Author: Daniel A. Lublin
Company a temporary works at may become her true employer
How do employers adapt to a workplace legal landscape generally tilted in favour of employees?
Concerned about the costs and liabilities associated with the traditional employer-employee relationship, companies have increasingly turned to non-conventional employment arrangements, believing that through these devices they will be automatically relieved of liability for regulatory complaints, employment standards claims, tax penalties and lawsuits by disgruntled employees. But a new era of corporate workplace responsibility has dawned and with it many of these employers may now be mistaken.
Temporary staffing agencies. In the current economy, businesses have increasingly turned to staffing agencies to fill their empty cubicles instead of making expensive commitments to longer-term employees. In exchange for a fee, the agency recruits, screens, hires and pays the employees. But a company must take precautions to avoid being viewed as the true employer. If a temporary employee continues to perform work for the company after her assignment ends, or if an assignment lasts so long that it is not really temporary at all, she may no longer be viewed as an employee of the agency and may be the responsibility of the employer. If such an employee is later fired or seeks to rely on other labour standards created by legislation, a court will often find that the company she worked at, not the company she worked for, has become her true employer.
Independent contractors or consultants. Labelling a worker as a contractor or consultant is not dispositive, even if that worker agrees or encourages that arrangement in order to avoid taxes. Tribunals and courts will always consider the true nature of the relationship in order to determine how the parties actually behaved. When they act as if the worker was an actually an employee, that is exactly how they will be treated under legislation and the common law when there is a dispute.
What are the factors the courts will consider? In a recent Ontario case, La-Z-Boy revised its arrangements for its commissioned sales agents by requiring them to sign agreements that confirmed that they were no longer employees. It believed this would distance them from tax audits and severance liability. However, when one of its “contractors”, who had been with the company for 23 years, was fired he sued, claiming that, despite the arrangement, he was actually an employee. According to the Ontario Court of Appeal, which decided the case last year, it did not matter that the worker had signed a contractor agreement, incorporated his own company and paid for his own expenses. Rather, it was more important that he worked exclusively for La-Z-Boy, which controlled which products he sold and how he sold them.
Successor employers. When a business is sold as a going concern and the purchaser employs the employees on the same terms as before, their tenure will be transferred to the purchaser. Similarly, when one company declares bankruptcy or closes and another entity “reappears” performing the same operation as before, it may be viewed as a successor. This is because courts and labour boards have interpreted laws broadly in order to ensure continuity of employee rights upon a merger, closure or sale.