CUPE- CLC, Ontario Hydro Employees Union, Local 1000 v. Ontario Hydro (Bancroft Area), 1986 CanLII 1513

Ontario Labour Relations Board

[1986] OLRB Rep. June 790

3299-84-M CUPE- CLC, Ontario Hydro Employees Union, Local 1000, Appli­cant, v. Ontario Hydro (Bancroft Area), Respondent

BEFORE: Patricia Hughes, Vice-Chairman, and Board Members W. H. Wightman and B. L. Arm­strong.

APPEARANCES: R. Ross Wells for the applicant; John B. West for the respondent.

DECISION OF PATRICIA HUGHES, VICE-CHAIRMAN, AND BOARD MEMBER B. L. ARMSTRONG; June 4, 1986

1. The applicant, CUPE - CLC, Ontario Hydro Employee Union, Local 1000 ("the union"), seeks a declaration under section 106(2) of the Labour Relations Act, ("the Act") that Dwayne Unger and David Sarginson are dependent contractors for the respondent, Ontario Hydro (Bancroft Area) ("Hydro").

2. Unger and Sarginson are engaged in the work of removing trees which pose a danger because they are close to power lines. During the operative period, they had entered into a contract with Hydro to carry out "danger tree removal". The contract was for the period February 18, 1985 to March 29, 1985 and provided that Unger and Sarginson were to cut down 1,085 trees which had been marked by Hydro for removal. The union argues that Unger and Sarginson are depend­ent contractors working for Hydro as their employer, while Hydro maintains they are independent contractors.

3. The Labour Relations Officer appointed to inquire into this matter met with the parties on December 17, 1985. It was agreed that the evidence of Dwayne Unger would stand for both himself and David Sarginson. The Officer's Report, dated January 30, 1986, was the subject of representations by the union and Hydro before us on April 15, 1986. At the hearing, counsel for the union did not pursue the union's original claim that Unger and Sarginson were employees of Hydro, but restricted his submissions to the claim that Unger and Sarginson are dependent con­tractors.

4. There was no argument before us, nor was there any suggestion in the evidence, that there was a potential employer other than Hydro. Accordingly, if the disputed individuals are dependent contractors, we conclude that Hydro is their employer.

5. Prior to 1975, the status of an individual as an employee or independent contractor had to be determined by reference to common law tests. However, in that year, the Ontario Labour Relations Act was amended to establish as a distinct category a "new" type of individual who was in fact neither employee nor independent contractor but possessed characteristics of both: the dependent contractor. Section 1(l)(h) of the Act provides that

"dependent contractor" means a person, whether or not employed under a contract of employment, and whether or not furnishing his own tools, vehicles, equipment, machinery, material, or any other thing, who performs work or services for another person for compensation or reward on such terms or conditions that he is in a position of economic dependence upon, and under an obligation to perform duties for, that person more closely resembling the relationship of an employee than that of an independent contractor.

The significance of a determination that a particular person is a dependent contractor is found in section 1(1)(i) of the Act which states that an "'employee' includes a dependent contractor". Consequently, an individual who has been declared a dependent contractor enjoys the same protec­tions under the Act as a traditional employee, including the opportunity to join a union and engage in collective action.

6. Neither Unger nor Sarginson intervened in the instant application, nor did Unger indicate expressly in evidence whether they preferred to be dependent or independent contractors. In any case, it is the Board's responsibility to determine their status on the basis of appropriate crite­ria, keeping in mind the purpose of the amendment as expressed in Adbo Contracting Company Ltd., [1977] OLRB Rep. April 197:

23. ...The determination of who is a dependent contractor is now a comparative exercise that requires reference to a much broader range of labour relations considerations.

