Are you an employee? The SCC has provided a compass to help you find out.

You may have come across news stories during the past week (see here, here and here) about the Supreme Court of Canada’s decision in McCormick v. Fasken Martineau DuMoulin LLP. This case involved a partner in a law firm who was being forced to retire from the partnership at the age of 65. The partner in question, Mr. McCormick, filed a complaint with the British Columbia Human Rights Tribunal alleging age discrimination. The case was being closely watched by law firms and accounting firms, as it dealt with the relationship between the partners who make up a partnership. Ultimately, the Court ruled that Mr. McCormick was not in an employment relationship with his law firm based on the particular facts of his case, while leaving open the possibility that such a relationship could exist in other cases.

The result in the McCormick case was fairly fact-specific and will not be relevant for most employers. However, in reaching its decision the Court provided some interesting commentary on how to define whether an individual is in an employment relationship. For example:

  1. The key factors for determining whether an employment relationship exists are control and dependency. The control / dependency approach to the definition of employment has been followed consistently in the context of “protective legislation” (i.e. human rights legislation and labour relations legislation) both in Canada and internationally.
  2. Tribunals have developed a multitude of tests for determining if an employment relationship exists. Often these tests refer to a list of factors. In most cases, these factors amount to a checklist that assists in exploring different aspects of the relationship. Ultimately, the essential character of the relationship will be defined by the underlying control and dependency of the relationship.
  3. The Court provided some general statements on the nature of the employment relationship that could be applied in a wide variety of circumstances:

“The test is: who is responsible for determining working conditions and financial benefits and to what extent does a worker have an influential say in those determinations? The more the work life of individuals is controlled, the greater their dependency and, consequently, their economic, social and psychological vulnerability in the workplace.”

“Control and dependency, in other words, are a function not only of whether the worker receives immediate direction from, or is affected by the decisions of others, but also whether he or she has the ability to influence decisions that critically affect his or her working life. The answers to these questions represent the compass for determining the true nature of the relationship.”

“Ultimately, the key is the degree of control, that is, the extent to which the worker is subject and subordinate to someone else’s decision-making over working conditions and remuneration.”

There is a strong possibility that tribunals in Canada will adjust their current tests for determining the existence of an employment relationship to align with the control / dependency analysis in McCormick.

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