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Preliminary Matters for Employment Law (9:IV): Difference between revisions

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{{REVIEWED LSLAP | date= August 1, 2023}}
{{REVIEWED LSLAP | date= August 21, 2024}}
{{LSLAP Manual TOC|expanded = employment}}
{{LSLAP Manual TOC|expanded = employment}}
== A. Determine Federal or Provincial Jurisdiction ==
== A. Determine Federal or Provincial Jurisdiction ==
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In ''McCormick v. Fasken Martineau DuMoulin LLP'', 2014 SCC 39 https://canlii.ca/t/g6xlp, the Supreme Court of Canada affirmed that the key to a determining whether an individual is an employee or an independent contractor” is the degree of control and dependency.  The Court in ''TCF Ventures Corp v The Cambie Malone’s Corporation'', 2016 BCSC 1521 https://canlii.ca/t/gt1j2, noted that the ‘dichotomy’ between independent contractors and true employees is best practically assessed on a spectrum that exists between the two extremes; persons (both natural and unnatural) can find themselves on that spectrum and can bring an action for breach of an entitlement to notice of termination of their contracts, and the true nature of the relationship should be assessed on a case-by-case basis.
In ''McCormick v. Fasken Martineau DuMoulin LLP'', 2014 SCC 39 https://canlii.ca/t/g6xlp, the Supreme Court of Canada affirmed that the key to a determining whether an individual is an employee or an independent contractor” is the degree of control and dependency.  The Court in ''TCF Ventures Corp v The Cambie Malone’s Corporation'', 2016 BCSC 1521 https://canlii.ca/t/gt1j2, noted that the ‘dichotomy’ between independent contractors and true employees is best practically assessed on a spectrum that exists between the two extremes; persons (both natural and unnatural) can find themselves on that spectrum and can bring an action for breach of an entitlement to notice of termination of their contracts, and the true nature of the relationship should be assessed on a case-by-case basis.


An employee is typically highly controlled by the employer: the employer might set the employee’s hours, provide training, decide how work should be performed, require adherence to policies such as dress codes, and discipline the employee for misconduct. The employer would also typically make Canada Pension Plan (CPP) and Employment Insurance (EI) deductions, provide Worker’s Compensation coverage, and pay for any business expenses and equipment. Employees tend to rely on their employment with a single employer or business as their primary or sole source of income.
An employee is typically highly controlled by the employer: the employer might set the employee’s hours, provide training, decide how work should be performed, require adherence to policies such as dress codes, and discipline the employee for misconduct. The employer would also typically make Canada Pension Plan (CPP) and Employment Insurance (EI) deductions, provide Worker’s Compensation coverage, and pay for any business expenses and equipment. Employees tend to rely on their employment with a single employer or business as their primary or sole source of income.


An independent contractor is generally not significantly controlled by the employer: the independent contractor might set their own hours, determine how to perform the work, make their own payments for CPP, EI, and Worker’s Compensation coverage, pay for their own business expenses and equipment, determine whether to hire their own employees or subcontractors to assist in performing the work, and invoice the employer for work performed.  Independent contractors often contract with more than one business, and as a result are less dependent on a single business to earn their living.  
An independent contractor is generally not significantly controlled by the employer: the independent contractor might set their own hours, determine how to perform the work, make their own payments for CPP, EI, and Worker’s Compensation coverage, pay for their own business expenses and equipment, determine whether to hire their own employees or subcontractors to assist in performing the work, and invoice the employer for work performed.  Independent contractors often contract with more than one business, and as a result are less dependent on a single business to earn their living.  


A dependent contractor is an intermediate category, falling somewhere in the middle of the scale. A dependent contractor might set their own hours and hire their own employees, but derive most of their income from a contract with one business, and thus be more dependent on that business to earn their living than an independent contractor would be.
A dependent contractor is an intermediate category, falling somewhere between independent contractor and employee. A dependent contractor may have some similarities to an independent contractor, such as setting their own hours or hiring their own employees. A dependent contractor may have some similarities to an employee, such as getting most of their income from a contract with one business, or if the company controls how or when duties are performed.    


None of the factors listed above can alone determine the categorization of the worker.  One of the leading tests to apply to determine how to categorize the worker is set out in ''671122 Ontario Ltd. v. Sagaz Industries Canada Inc.'', 2001 SCC 59, [2001] 2 SCR 983, https://canlii.ca/t/51z6:
None of the factors listed above can alone determine the categorization of the worker.   


