Canada: The HR Space: Québec Contractors Can't Have Their Cake And Eat It Too

Last Updated: May 30 2012
Article by Marie-Julie Lanctôt and Tanvi Shah

For a variety of reasons, more and more employees want to create companies to provide their services as contractors, rather than employees. Such services will often be identical to those that were provided when the individual was an employee. Subject to a tax, employment insurance or Canada Pension Plan audit, that may be fine while the individual is providing services. But it can go very wrong at the end of the relationship, with many contractors claiming the pay in lieu of notice and severance pay they would have received had they been employees. Things may be changing in Quebec, however. In Conseillers en informatique d'affaires CIA ("CIA") Inc. v. 4108647 Canada Inc. (PDF - Available only in French), the Court of Appeal of Québec recently said that employees who voluntarily choose to create a company in order to enter into a contract for services with their former employer will not be entitled to notice of termination or pay in lieu thereof, unless the contract provides otherwise.


In 2002, Solution and Integration of New Concept S.I.N.C. Inc. ("SINC") acquired the company for which Ms. Cohen, a senior IT manager, worked for 15 years. Ms. Cohen asked SINC if she could provide her services through a company that she would create for this purpose. SINC agreed and a consulting agreement (the "Agreement") was signed.

Subsequent to the signature of the Agreement and the creation of Ms. Cohen's company (the "Company"), her daily routine remained the same: 

  • she continued to work exclusively on projects for SINC despite a clause in the Agreement providing that the services rendered by the Company and Ms. Cohen were non-exclusive;
  • she did not provide her own work location or equipment, despite a clause in the Agreement stating that she had to; and
  • she had no independent control over her work.

In 2004, CIA acquired SINC. CIA approved the renewal of the Agreement with Ms. Cohen's company. In 2007, CIA advised Ms. Cohen it was terminating the Agreement without notice.

Ms. Cohen and the Company claimed 18 months of consultant fees, based on Ms. Cohen and the Company's combined total years of "service" with CIA and its predecessors. 

Trial Decision 

Despite the fact that the trial judge confirmed the Agreement could not be qualified as an employment contract because the services were provided by a company rather than by an individual, he nevertheless determined that when the parties to a contract for services have been in a long-term employment relationship prior to the contract and that the only element that differentiates their new contractual relationship is the vehicle through which the services are provided, it may be presumed that the company will be, like an employee, entitled to reasonable notice of termination of the services. According to the trial judge, the substantive rights of the parties that existed under the employment contract continued to apply.

CIA argued that Ms. Cohen, who voluntarily chose this arrangement for fiscal reasons, should not "have her cake and it eat too" and appealed.

Court of Appeal of Québec

The Court of Appeal confirmed that when a service provider is a company, it is only under exceptional circumstances that the court will find that the agreement is an employment contract. This may be the case if it is shown that the company is a "smoke screen" the employer uses to sidestep its obligations. 

Such was not the case here. Since Ms. Cohen had freely chosen for her own benefit to provide her services through a company as a contractor, no exceptional circumstances warranted departing from the rule. The Court of Appeal explained further that the law does not allow transferring the rules applicable to an employment contract to a contract for services.

Ultimately, Ms. Cohen was entitled only to 30 days notice, as was specifically set out in the services agreement.

Distinction With Other Provinces

This decision is welcomed in Quebec as it clarifies that if an employee chooses to modify his or her status in order to render services through a corporation, even though little else has changed, the employee forfeits all entitlements he or she would have had as an employee at termination.

But that is not necessarily the case throughout the rest of the country.  In other provinces, courts may take into account the degree of economic dependency that exists between the parties. Where the contractor works exclusively, or nearly exclusively, for the company, the individual may be deemed to be an employee or dependent contractor, and thus entitled to reasonable notice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions