7 factors determine relationship, regardless of the official agreement between employer and worker
In 2017, in a case called Glimhagen v. GWR Resources Inc., the B.C. Supreme Court affirmed the existence in law of the dependent contractor and that a dependent contractor is entitled to reasonable notice of termination due to the employee-like relationship that exists between a dependent contractor and an employer. The seven indicia of dependant contractorship were delineated as follows:
• Exclusivity: Whether the agent’s services are generally limited exclusively to the principal
• Control: If the agent is subject to the control of the principal, regarding the product and when or where the agent sells it to the principal
• Interest or Investment: If the agent had an investment in or interest in the tools necessary to perform their service for the principal
• Risk of Loss: Whether, by performing their duties, the agent undertook risk of loss or possibility of profit apart from the fixed rate of remuneration
• Essential Role: Whether the agent’s activity was part of the principal’s business organization
• Length of Relationship: Whether the relationship was long-standing (the more permanent the term of service, the more dependent the contractor)
• Reliance: Whether the parties relied on one another and closely co-ordinated their conduct
Since Glimhagen, B.C. courts appear more willing to recognize the existence of dependent contractor status in employment relationships. The three cases set out below are illustrative.
First, in Kok v. Adera Natural Stone Supply Co. Ltd., the worker, a stone fabricator, was an employee of the employer for 10 years before being taken off payroll and becoming a contractor. The worker sought a raise and the employer agreed on the condition that the worker work as a contractor, which he did, for the next 17 years before termination.
In concluding that the worker was a dependant contractor at the time of termination, the court held that all the Glimhagen indicia were present to suggest a dependent contractor relationship. The fact that the worker billed for his services and charged GST was not determinative, nor was the fact that the worker was not identified as an employee in a 2012 share transaction that included a schedule with the company’s employees. Based on an application of the Glimhagen indicia to the facts in this case, the court found that the worker was a contractor in name only and, therefore, granted damages equivalent to 22 months’ notice.
Second, in TCF Ventures Corp. v. Cambie Malone’s Corp., the worker was hired, through his corporation, to provide financial management services as the chief financial officer of the defendant company in 2009. The worker and the company, at the time of hiring, agreed that the worker could provide financial services outside the company and this was, in fact, the case. In September 2012, the worker was terminated.
In concluding that the worker was a dependent contractor, the court was most persuaded by the fact that the company hired the worker due to a desire for a personal, specific service from a professional consultant. The relationship also involved an intent to have the worker work for the company for three-and-one-half years, which suggested a permanency to the relationship.
Third, in Pasche v. MDE Enterprises Ltd., the worker worked exclusively for the company as a sheet metal estimator for 18 years. The company and the worker structured the professional relationship such that the company exercised very little control over the worker’s daily workplace activities, he was minimally supervised and had considerable discretion over the way he conducted his work.
However, there were several factors weighing in favour of an employment-like relationship. The worker, when working with clients and suppliers, presented to the world as an ambassador of the company. He had his own workspace at the company office and was treated like an employee through inclusion in all email and phone correspondence.
The court held that the most persuasive factor was the deep business integration and mutual dependency that developed over the course of the relationship. The worker had worked for the company for more than 18 years and relied exclusively on the company for his income and livelihood. The company, in turn, relied on the worker to bring in clients and generate a profit for the business.
What is clear from these recent cases is that the court’s analysis of a given working relationship is contextual. The takeaways are:
• As a general principle, if a contractor is financially and economically dependent on the employer, this relationship tends to lean more toward employer-employee.
• There need not be complete exclusivity between an employer and contractor for a finding of dependent contractorship.
• Even if both parties at first mutually intend for the relationship to be one of independent contractor and employer, this alone is not determinative of the relationship when other surrounding factors weigh in favour of an employment-like relationship.
• Mischaracterization of working relationships continues to cost employers. However, potential liability can be minimized through regular review of employment contracts and working relationships.
• Employers and employees alike should obtain legal advice when considering changing from an employment contract to an independent contractor or terminating working relationships.
For more information see:
• Glimhagen v. GWR Resources Inc., 2017 BCSC 761 (B.C. S.C.).
• Kok v. Adera Natural Stone Supply Co. Ltd. (2018), 2018 BCSC 1542 (B.C. S.C.).
• TCF Ventures Corp. v. Cambie Malone’s Corp., 2016 BCSC 1521 (B.C. S.C.).
• Pasche v. MDE Enterprises Ltd., 2018 BCSC 701 (B.C. S.C.).
Melanie Samuels is a partner with Singleton Reynolds in Vancouver and is co-chairperson of the firm’s Employment and Labour Group. She can be reached at (604) 673-7405 or [email protected]. Glen Stratton is an associate with Singleton Reynolds in Vancouver with a focus on civil litigation, employment, entertainment and construction law. He can be reached at (604) 673-7518 or [email protected]. Talya Nemetz-Sinchein is an associate with Singleton Reynolds in Vancouver practicing workplace law, construction law, insurance coverage, professional liability and commercial disputes. She can be reached at (604) 673-7440 or [email protected].
