Worker made claim for unpaid wages after quitting merger arrangement
The Ontario Labour Relations Board has denied a claim for unpaid wages because the would-be recipient of those wages was not an employee and instead ran her own business that had merged operations.
Joan Brennan was a chef who operated her own business, Elite by Design Catering, which catered weddings and other events. She ran the business without employees.
In the spring of 2016, Brennan was approached by Tim Seaton — the CEO of Aquatrust, a hot tub company that was diversifying into other areas such as installing vending machines in workplaces and stocking them with prepared foods — with a proposal. Seaton suggested an arrangement in which Elite would supply the food for the vending machines Aquatrust operated.
On May 20, 2016, Brennan and Seaton reached an agreement. The written but unsigned agreement stated that Brennan’s business, Elite by Design Catering, would merge with Aquatrust in a division separate from Aquatrust’s other divisions. It would include catering projects by Elite, wholesale food production for Aquatrust’s vending machine division — called Market to Work — and any retail at the division’s location. Brennan would receive 30 per cent of the division’s profit share “above and beyond her time” and Aquatrust would use the Elite branding for relevant services. They had a verbal agreement that Brennan would be paid $15 per hour for her time worked.
The agreement also stated that if Brennan “ever leaves our employ, she will have full rights to (Elite) branding to take with her.” Brennan was in charge of menu design, staffing, obtaining raw materials, organizing catering events, cost and quality control, equipment maintenance, and liaising with Market to Work staff.
Brennan felt Aquatrust had control over her because Seaton had drafted the agreement and used the word “employ,” though she didn’t try to change it. She started providing prepared food to Market to Work on July 7, 2016, with three employees she had hired and trained. The industrial kitchen in which Brennan worked had previously been leased by her but was now leased by Aquatrust.
Elite also provided prepared food for a prior regular customer and fulfilled about 15 event catering contracts.
Brennan received a $5,000 lump-sum payment from Aquatrust that she applied to operating expenses, though she didn’t invoice Market to Work for the prepared food she supplied despite the written agreement indicating that should be the practice. Aquatrust sent her cheques for hours worked from Aug. 31 to Sept. 16, but not for any before.
Brennan told Seaton on Oct. 13 that she quit. She requested a lump-sum payment of all the money Aquatrust owed her — encompassing hours worked, profit share and expenses — but offered another option if Aquatrust preferred “to put me on the books.” When she didn’t receive anything, she filed an application for unpaid wages.
An employment standards officer determined that Brennan and Aquatrust didn’t have an employment relationship and therefore Aquatrust didn't owe any wages to her. Brennan appealed to the Ontario Labour Relations Board to review the decision, arguing Aquatrust provided her with the tools to perform her work, controlled her work, dealt directly with clients, and most of what she did benefitted Aquatrust. This made her an employee, she said.
The board found that Aquatrust was not in the food preparation business and approached Brennan because her catering business would provide it with the skill and knowledge it needed. The agreement between Brennan and Seaton “most closely resembles a joint venture or horizontal integration between two established businesses” rather than Brennan simply being hired to make food, said the board.
The board also noted after the agreement was reached and Brennan began providing prepared food for Market at Work, she continued to operate Elite and service its pre-existing customer base. As a result, her position in relation to Market at Work was similar to her position with other Elite clients. In addition, the employees Brennan hired didn’t just work on food
for Market at Work but also other clients.
The board also found that the payments Aquatrust made to Brennan were characterized as for profit share and “for her time” and were intended for Elite's operating expenses. Even though a $15 per hour rate was decided upon for her time, it didn’t mean those payments were wages and Elite’s expenses were kept separate, the board said.
The board determined that the agreement documented “a contractual relationship between two commercial (i.e. entrepreneurial) enterprises” and the only part that could be seen as relating to an employment relationship was the word “employ” used in the termination clause. However, this was casual language and the rest of the agreement indicated the intentions of the parties as to the nature of the relationship — “employees do not ‘merge’ and do not have a ‘brand’: that is a hallmark of a business,” said the board.
In addition, Brennan’s suggestion she be put “on the books” indicated she didn’t think she was listed as an employee. The lump-sum payment and cheques for her time were acknowledgments by Aquatrust that “money should be flowing to Elite or Brennan pursuant to the terms of their financial arrangement," but they were not employee wages, said the board. See Brennan v. Aquatrust Inc., 2017 CarswellOnt 19750 (Ont. Lab. Rel. Bd.).
