Good labour relations start with defining the employment relationship

The </i>Toronto Star<i> case highlights the importance of defining “dependent” contractors.

Defining the employment relationship is a prerequisite for smooth labour relations.

It is the nature of this relationship that will determine whether workers have the right to bargain collectively, whether they are protected by labour and human rights legislation and whether employers are required to make payroll deductions for CPP, EI and income tax.

It is especially important as the nature of work has changed over the last two decades. While the ranks of full-time workers have been increasing over the last year, many workers remain in non-standard working relationships.

The number of self-employed workers fell by a resounding 196,000 from January 2000 to February 2001 according to Statistics Canada. However, many workers — owner-operator truck drivers, home-care workers, bicycle couriers, taxi cab drivers, garment-industry home workers, rural mail delivery employees, and newspaper carriers, just to name a few — remain in contract work.

Are these contract workers self-employed entrepreneurs or are they employees, even though their employment conditions are not typical of the 9-to-5 worker?

A recent decision by the Ontario Labour Relations Board (OLRB) concerning the status of newspaper carriers for The Toronto Star highlights this long-standing labour issue: what constitutes a “dependent” contract worker and a truly self-employed, “independent” contractor.

After a three-week strike, the newspaper’s 2,000 adult carriers signed a first contract that will provide bonuses and a guaranteed offer of work when the newspaper starts contracting out its delivery service to another firm later this year.

The strike, which disrupted home delivery, could have been avoided had the employment relationship between The Star and its carriers been clearly defined from the outset. The ensuing labour strife left a stain on the newspaper’s reputation. The Southern Ontario Newspaper Guild took the paper to the OLRB alleging that The Star’s decision to outsource its delivery and circulation functions stemmed from an anti-union bias, a claim the paper aggressively dismissed.

February’s OLRB decision declared that The Star’s carriers are “dependent” contractors. Although the terms of the carriers’ employment seemed to place them in the ranks of the self-employed, vice-chair Christopher Albertyn concluded that the carriers are employees who have the right to collective bargaining and are not independent contractors.

Task v. time

In his decision, Albertyn referred to the shift in the past 20 years in the nature of work, from typical full-time work to atypical forms of work — like contracting. The hallmark of the “atypical” relationship is that the employers shift the risks associated with employment to the worker.

Albertyn observed that the model of work relations becomes “task” based rather than “time” based, with the result that no long-term job tenure is offered, compensation is based on payment by result, and the employer can terminate the contract at will.

While consultants best personify the “task” model, this model also applies to other workers who, in contrast to consultants, do not consider themselves to be business operators. The result is that these non-standard forms of employment “require scrutiny for their substantive content and should be considered less by their formal contractual characteristics and more by how they actually operate,” said Albertyn.

In 1968, the federally commissioned Woods Task Force on Industrial Relations, charged with examining the regulation of industrial relations in Canada, expressed concern about the accessibility to collective action by groups of self-employed persons who are “economically dependent for the sales of their goods or services on a very limited market,” stated the report.

In 1972, professor Max Cohen, heading the Newfoundland Royal Commission on Labour Legislation, noted that many so-called independent contractors “are analogous to employees in an economic sense although not meeting the definition of employee in the traditional legal sense.”

Cohen concluded that these workers should have the right to organize and bargain under labour relations legislation.

In 1975, the Ontario government accepted the same conclusion and enacted what is now section 1(1)(h) of the Labour Relations Act, a section which states unequivocally the right certain employees may have to collective bargaining.

Unfortunately, as Albertyn cites in his decision, “the task of distinguishing between the individual worker and the true entrepreneur has never been easy especially when dealing with the vast gray middle ground between the extremes of the labour spectrum.”

Factors determining a dependent contractor relationship

What are the criteria for determining the status of a “dependent” contractor?

Albertyn noted the following and emphasized that no one factor is determinative, rather that all relevant factors must be considered as a composite whole:

•The relationship with the employer must be defined as ongoing and of indefinite duration.

•The employer must control how, when and where the contractor performs work. For example, in the case of newspaper carriers, this control would be shown if the papers had to be delivered at a certain time; the rates of pay were determined by the employer; the carrier was required to distribute only what the employee assigned and there was no right to buy, sell or trade in routes.

•The nature of the monetary rewards for work must be accurately defined. As Albertyn observed, “There is a world of difference between making a profit from an astute investment (as an independent contractor would do) and the selling of one’s own labour as a more or less undifferentiated commodity (the hallmark of the dependent contractor or employee).”

•The opportunity for making a profit or suffering a loss (one of the criteria for deciding whether a contractor is an independent businessperson) must be examined in the context of the relationship with that employer, not in relationship to other activities the worker may have outside of working for the employer in question.

Canada is one of only a few jurisdictions that have tried to clarify the distinction between a contractor who is an independent businessperson and one who is an employee. Other countries — Japan, the Netherlands, Spain, Norway, Sweden, Switzerland and the United Kingdom for example — have expressed concerns similar to Canada’s that contracting out can be used to disguise employee relationships in order to avoid application of potentially relevant labour legislation.

Although often a difficult task, determining the status of contractual employment affects employment conditions for workers at the margins of the employment picture and affects the way both small and large businesses operate in the new economy.

For more information: Toronto Star Newspapers Limited and Communications, Energy and Paperworkers Union of Canada, Local 87-M, Ontario Labour Relations Board Case No. 2766-98-R, February 2, 2001. Also see Revenue Canada publication entitled Employee or Self-Employed?(RC4110) and on the internet at

Lorna Harris is the assistant editor of Carswell’s CLV Reports, a newsletter that reports on collective bargaining and labour relations. She can be reached at (416) 298-5141 ext. 2617 or by e-mail at [email protected].

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