Employment standards claim denied due to independent contractor relationship

A worker’s relationship with a contracting company was more like a partnership than an employment relationship, eliminating any entitlement to employment standards minimum pay, the Ontario Labour Relations Board has ruled.

The worker and his family were tenants in the home of the owner of a Richmond Hill, Ont.-based remodeler company, Better Look Homes, while the worker was employed as a construction supervisor for a renovation company.

In May 2021, the owner offered the worker a position with his own company. He suggested that he would hire the worker as an employee, but if the worker did well in the role, he would transfer half of the company to the worker and make him a partner by early 2022. They verbally agreed that the worker would be paid $37 per hour and the worker would pay for his own fuel in his vehicle and provide some of the tools and equipment.

The worker agreed to the deal and resigned from his employment with the renovation company to join the owner’s company.

According to the owner, the worker had been laid off and had applied for employment insurance benefits when they began discussing working together. He also denied that any hourly wage rate was discussed, instead claiming that they had a mutual agreement to share profits as the worker performed electrical and tiling work while the owner performed plumbing and structural work at worksites.

Worker decided location, hours of work

The worker regularly discussed with the owner about when and where they would work, but the worker usually decided which job sites he would go to and what hours he would work. He sometimes advertised their business on social media but didn’t discuss it with the owner.

The worker secured several clients for the company and, when things became busy, he brought in another worker to help out. This worker’s pay was recorded as a cost item for the worker.

The worker was responsible for completing profit and loss statements and sometimes paid himself directly out of payments he collected from clients. Over the course of 2021, the company would sometimes pay the worker as an advance on his salary, but the worker repeatedly requested full payment of his salary and he was told that would be done by the end of the year.

By the end of 2021, the worker’s full salary still hadn’t been paid and the company owed him overtime pay. As a result, the worker started thinking about leaving. He decided to register his own company and considered filing an employment standards claim for unpaid wages and overtime.

The worker filed a claim for wages, public holiday pay, and vacation pay, in May 2022, and the owner requested that the worker return all tools and materials belonging to the company.

Employment standards claim denied

An employment standards officer reviewed the complaint and determined that the worker was an independent contractor and therefore not subject to the Ontario Employment Standards Act, 2000’s (ESA) provisions on wages, public holiday pay, and vacation pay. The worker then applied to the Ontario Labour Relations Board for a review of the officer’s decision.

The board noted that the ESA doesn’t define independent contractor, but it defines an employee “as including a person who performs work or supplies services to an employer for wages.” It also noted that the jurisprudence established that the level of control the employer has over the worker’s activities is a significant factor, along with other factors such as who supplies the equipment and the degree of financial risk and responsibility held by the worker.

“The greater level of control an individual has over various aspects of the relationship, the more likely it is that he or she is an independent contractor,” said the board.

The board noted that the worker initially worked for the company in order to evaluate his skill set, but after the owner was comfortable with the worker’s skills there was little evidence of a significant level of control over the worker’s activities.

There was no indication that the worker had to follow any company policies or request time off, or that he was prevented from working for anyone else, the board said. It appeared that the worker decided which job sites to attend and what hours he worked, it added.

Independent contractor relationship

The board determined that the worker and the owner of the company interacted and behaved more like partners than as an employer and an employee – they did different work on jobs and worker took the responsibility to pay himself at times. While there may or may not have been an official partnership in place, that was the way they treated the relationship, said the board.

The board noted that the company supplied some of the tools and took steps to recover them after the worker left, but the evidence indicated that the worker used some of his personal tools in performing the work and used his own vehicle and fuel to travel to job sites. These all pointed more to an independent contractor relationship, the board said.

The worker also was involved with profit and loss of the business, as he found clients for the company and hired another worker when help was needed and paid him, the board said. In fact, when the worker left the company, he took the other worker with him, the board noted.

The board found that the relationship between the worker and the company’s owner was “an arm’s-length relationship” and the worker was an independent contractor. As a result, the worker was not entitled to any wages under the ESA, said the board upholding the employment standards officer’s dismissal of the worker’s claim. See Amin Ghorbanmovahhed v. 2217949 Ontario Ltd. o/a Better Look Homes, 2024 CanLII 39671