Hassen v Dunwald & Fleming Enterprises Ltd., 2024 ABESAB 21 (CanLII), is an appeal of an Employment Standards decision, whereby employee Myron Hassen (“Hassen”) was awarded outstanding wages/overtime, vacation pay and general holiday pay (the “Order”).
The employer, Dunwald & Flemming Enterprise Ltd. (“Dunwald & Fleming”), appealed the Order, arguing that the worked hours assessed by the Employment Standards Officer in arriving at the Order included hours of work completed by Hassen while he was a subcontractor (and not an employee of the company).
Facts
The following are the pertinent facts of the case:
- Hassen worked for Dunwald & Fleming as a subcontractor for 20-25 years before becoming an employee there. He provided services as a welder to the company while also renting out his welding rig to them.
- In or around May 2020, Hassen transitioned from a subcontractor to an employee of Dunwald & Fleming. The offer letter between the parties contained the following terms:
- Annual salary of $108,000.00
- He would work 50 hours per week, and
- The annual salary included overtime pay
(the “First Employment Letter”).
- Hassen was also provided with an “Employee Sign on Sheet”. It stated that Dunwald & Fleming would pay its employees overtime pay at 1 ½ of the employees’ regular rate of pay for all hours worked in excess of 8 hours per day or 44 hours per week, whichever was greater. It also noted that vacation pay was calculated at 6% of employee’s regular pay.
- On January 18, 2021, the parties entered a Modified Employment Letter, whereby Hassen’s hours were reduced to 25 hours per week and his salary was reduced to $54,000.00.
- Under the Modified Employment Letter, Hassen would receive $2,076.92 bi-weekly (the “Fixed Salary Payments”).
- In January 2022, Hassen agreed to work on a project alongside other welders in Edson, Alberta (the “Project”).
- The parties did not enter into a new or amended written agreement.
- Hassen worked on the Project from January 2022 to October 2022.
- Hassen received the following remuneration during the Project and following it:
- $105/hr (the “Fee”)
- $2,076.92 bi-weekly, and and
- Benefits continuance.
- During the Project, Dunwald & Fleming was invoiced by and made payments to Hassen’s company.
- The parties disagreed as to whether Hassen was an employee or subcontractor.
- Hassen was of the position that he remained an employee and noted that his work on the Project contained the following employment features:
- He hours were tracked on Dunwald & Fleming timesheet, and they were reviewed and approved by Dunwald & Fleming
- Dunwald & Fleming provided the materials required for work on the Project
- He used a lot of Dunwald & Fleming’s tools
- Dunwald & Fleming directed how he was to do the job
- He was under Dunwald & Fleming’s foreman’s control
- He would regularly show up to work at the same time
- He was not asked to reactivate his own workers’ compensation account and liability insurance he had as a subcontractor for Dunwald & Fleming. When he was a subcontractor for Dunwald & Fleming prior to becoming an employee, he had his own workers compensation account.
- Hassen claimed that his remuneration consisted of the following:
- Rig rental fee of $105/hr, and
- The bi-weekly payments were the Fixed Salary Payments (compensation for services provided).
- Dunwald & Fleming was of the position that Hassen was a subcontractor, and noted some features of a subcontractor relationship as follows:
- Hassen was not supplied with all the materials required to work on the Project
- Hassen was required to provide his own rig, maintain his own tools and responsible for his own rig insurance
- Payments made to Hassen’s company did not have CPP or other tax withholdings and GST was applied to company invoices
- Workers’ compensation was Hassen’s responsibility as a subcontractor
- Hassen was not expected to exclusively work for Dunwald & Fleming
- Hassen could turn down work proposed by Dunwald & Fleming
- Hassen could be sent home if there wasn’t enough work, and
- Hassen was not included in the list of employees on the Project.
- Dunwald & Fleming’s position was that Hassen’s remuneration consisted of the following:
- The Fee was comprised of a rig rental fee, and services rendered fee
- The bi-weekly payments were not Fixed Salary Payments, rather, payments for 225 banked hours owed to Hassen for employment work (the “Banked Hours Payments”).
- Dunwald & Fleming asserted that the Banked Hours Payments were to be paid to Hassen from the start of the Project until March 2022, however, they continued to make these payments until September 2022 in error.
- The primary issues before the Appeal Body were as follows:
- Whether Hassen was a contractor or employee, and
- What portion of the remuneration received consisted of wages.
Analysis / Conclusion
In determining type of working relationship between Hassen and Dunwald & Fleming, the Appeal Body applied the following tests:
[46]
….
1) the control test:
37 […] It is expressed as follows: “the essential criterion of employer-employee relations is the right to give orders and instructions to the employee regarding the manner in which to carry out his work” […]
2) the four-fold or entrepreneur test:
39 An early attempt to deal with the problems of the control test was the development of a fourfold test known as the “entrepreneur test”. […]
3) the organization test:
40 As MacGuigan J.A. notes, a similar general test, known as the “organization test” or “integration test” was used by Denning L.J. (as he then was) in Stevenson Jordan and Harrison, Ltd. v. Macdonald, [1952] 1 The Times L.R. 101 (C.A.), at p. 111:
One feature which seems to run through the instances is that, under a contract of service, a man is employed as part of the business, and his work is done as an integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it.