24. This re-definition of the limits of the Labour Relations Act serves two purposes. First, it rec­ognizes that, as a matter of fairness, persons in economic positions that are closely analogous should be given the same legislative treatment. A second purpose, and one no less important, is to protect existing collective bargaining rights from being eroded by arrangements that differ only in form, but not in substance, from the employment relationship.

employee more than the independent contractor. It is not therefore surprising that in most cases, the disputed individuals in some respects resemble employees and in other respects resemble inde­pendent contractors. Counsel for the union, in an approach endorsed by counsel for Hydro, sug­gested we envision a continuum with "employees" at one end and "independent contractors" at the other end with a line through the middle. We must decide on which side of the line Unger and Sarginson are to be most appropriately placed. As the Board said in the Cupido Haulage case, [1980] OLRB Rep. May 679 at paragraph 17, "[t]he statutory definition forces the Board to engage in a comparative exercise; to determine on which side of an imaginary line between independent contractor and employee the disputed persons fall". We are not required to find that Unger and Sarginson have the same characteristics as an employee performing the same work would have, but only that the characteristics of their work environment have more in common with an employee's working environment than with an independent contractor's working environment.

8. Each counsel referred to one case in particular to support his submissions. Counsel for Hydro suggested that the indicia set out in the Algonquin Tavern case, [1981] OLRB Rep. Aug. 1057 at paragraph 64 are especially helpful and that on those indicia, Unger and Sarginson are independent contractors. Counsel for the union placed heavy emphasis on Cradleship Creche, [1986] OLRB Rep. Feb. 225. While the principles enunciated in both those cases are, of course, relevant to our inquiry, the facts in both of them are quite different than the facts here. Algonquin Tavern concerned the status of burlesque entertainers. With one exception, the entertainers involved worked for the purported employer taverns or hotels for only brief periods, usually no longer than a week, with little or no subsequent employment by the same tavern or hotel. The Board therefore found that the "principal ... question is whether the dancers are to be regarded as 'self-employed' or 'employees' of the various hotels at which they work from time to time". It concluded that the dancers were self-employed. In Cradleship Creche, the issue was whether persons who provided child care in their homes through the agency services of the Creche were employees of the Creche, dependent contractors working for the Creche or independent contractors. The pro­viders were found to be dependent contractors by the majority of the Board. The obligations of and opportunity for extra work by the providers were in large part determined by statute, the Day Nurseries Act, and fees were established unilaterally by the Municipality of Metropolitan Toronto. On the other hand, the facts here are similar (although certainly not identical) to the kind of facts in evidence in the "truck driver cases" to which both counsel also referred. Accordingly, we con­sidered the following cases in detail: Canada Crushed Stone, [1977] OLRB Rep. Dec. 806; Sherman Sand Gravel Ltd., [1978] OLRB Rep. May 459; Superior Sand, Gravel & Supplies Ltd., [1978] OLRB Rep. Feb. 119; Nelson Crushed Stone, [1977] OLRB Rep. Feb. 104; and Indusmin Limited, [1977] OLRB Rep. Sept. 552. Apart from Indusmin, all these cases were provided the Board by counsel for Hydro, in addition to other related material. Counsel for the union also asked the Board to consider the Dominion Dairies Limited case, [1978] OLRB Rep. Dec. 1083. One of the major distinctions between some of these cases and the instant case is that the drivers had to deal with customers as well as the entity with which they contracted. However, the relation­ship with customers was not determinative of the status of the drivers, and it is not considered fur­ther here. Another distinction is that the owner-drivers are generally in on-going relationships with the employer, while Unger and Sarginson were engaged in a series of short-term contracts. How­ever, as considered below, the timing of the Unger and Sarginson contracts was such that the rela­tionship was tantamount to an on-going relationship.

9. While a series of indicia may be useful in determining whether disputed individuals are dependent contractors, section 1(1)(h) of the statute itself establishes the two major criteria of (a) economic dependency and (b) an obligation to perform duties resembling more those owed by an employee than those owed by an independent contractor. In this case, then, we must answer the following questions:

(a) to what extent are Unger and Sarginson economically dependent on

Hydro and what is the nature of that dependency; and

(b) what is the nature of the duties owed by Unger and Sarginson to Hydro?

10. With respect to economic dependency, we are particularly concerned about the percent­age of work performed for Hydro and the opportunity available to Unger entrepreneurial activity; the selling of one's services to the market; and economic mobility.

