(416) 864 - 6200

Tax & Trade Blog

  • Home
    Home This is where you can find all the blog posts throughout the site.
  • Categories
    Categories Displays a list of categories from this blog.
  • Tags
    Tags Displays a list of tags that have been used in the blog.
  • Bloggers
    Bloggers Search for your favorite blogger from this site.
  • Archives
    Archives Contains a list of blog posts that were created previously.

Direct Sellers: Review Your Documents!

Posted by on in Direct Selling Blog
  • Font size: Larger Smaller
  • Hits: 494
  • Subscribe to this entry
  • Print

A common theme of our direct selling blogs is that direct selling businesses should pay close attention to the wording of their key documents (compensation plans, contracts, and policies and procedures, etc.) to ensure that plan participants are properly characterized as independent contractors and not as employees.

While not in a direct selling context, a recent decision at the Tax Court of Canada serves as a cautionary tale for businesses that fail to examine the details of their documents – their workers may be characterized contrary to their intentions!


In All Sports Marketing Inc. v. MNR (2023 TCC 32), All Sports Marketing Inc. (the “Taxpayer”), provided digital marketing services to organizers of outdoor sporting events such as marathons. The Taxpayer hired Bruce Swinden as a sales representative in November 2015. The agreement provided that he was a contractor and not an employee, while also requiring Mr. Swinden to work full-time, abide by the Taxpayer’s rules and regulations, perform any duties assigned by the Taxpayer, and avoid any conflicts of interest with the Taxpayer’s business.

The Minister of National Revenue audited the Taxpayer and determined that Mr. Swinden was in fact an employee during the audit period, assessing for unremitted pension contributions and employment insurance premiums on Mr. Swinden’s earnings. The Taxpayer appealed to the Tax Court.

Tax Court Decision

The Tax Court applied the well-established test from Wiebe Door Services Ltd. v. MNR (1986 CanLII 6775 (FCA)), which considers various factors, such as the level of control, the ownership of tools, the chance of profit, and the risk of loss, as apportioned between the parties.

The Court found that the agreement between the Taxpayer and Mr. Swinden was inconsistent and contradictory, and read like an employment contract rather than a contract for services. The Court noted that the Taxpayer had the right to exercise behavioural and financial control over Mr. Swinden, who was subject to the Taxpayer’s supervision, direction, rules, and orders. The Court also noted that Mr. Swinden had limited independence and flexibility in carrying out his duties, and that he could not subcontract his work to others or choose his own clients.

The Court concluded that the parties’ expressed intention to create an independent contractor relationship was not reflected in the “objective reality” of that relationship – that Mr. Swinden was the Taxpayer’s employee!


The language of contracts and policies must reflect the true nature of the relationship between direct selling companies and their representatives. Simply calling someone an independent contractor does not make it so if the facts indicate otherwise. The consequences of misclassifying independent contractors can be significant, as they may result in liability for unpaid taxes, penalties, interest, and statutory benefits if they are found to be employees.

Direct selling businesses need expert legal advice to ensure that their intentions to classify representatives as independent contractors are reflected in their key documents and practices. This may involve revising or updating contracts and policies to align with the relevant criteria, providing more certainty to both parties!

Want a PDF copy of this blog?

Last modified on


  • No comments made yet. Be the first to submit a comment

Leave your comment

Guest Wednesday, 19 June 2024

Toronto Office

10 Lower Spadina Avenue, Suite 200, Toronto, Ontario, M5V 2Z2 Canada
Phone: (416) 864-6200| Fax: (416) 864-6201

Client Login

To access the Millar Kreklewetz LLP secure client file transfer system, please log in.