Northern Exposure

Employee or self-employed? That is the question!

By Alexandra Meunier and Yves Turgeon

In the financial services industry, the status of insurance and financial product sales reps is often in question. Are they employees or independent contractors? No matter what part of Canada you’re in, it is important to get it right.

As we have explained before, there can be significant consequences from incorrectly characterizing an employee as an independent contractor. Not only can the individual, at the end of the relationship, claim he was really an employee and entitled to significant severance benefits, the individual may seek the protections of the various employment and labor standards laws across the country during the relationship.

Such was the case recently in Blackburn v. Industrielle Alliance assurance et services financiers, where Quebec’s labor board, the Commission des relations du travail, had to consider whether these individuals were protected by Québec’s various labor laws, such as the Act respecting labour standards.

Facts

Two representatives filed a complaint under the Act respecting labour standards that they had been dismissed without good and sufficient cause. Industrielle Alliance made a preliminary argument that the complaints were not permitted because both representatives were self-employed workers, not employees. They therefore could not receive the protections of the Act.

After an exhaustive analysis of the facts and case law, including the principles laid down by the Quebec Court of Appeal in Paquin v. Services Financiers Groupe Investors inc., the commissioner accepted the employer’s position. In this particular instance, he concluded that the representatives’ work, evaluated as a whole, did not meet the legal subordination criteria specific to employer/employee relationships:

• The representatives had great latitude over their work schedule, any leave they took, and the length of their vacation time.

• They were free to perform their work in the premises of their choice and were not limited to the offices provided by Industrielle Alliance.

• The representatives were not bound to perform their tasks personally. They could have many of the administrative duties performed by an assistant that they paid personally, or they could choose to partner up with another representative in order to share profits. This criterion was exceedingly important to the commissioner.

• Many representatives engaged in their activities through an incorporated company.

• Even though this element was not an influencing factor in and of itself, the contract between Industrielle Alliance and the representatives also specifically provided that the representatives were self-employed.

The commissioner reiterated that it was irrelevant that the representatives mainly sold Industrielle Alliance products, since economic dependence and legal subordination are two separate notions.

Lessons learned

Even though each case is different, this decision confirms that representatives in the financial services industry may be determined to be self-employed workers rather than employees. Although a case originating from Quebec, the same types of factors would be considered by courts and tribunals in other Canadian provinces.

That said, businesses wanting to ensure that their representatives have the status of self-employed independent contractors had better make sure that their contracts reflect this status. Even though a written contract characterizing an individual may be useful, it won’t be determinative. Instead, the Canadian courts will not hesitate to go beyond the text to examine the true nature of the relationship between the parties, including whether there is “legal subordination.”