Getting with the Times – The “Modern” Approach to Determining if an Employment Relationship Exists
The modern workplace includes all sorts of working arrangements, and it is not always clear whether a person is an employee, an independent contractor, or somewhere in between. In TCF Ventures Corp. v. The Cambie Malone’s Corporation, the B.C. Supreme Court applied some “modern” thinking to the parties’ relationship and determined that an employment relationship existed despite the non-exclusive, non-traditional working arrangement in place.
Tim Fernback provided financial and commercial services to Cambie Malone’s Corporation (“CMC”) through his personal services firm, TCF Ventures Corp (“TVC”). The pertinent aspects of the working relationship included:
- TVC invoiced CMC for work performed by Mr. Fernback, including charging GST, and CMC made no source deductions on amounts paid to TVC;
- Mr. Fernback was free to, and did, provide services to other clients;
- Mr. Fernback initially worked 3 days per week, within an annual “budget” of $75,000, although this increased to 5 days per week for a period of time, and decreased again towards the end of the relationship;
- Mr. Fernback was the direct supervisor of a number of CBC’s employees and was granted a substantial amount of autonomy in his role. He had an office at the CMC premises as well as a CMC local phone, email account, and business cards. He had an assigned parking space and his computer and telephone were supplied by CMC. He also had a company expense account; and
- Mr. Fernback was part of the CMC extended health benefits plan.
When CMC ended the relationship, TVC sued for damages for wrongful dismissal of Mr. Fernback, which were only available if Mr. Fernback was an employee.
To determine the true nature of the working arrangement, the Court looked closely at the nature of the parties’ relationship. The Court accepted that there were “material differences” between the format of the relationship and a “conventional, traditional” working arrangement. However, the Court also noted that employment law has evolved to recognize that the modern workplace is no longer built on traditional working arrangements. Rather, courts now recognize a spectrum of working relationships, with employment at one end, independent contractor arrangements at the other end, and multiple variations in between.
For CMC and TVC, despite the non-traditional, non-exclusive arrangement, the Court found that the relationship was more like employer/employee than employer/independent contractor. The Court was particularly influenced by the “significant element of personal service” and the length of the relationship (over three years). Therefore, TVC’s action for wrongful dismissal was successful and Mr. Fernback was awarded damages in lieu of reasonable notice of dismissal.
Takeaways for Employers:
- Always address the nature of the working arrangement up front and put in place an appropriate contract that sets out the parties’ expectations and intentions. However, despite the parties’ stated intentions, the Courts will look to the reality of the situation and make a determination based on substance rather than form.
- If you have a non-traditional working arrangement, consider where the relationship falls on the spectrum between traditional employment and true independent contractor. Simply making the relationship non-exclusive, with invoices for services rather than salary, is not sufficient to establish a true independent contractor relationship.
- If you are uncertain, seek professional advice. Getting the characterization wrong can be costly for both parties.