Post-Glimhagen: Mischaracterizing Working Relationships Continues to Cost Employers

In 2017, in a case called Glimhagen v GWR Resources Inc., Mr. Justice Rogers affirmed the existence in law of the dependent contractor and that a dependent contractor is entitled to reasonable notice of termination due to the employee-like relationship that exists between a dependent contractor and an employer.[1] The seven indicia of dependent contractorship were delineated as follows:

Exclusivity: Whether the agent’s services are generally limited exclusively to the principal;

Control: If the agent is subject to the control of the principal, regarding the product and when/where the agent sells it to the principal;

Interest or Investment: If the agent had an investment in or interest in the tools necessary to perform his or her service for the principal;

Risk of Loss: Whether, by performing his or her duties, the agent undertook risk of loss or possibility of profit apart from the fixed rate of remuneration;

Essential Role: Whether the agent’s activity was part of the principal’s business organization;

Length of Relationship: Whether the relationship was long standing (the more permanent the term of service, the more dependent the contractor); and

Reliance: Whether the parties relied on one another and closely coordinated their conduct.

Since Glimhagen, British Columbia courts appear more willing to recognize the existence of dependent contractorship in employment relationships. The three cases set out below are illustrative.

First, in Kok v Adera Natural Stone Supply Co. Ltd. (2018), the plaintiff, a stone fabricator, was an employee of the defendant for 10 years before being taken off payroll and becoming a contractor. The plaintiff sought a raise and the defendant employer agreed on the condition that the plaintiff work as a contractor, which he did, for the next 17 years before termination.[2]

In concluding that the plaintiff was a dependent contractor at the time of termination, the Court held that all the Glimhagen indicia were present to suggest a dependent contractor relationship. The fact that the plaintiff billed for his services and charged GST was not determinative, nor was the fact that the plaintiff was not identified as an employee in a 2012 share transaction that included a schedule with the defendant company’s employees.[3] Based on an application of the Glimhagen indicia to the facts in this case, Justice Adair found that the plaintiff was a contractor in name only and therefore granted damages equivalent to 22 months’ notice.[4]

Second, in TCF Ventures Corp. v The Cambie Malone’s Corporation (2018), Mr. Fernback was hired, through his corporation, to provide financial management services as the Chief Financial Officer of the defendant company in 2009. The plaintiff and defendant, at the time of hiring, agreed that Mr. Fernback could provide financial services outside the defendant company and this was in fact the case. In September 2012, the plaintiff was terminated.[5]

In concluding that Mr. Fernback was a dependent contractor, the Court was most persuaded by the fact that the defendant hired the plaintiff due to a desire for a personal, specific service from a professional consultant.[6] The relationship also involved an intent to have the plaintiff work for the defendant for three and a half years, which suggested a permanency to the relationship.

Third, in Pasche v MDE Enterprises Ltd. (2018), the plaintiff worked exclusively for the defendant as a sheet metal estimator for 18 years. The defendant and plaintiff structured the professional relationship such that the defendant exercised very little control over the plaintiff’s daily workplace activities, he was minimally supervised and had considerable discretion over the way he conducted his work.[7]

However, there were several factors weighing in favor of an employment-like relationship. The plaintiff, when working with clients and suppliers, presented to the world as an ambassador of the company. He had his own work space at the company office and was treated like an employee through inclusion in all email and phone correspondence.[8]

The Court held that the most persuasive factor was the deep business integration and mutual dependency that developed over the course of the relationship.[9] The defendant had worked for the company for over 18 years and relied exclusively on the defendant company for his income and livelihood. The defendant, in turn, relied on the plaintiff to bring in clients and generate a profit for the business.

What is clear from these recent cases is that the court’s analysis of a given working relationship is contextual. As a general principle, if a contractor is financially and economically dependent on the employer, this relationship tends to lean more towards employer-employee. There need not be complete exclusivity between an employer and contractor for a finding of dependent contractorship. Even if both parties at first mutually intend for the relationship to be one of independent contractor and employer, this alone is not determinative of the relationship when other surrounding factors weigh in favor of an employment-like relationship.

Mischaracterization of working relationships continues to cost employers. However, potential liability can be minimized through regular review of employment contracts and working relationships. Employers and employees alike should obtain legal advice when considering changing from an employment contract to an independent contractor or terminating working relationships.

Co-authored by Glen Stratton.

[1] To view the article where Glimhagen is discussed in detail, click here.

[2] Kok v Adera Natural Stone Supply Co. Ltd., 2018 BCSC 1542, para 24.

[3] Ibid, para 23 and 36.

[4] Ibid, para 45.

[5] TCF Ventures Corp. v The Cambie Malone’s Corporation, 2016 BCSC 1521, paras 2-12.

[6] Ibid, para 51.

[7] Pasche v MDE Enterprises Ltd. (2018), 2018 BCSC 701, para 93.

[8] Ibid, para 95.

[9] Ibid, para 99.

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