Heavy machinery workers (Owners and operators)
To determine if a person is an employee or a self-employed worker, the Canada Revenue Agency (CRA) looks at the factual working relationship between the worker and the payer. This article provides information on facts related to workers who own heavy machinery and operate it, and offers indicators that can help you determine whether a worker in this situation is an employee.
For example, in the forestry industry, types of heavy machinery may include: skidders, fellers, bunchers, forwarders, delimbers, slashers, harvesters, log loaders, and chippers.
For general information about determining whether a worker is an employee or is a self-employed worker, see guide RC4110, Employee or Self-Employed?
Agreements between the worker and the payer
There might exist two separate agreements between a worker who owns and operates heavy equipment and the payer that hires the worker. Firstly, a payer may hire the worker as an employee (we refer to this agreement as the employment contract). Secondly, the payer may rent the workers' heavy machinery under a separate contract with the worker (we refer to this contract as the rental contract).
For the worker to be an employee, the two agreements must be distinct and not in any way dependent on each other. For example, if the heavy machinery owned by the worker is not operating, the worker must still be under contract to provide services for the payer. Any remuneration for the worker's services under the employment contract and any amounts paid for the heavy machinery rental must be distinct from each other. The terms and conditions of both agreements can be contained in one written contract.
All terms and conditions of these agreements, whether in writing or agreed to verbally, must be analyzed to determine the nature of the relationship between the parties.
Indicators of an employer-employee relationship
Generally, an employee is someone who is hired to perform specific duties under the direction and control of the party that hired him or her. Under the terms and conditions of employment, a worker is not normally in a position to make a profit or incur a loss. An employee is not perceived as operating his or her own business, but rather as being an integral part of the payer's business.
The following are some indicators that can be used to help determine whether a worker is an employee. Keep in mind that this list is not exhaustive and not all of the following indicators may be present in every situation. Please remember that all facts pertaining to the working relationship need to be considered.
- The employment contract and the rental contract are distinct from each other and do not depend on each other.
- The method of remuneration is indicated (e.g., hourly, daily, piece rate).
- The remuneration for the worker's services is clearly distinguishable from the amount for any heavy machinery rental.
- The remuneration for the worker's services does not depend on and is not connected to the amount paid for the heavy machinery rental.
- The payer has the right to control the way the work will be done (e.g., the payer has a foreman on the work site).
- The payer tells the worker where and for how long he or she will render the services (e.g., location, schedule).
- The payer has the right to decide what type of work the worker will do and has the right to choose another worker to be the operator of the machinery.
- The services of the worker are not directly linked to the production of his or her heavy machinery. For example, in cases of major breakdown of heavy machinery, the worker may be required by the payer to carry out other duties for which the worker will be remunerated.
- The payer is responsible for all damages caused and all injuries suffered as a result of the worker carrying out his or her duties, including any injuries suffered by the worker.
To distinguish a rental contract from an employment contract, the rental contract should include certain points indicating that the lessee (payer) assumes control of the machinery for the duration of the agreement. The following points should be covered in a rental contract:
- the identificationof the parties involved, (e.g., worker and payer);
- the responsibilities of the lessor (worker) and the lessee (payer)-including the responsibilities for the cost of maintenance, repair, and transportation related to using the leased equipment;
- the duration of the rental agreement;
- the monetary amount for the heavy machinery rental and the method of calculation (e.g., hourly, per diem, weekly, per cord, per cubic metre, or by the length of the logs handled);
- insurance and indemnification clauses for liability resulting from the possession, use, transportation, and condition of the equipment used;
- the amount for the heavy machinery rental must be clearly distinguishable from the remuneration paid for the worker's services; and
- the amount for the rental must not depend on the remuneration paid for the worker's services.
If a worker is an employee, the earnings from the employment contract are considered employment income and are subject to Canada Pension Plan, Employment Insurance, and income tax deductions.
All employers are required by law to deduct Canada Pension Plan (CPP) contributions and employment insurance (EI) premiums from most amounts they pay to their employees. Employers must remit these amounts to CRA along with their share of CPP contributions and EI premiums. More information on employer responsibilities and obligations can be found through our Payroll menu page.
Requesting a ruling
If a worker or payer is not sure of the worker's employment status, either party can request a ruling by the CRA to have the status determined. More information on the ruling process is available in How to obtain a ruling for Canada Pension Plan and Employment Insurance purposes.
For more information
To get more information, call 1-800-959-5525.
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