Preliminary Matters for Employment Law (9:IV)
Determine Federal or Provincial Jurisdiction
Employees are subject to either federal or provincial employment legislation. This section will help you determine whether the employee is covered by federal or provincial jurisdiction, and which statutes apply.
Employees will fall under federal jurisdiction if they are employed in connection with any federal work, undertaking, or business that is within the legislative authority of Parliament, or if they work for certain federal crown corporations. This can be a complicated constitutional question, but generally, areas of business that are federally regulated include:
- Shipping and navigation, including the operation of ships and transportation by ship anywhere in Canada
- Interprovincial or international transportation (for example, truck, rail, ferry, or shipping routes that cross a provincial or international border)
- Telecommunications companies, such as cell phone, cable, or internet providers
- Airports and air transportation, including any airline companies
- Radio broadcasting stations
- Banks (but not credit unions)
- Businesses located on First Nations reserves
- Other areas listed in section 91 of the Constitution Act, 1867 (UK), 30 & 31 Vict, c 3, reprinted in RSC 1985, App II, No 5.
In order to determine jurisdiction, look to the type of work done, as well as the employer’s area of business. It is important to note that a single employer could have both federally and provincially regulated employees. Although an employer may be subject to federal jurisdiction, it does not mean all of that employer’s employees will be governed by federal law. In some cases, additional research must be done to determine the employee’s jurisdiction. For additional details to assist in determining jurisdiction if a difficult case arises, see Actton Transport Ltd v British Columbia (Director of Employment Standards), 2008 BCSC 1495.
Performing a BC Online company search may help determine jurisdiction. While not always determinative, a company search will provide information regarding whether the company is provincially registered, which may help determine jurisdiction. In addition, a company search will usually provide the company’s director and registered office information: http://www2.gov.bc.ca/gov/content/governments/organizational-structure/ministries-organizations/ministries/technology-innovation-and-citizens-services/bc-registries-online-services
Employees who are not within the scope of federal legislation generally fall under provincial jurisdiction and accordingly their employment is governed by provincial legislation.
Determine Applicable Legislation
Once you have determined the jurisdiction, make note of which statutes apply to the employee, and then continue on to the next step in the checklist: Section IV.C: Unionized vs. Non-Unionized Employees.
Note that this chapter focuses on provincial legislation. In cases where the employee is federally-regulated, this chapter can still be of assistance as the provincial and federal statutes have many similarities, but it will be necessary to read the federal statutes to determine whether a particular provision is similar.
The Employment Standards Act
Provincially regulated employees are generally covered by the Employment Standards Act [ESA] as updated by the Employment Standards Amendment Act.
Be aware that certain professions and employees are exempt from the ESA, or parts of the ESA. Review the Employment Standards Regulations to determine if the employee is covered by the ESA.
See V.A.10: Exceptions to the General Rule (Specialty Professions) to determine whether the ESA applies to the employee in question. See V.A.6: Hours of Work and Overtime Pay to determine if the employee is exempt from overtime.
Labour Relations Code and Canada Labour Code
Provincially regulated employees who belong to a union are covered by the Labour Relations Code in addition to the ESA. However, some parts of the ESA do not apply to unionized employees.
Federally regulated employees are covered by the Canada Labour Code [CLC]. A significant difference between the CLC and the ESA is that the CLC confers a special right: If the employee is non-managerial, worked for at least one year, and was unjustly dismissed, his or her job can be reinstated (CLC, ss 240-246). This right exists alongside a number of other discretionary remedies for unjust dismissal under the CLC. A complaint must be filed within 90 days (CLC, s 240(2)).
For a discussion on the significance of the discretionary remedies for unjust dismissal available under the CLC, see the Supreme Court of Canada’s recent decision in Wilson v. Atomic Energy of Canada Ltd., 2016 SCC 29.
Provincially regulated employees are covered by the British Columbia Human Rights Code. Federally regulated employees are covered by the Canada Human Rights Act. For more information on Human Rights claims: See Chapter 6: Human Rights.
