Self Employment and The Canadian Experience Class

Steven MeurrensUncategorized

The Canadian Experience Class (the “CEC”) is an immigration program for skilled workers who have Canadian work experience and want to become permanent residents.

Regulation 87.1(3)(b) of the Immigration and Refugee Protection Regulations provides that any period of self-employment shall not be included in calculating Canadian work experience under the CEC.

The Immigration Refugee and Citizenship Canada (“IRCC“) guidelines provide the following guidance to officers in assessing whether someone is self-employed:

Determining an applicant’s employment status

Applicants under the CEC must satisfy an IRCC officer that they meet all program requirements as per section R87.1. Any period of self-employment shall not be included in calculating the period of qualifying work experience under the CEC [R87.1(3)(b)]. As such, the CEC requires that applicants demonstrate they acquired skilled work experience in Canada through authorized employment by a third party.

Principal applicants are requested to provide documentary evidence of their work experience in Canada through a combination of: a copy of their most recent work permit (unless they are work-permit exempt), copies of their most recent T4 tax information slips and Notice of Assessment (NOA) issued by the Canada Revenue Agency (CRA) or a sufficient combination of other supporting documentation, and employer letters of reference for all periods of qualifying work experience claimed in the application.

Canadian employers are responsible for deducting and remitting Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax from remuneration or other amounts they pay to their employees to the CRA. They must also provide employees with a record of their remuneration and deductions in the form of a T4 tax information slip. The T4 slip is therefore key documentary evidence for the vast majority of CEC applicants to demonstrate that they were in an employer-employee work relationship during their period of qualifying work experience in Canada.

However, there is no obligation under the regulations that CEC applicants provide a T4 tax information slip or NOA specifically with their application, and these particular documents cannot be considered conclusive evidence or the only evidence accepted for the purposes of substantiating whether an applicant has qualifying Canadian work experience. As such, in the absence of a T4 tax information slip or NOA, documents which may help substantiate the applicant’s work experience in Canada could include a record or letter of employment from the Canadian employer, work contracts and pay stubs.

In all cases, the onus is on the applicant to establish that they meet the CEC criteria at the time of their application. All applicants are required to provide satisfactory evidence of their work experience in Canada, including the fact that they were in an employer-employee relationship during their period of qualifying work experience.

Factors to consider – Employee vs. self-employed

In determining whether an applicant under the CEC was an employee or a self-employed individual during their period of qualifying work experience in Canada, IRCC officers should consider factors such as

    • the degree of the worker’s control or autonomy in terms of how and when work is performed, and the method(s) used to do the work
    • whether the worker owns or provides tools and equipment to accomplish the work;
    • the degree to which the worker has to perform the work personally and whether the worker has the option of subcontracting work or hiring others to help and assist with completing the work
    • the degree of financial risk assumed by the worker, including whether the worker is required to make any investment in order to complete the work or provide the service and whether the worker is free to make business decisions that affect their ability to realize a profit or incur a loss (as opposed to the opportunity to earn commissions or other productivity bonuses)
    • any other relevant factors, such as written contracts

Additional details regarding each of the above factors, and indicators that can be used when determining whether an individual is an employee or self-employed, are available in the Employee or Self-employed? CRA guide.

Determination of the degree of control can be difficult when examining the employment of professionals such as engineers, physicians and information technology consultants. Given their expertise and specialized training, they may need little or no specific direction in their daily activities. When examining the factor of control, it is necessary to focus on both the payer’s control over the worker’s daily activities and the payer’s influence over the worker. There are also certain occupations in which individuals may be either self-employed or in an employer-employee relationship depending on the specific circumstances of their employment. More information on the determination of a worker’s employment status for a number of specific employment categories is available on the CRA website.

Generally speaking, consultants or contractors are considered to be self-employed individuals in a contract for services business relationship. For example, independent contractors in the financial, real estate and business service industries. Similarly, individuals who hold substantial ownership and/or exercise management control of a business for which they are also employed are generally considered to be self-employed.

If a prospective applicant is not sure of their employment status and does not have the documentation set out above, they may choose to request a ruling from the CRA to have that status determined. Such a ruling will state whether, in the view of the CRA, a worker is an employee or self-employed, and whether or not that worker’s employment is pensionable or insurable. A worker may request a ruling by sending a letter or completed Form CPT1, Request for a Ruling as to the Status of a Worker Under the Canada Pension Plan and/or the Employment Insurance Act to their tax services office. This ruling may thereafter be submitted to IRCC to supplement a CEC application.

Each application under the CEC is to be considered on its own merits, with a final decision based on a review of all the information available to the IRCC officer at the time of decision. While a CRA ruling on an applicant’s employment status will be given due consideration by an IRCC officer, such a ruling will not constitute conclusive evidence. The final decision as to the employment status of the applicant for the purposes of meeting CEC requirements rests with the IRCC officer.

Jurisprudence

In Lazar v. Canada (Citizenship and Immigration), 2017 FC 16, Justice Gleeson determined that it was reasonable for an officer to decide that an individual who owned 90% of a company, and was President of the company, meant that someone had substantial ownership and management control of the business.  He also addressed an issue that many lawyers have raised, which is that the definition of “self-employment” under Canadian immigration law is different from that of corporate law. Justice Gleeson wrote:

While a corporation is, in law, a separate and distinct legal entity, the assessment of the question of self-employment under the CEC is driven by factors relating to ownership and control of a business. This is evident when one reviews the factors relating to an assessment of self-employment set out in the Operational Manual. The Operational Manual draws no distinction between businesses established as corporations, sole proprietorships or partnerships. Rather, the Operational Manual speaks of businesses generally and focuses on questions of ownership and control, not business structure.

In Byrne v. Canada (Citizenship and Immigration), 2017 FC 640, Justice Southcott determined that in the context of a Labour Market Impact Assessment which states that someone is an Owner/Operator and where someone is the principal shareholder of a business, then it is reasonable for an officer to conclude that they are self-employed.

In Zamani v. Canada (Citizenship and Immigration), 2023 FC 19, Madam Justice Furlanetto determined that if an individual has been approved as an Intra-Company Transferee, then this means that a determination has been made that there is a qualifying employer-employee relationship, which, according to the IRCC Guidelines, includes a statement that “[t]he essential element in determining [the] relationship is the right of the employer to order and control the employee in the performance of their work.” A visa officer under the CEC needs to address the fact that a previous officer has determined that someone met this requirement in their work permit application before determining that they are self-employed under the CEC.