Exclusive deal not employment

Techie was independent

A recent decision about employment insurance shows how blurry the line can be between an independent-contractor relationship and an employment situation. In the latter, of course, the employer is obliged to withhold taxes and employment insurance premiums, and can be liable for wrongful-dismissal damages.

The Tax Court had told Quebec’s Vulcain Alarme Inc., for whose customers a Mr. Blouin inspected and gauged toxic substance detectors, that it had to pay employment insurance premiums for Blouin because their relationship amounted to a contract of employment.

The Tax Court judge based its decision on the facts that Blouin reported to Vulcain once a month to get the customer list; he had to provide service to the customers within 30 days and give Vulcain priority over anyone else he worked for; he worked exclusively for Vulcain, although this arrangement was voluntary; he had to submit time sheets and expense reports to Vulcain; and Vulcain supplied a special detector for Blouin’s work.

As well, customer service represented 20 per cent of Vulcain’s business; Vulcain reimbursed Blouin and his company for travel expenses even if the customer was not available on the call; Vulcain paid Blouin what amounted to a salary set by Vulcain; and Vulcain carried liability insurance to protect itself against Blouin’s mistakes.

But the Federal Court of Appeal has ound that, despite these “badges” of an employment agreement, Blouin was an independent contractor.

Contractors or subcontractors, the higher court notes, are often approached by influential customers (here, Vulcain) who oblige them to set priorities in those customers’ favour.

By fixing the remuneration, Vulcain did not control Blouin’s work; paying a set fee, reimbursing expenses or defining the purpose of the work applied as much to a contract for services as to a contract of service, the court has ruled.

No one supervised Blouin, the court notes. He set his own schedule. The fact that Vulcain controlled the quality of work was not the same as controlling its performance.

Moreover, Blouin owned most of the tools employed, with the exception of special equipment not available on the open market. For reasons of security and potential liability, Vulcain wanted strict control over their special tools.

Despite Blouin’s decision to work only for Vulcain, the arrangement was not exclusive.

Even so, he was involved with only a small part of Vulcain’s operations, he had no guarantee of income from Vulcain, it was only natural that customers complained directly to him, and he provided his own vehicle, paying the associated expenses himself.

For more information:

Vulcain Alarme Inc. v. Canada (M.N.R.), FCA file A-376-98, received Mar./99.

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