Canadian HR Reporter

www.hrreporter.com 41 C O L U M N S E M P L O Y M E N T L AW CONTRACTOR TURNS OUT TO BE EMPLOYEE IN B.C. British Columbia company thought it hired an independent contractor to help launch a new product, but instead it must pay more than $54,000 in wrongful dismissal damages after the B.C. Supreme Court found that he was an employee. Harry Cho, 51, was an experienced technology salesperson when startup company Stonebridge Solutions came calling in mid-2018. Stone- bridge was looking for someone to be the vice president of a new company to be created around the development of XUMI, an online payment product. The position would be involved in developing business and strategic partnerships along with planning and budgeting XUMI's launch. Stonebridge would provide expenses, a laptop and a cellphone. It also stated, "We are flexible and open to a contract position with the option to migrate to a salaried position if that is desirable." Cho countered with a proposal that included his expected salary, a signing bonus, medical and dental benefits, expenses and a cellphone allowance. Stonebridge said it could meet his terms, but only after the new company was formed. Cho asked for a letter of employment confirming his terms, but Stonebridge said benefits and the signing bonus would have to wait until Cho signed an employment contract with the new company. Cho started working on Oct. 3, 2018 and Stonebridge paid him twice a month for salary, cellphone allowance and expenses. The money came out of the personal bank account of Stonebridge's primary shareholder and no statutory deductions were made. Each payment was on a bank draft stating "contract payment," although Cho never invoiced the payments. Cho received a laptop with the necessary software licences and an email account identifying him as the vice president of Stone- bridge. Cho worked on the project for six months, receiving his semi-monthly pay and taking vacation time. The new company around XUMI wasn't incorporated, so Cho remained without an employment contract and didn't receive a signing bonus or benefits. On April 1, 2019, Stonebridge's owner told Cho that they could no longer work together and asked him to propose his own departure terms. However, she rejected the terms and Cho wasn't paid for his last two weeks of work. Cho sued for damages in lieu of reasonable notice, but Stonebridge countered that Cho was an independent contractor so no notice was required. Court weighs in The court noted that the status of a working relationship depends on the facts of the situation, regardless of the intention at the time of hiring. It found that, while Cho exercised some independence, it wasn't to the extent of an independent contractor. His work was guided by Stonebridge and he had to meet specific deliverables set by the company. The court also found that Stonebridge provided the essential tools for him to do his job — a laptop, software and an email account. Stonebridge paid him a fixed salary every two weeks regardless of what he did or if he took vacation. Stonebridge argued that Cho was a fixed- rate contractor, but the court pointed out that there was no official contract or targets for Cho to meet to get paid. Cho was set up as vice president of Stonebridge, which made him integrated into the company. The court acknowledged that it was standard practice for technology startups to assign independent contractors identities showing them as integrated with the company, but it said that didn't matter when determining the nature of the employment relationship. It pointed to the fact that Stonebridge had several "true, independent contractors" that performed services for Stonebridge and their level of engagement was different than Cho's. The court determined that Cho was in an employment relationship with Stonebridge and he was entitled to reasonable notice of dismissal. Although Cho had the title of vice president, he didn't manage any employees and had his own responsibilities. His skills were specialized, but he spent most of that tenure familiarizing himself with XUMI rather than using those skills, said the court, in finding two months an appropriate amount of notice. Stonebridge was ordered to pay Cho $37,723 in damages in lieu of notice plus $11,365 for his missed final pay. The court also added $5,000 in punitive damages for Stonebridge failing to pay Cho for work performed in the last two weeks of his employment. See Cho v. Stonebridge Solutions Inc., 2020 BCSC 1560 (B.C. S.C.). CHRR A B.C. technology startup company intended for a new recruit to be an independent contractor until it formed a new company, but the nature of the relationship meant the recruit was an employee right from the start, writes Jeffrey R. Smith U.S. INDEPENDENT CONTRACTORS LIKE THEIR FREEDOM Jeffrey Smith Editor of Canadian Employment Law Today Source: MBO Partners It was standard practice for tech startups to assign independent contractors integrated identities, but that didn't determine the nature of the employment relationship. A 67% are working independently by choice 53% feel more secure working independently 82% are happier working on their own 72% say flexibility is more important than more money

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