll compliance review. Auditors requested contracts, schedules, patient booking records, and payment histories for every physiotherapist who had worked at the clinic over the prior three years, including Natalia. Heather assumed the review would confirm what her paperwork already said. It did not go that way.

What the review found

Worker status in Canada is not decided by what a contract calls someone. It is decided by the actual working relationship, tested against a set of common-law factors: how much control the payer exercises over how and when the work is done, whether the worker supplies their own tools and equipment, whether the worker has a genuine chance of profit or risk of loss, and how integrated the worker's activities are into the payer's business. A contract that says "independent contractor" carries some weight, but it does not override what actually happened day to day.

The review found several features that pointed toward employment rather than independent contracting. The clinic set the booking schedule and assigned patients rather than letting contractors build their own client base. Treatment rooms, equipment, and administrative support were all provided by the clinic at no separate charge. Contractors could not send a substitute physiotherapist to cover a shift, and they billed patients through the clinic's own systems rather than invoicing patients directly. None of the contractors, including Natalia, carried meaningful financial risk beyond simply not getting paid if they did not show up to work.

Based on that pattern, the reviewer issued a ruling that the contractor physiotherapists, including Natalia, had in fact been employees for Canada Pension Plan and Employment Insurance purposes throughout the period under review. That ruling had direct financial consequences. Employers are required to withhold and remit both the employee's and the employer's share of CPP contributions and EI premiums from an employee's pay. When a worker has been mistakenly treated as a contractor, the employer typically ends up liable for the unremitted employer and employee portions retroactively, plus arrears interest and penalties for the failure to withhold and remit on time. Across four workers and roughly three years, the assessment that followed totalled a little over $310,000, including principal, interest, and penalties. The clinic operated through a corporation, and Heather, as its director, learned that directors can be held personally liable for a corporation's unremitted source deductions if the corporation cannot pay.

What we did

1. Reviewed each contractor relationship individually rather than accepting a blanket ruling. Worker status is assessed person by person, not clinic-wide. One of the four contractors, unlike the others, had her own separate practice elsewhere, set her own patient roster at the clinic, and occasionally sent a colleague to cover appointments. We gathered evidence to support treating her differently from the rest.
2. Requested a formal reconsideration of the ruling. A worker or payer who disagrees with a CPP/EI ruling can ask for it to be reviewed before deciding whether to appeal further. We compiled scheduling records, billing patterns, and correspondence to show, worker by worker, exactly how much independence each contractor actually had.
3. Advised on director liability exposure early. Because the clinic operated as a corporation, we explained to Heather what personal exposure looked like if the corporation could not fund the assessment, and what steps could reduce that exposure, including ensuring the corporation itself first attempted to pay and correcting the underlying payroll treatment without delay.
4. Corrected the going-forward relationship immediately. Continuing to treat the same workers as contractors after receiving a ruling to the contrary would have compounded the liability with each pay period. We advised moving the affected physiotherapists onto proper payroll, with CPP and EI withheld going forward, while the dispute over past periods was still being resolved.
5. Negotiated a payment arrangement for the amount that could not be reduced. Even with a favourable reconsideration, a genuine liability remained. We worked with the reviewer's office to arrange payment over time rather than as a lump sum, so the clinic's cash flow was not put at immediate risk.

The outcome

The reconsideration succeeded for one of the four workers, the physiotherapist with the separate outside practice and the ability to send a substitute, whose relationship was reclassified back to independent contractor status. That reduced the assessment by roughly $70,000. For the remaining three, including Natalia, the employment finding stood. The retroactive CPP and EI liability for those three workers, plus interest and penalties, settled at approximately $240,000, payable over an arranged schedule rather than all at once.

This was not a case where the firm's work made the underlying problem disappear. Heather owed a substantial sum, and the years of contractor-style billing that had made the clinic's early growth affordable turned out to carry a real cost once the relationships were examined closely. What acting quickly and properly did accomplish was containment: the liability did not compound further after the ruling, the corporation avoided the harsher outcome of the debt going unpaid and Heather facing personal collection action as a director, and the clinic's payroll going forward was brought into compliance before any further periods accrued exposure. The clinic remained open and financially stable, but the settlement absorbed a significant share of that year's profit, and Heather adjusted the clinic's staffing model afterward to rely on genuine employees for anyone working under this level of clinic control. She also asked her accountant to review the payroll treatment of every worker at the clinic annually going forward, rather than setting up an arrangement once and assuming it would hold indefinitely as the practice grew and its scheduling systems changed.

What you can learn from this