Common Law and Contract Law
In addition to statutory entitlements, provincially and federally regulated employees have common law employment entitlements. Causes of action, such as breach of contract due to wrongful dismissal, remain the same whether the employee is provincially or federally regulated.
Employees will also often have written contractual entitlements. Any applicable written employment contract or applicable workplace policy should be reviewed carefully to both clarify the terms of employment and whether the contract is enforceable. See Section V.C(d) and (c): Invalid Contracts.
Unionized employees may have common law or contractual entitlements, but generally these entitlements have to be acted upon by the union that is party to the collective agreement. See Section IV.C: Unionized vs. Non-Unionized Employees.
Determine if the Employee is Unionized or Non-Unionized
Determine whether the employee belongs to a union. If the employee does not belong to a union, continue on to the next step in the checklist: Section IV.D: Determine if the Worker is an Employee or Independent Contractor.
Issues regarding unionized employees can be complex, and unionized employees should therefore generally be referred to their union representative or a lawyer. However, the following paragraph provides basic information for unionized employees.
If an employee is a union member and has a complaint regarding the employer, he or she must first advise the union’s representative. The employee can contact either the shop steward at the workplace, or an external union representative, to see what the union can and will do. The ESA provides minimum standards that generally must be met, but collective agreements will contain other critical guidelines that the employer must follow. Usually, union contracts contain different or more onerous terms than the ESA provisions, and union members in their collective agreements can contract out of ESA limitations (ESA, s 3) regarding such matters as hours of work, overtime, statutory holidays, vacations, vacation pay, seniority retention, recall, and termination of employment or layoff. Whole sections of the ESA might not apply under a collective bargaining agreement as long as they have been addressed by the agreement. The collective agreement does not necessarily have to meet minimum guidelines for certain sections of the ESA. For more information consult the Employment Standards Branch fact sheet on collective bargaining agreements at: http://www.labour.gov.bc.ca/esb/facshts/collagr.htm
Unions have a duty to represent their workers fairly. An employee who feels his union has not fairly represented his interests or advanced a grievance can bring a complaint under section 12 of the Labour Relations Code. These complaints are seldom successful, and so it is very important to have the employee document all requests for help to the union and document the union’s response.
Determine if the Worker is an Employee or Independent Contractor
Most workers are considered “employees”, but some are considered “independent contractors”, and some fall under an intermediate category sometimes referred to as “dependent contractors”.
The distinction is important because independent contractors are generally not protected by the Employment Standards Act or the Human Rights Code for provincially regulated employees, or the Canada Labour Code or the Canada Human Rights Act for federally regulated employees.
Additionally, independent contractors may not be entitled to reasonable notice if they are dismissed, as many employees are, although the law on this can be complex (see below).
Note that different statutes have different objectives and definitions, and as a result, “employee” and “independent contractor” may be interpreted differently under each statute. These interpretations are generally similar and sometimes follow the same tests; however, the ESA and particularly the HRC may define “employee” more broadly than the common law tests would – see Sections IV.D.2 and IV.D.3, below. As a result, those who would be categorized as dependent or independent contractors under the common law may sometimes be categorized as employees under the HRC.
Employees v. Contractors - Common Law
When considering an employment related claim, it will be important to determine if the claimant was an employee, dependent contractor, or an independent contractor.
This classification will determine which statute laws apply. It will also change what entitlements are available for breach of contract (including wrongful dismissal) at common law. For example, employees can make claims for severance pay in lieu of notice, a common law entitlement that is not available to contractors.
In McCormick v. Fasken Martineau DuMoulin LLP, 2014 SCC 39, the Supreme Court of Canada affirmed that the key to a determination of employment with regards to 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, 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 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, and determine whether to hire their own employees or subcontractors to assist in performing the work. 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 fairly dependent on that business to earn their living.
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,  2 SCR 983:
"[…]The central question is whether the person who has been engaged to perform the services is performing them as a person in business on his 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 his or her own equipment, whether the worker hires his or her 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 his or her tasks."
