Mr. Independent Found to be Dependent – Court Awards 12 Months’ Severance Pay to Dependent Contractor
The decision of Glimhagen v. GWR Resources Inc., is a clear reminder for employers that, labelling someone as an independent contractor does not necessarily make them one. In this case, the employer learned the hard way when the BC Supreme Court ordered it to pay Mr. Glimhagen damages in the amount of 12 months’ pay in lieu of notice.
The main issue before the Court was whether during his first 21 years with GWR, Mr. Glimhagen was an independent contractor, a dependent contractor, or, if he “morphed” from the former to the latter, and when that change took place.
At the time of trial, Mr. Glimhagen was 68 years of age. Between finishing high-school in 1967 and 1985 he had worked in a variety of positions. In 1988, he started his own business selling and consulting on the use of an accounting software package called Accpac. In 1988 or 1989, Mr. Glimhagen’s sister, Margaret Glimhagen, was providing accounting and office management services to GWR. At that time, GWR was beginning to move its accounting and control procedures from a manual to a computer based system. Ms. Glimhagen and GWR’s principal had no expertise in making this transition, and so GWR retained Mr. Glimhagen to set up a new computer-centric accounting system.
From 1989 to 1995, Mr. Glimhagen provided accounting and computer consulting services to GWR pursuant to the terms of a contract. GWR paid Mr. Glimhagen a flat fee of $2,000 per month. Mr. Glimhagen performed his work for GWR at GWR’s offices using the GWR’s equipment. At the same time that he was providing services to GWR, Mr. Glimhagen was promoting his own accounting software sales and service business. He received revenue from GWR and his other clients.
From 1998 through to mid-2010, Mr. Glimhagen provided accounting services to GWR. He spent on average 20 to 25 hours per week providing various services to GWR. He devoted the balance of his working life to developing and maintaining his accounting software sales and consulting business. He also provided some accounting or bookkeeping services to clients other than GWR.
In August 2010, GWR appointed Mr. Glimhagen as its CFO. His duties and responsibilities with GWR did not change with that appointment but his formal status did. Instead of paying Mr. Glimhagen’s company as a contractor, GWR put Mr. Glimhagen personally on its payroll. It started issuing conventional paycheques to him and it started making the usual statutory deductions from his pay.
In 2012, GWR formally appointed Mr. Glimhagen as its corporate secretary. The appointment worked no change in the chores that Mr. Glimhagen did for GWR. Shortly after this new appointment, the relationship between Mr. Glimhagen and GWR soured and ultimately resulted in Mr. Glimhagen’s termination in September 2012.
At trial, Mr. Glimhagen argued that he was entitled to 23 months’ notice on the basis that he was either an employee or a dependent contractor from the start of his relationship with GWR. The trial judge held that, as a general proposition, a person on an employer’s payroll and for whom the employer makes conventional statutory deductions from his pay will be considered to be an employee. An independent contractor, on the other hand, is not an employee. Between those two states lies an intermediate category: the dependent contractor. The dependent contractor is not on payroll, but in most other ways operates and is treated as an employee. A dependent contractor is entitled to reasonable notice of termination of his contract.
To this end, the Court considered the following factors, as adopted from TCF Ventures Corp. v. The Cambie Malone’s Corporation, 2017 BCCA 129:
- Whether Mr. Glimhagen was largely limited exclusively to the service of GWR;
- Whether Mr. Glimhagen was subject to the control of GWR, not only as to the
tasks performed, but also when, where and how they were performed;
- Whether Mr. Glimhagen had an investment or interest in the tools necessary to
complete the tasks for GWR;
- Whether by performing his duties Mr. Glimhagen undertook risk of loss or
possibility of profit apart from his fixed rate remuneration;
- Whether Mr. Glimhagen’s activity was part of GWR’s business organization – in
other words ‘whose business was it?
- Whether Mr. Glimhagen’s and GWR’s relationship was long standing – the more
permanent the term of service the more dependent the contractor; and
- Whether Mr. Glimhagen and GWR relied on one another and closely co-
ordinated their conduct.
Taking all of the evidence into account, the Court concluded that, by the year 2000, Mr. Glimhagen was an integral part of GWR’s operation. His relationship with GWR was by 2000, well “ingrained and established”. Mr. Glimhagen was a dependent contractor for GWR. His term of service as a dependent contractor and employee was from 2000 to September 2012 – a 12 year span.
The Court awarded Mr. Glimhagen 12 months’ reasonable notice in the amount of $78,000.
If you are an employee or an employer with questions about employment status and written agreements, or about whether you or a worker will be considered an employee, an independent contractor, or a dependent contractor please contact any member of our Employment and Human Rights Group.