Contractors claimed company controlled all aspects of their work regardless of what contract said
This instalment of You Make the Call looks at a dispute in Tax Court over whether five workers were independent contractors or employees.
Promotions C.D. was a distributor of non-food products inside grocery stores and pharmacies in the province of Quebec. The company had a mix of salaried employees and workers it considered to be “self-employed representatives.” Michel Blais, Antoine Corbeil, David Franks, Robert Lavoie and Denis Pilon were five of these representatives who each signed a contract to take orders from Promotions’ customers, picking up merchandise at the regional warehouse and delivering and setting it up in the stores.
The contracts set out the terms and conditions for the workers to sell Promotions products and described them as non-exclusive independent contractors. Promotions paid them on commission every two weeks and they had to pay their own costs. Promotions provided each with a handheld computer and equipment racks but nothing else. The workers were also free to sell products from other companies, as long as they didn’t compete with those of Promotions, and hire their own sales staff to help without any input from Promotions. Each worker carried business cards provided by Promotions.
Pilon worked for Promotions for 12 years, Blais and Franks for eight years and Corbeil and Lavoie for five years. Their contracts were renewed automatically on an annual basis. They decided on their own hours of work and recruited their own customers in addition to Promotions customers.
Though the five workers reported their payment from Promotions as business income each year and registered with the government for GST and provincial tax purposes, they claimed they accepted the terms of the contracts only so they could “work and earn a living.” After working for Promotions for many years, they claimed the circumstances were that of an employment relationship, despite what the contracts that were automatically renewed said. They also claimed Promotions instructed them setting up proper displays but Promotions said it didn’t give any formal training to its contractors.
You Make the Call
Were the five workers employees of Promotions C.D.?
OR
Were they independent contractors?
If you said they were independent contractors, you’re right. The relationship between Promotions and the workers was not necessarily defined by the contracts, the court said, but rather the reality of the circumstances. However, it found the relationship was that of a contract of service.
The court felt there was no element of subordination in the working relationship as the workers were free to decide their own hours and weren’t providing their services on an exclusive basis. They assumed the costs of doing business and, except for the computer and product display materials, owned their own tools need to do the job.
The only control Promotions had was over the pricing of merchandise, the court found. However, this wasn’t an element of subordination in this case as it was Promotions who contracted with the customers while the workers were middle men.
“It can be said the fundamental distinction between a contract for services and a contract of employment is the absence, in the former case, of a relationship between the provider of services and the client,” the court said. “And, in the latter case, of the right of the employer to direct and control the employee.”
Since Promotions had no control over the workers and their tools, the court found the workers were under legitimate contracts of service and weren’t employees.
For more information see:
•Promotions C.D. Inc. c. Ministre du Revenu national, 2008 CarswellNat 2499 (T.C.C. [Employment Insurance]).
Promotions C.D. was a distributor of non-food products inside grocery stores and pharmacies in the province of Quebec. The company had a mix of salaried employees and workers it considered to be “self-employed representatives.” Michel Blais, Antoine Corbeil, David Franks, Robert Lavoie and Denis Pilon were five of these representatives who each signed a contract to take orders from Promotions’ customers, picking up merchandise at the regional warehouse and delivering and setting it up in the stores.
The contracts set out the terms and conditions for the workers to sell Promotions products and described them as non-exclusive independent contractors. Promotions paid them on commission every two weeks and they had to pay their own costs. Promotions provided each with a handheld computer and equipment racks but nothing else. The workers were also free to sell products from other companies, as long as they didn’t compete with those of Promotions, and hire their own sales staff to help without any input from Promotions. Each worker carried business cards provided by Promotions.
Pilon worked for Promotions for 12 years, Blais and Franks for eight years and Corbeil and Lavoie for five years. Their contracts were renewed automatically on an annual basis. They decided on their own hours of work and recruited their own customers in addition to Promotions customers.
Though the five workers reported their payment from Promotions as business income each year and registered with the government for GST and provincial tax purposes, they claimed they accepted the terms of the contracts only so they could “work and earn a living.” After working for Promotions for many years, they claimed the circumstances were that of an employment relationship, despite what the contracts that were automatically renewed said. They also claimed Promotions instructed them setting up proper displays but Promotions said it didn’t give any formal training to its contractors.
You Make the Call
Were the five workers employees of Promotions C.D.?
OR
Were they independent contractors?
If you said they were independent contractors, you’re right. The relationship between Promotions and the workers was not necessarily defined by the contracts, the court said, but rather the reality of the circumstances. However, it found the relationship was that of a contract of service.
The court felt there was no element of subordination in the working relationship as the workers were free to decide their own hours and weren’t providing their services on an exclusive basis. They assumed the costs of doing business and, except for the computer and product display materials, owned their own tools need to do the job.
The only control Promotions had was over the pricing of merchandise, the court found. However, this wasn’t an element of subordination in this case as it was Promotions who contracted with the customers while the workers were middle men.
“It can be said the fundamental distinction between a contract for services and a contract of employment is the absence, in the former case, of a relationship between the provider of services and the client,” the court said. “And, in the latter case, of the right of the employer to direct and control the employee.”
Since Promotions had no control over the workers and their tools, the court found the workers were under legitimate contracts of service and weren’t employees.
For more information see:
•Promotions C.D. Inc. c. Ministre du Revenu national, 2008 CarswellNat 2499 (T.C.C. [Employment Insurance]).
