Introduction: When a worker is dismissed and the employment terminated, there can be question of whether the dismissal was lawful or wrongful.  A wrongful dismissal can render compensation ordered to a worker if it is deemed obligations accrued to the employer who terminated the working relationship improperly.  Over the past many decades, a category of worker has developed in law known as the dependent contractor, which raises a variety of issues and concerns and pertains to both workers and employers.

A:  Employee v. Agency

Traditionally, workers were considered to be, either employees, implicating employer obligations, or agents, exonerating employer responsibility.
This development changed in law, gradually, over the past ninety (90) years.

The significance of employment status is important in terms of wrongful dismissal.  Any action for wrongful dismissal requires the establishment of an employer-employee relationship; absent a judicial finding thereof will provide a complete bar to action for any recovery.

Two principles of employment law are (1) the duty of the terminating party to give notice, which varies according to the facts of the matter, and (2) classifying any sort of business relationship between the terminator and the terminated on a case-by-case analysis of the parties’ intentions with respect to their business dealings with one another.

Principal v. agent is a common form of business association resembling, but different than, an employer v. employee relationship. The hallmark of a principal v. agent category is the dominant party’s control over the subordinate party’s work and/or the subordinate party’s integration into the dominant party’s business organization.

Control

Historically, a seminal and basic test to distinguish employee from agent is found in Carter v. Bell & Sons (Canada) Ltd., 1936 in which the resulting common law principle holds that, under a contract for service, the dominant party has the right to control the subordinate party’s method of doing the work.

In addition to a principle of having control over work method, three other concomitant principles were  (i) prerogative to select the servant; (ii) payment of wages or other remuneration; and (iii) right of supervision or dismissal.  All four principles are also found in Short v. Henderson Ltd., [1946] S.C. (H.L.) 24, 115 L.J.P.C. 41 (H.L.); Baldwin et al. v. Lyons and Erin District High School Board, 1961 (ON SC) and, ultimately, Baldwin v. Erin District High School Board and Lyons McKinney v. Erin District High School Board and Lyons, 1962 (SCC).  All four principles confirm the concept of control as fundamental to the criteria for discerning employee from agent.

Permanence

The development, in law, of an intermediate area between traditional employer and employee relations stem from Carter.  With Carter, a “master” and “servant” relationship was augmented by recognition of a business arrangement, which implied a need for reasonable notice of termination if work duties could be construed to be of a more permanent, rather than a transient, character.  That is, pursuant to Carter, the permanency of the character of the work, in addition to control factors, contributed to principles relevant to terms or notice of employment termination.

Four-Fold Test

Considerations subsequent to Carter lead to a revised “four-fold” test pursuant to Montreal v. Montreal Locomotive Works Ltd., 1946 CanLII 353 (UK JCPC).  Control factors and permanency characteristics set out the following indices: (1) control over working terms; (ii) ownership of tools; (iii) chance of profit; and (iv) risk of loss.  Montreal went further than Carter to ask questions of whose business it was that was being worked at or, in other words, was the working agent carrying on business for self or a superior agency.  Furthermore, the Supreme Court of Canada affirmed Carter in Machtinger v. HOJ Industries Ltd., 1992 (SCC), [1992] 1 SCR 986 stating, as established principle, that employment contracts for indefinite periods, absent express contractual language to the contrary, suggest an air of permanency and, thus, require the employer to give reasonable notice if a dismissal is without cause.

Integration

The issues of control by a dominant over a subordinate party in Carter and Montreal are not necessarily disjunctive.  The integration of employment into the business operation, a principle first known as the “organization test” in Stevenson, Jordan & Harrison Ltd v. MacDonald & Evans, [1952] 1 TLR 101, was used in Koch v. Ottawa Civic Hospital, (1979) 3 L. Med. Q. 204, [1979] 3 A.C.W.S. 210 (Ont. H.C.).  Therefore, integration of work into and working conditions of a business operation also came to require of employer notice upon termination of a worker.

