16.2.1 The goal of this policy is to explain the difference between contracting for the services of individuals and Public Service employment. It outlines how to avoid entering into contracts of services with the Crown which create an employer-employee relationship, and how to avoid conflicting with staffing legislation. A contract of service results in the establishment of employee-related benefits, which include, for example, health and dental care, long-term disability coverage, government pensions, Employment Insurance, Canada Pension Plan and income tax source deductions. Factors that may create an employer-employee relationship include the degree of supervision; provision of working space and equipment; type of work (i.e. is the contractor doing the same work as employees); and basis of payment and benefits.
16.2.2 The Public Service consists of the positions in departments and other government entities that are listed in Schedule I of the Public Service Staff Relations Act. Part I of the Schedule, which lists those positions for which the Treasury Board is employer, represents the vast majority of Public Service employees. Part II of the Schedule lists "separate employers," that is, entities that establish their own terms and conditions of employment.
16.2.3 Employment in the Public Service is generally determined according to a statutory regime. In particular, employment in that part of the Public Service for which the Treasury Board is employer is governed by three statutes:
• the Public Service Employment Act, which gives the Public Service Commission, with exceptions, the exclusive authority to appoint persons to positions in the Public Service;
• the Financial Administration Act, which gives the Treasury Board the power of personnel management in the Public Service; and
• the Public Service Staff Relations Act, which governs collective bargaining in the Public Service.
16.2.4 The Supreme Court of Canada has ruled that, for labour relations purposes (i.e. whether an individual is an employee for collective bargaining purposes), a person can be employed in that part of the Public Service for which the Treasury Board is employer only if
• a position has been created by a Minister or deputy head,
• the position has been classified by the Treasury Board, and
• the Public Service Commission, or its properly authorised delegate, has appointed the person to the position.
Only a duly appointed employee of the Public Service can enjoy the benefits of a public servant under the Public Service Employment Act (employee rights) and the Public Service Staff Relations Act (right to collective bargaining).
16.2.5 While the Public Service Commission's appointment authority can be delegated to departments and agencies, contracting authorities cannot employ persons in the Public Service without complying with the Public Service Employment Act. Appointments to positions in the Public Service must be made under the statutory regime established by that Act and not under contract. Contracting authorities, therefore, do not have the legislative authority to create employer-employee relationships by way of contract, however an improperly construed contract for services may evolve into an employer-employee relationship at common law.
16.2.6 There are exceptions to these rules. For example, Cabinet directly appoints a number of high ranking officials in the Public Service and ministers can hire members of their own offices. In addition, while many of these rules apply to employment by "separate employers," each separate employer has a distinctive employment regime.
16.2.7 Contracting authorities cannot use contracts for services to circumvent the requirements of the statutory employment regime established by the Public Service Employment Act. In other words, contracting authorities cannot sign contracts with individuals that would, in the absence of the Public Service employment regime, create employer-employee relationships according to the rules of the common law.
16.2.8 Contracting authorities who circumvent the requirements of the Public Service Employment Act, by signing contracts that create employer-employee relationships at common law risk incurring liability under the following statutes the Canada Pension Plan, the Canadian Human Rights Act, the Crown Liability Act, the Government Employees Compensation Act, the Income Tax Act, the Official Languages Act and the Employment Insurance Act. Under those statutes, the Crown may incur liability for persons having the attributes of employees, or "servants," at common law. For example, the Minister of National Revenue may assess a department for source deductions pursuant to the Employment Insurance Act.
16.2.9 On the other hand, contracting authorities may be able to respond to challenges, especially to challenges or liabilities related to employee-related benefits, by using the rationale of the "trilogy" of statutes argument cited in paragraph 16.2.3 (above).