11. With respect to the nature of the duties owed, we need to consider the degree of control exercised by Hydro over the way the job is to be done, including training; the extent of supervision on an ongoing basis; the method of the determination of the amount of the contract; the method of payment; and whether Unger and Sarginson themselves hire employees. The Algonquin Tavern indicia most relevant to these factors are: the use of substitutes; evidence of variations in fees or the ability to bargain fees; the degree of specialization involved; the right (rather than ability) to control the work; the magnitude of the contract amount, terms, and manner of payment; the degree of integration into the employing unit, and the similarity between the work done by Unger and Sarginson and that done by acknowledged employees. In considering the second statutory cri­teron, the majority in Cradleship Creche reviewed the extent to which the providers could refuse work, the method of payment, training, regular supervisory visits and discipline exerted by the Creche over the providers. While it is obvious that these factors cannot be clearly allocated to one or the other of the major statutory criteria, they do provide points of reference by which to organ­ize and assess the evidence.

Degree of economic dependency on Hydro

12. Unger and Sarginson are in fact entirely dependent on Hydro for their income. Unger testified that they do 100% of their business with Hydro. Thus, if the test were the nature of the economic relationship in fact, there would be no question that the first criterion under section 1(1)(h) of the Act would be satisfied and the status of Unger and Sarginson would depend on the nature of the duties they performed for Hydro. However, counsel for Hydro maintained that the test is not actual dependency but the reason for it. He argued that since it was Unger and Sarginson's own choice to restrict their work to Hydro, and that dependency did not derive from the con­tract itself, the first criterion was not satisfied. In other words, since Unger and Sarginson could work for other persons, they were not economically dependent on Hydro within the meaning of section 1(1)(h) of the Act. He cited The Citizen case, [1985] OLRB Rep. June 819 to support his position. In that case, the Board stated that "the economic dependence necessary under the defini­tion in section 1(1)(h) of the Act must flow from the terms and conditions of the relationship between the parties". There was nothing explicit or implicit which prevented the drivers for The Citizen from seeking income elsewhere, although the only actual source of income was The Citizen for whom the drivers distributed papers. Counsel for Hydro correctly pointed out that there was no restriction on Unger and Sarginson imposed by Hydro with respect to earning income from other sources. They had made their own choice to work only for Hydro. There was no evidence about what would happen if Unger and Sarginson worked for someone else or were not available when Hydro required them. In contrast, in Nelson Crushed Stone, supra, for example, there was evi­dence that a driver who refused to accept a particular load of crushed stone would be "shown the gate".

13. Counsel for the union argued that Cradleship Creche supports his view that the reason for the dependency is irrelevant. In Cradleship Creche, the demands of the Day Nursery Act and the agreement between Metro Toronto and the Creche restricted the providers' opportunities to earn other income. The majority found at paragraph 28 that "[t]he fact that the demands of the D. N. Act and the Creche's contract with Metro impose the need for most of the controls which the Creche exercises over the providers does not alter the fact that their economic independence and their opportunity to act as independent entrepreneurs are severely circumscribed". Counsel for the union suggested that this statement indicates that the Board does not care why the individual is in a position of economic dependency. In Creche, he argued, the demands of the job created the dependency (for example, the providers were limited in the number of children they could care for at one time and were discouraged by the Creche from seeking children under private arrangement). It is our view that the statement in Creche refers to the dependency arising out of the condi­tions of work and therefore is not inconsistent with the proposition in The Citizen. The phrase "on such terms and conditions" in section 1(1)(h) (emphasis added) supports the position that the terms and conditions must arise out of the relationship or contract itself. This interpretation is even clearer when contrasted with the phrase "under such terms and conditions" which seems to refer to actual conditions. Nevertheless, the policy underlying the statutory amendment - recognition of the need to look at the reality of the contractor's relationship with the person with whom he or she contracts - militates against too technical or literal an interpretation of the definition. Rather the statutory purpose encourages us to base our decision on the actual extent to which the contractor is dependent.

