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“Intention” Relevant in Distinguishing Employees from Independent Contractors
April 11, 2006

In an important development in the law of personal contracts, the Federal Court of Appeal has decided that the parties’ intentions are relevant to whether they have created an employment or independent contractor relationship.

The Royal Winnipeg Ballet appealed a Federal Tax Court decision which found that its dancers were employees for tax purposes. The Ballet and the dancers agreed that they were independent contractors. Following the traditional law of contract, the lower court found the parties’ intentions should only be considered when applying other legal tests yielded no definitive result. In effect, the court concluded that the parties’ intentions should only be applied as a “tie-breaker”.

The Federal Court of Appeal disagreed, finding that evidence of the parties’ intentions about the nature of their relationship must always be examined and given appropriate weight. Although intention may not be determinative, it will be highly relevant if consistent with the terms of the contract and the other surrounding circumstances. After giving the parties’ intention proper consideration, the majority of the Court found that the dancers were independent contractors and allowed the appeal.