Canadian Employment Law Today

STEWART McKELVEY HALIFAX 2 | October 23, 2019 with Brian Johnston Ask an Expert Canadian HR Reporter, 2019 Have a question for our experts? Email jeffrey.smith@keymedia.com Independent contractor choosing to become more dependent Question: If an independent contractor chooses to reduce his other work during an existing contract so the contract's proportion of his work has increased from less than half to most of it, can his independent status change? Answer: Yes, but it is unlikely unless other factors also support a change in the contrac- tor's status. Across Canada, courts or labour boards look to several factors to determine whether a worker is an employee or an independent contractor; namely: • Intention of the parties • Level of worker control • Ownership of equipment and tools • Profit/loss opportunity • Business integration. ese factors are considered holistically — no one factor is determinative. However, the worker's status may transcend into one of dependent contractor or perhaps employ- ee if the relationship considered as a whole points to the worker becoming dependent on one work provider. If that worker unilat- erally chose to refrain from work elsewhere and such was not the intention of the parties, the worker's status as independent contrac- tor is less likely to change. Consider Malleau v. M.N.R., in which the Tax Court of Canada was asked whether a carpenter was an employee or an indepen- dent contractor of a construction company for tax purposes. e worker had initially worked odd jobs until the company's direc- tor asked the worker to do a large amount of work on a series of projects. From this point on, the worker considered himself to be an employee, but the company did not perceive any change in the relationship. e worker remained free to select and turn down jobs at the company as he liked and was free to take on other work for other contractors if he chose, but he in fact worked primarily for the company from thereon. e court considered the factors listed and concluded that the worker remained an independent contractor. It was highlighted that the worker was not required to provide his services exclusively to the company, and the fact that he chose to do so was not deter- minative but merely indicative of his desire to work exclusively for the company. While the treatment of an individual as an independent contractor for tax purposes is not determinative to the analysis in an em- ployment context (Dynamex Canada Inc v. Mamona), it may be persuasive, and the court here applied case law from the em- ployment context to classify the relationship for tax purposes. Similarly, in Robinow and Calian Ltd, Re, a psychiatrist had contracted to provide ser- vices to the Canadian Forces through an in- termediary contractor, Calian, for a number of years, while being free to provide services elsewhere. Eventually, his contract was ter- minated and he filed a wrongful dismissal claim. Among his submissions, the psychia- trist noted that, over the period of his con- tract, he had increased his work at the Forces bases and simultaneously decreased his other work commitments. He claimed that, eventually, he was almost entirely financially dependent on Calian. Calian submitted that, although the psychiatrist's reliance on his work at the Forces clinics increased over time, the decision to reduce his activities elsewhere was the psychiatrist's own and had not been requested by Calian. Applying the factors, the adjudicator held that the psychiatrist had remained an inde- pendent contractor. ere was no obligation for him to work only for Calian and, in fact, the agreement clearly anticipated that he would have other clients. While the num- bers of hours the psychiatrist had worked over the latter portion of the contract could reflect a high degree of dependency, the ad- judicator said, "I cannot agree that because Dr. Robinow chose to work more hours at the clinic that his status had changed in any manner" to one of dependent contractor. In some cases, however, the status of a worker shifts despite their continuing to work on other contracts, due to the level of the worker's integration into the business as a whole and level of dependency. Consider Glimhagen v. GWR Resources Inc., in which a worker who had provided accounting services to a business as an in- dependent contractor began taking on more responsibilities after a period of time. e company had switched from paying the worker's company as a contractor to placing him on their payroll personally, but it never required the worker to provide services ex- clusively. In fact, after the worker went on the payroll, he continued provide services to other parties. In the context of a wrong- ful dismissal suit, the court had to determine whether he was a dependent or independent contractor. e court concluded that the relation- ship had evolved over time from one of independent contractor to dependent con- tractor. Although the worker continued to pursue some other business interests — this factor mitigated against a finding that he was a dependent contractor — overall, it was clear that the relationship had be- come ingrained and established over time and the worker had become a key player in the company's operation. e length of the relationship, which spanned some 23 years, was an important factor, as were the work- er's evolving duties. is illustrates that no one factor is deter- minative, and where the worker is substan- tially involved in the project, the court will be more likely to find that the worker is either an employee or a dependent contractor in order to afford the worker more protection, even where the worker remains free to work on other projects. Another interesting situation arose in Shaham v. Airline Employee Travel Con- sulting Inc., where a worker had initially suggested that they structure his working relationship as one of a contractor, not an employee, in part because he had an interest in remaining free to work on other projects. However, the worker recognized from the outset that working for the company would require putting in considerable hours and he devoted most of his time to this contract. e company's director eventually learned that the worker had been taking some steps (albeit very preliminary) to develop a new business, felt that the worker was not work- ing in the best interests of the company and terminated the contract. e court determined that the worker was a dependent contractor as, although he had the right to work on other projects, it was clearly understood that he would be working long hours for the company and was relying on that income to support himself. e com- pany was, therefore, in breach of contract by terminating the worker without just cause. Ultimately, all of the factors will be consid- ered in totality to determine a worker's sta- tus and the label placed on the relationship is not determinative. However, the amount of work being done is associated with the level of integration into the business as a whole, which plays a large role in the analysis, whether or not the worker is free to engage in other business interests. Where a worker is dependent on one con- tract by virtue of the nature of the contract itself, rather than their own choice to reduce work elsewhere, courts will be more likely to afford the worker the protection associ- ated with a status of dependent contractor or employee. It is also noteworthy that, in 2020, certain amendments to the Canada Labour Code will likely come into force, including s. 167.1, which prohibits an employer from treating an employee as if they were not an employee in order to avoid obligations with respect to standard hours, wages, vacation, holidays and leave. If any complaint is brought with INTEGRATION on page 7 »

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