1. Independent Contractor versus Employee Relationships

2. Independent Contractor versus Employee Relationships
REBBA 2002 sees salespersons and brokers as “employees” even if they are independent contractors
Employees have a contract OF service
There is a master-servant relationship
Employer = master
Employee = servant
Employers have full control over employees

3. Independent Contractor versus Employee Relationships
Independent contractors have contract FOR service
Employee has limited control over day-to-day activities of contractor
Canada Customs and Revenue Agency (CCRA/CRA) deals with this relationship for purpose of taxation
Independent contractors are taxed differently because they can claim business expenses
Most real estate professionals are independent contractors and work for a commission or a flat fee

4. Independent Contractor versus Employee Relationships
Government does not regulate commissions
The split is typically negotiated between brokerage and the independent contractor
Students are not authorized to collect commission since they are not licensed
Independent contractors use personal resources to earn commission
They enter into “Contract for Service”
They negotiate commission with brokerage
They cannot be paid directly by the client

5. Independent Contractor versus Employee Relationships
Independent contractors are free to determine what they want to charge their clients
They may charge either a flat fee or a commission but not both
All payments are made through the brokerage
Independent contractors must pay their own advertising expenses
Brokerages may arrange privileges but these are typically provided in exchange for a split in commission or desk fee
Most of a broker’s income comes from desk fees

6. Independent Contractor versus Employee Relationships
Employees are paid a wage or salary
Few brokerages actually hire employees
Government regulates minimum wage
Canada Revenue Agency (CRA) applies several tests to determine if someone is an independent contractor or an employee for tax purposes

7. Independent Contractor versus Employee Relationships
According to CRA, a sales person is likely to be an independent contractor if:
Brokerage exercises limited control over day-to- day activities of the salesperson
They are free to hire others to assist in day-to- day activities
They pay for their own equipment/tools/costs of doing business
They bear financial risk and have opportunity to profit
Both brokerage and salesperson have intention to have relationship of independent contractor

8. Independent Contractor versus Employee Relationships
CRA recently said that the mere presence of a commission-sharing arrangement does not in itself establish the presence of an employee relationship
CRA looks at the entire relationship before determining whether a salesperson is an employee or an independent contractor