14. On this view, some considerable assistance in resolving this issue can be gained from a more extensive consideration of the evidence, seen particularly in light of the extent to which Unger and Sarginson engage in entrepreneurial activity. Unger testified that prior to entering into partnership with Sarginson, he had worked for Fred Palmer, a contractor for Hydro. When Fred Palmer decided to go into a different business, Unger went to see Roger Bouchard, Area Forestry Foreman at Hydro and determined that "[i]f we had the correct insurance and equipment that we'd be able to bid on the contracts because we were doing the work". Unger and Sarginson then formed a partnership in April 1984 and purchased only the equipment Bouchard advised they would need to work for Hydro. The equipment does not appear to have required any substantial capital investment; it consisted of "two chain saws, one set of spurs, ropes, pulleys, hard hats, chain saw pants [and] boots". (Unger subsequently purchased a "chipper" himself but neither counsel made much of this additional purchase and it does not change our conclusion that the equipment purchased was for the specific purpose of working for Hydro.) They purchased liability insurance in the amount of $1,000,000, an amount required and designated by Hydro. They then bid on their first contract and from April 1984 until at least March 29, 1985, they contracted exclu­sively for Hydro. As they finished one contract, they bid on another. They were awarded 40% of the contracts they bid on but even with a rejection rate of 60%, they were never without a contract with Hydro. They might take a few days off between contracts. For example, they bid on the Feb­ruary 18th to March 29th contract on February 15th and were awarded it that day. Although the contract began on February 18th, they did not commence the actual work until early in March. However, they did not attempt to perform work for anyone else during those periods. Indeed, they were glad to have a few days off.

15. Thus the evidence indicates that Unger and Sarginson began their partnership with the purpose of working for Hydro and did in fact work entirely for Hydro during the operative time. At no time during that period did they exhibit any of the characteristics of entrepreneurial behaviour such as advertising, soliciting work, distributing business cards or other similar activity. Counsel for Hydro claimed that the partnership had the "external trappings of running a business" because they hired an accountant and employees (the issue of employees is dealt with below) and claimed depreciation on their equipment. But there is no evidence to suggest that they would have any other work to go to should they stop working for Hydro. Indeed, the evidence indicates that their sole business contact was with Hydro. We adopt the reasoning of the majority in Indusmin Limited, supra, at paragraph 16: "the decision by a driver to attach his financial success to one entrepreneur [may not be] conclusive of a finding of dependency", but "the absence of any indica­tion by the driver to expand the parameters of his alleged business may very well justify the infer­ence of dependency". Unger and Sarginson are similar to the driver in Indusmin who was "shown to be patently without business initiative. He does not advertise his services or seek 'the business' of other quarry operators. In short, he does not attempt to compete for other customers in order to achieve 'a better deal' than that offered by Indusmin Limited". It can be said of Unger and Sargin­son, as it was said of the owner-drivers in Superior Sand, Gravel & Supplies Ltd., supra, that "like employees, [they] did not themselves create their own work opportunities but, rather, relied upon the work opportunities created by another person, in this case the respondent ... Work opportuni­ties ... flowed from the respondent". In that case, the drivers were found to be dependent contrac­tors although they dealt with customers and performed some work for other persons than the res­pondent. However, unlike Unger and Sarginson, they were expected to notify the respondent if they were going to be absent and they were required to report every morning.

16. All of Unger and Sarginson's work is done for Hydro. Furthermore, they exhibit no entrepreneurial characteristics. We therefore conclude that the first criterion under section 1(1)(h) of the Act has been satisfied and that Unger and Sarginson are economically dependent on Hydro.

Nature of the Duties owed Hydro

17. Unger and Sarginson cut down trees which Hydro had marked for removal. They could work when they liked, as long as they completed the contract on time. They were not required to report absences to Hydro, but they were only likely to be absent on rainy or snowy days. In fact, they put in the kind of working day one would expect of an employee: weekdays from 7 a.m. to 4:30 p.m. with an hour for lunch and two fifteen-minute breaks. Every three or four days Ron McGibbon came onto the site and spent fifteen minutes confirming that the job was being done properly and that they were wearing their safety equipment. By contrast, regular foresters were expected to report to their foreman every morning. But foresters were not necessarily under constant supervision as the following responses by Ron McGibbon to questions asked by counsel for the respondent indicate:

Q. Tell me about the degree of supervision that a forester would have?

In quite a few instances, there would be no direct supervision with the crew foreman. In Hydro we're leaning more to two man crews, in a two man sit­uation they don't deem it necessary to have a supervisory position in that instance, since they're both trained personnel.