"[…]The central question is whether the person who has been engaged to perform the services is performing them as a person in business on [their] own account. In making this determination, the level of control the employer has over the worker's activities will always be a factor. However, other factors to consider include whether the worker provides [their] own equipment, whether the worker hires [their] own helpers, the degree of financial risk taken by the worker, the degree of responsibility for investment and management held by the worker, and the worker's opportunity for profit in the performance of [their] tasks."
One of the leading tests to apply to determine how to categorize a worker considers whether or not the worker is performing services as a person in business on their own account. The following factors are considered (''671122 Ontario Ltd. v. Sagaz Industries Canada Inc.'', 2001 SCC 59, [2001] 2 SCR 983, https://canlii.ca/t/51z6:)


It bears repeating that the above factors constitute a non-exhaustive list, and there is no set formula as to their application. The relative weight of each will depend on the particular facts and circumstances of the case.
* The level of control the employer has over the worker’s activities
Although this is one of the leading tests, it should be noted that there are other tests that courts would consider as well.
* Whether the worker hires their own staff
* The degree of financial risk taken by the worker 
* The degree of responsibility for investment and management held by the worker 
* The worker’s opportunity for profit in the performance of their tasks


Some additional examples of conditions that are not, by themselves, enough to ensure someone is considered a contractor are:
The above factors are a non-exhaustive list and there is not a set formula on how they are applied. The weight of each factor will depend on the facts and circumstances of each case. Although this is one of the leading tests, there are other tests that courts consider as well.
 
These are other examples of conditions that are not, by themselves, enough to ensure someone is considered a contractor but could be considered in determining a worker’s status:


*The worker signs an agreement that identifies them as a contractor. (Section 4 of the ''ESA'' states that you cannot contract out of the Act.  If you sign an independent contractor agreement, you still must meet that definition);  
*The worker signs an agreement that identifies them as a contractor. (Section 4 of the ''ESA'' states that you cannot contract out of the Act.  If you sign an independent contractor agreement, you still must meet that definition);  
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*The worker uses their own vehicle or provides their own tools (it may simply be considered a condition of employment. Note that employment  related expenses are recoverable and cannot be charged to the employee).  
*The worker uses their own vehicle or provides their own tools (it may simply be considered a condition of employment. Note that employment  related expenses are recoverable and cannot be charged to the employee).  


All of the above factors will be considered, but do not determine the issue.
All of the above factors will be considered, but do not determine the issue.  
 
'''Dependent contractors are entitled to reasonable notice'''


In some cases, a worker may fall into the category of dependent contractor. Those who fall under this intermediate category are entitled to reasonable notice. Some of the factors that are considered in determining whether a worker falls under this category are (''Marbry Distributors Limited v Avrecan International Inc'', 1999 BCCA 172, https://canlii.ca/t/546j):  
Those who fall under the category of dependent contractor are entitled to reasonable notice. Some of the factors that are considered in determining whether a worker is a dependent contractor are ([https://www.canlii.org/en/bc/bcca/doc/1999/1999bcca172/1999bcca172.html Marbry Distributors Limited v. Avrecan International Inc., 1999 BCCA 172]):


*Duration or permanency of the relationship  
* Duration or permanency of the relationship
*Degree of reliance and closeness of the relationship  
* Degree of reliance and closeness of the relationship
*Degree of exclusivity  
* Degree of exclusivity


In the case of ''Marbry'', the incorporated company, Marbry Ltd., distributed Avrecan’s products almost exclusively for 11 years. Marbry Ltd. employed Mr. Marbry as well as one salesperson. Considering the above factors, the court found that the contractual relationship between Marbry Ltd. and Avrecan required reasonable notice to terminate. See also ''Zupan v Vancouver (City)'', 2005 BCCA 9, https://canlii.ca/t/1jk91; ''1193430 Ontario Inc v Boa-Franc Inc'', 2005 78 OR (3d) 81, 260 DLR (4th) 659, https://canlii.ca/t/1lwkv; ''Hillis Oil & Sales v Wynn’s Canada'', [1986] 1 SCR 57.  
In the case of ''Marbry'', the incorporated company, Marbry Ltd., distributed Avrecan’s products almost exclusively for 11 years. Marbry Ltd. employed Mr. Marbry as well as one salesperson. Because of the length of time and the closeness of relationship, the court found that the contractual relationship between Marbry Ltd. and Avrecan required reasonable notice to terminate. See also ''Zupan v Vancouver (City)'', 2005 BCCA 9, https://canlii.ca/t/1jk91; ''1193430 Ontario Inc v Boa-Franc Inc'', 2005 78 OR (3d) 81, 260 DLR (4th) 659, https://canlii.ca/t/1lwkv; ''Hillis Oil & Sales v Wynn’s Canada'', [1986] 1 SCR 57.  


The BCSC has adopted Alberta’s ruling that dependent contractors are also entitled to reasonable notice (''Pasche v. MDE Enterprises Ltd.'', 2018 BCSC 701, https://canlii.ca/t/hrs4z). It appears there may also be a judicial shift away from the notion that dependant contractors could be entitled to a lesser degree of reasonable notice than a regular employee.  In Liebreich v. Farmers of North America, 2019 BCSC 1074, https://canlii.ca/t/j196n, the BCSC found there was no “principled basis to automatically give less notice to a dependent contractor than an employee”.
The BCSC has adopted Alberta’s ruling that dependent contractors are also entitled to reasonable notice (''Pasche v. MDE Enterprises Ltd.'', 2018 BCSC 701, https://canlii.ca/t/hrs4z). It appears there may also be a judicial shift away from the notion that dependant contractors could be entitled to a lesser degree of reasonable notice than a regular employee.  In Liebreich v. Farmers of North America, 2019 BCSC 1074, https://canlii.ca/t/j196n, the BCSC found there was no “principled basis to automatically give less notice to a dependent contractor than an employee”.