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. . Although this is one of the leading tests, it should be noted that there are other tests that courts would consider as well.
Some additional examples of conditions that are not, by themselves, enough to ensure someone is considered a contractor are:
- The worker signs an agreement that identifies him 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 charges sales tax (the worker may or may not be in a lawful position to charge sales tax);
- The worker is incorporated (per Marbry Distributors Limited v Avrecan International Inc, 1999 BCCA 172). However, the worker may wish to see an accountant or tax lawyer if they are an incorporated employee as they may not be entitled to all of the same tax benefits of other corporations;
- No deductions are taken from the worker’s paycheque (this may simply mean that the employer is in violation of both the ESA and the Income Tax Act);
- The worker submits a “bill” for labour (it may be nothing more than a time card); and
- 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 these factors will be considered, but do not determine the issue.
In some cases, a worker may fall into the category of dependent contractor. Those who fall under the 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):
- Duration or permanency of the relationship
- Degree of reliance and closeness of the relationship
- 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; 1193430 Ontario Inc v Boa-Franc Inc, 78 OR (3d) 81, 260 DLR (4th) 659; Hillis Oil & Sales v Wynn’s Canada,  1 SCR 57.
The BCSC has recently adopted Alberta’s ruling that dependent contractors are also entitled to notice, albeit possibly to a lesser degree than that of a regular employee (Pasche v. MDE Enterprises Ltd., 2018 BCSC 801).
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
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 is 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. Otherwise, continue to the next step of the checklist.
Employees v. Contractors - Employment Standards Act
The distinction between employees and independent contractors under the Employment Standards Act is quite similar to that under the common law. It should be used when pursuing a claim at the Employment Standards Branch.
“Employee” is defined in the ESA, s 1. The Employment Standards Branch has published an Interpretation Guidelines Manual to assist in determining the difference between employees and independent contractors. It can be found at: https://www2.gov.bc.ca/gov/content/employment-business/employment-standards-advice/employment-standards/forms-resources/igm/esa-definitions/esa-def-employee
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 him or her 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 his or her employment, the more likely it is to be considered an employment relationship.
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,  1 SCR 986 and Rizzo & Rizzo Shoes Ltd (Re),  1 SCR 27). The legislation is always construed broadly when determining whether someone is or is not an employee.
Employees v. Contractors - Human Rights Code
The distinction between employees and independent contractors under the Human Rights Code should be used when pursuing a claim at the Human Rights Tribunal.
Employment is more broadly defined under the HRC compared to the common law and the ESA. It includes the relationships of master and servant, master and apprentice, and some principals and agents. In some cases it may extend to include workers who would, under the common law, be defined as dependent or independent contractors. Additionally, some volunteering relationships could potentially be considered employment relationships, or alternately could be covered under s 8 of the HRC (provision of services).
The four factors that most strongly determine whether a worker is an “employee” for the purpose of the HRC are (Ismail v British Columbia (Human Rights Tribunal), 2013 BCSC 1079, at para 265):
- Whether the employer utilized, or gained some benefit, from the worker
- The amount of control exerted by the employer over the worker
- Whether the employer bore the burden of financial remuneration of the worker
- Whether the employer has the ability to remedy any discrimination
The Canadian Human Rights Tribunal also uses a broader definition of employment compared to the common law; see Canadian Pacific Ltd v Canada (Human Rights Commission),  1 FC 571 (CA), at paras 9-15.
Employees v. Contractors – Workers Compensation
The Supreme Court of Canada recently upheld a British Columbia decision extending employer occupational health and safety obligations to contractors. See West Fraser Mills Ltd. v. British Columbia (Workers Compensation Appeal Tribunal) 2018 SCC 22. If a contractor has been injured in the workplace, explore whether employee occupational health and safety regulations may apply to the contractor.
|This information applies to British Columbia, Canada. Last reviewed for legal accuracy by the Law Students' Legal Advice Program on June 28, 2019.|
|© Copyright 2017, The Greater Vancouver Law Students' Legal Advice Society.|