Therefore, over time, the relatively simple principle of control expanded to also consider issues of the character of the work, how the character of the work affects the worker, and how a worker may be integrated into the working context.  These considerations rendered making a distinction between employee v/ independent agent as being problematic and have subsequently given rise to intermediate employment considerations or, in other words, levels of dependency of a worker to the employment context.

B.  Employee v. Independent Contractor:

Stemming from the development of jurisprudence per employees v. agents, an intermediate category of employment was developed whereby such intermediate employees are considered as deserving of employer obligations much like would a true employee.  Boroditsky v. Red River College et al., 2018 MBQB 132 submitted that the four fold test, as per Montreal, and the organization test, as per Stevenson, are equally applicable as tests in determining employment entitlements.

Autonomy

This relevance of both the four-fold test and the organization test were further confirmed in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59, [2001] 2 SCR 983, in which Justice Major writing for the Supreme Court noted that “there is no one conclusive test which can be universally applied to determine whether a person is an employee or an independent contractor.”  Major, J. further identified significant determining factors to be (1) the level of control the employer has over the worker’s activities, (2) whether the worker provides his or her own equipment, (3) whether the worker hires his or her own helpers, (4) the degree of financial risk taken by the worker, (5) the degree of responsibility for investment and management held by the worker, and (6) the worker’s opportunity for profit in the performance of his or her tasks.  Futhermore, Major J. summarized that the central question in determining employment status is whether a worker is performing work on his own account or not; therefore, multiple considerations notwithstanding, the level of control an employer has over a worker’s activities remained a prominent factor of paramount importance.
The influence of Sagaz was reiterated in many and varied subsequent decisions such as Belton v. Liberty Insurance Co. of Canada, 2004 (ONCA), Tajarobi v. Corporate Couriers, 2006 BCSC, and McKee v. Reid's Heritage Homes Ltd., 2009 ONCA.

Facts v. Contract

As important as an employment contract, job description, or job title may be when considering evidence, courts consider how the parties actually function, as per Techform Products Ltd. v. Wolda, 2000 (ON SC).  Sachs J. wrote “how parties describe the relationship is not determinative of the issue unless the description actually accords with the economic realities of the particular situation.”  Therefore, a worker can be referred to in an employment contract as an independent contractor but that designation may fail to persuade in law when compared with the facts of the matter.

C: Exclusivity of Services and Economic Dependence:

Exclusivity

Recently, in Thurston v. Ontario (Children’s Lawyer), 2019 ONCA, the Ontario Court of Appeal found that employment exclusivity plays a defining role in the determination of employment status.  That is, in terms of, primarily, economic dependence and, secondarily, duration and integration, Thurston clarified the concept of employment exclusivity as defining of and determining for dependent contractors. The concept of “exclusivity” of work performed was determined to be less a matter of “employee-like” fidelity and more a matter of economic dependency.  In assessing an employment dismissal as being lawful or wrongful, economic dependency correlates with a judicial finding of contractor dependency status; an absence of exclusivity suggests a worker is an independent contractor.

Further to the distinction of dependency, as per Keenan v. Canac Kitchens Ltd., 2016 ONCA 79, in the case of a long-term employee providing non-exclusive services for a only a short duration within the longer period of employment, the employer cannot rely upon the brief period of non-exclusivity to nullify the longer period of exclusivity.  That is, duration of services is not simply a matter of addition of time periods; it is measured as, and within, a question of economic dependency.

As per Thurston, a worker performing some or even most of their work for an employer does not establish dependency; a worker must be almost completely exclusive to an employer to be considered as dependent rather than independent.  Thus, Thurston raised the bar for establishing dependency to require complete or near-complete exclusivity or economic dependence of the subordinate to the employer.  This may represent a regression for contracted workers seeking redress for perceived wrongful dismissal but, at the same time, it lends clarity to an ongoing and interesting area of employment law.

D: Summary

The legacy of employment law renders the need for employers and employees to be vigilant when establishing terms of employment, writing employment contracts, and terminating employment fairly and properly.  The historical presumption of the pre-eminence of employer control over employment terms has evolved to include various contextual factors, most notably, job permanence, worker integration, worker autonomy, and economic dependence, all considered situationally, regardless of contractual terms.

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