A letter arrived at a small landscaping and property maintenance business in the Calgary area notifying the owner that the Canada Revenue Agency had selected the company for a payroll audit focusing on worker classification. The business had operated for 7 years, growing from a sole proprietorship into an incorporated company with annual revenues approaching $1.2 million. Over that period, the owner had engaged a shifting roster of workers to perform landscaping installation, seasonal maintenance, snow removal, and related property services for residential and commercial clients throughout the region.

The business model relied on engaging workers as independent contractors rather than employees. The owner had developed a standard contractor agreement, adapted from a template found online, which each worker signed before beginning work. The agreement stated that the worker was an independent business operator, responsible for their own taxes, and not entitled to employment benefits or statutory protections. It specified that workers would invoice the company for completed work and would not receive T4 slips at year end. The company issued T4A slips reflecting payments to contractors and did not remit source deductions to the CRA on their behalf.

At the time of the audit notice, the business had 9 active workers engaged under these contractor agreements. Some had worked with the company for 4 or 5 years, while others were more recent. The workers used a mix of company-owned equipment and their own tools depending on the task. Scheduling varied: some workers set their own hours and accepted or declined jobs as offered, while others worked consistent weekly schedules determined by the owner. Most performed work exclusively for this company, though 2 occasionally took jobs for other businesses. The company provided branded uniforms to workers who interacted with clients but did not require them for all tasks. Invoicing practices had become routine rather than project-based, with most workers submitting identical biweekly invoices reflecting hours worked at agreed hourly rates.

The audit notice requested records going back 4 years, including all contractor agreements, invoices, payment records, T4A slips, correspondence with workers, and documentation of how work was assigned and supervised. The owner had also recently learned that a worker who left the company 8 months earlier had filed a complaint with the provincial employment standards branch claiming entitlement to unpaid vacation pay, statutory holiday pay, and termination pay. That complaint remained under investigation. The business now faced simultaneous scrutiny from federal tax authorities and provincial employment regulators, with accumulated obligations potentially spanning multiple years and multiple workers whose classification had never been formally challenged until now.