It’s ‘employer beware’ in the complex world of independent labour
A recent case from the B.C. Supreme Court highlights two dynamic facets of employment law.
One facet, the conduct between the employer and employee, operates under the surface and often escapes detection. The other facet, independent contractor, is more easily observed, but this case tells us that we must be careful what conclusions we draw from what we are seeing.
In Fasslane Delivery v. Purolator Courier Ltd., the facts involve common independent contractor factors, a written agreement confirming the independent contractor arrangement, and a subsequent oral agreement that amended and actually replaced the written agreement via conduct over time.
In Fasslane, an owner-operator of a truck incorporated and contracted his services through his incorporation, a company called Fasslane, to Purolator. In 1988 Fasslane began providing the services to Purolator, in the Vancouver-Seattle route, as an owner-operator. Fasslane provided its own truck to perform these services.
In 1991, Purolator made the owner-operator sign a written “Owner-Operator Contract” between Fasslane and Purolator, that allowed Purolator to end the arrangement on seven days’ notice. At this point, we have a classic independent contractor fact pattern.
Over time, business in the Vancouver-Seattle route increased for Purolator such that Purolator made some demands on Fasslane to accommodate the increase in business. Purolator required Fasslane to upgrade its delivery truck to a five-ton truck, which required a long-term lease that increased Fasslane’s operating costs.
Purolator also added a second route to Fasslane’s workload, and Fasslane had to hire another driver to cover the additional route.
Because the owner-operator was concerned about rising expenses, he asked Purolator how long he could rely on the work, and was told he could have the Vancouver-Seattle route for the rest of his career until retirement.
When the owner-operator received this assurance, he hired the additional driver and purchased the five-ton truck. The owner-operator also set up a home office with office equipment and a power washer to clean the trucks.
All of this was agreed to verbally; there was nothing reduced to writing.
At this point, although there are still numerous independent contractor factors present, the true nature of the relationship changed, it took on more permanence and substantial economic reliance, due to the conduct of the parties.
Eventually, Purolator demanded the owner-operator buy a tractor-trailer truck and told him he could operate only one Vancouver-Seattle route instead of the two routes he was handling. This would have resulted in Fasslane doubling its expenses but cutting income in half.
When the owner-operator refused to agree, Purolator sent the owner-operator a letter that made it clear that the changes would be put in place within the next month.
The letter ended with wording, thanking the owner-operator for his years of service and wishing him well, the sort of wording one gets while being dismissed.
The court found that the letter from Purolator constituted a constructive dismissal of the owner-operator and Fasslane. The court found that the relationship between Fasslane and Purolator was governed by the oral agreement that came after the written agreement, and not by the earlier written agreement.
This finding was based on the conduct between the parties over a period of time. When Purolator induced the owner-operator into greater reliance by requiring greater capital outlay and expanded duties and workload on the promise of a secure arrangement, and then allowed the owner-operator to increase his economic reliance on Purolator over time by performing these new expanded functions, the relationship crossed over from a classic independent contractor fact pattern, to a relationship that was more akin to employer-employee.
The court found that the true nature of the relationship was like an employment. Although it was not an employment, it was enough like an employment to attract the rights employees have upon termination.
The net effect was that the written agreement was replaced by the oral agreement, and because the oral agreement was akin to an employment, it could only be terminated upon reasonable notice, not the seven days referred to in the written agreement.
The court awarded the owner-operator six months compensation in lieu of reasonable notice.
There are many workers who sell their labour to an employer under the banner of self-employment or independent contractor. This type of worker has been perceived to have the least protection from a summary dismissal.
However, the courts are developing policies to protect workers who are economically dependent on the sale of their labour. The Fasslane case, which 20 years ago would probably have resulted in a decision that would have favoured Purolator, is stark proof of the direction the courts are taking.
It’s a new world for independent contractors, employer beware.