Q. Would the work be assigned on a daily basis?

No not really, it would be assigned a switch number, for example which might represent anywhere from three to five kilometers of line or some­thing of this nature and you just go to that location and do the total line clearing job required.

Q. Would you, during the course of a day, see a crew foreman everyday?

Not necessarily on the job, no, you'd see him in the morning at the shop

and that's about all sometimes.

Q. Would it be a practice that you would see him at least once a day whether it be in the field or the shop?

Oh you'd definitely see him once a day at the shop, yes.

18. While there was little supervision of Unger and Sarginson on a daily basis, Hydro had provided explicit instructions on how the trees were to be removed. Instructions included a diagram showing how the rope and other equipment were to be attached to the tree. There were also written instructions. The method of rigging and chaining trees were set out explicitly and in detail. Prior to beginning the first contract, they received two days of training by Hydro (Unger's training at least had been completed while he had been working for Fred Palmer; the evidence did not indi­cate when Sarginson received his training) and subsequently four-and-a-half hours of training. They were not paid but attendance was effectively mandatory since a failure to attend would result in no contracts. In felling the trees, they simply started at a point and followed the line of trees. They would not cut down rotten trees or trees in the wires but would notify Ron McGibbon when he came onto the site and he would arrange for their removal. We find that Unger and Sarginson had little discretion in satisfying the requirements of the job.

19. Hydro could unilaterally terminate a contract if a tree was felled on the power line. However, discipline would not be imposed until the third contract, a situation counsel for the union analogized to progressive discipline. Counsel for the union argued that this arrangement was premised on the assumption that there would be successive contracts. Counsel for Hydro submit­ted that the right to terminate the contract under such circumstances was simply the reasonable right of an owner of property. Hydro could also terminate if Unger and Sarginson did not wear their safety equipment. Counsel for Hydro stated that these requirements were in part to satisfy the minimum requirements of the Occupational Health and Safety Act. Neither party elaborated on the application of the Occupational Health and Safety Act, nor did counsel for the union dispute the statement of counsel for Hydro in this regard. The relevant provisions of the Occupational Health and Safety Act are not determinative of the status of the disputed individuals, since they are consistent with their being either independent contractors or dependent contractors.

20. Unger and Sarginson were paid halfway through a contract and again at the end. Hydro paid no benefits, nor made any deductions. Counsel for the union candidly admitted that this factor was more consistent with the way in which an independent contractor would be paid than with the way in which an employee would be paid. However, we note that this method of payment is commonplace in relationships determined to be dependent contractor-employer relationships (for example, see Sherman Sand and Gravel Ltd., supra, and Nelson Crushed Stone, supra).

21. Counsel for Hydro explained that the work being done here was part of a cyclical process in which certain problems were being remedied. Unger and Sarginson were engaged in a series of short-term contracts for a period of short duration. Hydro did not intend to make Unger and Sarginson an operating unit of Hydro. In fact, Hydro was careful not to integrate them; for example, they were not trained with Hydro employees, there were no Hydro markings on their vehicle or equipment. Yet we note that Unger testified that he had been a contractor with Hydro for a year and a half. The work Unger and Sarginson did was integrated into Hydro's own operation. For example, when a tree was too rotten to cut, they simply informed Ron McGibbon who arranged for someone else to cut it. Furthermore, Unger and Sarginson perform work which is per­formed by Hydro's own employees (although it constitutes only a portion of the latters' work as foresters).

