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An Employee or an Independent Contractor? The Supreme Court Says It Depends on the Facts and Not Just the Words in the Contract

An Employee or an Independent Contractor? The Supreme Court Says It Depends on the Facts and Not Just the Words in the Contract

On May 3, 2019 the Supreme Court of Canada rendered its decision in Modern Cleaning Concept Inc. v. Comité paritaire de l’entretien d’édifices publics de la région de Québec, 2019 SCC 28. The case examines who is an “employee” entitled to certain minimum protections under the Decree respecting building service employees in the Quebec region (the “Decree”) and the Act respecting collective agreement decrees (the “Act”).

While the majority is careful to note that the definition of “employee” under the Act is broader than that set out in the Civil Code of Quebec, the decision is nonetheless relevant to those who deal with this question in other statutory contexts. The main takeaway is that it does not matter how the contract defines the relationship: what matters is how the relationship operates in fact.

In this case, an individual, Mr. Bourque, performed work for Modern Cleaning Concept (“MCC”), a company offering cleaning services. MCC signed contracts directly with clients but hired people like Mr. Bourque called “franchisees” to do the work. The agreement between MCC and Mr. Bourque stipulated that Mr. Bourque was an “independent contractor” and that he had “complete control over the management of his operations.” However, at the same time, Mr. Bourque was required to fire an employee at the request of MCC, report complaints to MCC, perform cleaning services exclusively through the franchise relationship and not compete with MCC’s network. MCC paid Mr. Bourque directly and would deduct amounts he owed under the agreement. This could be up to 43% of his revenue.

The trial judge concluded that Mr. Bourque was an independent contractor. A majority of the Court of Appeal reversed and held that he was an employee.

A majority of the Supreme Court agreed with the Court of Appeal that Mr. Bourque was an employee. As the majority stated, “the inquiry must assess the actual nature of the relationship between the parties, regardless of the terms and labels used in the franchise agreement”; “[t]his inquiry is consistent with the longer judicial tradition in Quebec of looking behind contracts to ascertain the true nature of the relationship of the parties” (para 37). This required examining not only the franchise agreement between MCC and Mr. Bourque, but also MCC’s contracts with its clients.

The relevant question was whether Mr. Bourque assumed the business risk and corresponding ability to make a profit that would qualify him as an independent contractor, as opposed to an employee. The franchise agreement, when read together with MCC’s contracts with its clients, made it clear that MCC retained the risk and the ability to profit. MCC was responsible to its clients for the work done and was rewarded accordingly. MCC also exerted close control over Mr. Bourque and the terms of the franchise agreement prevented him from building his own business. For these reasons, he was an “employee” despite the labels used in the franchise agreement.

 

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