The British Columbia Supreme Court recently applied the “modern approach” to determining whether an employment relationship exists at law in TCF Ventures Corp. v The Cambie Malone’s Corporation, 2016 BCSC 1521.
Tim Fernback applied for the position of CFO which had been advertised as an employment opportunity by The Cambie Malone’s Corporation (“CMC”). Ultimately selected for the role, Mr. Fernback proposed a working arrangement whereby he would provide financial and commercial services through his incorporated entity, TCF Ventures Corp. (“TVC”). Mr. Fernback suggested that TVC would render invoices for fees working within a “budget” of $75,000.00 per year, would charge GST, and that the agreement would have a 30-day termination clause. The services would be provided over three days a week, and TVC would not be required to render services exclusively to CMC.
A formal agreement was never executed, although the parties did generally proceed as Mr. Fernback had suggested. In the course of the work, Mr. Fernback was granted authority over a number of employees, and exercised a substantial amount of autonomy. He was also provided with an office, had a phone local, email accounts, business cards, and a designated parking space. His computer and phone were supplied by CMC, and he participated in CMC’s benefits plan and had access to an expense account. Nevertheless, the evidence demonstrated that Mr. Fernback regularly pursued outside business interests and opportunities during the term.
In November of 2009, Mr. Fernback’s role was expanded from CFO to include COO. His days of work increased to five days per week, and he undertook more operational duties. However, by 2012 the relationship began to sour, and the COO title was dropped. Mr. Fernback continued in his CFO role although the company had hired someone else to take over certain accounting tasks. Mr. Fernback then took on an assignment which required him to raise capital for CMC in return for a commission.
As of November 2012 Mr. Fernback’s position as CFO was terminated, and he was advised that he would be solely working for a subsidiary raising capital. Mr. Fernback sued for wrongful dismissal, claiming that his employment had been terminated without cause and that he was entitled to a notice period in the range of 12 to 18 months.
The court found that Mr. Fernback was an employee of CMC:
The jurisprudence of employment law has, in relatively recent times, evolved to recognize the realities of the modern workplace and the fact that the relationship between workers and those to whom they provide their services are not simply binary–either employee-employer or independent contractor. In a number of decisions, the courts have come to acknowledge that there are a variety of different arrangements that the parties may have. The approach to be taken is to examine the situation from a functional perspective.
Applying the three general criteria established by the British Columbia Court of Appeal: (1) the duration or permanency of the relationship; (2) the degree of reliance or closeness of the relationship; and (3) the degree of exclusivity of the relationship, the court found that despite the lack of a traditional employer-employee structure to the relationship between TVC and CMC, and despite the lack of exclusivity, it involved a sufficient degree of personal service such that the relationship could not be between independent contractors:
…this was not a situation where CMC entered into a contract with a third-party corporate entity – say, for example, one of the major accounting firms – to have that firm assign a properly qualified worker to provide the services required. CMC bargained to have Mr. Fernback to join its workforce, and that is what happened. There was a permanency to that relationship that persisted for a significant time – some three and half years.
Accordingly, I am satisfied that the essential nature of the relationship was akin to an employer-employee situation, as opposed to a pure independent contractor.
Mr. Fernback was awarded a notice period of nine months. This decision is another example that substance usually trumps form, and demonstrates that the courts likely no longer consider themselves bound by the traditional view of the employer-employee relationship when resolving disputes in the modern workplace.