Canadian Employment Law Today

STUART McKELVEY HALIFAX Have a question for our experts? Email Jeffrey.R.Smith@thomsonreuters.com Canadian HR Reporter, a Thomson Reuters business 2016 2 | July 20, 2016 with Brian Johnston Ask an Expert with Brian Johnston Answer: While there is no way to guarantee that an individual will be viewed at law as an independent contractor, there are steps the employer can take to increase the likelihood that such a relationship would be found. 1. Formally sever the employment rela- tionship. For the employment relationship to properly end, it must be terminated with proper notice (or pay in lieu), severance (if applicable), etc. Alternately, the employee can resign by providing proper written no- tice. e employee should be provided with a record of employment which clearly indi- cates that the employment relationship has ended. 2. Prepare the independent contrac- tor agreement. e individual and the em- ployer should create an independent con- tractor agreement. e agreement should indicate, in the recitals, that the individual was formerly an employee but chose to become an independent contractor (IC) and that the employment relationship was properly severed. Any "employee" benefits to which the individual was previously en- titled should cease; the fact that there are no entitlements to benefits (such as health and dental) should be clearly stated in the agreement. e new remuneration model should be based on invoices provided by the IC for work performed (as opposed to a regular "salary"). Other terms of the agreement will vary, but they should include the key indicators of an IC relationship. One of the central con- siderations in determining whether the rela- tionship is one of IC is how much control is exerted over the individual by the company (the less control over the IC the better), with regard to the following factors: • e IC's ability to control hours and place of work • Whether the IC brings her own tools to the work (the more the IC brings to the work- place, the better) • e amount of oversight the company has over the IC — the more oversight (daily direction, ability to discipline, etc.), the less likely the individual will be found to be an IC • e degree to which the IC stands to profit or lose and how much risk is involved for the IC (the greater the chance of profit and loss and the more risk, the greater the ar- rangement looks like an IC arrangement) • Whether the IC can hire assistants for completing the work (such assistants to be employees of the IC, not the company) • Whether the IC can perform work for more than one entity (an IC should be able to provide services to a variety of entities). is list is not exhaustive but provides a sense of the various indicators of an IC re- lationship. If any terms need to be changed during negotiations, keep the above factors in mind. Finalize the agreement and clearly indi- cate that the IC was given an opportunity to seek independent legal advice (a best prac- tice for any contract) prior to agreeing to the terms. 3. Act like the individual is an IC. e contract is very important, but so is the be- haviour of the company and the individual. If the individual, in practice, is heavily con- trolled by the company, it is possible that the relationship will be found to be that of employee/employer. erefore, the above factors must be considered not only with re- gard to the preparation, but also with regard to the execution, of the contract. Have a question for our experts? Email Jeffrey.R.Smith@thomsonreuters.com Transitioning from employee to independent contractor Question: If an employer wants to terminate a full-time employee and offer him a position as an independent contractor, what must be done to ensure the relationship is that of a contractor and no longer an employee? Manager allowing harassment to happen Question: Can a managerial employee be fired for just cause if he allowed harassment to happen on his watch and did nothing about it, even if he was not involved? Answer: Employers have a high standard to meet when firing an employee for just cause. Failing to properly manage employees may justify termination for cause, if the employer can demonstrate that the manager's conduct is "grossly deficient," and: • Has caused the employer to lose total con- fidence in the manager, • Constitutes a fundamental breach of an employer's policy, or • Constitutes a failure to faithfully discharge duties. e law is clear that the employer has a duty to provide a workplace free from ha- rassment. To achieve that goal, the employer should have a policy against harassment and the employer's managers should be trained in detecting, investigating and addressing it. Managers are in a position of trust and employers trust managers to ensure a ha- rassment-free workplace. Failure to properly manage a harassment situation can result in employer liability. For that reason, a manager properly trained on a clear anti-harassment policy who stands by and does nothing (even when fully aware of harassment) may be fired for cause — in the right circumstances. In determining whether a manager's fail- ure to ensure a harassment-free workplace is grounds for summary dismissal, the two- step test analysis from the Supreme Court of Canada (McKinley v. BC Tel) applies: • Does the evidence establish the employ- ee's alleged conduct on a balance of prob- abilities — did the employee engage in the prohibited behaviour, such as failing to ad- dress known harassment at the workplace? • If so, does the nature and degree of the conduct justify terminating employment? As always, the facts in any given case are important. Assuming the first step is proven, the nature and degree of the conduct, in the individual circumstances of each workplace, must still be evaluated. Dismissal for cause is more difficult if: • e employer has not taken active steps (such as implementing a policy or train- ing) to prevent harassment. • e manager was not trained on the duty to prevent harassment. • e employer itself condoned harassment in the past. • e harassment is on the "lower end of the spectrum" of seriousness. In these situations, a manager's failure to act may not be seen as "grossly" deficient. Employers and managers should also be aware that a manager who completely ignores harassment could face personal liability, particularly in the human rights context. Note that, in all cases, an employer will need to conduct an investigation into any allegation of harassment prior to impos- ing a sanction such as termination of em- ployment. e manager should be given a fair opportunity to understand, and respond to, the complaints put forward before any final decisions are made. See McKinley v. BC Tel, 1996 CarswellBC 1005 (B.C. S.C.). Brian Johnston, Q.C., is a partner with Stewart McKelvey in Halifax. He can be reached at (902) 420-3374 or bjohnston@stewartmckelvey.com.

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