4) the enterprise test:
45 Finally, there is a test that has emerged that relates to the enterprise itself. Flannigan, supra, sets out the “enterprise test” at p. 30 which provides that the employer should be vicariously liable because (1) he controls the activities of the worker; (2) he is in a position to reduce the risk of loss; (3) he benefits from the activities of the worker; (4) the true cost of a product or service ought to be borne by the enterprise offering it. According to Flannigan, each justification deals with regulating the risk-taking of the employer and, as such, control is always the critical element because the ability to control the enterprise is what enables the employer to take risks. An “enterprise risk test” also emerged in La Forest J.’s dissent on cross-appeal in London Drugs where he stated at p. 339 that “[v]icarious liability has the broader function of transferring to the enterprise itself the risks created by the activity performed by its agents.”
[47] Lifechoice (at paragraph 24) then cites A.U.P.E. v Board of Governors University of Calgary, [2008] Alta. L.R.B.R. 129, for its comments on some of these above tests:
…
The “control test” of Montreal Locomotive Works, expanded by York Condominium, is still an important test that will often decisively identify the employer-employee relationship. The enquiry into control, however, must not limit itself to indicia of day-to-day supervision over the work. Where control is shared, the decision-maker should look to the degree of control exercised over all aspects of the work, not just daily supervision.
The control test, however, may be insufficient or even unsuitable in many modern relationships, especially where the ownership of the enterprise, and the knowledge and technical expertise necessary to operate the enterprise, do not both reside in the employer.
The “entrepreneur” test, encapsulated by the question “Whose business is this?”, can be a useful method of analysis in identifying the employer-employee relationship. The entrepreneur test allows the decision-maker to take into account factors like ownership of the means of production, chance of profit and risk of loss, and responsibility for management of the enterprise.
The “organization” test, asking whether the “employee” is an integral part of the would-be employer’s organization, is probably unsuitable as a major test of the employment relationship. But it is still a valid question to ask, because a thorough, ongoing integration into an enterprise will tend to characterize the relationship as one of service, not for specific services.
[48] As set out in Sagaz, no test is conclusive, the considerations listed therein are not exhaustive, and the relative weight of each factor varies depending on the particular facts and circumstances.
The Appeal Body ultimately determined that Hassen was an employee of Dunwald & Fleming for the following reasons:
- In applying the control test, Dunwald & Fleming was primarily in control of Hassen. Dunwald & Fleming created the schedule and directed how work was to be performed on the Project
- In applying for the entrepreneur test, Dunwald & Fleming was responsible for managing the work on the Project and the outcome. Hassen had no chance of profit or loss, and despite providing his own tool (the rig), he also had to use Dunwald & Fleming’ s tools and materials
- In applying for the organization and integration test, the work completed by Hassen was an integral part of Dunwald & Fleming’s business. While there was no explicit requirement for Hassen to exclusively work for Dunwald & Fleming, he dedicated and integrated himself to the company
- In applying the enterprise test, Dunwald & Fleming was in a position of control of the Project, in control of the risks associated with it and benefited from the activities of Hassen. Despite Dunwald & Fleming requiring subcontractors to obtain their own liability insurance and workers compensation coverage, Hassen did not obtain such independent coverage, and
- Hassen continued to receive employee benefits while working on the Project.
In accordance with the above, the Appeal Body had to determine which portion of the remuneration Hassen received constituted wages in accordance with the Employment Standards Code (Alberta).
The Appeal Body determined the following:
- The Fee was made up of the rental fee for the rig (not wages) and for services rendered (wages). Only the wage portion of the Fee was to be taken into account in determining Hassen’s entitlements, and
- The Banked Hours Payments were erroneously made and were to be accounted as wages /monies having been paid but not earned.
The Appeal Body ordered that the Order be varied and recalculated taking into account its findings.
My Take
This case is a good reminder of the difficulties faced in determining whether one is in an employee or contracting relationship. Moreover, it rarely boils down to the intentions of the parties, rather, an objective lense is to be applied.
This situation was also quite different from what we normally see, as not all amounts that were paid by Dunwald & Fleming to Hassen were deemed wages by the Appeal Body, irrespective of the finding that Hassen was an employee. I am interested to see how Hassen’s entitlements will be impacted by this decision, and whether any amounts will be owed by Dunwald & Fleming to him.
Another important consideration that was not dealt with in this case but is worth mentioning is severance pay. True independent contractors are not generally entitled to severance packages, but most workers are legally classified as employees, and employees are usually entitled to severance.
Bow River Law provides these regular legal blog articles for the purposes of legal news, education and research for the public and the legal profession. These articles should be considered general information and not legal advice. If you have a legal problem, you should speak to a lawyer directly.
Amanda Jacinto is an employment and labour lawyer at Bow River Law in Calgary.
