Canadian Employment Law Today

December 11, 2013

Focuses on human resources law from a business perspective, featuring news and cases from the courts, in-depth articles on legal trends and insights from top employment lawyers across Canada.

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December 11, 2013 Contractors on the road to employee status? THIS INSTALMENT of You Make the Call features a dispute over whether tow truck drivers were employees or contractors with a towing company. SB Towing is a towing and roadside assistance company in London, Ont. It had several truck drivers in its service with which it signed independent contractor agreements. The company was also under contract to the Canadian Automobile Association (CAA) to provide roadside assistance to CAA members. SB Towing provided trucks with CAA mobile computers on board for the drivers and CAA calls were to take priority over any other calls. Drivers were free to take other calls, but if a CAA call came in, it became top priority as SB Towing was required to provide immediate ser- Published biweekly 22 times a year Subscription rate: $299 per year Customer Service Tel: (416) 609-3800 (Toronto) (800) 387-5164 (outside Toronto) Fax: (416) 298-5082 (Toronto) (877) 750-9041 (outside Toronto) E-mail: Carswell.customerrelations@ Website: Thomson Reuters Canada Ltd. One Corporate Plaza 2075 Kennedy Road, Toronto, Ontario, Canada M1T 3V4 Publisher: John Hobel Managing Editor: Todd Humber Editor: Jeffrey R. Smith E-mail: ©2013 Thomson Reuters Canada Ltd. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher. The publisher is not engaged in rendering legal, accounting or other professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The analysis contained herein represents the opinion of the authors and should in no way be construed as being either official or unofficial policy of any governmental body. We acknowledge the financial support of the Government of Canada, through the Publications Assistance Program (PAP), toward our mailing costs. GST #897176350 12 How would you handle this case? Read the facts and see if the judge agrees vice under its deal with CAA. CAA calls represented about 90 per cent of all service calls, which provided the same commission as non-CAA calls to the drivers. If a driver wasn't in his truck when a call came in to his truck's computer, it was forwarded to his cellphone if he was on duty. The drivers were paid monthly by SB Towing, once CAA made its payments to SB Towing. Since the drivers were independent contractors, SB Towing didn't make any deductions — the drivers were responsible for paying their own taxes. They also didn't receive any benefits or vacation, as they were only paid when they worked. Drivers were responsible for damage to their trucks, up to a maximum of $2,500, after which SB Towing took care of the rest. In 2011, the Minister of National Revenue assessed SB Towing and found 39 of its tow truck drivers were not independent contractors but rather were employees, making SB Towing responsible for deducting employment insurance (EI) and Canada Pension Plan (CPP) contributions from their pay. SB Towing appealed, arguing it had signed agreements with the drivers indicating they were independent contractors and that was the intention of the parties when they signed. The company claimed workers had control over the money and hours they worked, and also took independent jobs from time to time. Some drivers paid their own EI and CPP and claimed business expenses and operated independent of the company. In addition, they were all reminded they were independent contractors when they signed their monthly pay statements. You Make the Call Were the tow truck drivers independent contractors? OR Were they employees? IF YOU SAID the drivers were employees, you're right. The court noted the intention of the parties when they signed the contract is "only relevant to the extent that it is reflected in the facts." In other words, the reality of the circumstances may be contrary to the original arrangement. Factors such as control, ownership of tools, chance of profit and risk were the real considerations, said the court. The court found some of the drivers paid their own EI and CPP contributions and deducted the cost of their own tools as expenses. However, others felt they were employees and didn't make their own contributions. Regardless of how different drivers felt, the court found SB Towing controlled most of the drivers' work. Though they were technically free to refuse calls or seek other work, the CAA contract made up most of their work and the strict standards made it difficult to do so. In fact, SB Towing had the ability to discipline workers for misconduct — by taking trucks away — or to demand a good reason for refusing a call. "In my opinion, taking a vehicle away from a driver is the ultimate example of control since the vehicle is an absolutely essential tool in the roadside assistance industry," said the court. The court also heard evidence that drivers were supposed to obtain approval in advance if they were going to miss a shift or take a vacation. This made sense, given that SB Towing couldn't fulfill its CAA contract if drivers could miss shifts at their own discretion, said the court. In addition to a substantial amount of control over the drivers, SB Towing also owned the trucks and many of the tools on them, as well as paid the insurance. Drivers were responsible for a certain amount of damage, but the company covered significant damage over $2,500. In addition, the company controlled which calls went to which drivers and therefore controlled their level of profit. "The workers whom I found to have a common intent with (SB Towing) to enter into a contract for services were not performing their services as independent contractors," said the court. "Their intention was not reflected in the objective reality of their working relationship with (SB Towing) and therefore cannot prevail." For more information see: •SB Towing Inc. v. Minister of National Revenue, 2013 CarswellOnt 4204 (T.C.C.). Published by Canadian HR Reporter, a Thomson Reuters business 2013

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