Worker, employee, contractor or partner? That depends — and it’s changing

Security of employment?

Worker Categories Vary Widely

Recent legislative changes, case law and a pending appeal are narrowing and clarifying the categories of “worker” in Ontario. These promise wide-ranging implications for both paralegals’ practices and practice management.

Severance pay, vacation pay and paycheque deductions are among the areas affected by the category to which a worker belongs under provincial and federal regulations, and as determined in case law. A business is more likely to be held liable for the tortious acts of an employee than those of an independent contractor. Legislation and case law will also have an effect on Human Rights matters.

Construction-industry definitions expanded

Workplace Safety and Insurance Board changes came into effect January 1. While these redefine employee and employer in the construction industry, they may have a ripple effect in other areas. In its 2013 Reconciliation Guide, the WSIB introduces the expanded definitions. Previously excluded employers and employees within the construction industry are now included in the registration scheme.

Whether someone is an “employee,” “independent operator,” “partner” or other category of worker for WSIB purposes depends on factors such as the nature and place of work, when it is performed and how it is performed. The Board has increased the type of construction practice to which WSIB coverage is mandatory. Primary contractors must ensure their subcontractors are in compliance with mandatory coverage. Deemed workers now include executive officers, independent contractors, sole proprietors and partners.

Sagaz and Wiebe tests for relationship

Supreme Court and Federal Court decisions guide “employee” assessments. 1671122 Ontario Ltd. v. Sagaz Industries Canada Inc. 2001 SCC 59 and Wiebe Door Services Ltd. v. The Queen [1986] 3 F.C. 553, set out tests to assess factors to assist in determining the employment relationship.

Relevant factors iterated include: the level of control exercised by the employer over the worker’s activities; whether the worker provides his own tools and equipment; whether the worker hires helpers; the degree of financial risk assumed by the worker; the degree of responsibility for investment assumed and opportunity for profit by the worker through the performance of his tasks.

Despite employment contracts, the objective factual circumstances of the employment relationship have held the key to determining the category to which an employee belongs. This is expected to continue. As in 1392644 Ontario Inc. (Connor Homes) v. Canada (National Revenue), 2013 FCA 85 (2013), the shared intent or understanding of a worker and the organization that engages his services is not determinative of the worker’s legal status for tax purposes. The Federal Court found that several workers were employees of the companies, despite contractual agreements.

These decisions suggest that employers should ensure that the factual circumstances and real-life duties, responsibilities and involvement of a worker’s engagement support the designation of the worker. Designations have continued to evolve as well, and now include contractor, dependent contractor, elect-to-work, temporary, assignment employee, student, intern, volunteer, casual, partner and associate.

Significant appeal heading to SCC

The Supreme Court will determine whether a partner may be deemed to be an employee for human rights purposes, now that leave has been granted in McCormick v. Fasken Martineau Dumoulin LLP .

An equity partner filed a complaint with the B.C. Human Rights Commission alleging employment discrimination on the basis of age. He alleged that his law firm discriminated against him by requiring him to retire at the age of 65.

While common law would not recognize an equity partner as an “employee,” the decision could mean that for the purposes of a human rights case, a partner will be protected against prohibited discrimination grounds.

This is an important case to watch; observers expect the decision to broadly affect employment law, human rights and other tribunals within the paralegal scope of practice.

See also:
Smith v. M.N.R., 2011 TCC 20
Prue v. M.N.R., 2011 TCC 9

Information about the WSIB regulatory changes and how they will affect construction-industry firms is available at:

Details of the legislative changes can be found at ONTLA:
Workplace Safety and Insurance Amendment Act (Alternate Insurance Plans), 2013.

The Ministry of Finance offers guidance in categorizing an employer-employee relationship:

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