Contractor or Employee? A Hamilton Retiree's CRA Fight

The situation

Niloufar had retired from a full-time career several years earlier, but like many retirees stretching a fixed income, she kept working part-time to supplement her pension. For just over four years, she cleaned offices several evenings a week for a small commercial cleaning company in Hamilton run by a woman named Camila. Niloufar was given a set schedule, told which buildings to clean and in what order, issued a uniform shirt with the company's logo, and used cleaning equipment and supplies the company provided. She could not send someone else in her place, and if she wanted time off, she had to ask Camila directly.

Despite all of that, Camila's company had always paid Niloufar as a self-employed contractor. Every year she received a statement showing gross payments with no deductions, rather than the pay stub with tax, Canada Pension Plan (CPP) and Employment Insurance (EI) amounts withheld that an employee would normally see. Niloufar assumed, as many workers do, that this was simply how the arrangement had always worked and that it must be fine because it had gone on for years. It was only when her spouse, Darius, a retired early childhood educator who had spent his own career as a properly classified employee, compared notes on their retirement income that the gap became obvious: Darius's years of CPP contributions had built him a meaningful monthly pension credit, while Niloufar's four years of cleaning work had added almost nothing to hers, because no CPP contributions had ever been made on her behalf.

The legal problem

Whether a worker is an employee or a self-employed contractor is not simply a matter of what the parties call the arrangement or what is written on an invoice. The Canada Revenue Agency looks at the substance of the relationship: who controls how, when and where the work is done; who owns the tools and equipment; whether the worker can subcontract the work to someone else or bears a genuine risk of profit or loss; and how integrated the worker is into the payer's business. Someone who is told exactly what to do, when to do it, and with whose equipment, and who cannot send a substitute, looks far more like an employee than an independent business, regardless of what the paperwork says.

The distinction matters because employees and their employers are each required to contribute to CPP and EI on the employee's earnings, split between the two, while genuinely self-employed contractors are generally responsible only for the self-employed portion of CPP and are not covered by EI at all. When a worker is misclassified as a contractor, the practical effect is that years of contributions that should have built up their CPP retirement benefit, and their EI eligibility, simply never happened. That gap does not surface until years later, often at retirement, exactly as it did for Niloufar.

Fixing it required a formal step most workers never learn exists: either the worker or the payer can ask the CRA for a ruling on CPP and EI status for a specific period of work. The ruling is not something a worker and a payer negotiate between themselves — it is a determination the CRA makes after reviewing the facts of the relationship, and either side can request a review if they disagree with the result. Camila's company had an obvious financial incentive to resist reclassification, since a ruling of employee status going back several years would mean it owed its own share of unremitted CPP and EI contributions on Niloufar's earnings, plus the associated penalties and interest that come with unremitted payroll amounts. The total amount in dispute, once the shortfall in Niloufar's own missing contributions and the corresponding employer share were estimated, came to just under $15,000 across the full period.

What we did

1. Gathered evidence of the real working relationship. We worked with Niloufar to document the specifics that mattered to the CRA's test: the fixed schedule set by Camila, the assigned buildings and cleaning checklist, the company-branded uniform and supplied equipment, and the absence of any ability to subcontract or work for other cleaning clients during that period.
2. Requested a CPP/EI ruling from the CRA. We filed the formal request asking the CRA to determine Niloufar's status for the four years she had worked for the company, attaching the supporting evidence and a clear timeline of the working relationship.
3. Responded to the company's position. As expected, Camila's company took the position that Niloufar had always operated as an independent contractor by mutual agreement, and it submitted its own account of the relationship. We prepared a written response addressing each point, focused on the CRA's actual legal test rather than on what either side had assumed the arrangement to be.
4. Reviewed the CRA's initial ruling and requested reconsideration on the disputed years. The CRA's first ruling found in Niloufar's favour for the more recent portion of her work, where the evidence of control and integration was strongest, but sided with the company for an earlier stretch where the record was thinner and some of Niloufar's own recollection of the details had faded. We asked the CRA to reconsider the earlier years, supplementing the record with bank statements and messages that helped fill in the gaps, but the underlying evidence for that earlier period was genuinely weaker, and we were candid with Niloufar that a full reversal was unlikely.
5. Advised on next steps for her pension record. Once contributions were established as owing, we explained how those amounts would flow through to Service Canada's records to affect her CPP entitlement going forward, and what she could expect from her monthly pension calculation as a result.

The outcome

The CRA's final position, after reconsideration, confirmed employee status for roughly the second half of Niloufar's four years with the company but maintained the contractor classification for the earlier period. That meant the company was required to remit its share of unpaid CPP and EI contributions for about two years of Niloufar's work, with Niloufar's own missing contributions for that same period also being corrected, adding a modest but real amount to her future CPP entitlement. For the earlier two years, the contractor classification stood, and that portion of missing contributions was not recovered.

It was not the full result Niloufar had hoped for going in — she had worked under essentially the same conditions for all four years, and it was hard for her to accept that only half of that time counted. But it was a genuine improvement over where she started, achieved without a drawn-out formal objection or an appeal to the Tax Court of Canada, either of which would have cost far more in time and stress than the amount ultimately at stake justified. Camila's company, for its part, avoided a finding that would have applied to the full four-year period and the larger remittance bill that would have come with it, which is very likely why it did not push the dispute further once the CRA issued its position. Both sides absorbed something: Niloufar accepted that two years of her working history would not count toward her pension, and the company paid real money it had structured its arrangements specifically to avoid.

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