The Supreme Court of Canada recently released a decision setting out its view of the old age distinction between employee and contractor. This case has received considerable publicity. It did, once again, define the test for searching as to whether the person in question is an employee or the converse.
The company, Modern Cleaning Concept Inc., provided cleaning services to its customers through a network of “franchisees”, as the workers were defined. The consequences of the person being an employee led to entitlements to statutory benefits and certain collective agreement protections.
The business model showed that Modern negotiated the business details with the customers and then, in turn, assigned this contract to the franchisees. The language in the agreement characterized the role of the franchisees to be that of a contractor. The contract also purported to give each worker “complete control over the management of his operations which involves a business risk as in any other business, for which the franchisor is in no way a guarantor.” It also stated that the worker was responsible for the hiring and firing of employees. Payment went from the customer to Modern and in turn to the worker, less certain deductions.
The Supreme Court agreed with the Quebec Court of Appeal that the franchisees were employees and significantly, to the astonishment of no legal observers, that the language of the contract was not, in itself, determinative of the outcome.
The entirety of the relationship must be considered, the Court concluded, including the traditional factors such as the degree of control, ownership of tools, and the chance of profit and risk of loss. What rules the day is “the actual nature of the relationship” and not the nomenclature applied in the contract.
Employers Should Be Cautious When Setting out Terms
This decision underpins the reality test that will be applied to the construction of the relationship under scrutiny. Wordsmithing in the employment contract alone will not define the result. Rather, the reality of the various elements involved in the employment relationship will be the determinative factor.
Employers looking to establish a contractual relationship would be advised to seek out experienced legal advice to ensure that the proper parameters are put into place.
Get Advice and Know Your Rights
If you have questions about this issue or any employment question, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins LLP. We regularly advise workplace parties on a wide range of legal workplace issues. Contact us online or by phone at 416-364-9599 to schedule a consultation.
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