For additional discussion of intermediate contracts, see “Intermediate Contracts of Employment”, Stephen Schwartz, Employment Law Conference 2010, Paper 4.1, CLE BC. For additional discussion of the tests used to determine whether a worker is an employee or an independent contractor, see the Canada Revenue Agency publication: ''Employee or Self-Employed'' (RC4110). This useful publication lists a number of indicators to  help determine whether a worker is an employee or an independent contractor but note that it does not consider the category of dependent contractor. It can be found at: http://www.cra-arc.gc.ca/E/pub/tg/rc4110/rc4110-16e.pdf
Canada Revenue Agency publishes a guide to help determine whether a worker is an employee or an independent contractor: Employee or Self-Employed (RC4110). The publication lists factors that help determine whether a worker is an employee or an independent contractor. It does not consider the category of a dependent contractor. It can be found [https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4110/employee-self-employed.html online here.]


Cases where the worker may be considered a dependent or independent contractor, rather than an employee, can be quite complex. Although this chapter includes some information regarding dependent and independent contractors, its focus is towards the rights and responsibilities of employees. Ensure that you thoroughly research case law if you have a case involving dependent or independent contractors.
Cases where the worker may be considered a dependent or independent contractor, rather than an employee, can be quite complex. Although this chapter includes some information regarding dependent and independent contractors, its focus is towards the rights and responsibilities of employees. Ensure that you thoroughly research case law if you have a case involving dependent or independent contractors.


If the worker appears to be a dependent or independent contractor, and the worker has a legal issue that may be covered by the ''ESA'' or the ''HRC'', see Sections IV.D.2 and IV.D.3 below to determine whether these statutes’ broader definitions of “employee” include the worker in question. If the worker appears to be an employee, continue to the next step of the checklist.
If the worker appears to be a dependent or independent contractor, and the worker has a legal issue that may be covered by the ESA or the HRC, see Sections IV.D.2 and IV.D.3 which have broader definitions as to what constitutes an “employee”. If the worker appears to be an employee, continue to the next step of the checklist.  


=== 2. Employees v. Contractors - Employment Standards Act ===
=== 2. Employees v. Contractors - Employment Standards Act ===
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Additionally, Employment Standards Branch staff sometimes use Levitt’s discussion of the control test, four-fold test, and integration or organization test in his book ''The Law of Dismissal in Canada'' (Aurora, Ont: Canada Law Book, 2003).  
Additionally, Employment Standards Branch staff sometimes use Levitt’s discussion of the control test, four-fold test, and integration or organization test in his book ''The Law of Dismissal in Canada'' (Aurora, Ont: Canada Law Book, 2003).  


As previously mentioned, an independent contractor is not protected by the ''ESA''. However, just because an employer calls someone an independent contractor does not make them one. Generally, at the Employment Standards Branch, the onus is on the company to show that someone is an independent contractor. If there is a disagreement, the Employment Standards Branch will use the common law tests. Generally, the longer and more continuous the relationship, and the less control the contractor has over their employment, the more likely it is to be considered an employment relationship.  
As mentioned, an independent contractor is not protected by the ESA. However, just because an employer calls someone an independent contractor does not make them one. Generally, at the Employment Standards Branch, the responsibility is on the company to show that someone is an independent contractor. If there is a disagreement, the Employment Standards Branch will use the common law tests. A worker is more likely to be considered an employee the longer and more continuous the relationship, and the less control the contractor has over their employment.


Generally speaking, the ESA is to be given a wide and liberal interpretation (per ''Interpretation Act'', RSBC 1996, c 238, s 8; see also ''Machtinger v HOJ Industries Ltd'', [1992] 1 SCR 986, https://canlii.ca/t/1fsd2 and ''Rizzo & Rizzo Shoes Ltd (Re)'', [1998] 1 SCR 27, https://canlii.ca/t/1fqwt). The legislation is always  construed broadly when determining whether someone is or is not an employee.
Generally speaking, the ESA is to be given a wide and liberal interpretation (per ''Interpretation Act'', RSBC 1996, c 238, s 8; see also ''Machtinger v HOJ Industries Ltd'', [1992] 1 SCR 986, https://canlii.ca/t/1fsd2 and ''Rizzo & Rizzo Shoes Ltd (Re)'', [1998] 1 SCR 27, https://canlii.ca/t/1fqwt). The legislation is always  construed broadly when determining whether someone is or is not an employee.
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