Partners, Independent Contractors & Employees
AOM Template Partnership Agreement
All workers are either employees or are self-employed. Those who are self-employed may be the owners of the business or may be contractors (i.e., associates). Employees can be part-time or full-time, probationary or permanent, on a fixed-term contract, or a combination of these options and more. A business owner could be a sole proprietor, a partner in a partnership, or the shareholder of a corporation. A contractor could be either an independent contractor or a dependent contractor.
The partners or, collectively, “the partnership” are the owners of the practice group. They are responsible for all of the practice group’s activities, including finances, the Funding Agreement, workers, and policies. Two sources govern the relationship between partners: the Partnerships Act and partnership agreements. A partnership can exist without a partnership agreement, however, having an agreement is considered good practice and allows the partnership to be customized. In addition, the midwifery Funding Agreement requires that all midwifery partnerships have partnership agreements.
Joining an MPG partnership can be a very positive and rewarding experience; however, like any serious relationship, it should not be entered into lightly or without doing some homework. Midwives who are considering joining a partnership can mitigate potential risks through good business practices and due diligence to be sure that it is an informed decision. The AOM has developed a due diligence checklist to help potential partners consider their decision.
Ontario midwives generally consider themselves to be self-employed independent contractors. To maintain funding and statutory compliance, and to preserve the viability of the current midwifery care model, it is important that midwives retain that status and not be considered employees. However, this relationship has not been tested in the courts.
Whether the courts or a government body such as the Canada Revenue Agency (CRA) will view a midwife as self-employed or as an employee will depend on the total nature of the relationship. After assessing the parties’ intentions as to the nature of the relationship (as outlined in a contract), courts and government agencies will examine factors such as who supplies equipment and tools, who hires subcontractors or assistants, whether the worker has the opportunity for profit and the risk of loss, and who controls the time, place, and manner of work. Using resources from the CRA, we have developed this questionnaire to help practice groups consider whether their midwives are employees or self-employed independent contractors.
Recently, courts have also recognized another type of worker: the dependent contractor. After determining that a worker is not an employee but a contractor, a court may also assess the exclusivity of the business relationship to determine whether the worker should be treated more like an employee. Midwives generally do not consider themselves to be dependent contractors and, at present, the legal obligations that flow for dependent contractors are uncertain. However, they are expected to be very similar to the obligations to employees. This is a developing area of the law.
While the role of an associate midwife can be ambiguous, it is up to each practice group to take care to stay on the side of “independent contractor.” If a court determines that there is an employee-employer relationship between the practice group and a midwife, both will likely be found in breach of their legal obligations, such as rules around hours of work, vacation time, and time off; Canada Pension and Employment Insurance remittances; and tax implications.
All paid workers who are not partners or contractors are considered employees, whether full- or part-time, permanent or temporary. This includes practice administrators, other support staff, and any midwives perceived to be employees.
The practice group’s relationship with employees is governed by legislation and their employment contract, if available. While partnership contracts can deviate from the standard rules outlined in legislation, employment contracts cannot (unless the contract provides employees with a greater benefit than the legislation would). The rules outlined in laws such as the Employment Standards Act provide the minimum rights of employees and obligations of employers. Employment contracts cannot state that the rules don’t apply. As such, partners need to be aware of, understand, and adhere to all relevant employment-related legislation.
Nonetheless, practice groups are well-advised to use employment contracts with all of their employees so as to be clear about expectations, salary and benefits, job descriptions, and notice periods on termination. If they are not used, a court may infer clauses and agreements that were not intended (e.g., a lengthy notice period).