22. The final issue to be considered is the evidence that Unger and Sarginson hired employ­ees. In Superior Sand, Gravel & Supplies Ltd, supra, the Board stated that "[t]he employment of others ... is sufficient to place a person beyond the reach of the dependent contractor provisions of the Act". As is pointed out in Canada Crushed Stone, supra, a conflict of interest could result if both the dependent contractors and their employees could join the same union. But the Board emphasized that only "employers in substance as well as form" should be excluded from coverage as dependent contractors: "A dependent contractor with the authority to hire, fire, discipline, and set the terms and conditions of employment in respect of others is not a dependent contractor enti­tled to the benefits and protections of the Labour Relations Act". In the instant case, Unger and Sarginson's employee is hired and terminated by them; his wages are set by them. But Hydro trains the employee and imposes the safety requirements on him that it imposes on Unger and Sar­ginson. We must look elsewhere for assistance in determining the significance of this factor. Coun­sel for the union submitted that these employees were hired simply to help lighten the load on a short-term basis. He referred the Board to Dominion Dairies, supra, in which the Board distin­guished between helpers and employees doing separate work:

When the Board is faced with the question of the effect of the use of paid help by a contractor it must determine whether, in the light of all of the evidence, the person or persons used merely assist the contractor in the performance of his work or in fact perform work that is separate and beyond the work done by the contractor, so that the contractor may fairly be characterized as master of a business that profits in a substantial way from the labour of others.

Thus drivers who hired helpers, as contrasted with truck owners who hired a driver, were found to be dependent contractors. In Windsor Airline Limousine Services Limited, [1981] 3 Can LRBR 60, the majority found that an owner-operator of a car who hired a driver is not brought outside the Act because he hired the helper "not as a means of expanding a personal business", but rather from financial necessity. Unger and Sarginson did not profit from hiring an employee (the employee did not work on a separate contract for them, for example). Hiring employees (one employee during the February 18 - March 29 contract) simply eased the tree-cutting operations in the winter. We note, too, that the employee was trained by Hydro and subject to some Hydro supervision.

23. Thus in their work habits, in the monitoring relationship with Hydro and in their place in Hydro's work scheme, Unger and Sarginson were more like employees than independent contractors. We believe the safety requirements imposed by Hydro are not determinative on either side of the question. Nor does the fact that they hired employees exclude them from the protection of the Act. Accordingly, we conclude that Unger and Sarginson satisfy the second criterion of sec­tion 1(1)(h) of the Act in that their obligation to perform duties more closely resembles an employee than an independent contractor.

24. Counsel for Hydro submitted that the case was moot since the contract at issue had been completed and that the only remedy the Board could give would be a declaration. Counsel for the union confirmed that the union was seeking only a declaration. This remedy is the one envi­sioned by section 106(2) which does not appear to give the Board discretion to decline to hear and rule on such an application because the question may be moot by the date of the hearing.

25. The Board therefore declares that Dwayne Unger and David Sarginson are dependent contractors pursuant to section 1(1)(h) of the Labour Relations Act and that Ontario Hydro (Bancroft Area) is their employer.

DECISION OF BOARD MEMBER W. H. WIGHTMAN;

1. At the outset I should stress that, unlike the majority, in Cradleship Creche it was not my view of the evidence that providers were "severely circumscribed" in their opportunity to act as individual entrepreneurs. Moreover, whatever it is that Cradleship Creche stands for, I am inclined to agree with the majority in this case that there is little to be gained from attempting to decide whether tree cutters compare more closely with babysitters than with the strippers of Algonquin Tavern.

2. Hydro engages in substantial tree-clearing activity in association with the opening of new power lines. The work in question is distinct from the major tree-clearing activity. Inspectors identify new growth which would endanger existing lines if not removed. Having marked the trees in question, the work of clearing it is then contracted out. The Unger/Sarginson partnership is one of the business entities which bid for this work.

3. It is at point to recall that prior to 1984 linger and Sarginson were among persons employed by Fred Palmer, a contractor through whom this identical work was performed for Hydro. Palmer did not work as a cutter himself and when he decided to get out, Unger and Sargin­son found they were well positioned to step into Palmer's shoes in terms of bidding for the work.

4. There seems to be little question that Palmer was an independent contractor since his only involvement was to bid the jobs and hire the men. The apparent change since 1984 is the dis­appearance of Palmer as a middle-man. This strikes me as a tenuous premise for the insinuation of collective bargaining into the relationship, but it demonstrates the authority of the Board to make such a decision.