Home-based day care providers not employees, divided Court rules

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By a majority of two to one, the Ontario Divisional Court has quashed a decision of the Ontario Pay Equity Hearings Tribunal which had held that three female day care providers were employees for the purposes of the Pay Equity Act. The Tribunal’s decision had also been a split one, with two of three members ruling that the women were employees.

The case, Wellington (County) v. Butler (October 31, 2001), concerned three women who provided day care in their homes for children of parents subsidized by the County. The day care scheme was provided for under the Day Nurseries Act and involved annual agreements between the women, known as providers, and the County, under which the providers agreed to provide day care services “from time to time when called upon to do so”. These agreements contained the following provision:

    “I acknowledge and agree that I am an independent contractor willing to offer any services as a day care provider provided that the time of performing such services is agreeable to me, but under no circumstances shall I be deemed to be an agent or employee of any person…”

In December 1994, one of the providers approached the Pay Equity Office and asked that she be considered an employee for pay equity purposes. There is no definition of the word “employee” in the Pay Equity Act. In February 1996, a Review Officer determined that the providers were employees and ordered the County to include the job class of “provider” in its pay equity plan. The County objected on the grounds that the providers were independent contractors, but lost before the Tribunal in October 1999.

In ruling that the providers were employees, the majority of the Tribunal stated that it had applied two common law tests of the existence of an employment relationship: the “total relationship test” and the “organization/integration test”. The Tribunal found that, under both tests, the providers should be considered employees for pay equity purposes. It arrived at this conclusion despite a number of factors indicating the providers’ independence from the County:

  • The providers claimed independent contractor status on their tax returns, and represented themselves as being self-employed;
  • They were required to hold liability insurance for themselves;
  • They were free to take on children from private customers simultaneously with those referred by the County;
  • They determined the number of hours of care they were willing to provide and could set their own hours of work;
  • Providers could set their own house rules and policies and were free to charge fees above and beyond those paid for by the County; and
  • Providers were free to hire helpers.

Further, the Tribunal majority declined to attach any significance to the language of the annual agreements regarding the providers’ status. The majority denied that “a characterization of their relationship imposed unilaterally by one party amounts to a joint expression of intention”. The County applied for judicial review of the Tribunal’s decision.

TRIBUNAL’S DECISION “PATENTLY UNREASONABLE”

By way of two sets of concurring reasons, the majority of the Divisional Court quashed the Tribunal’s decision and revoked the Review Officer’s order. Both of the judges in the majority took strong exception to the way the Tribunal had disregarded the language of the agreements, stating that there was no legal basis for doing so. In the words of Justice David Aston:

    “[The Tribunal] expressed no valid reason at law for essentially disregarding a plain and unambiguous single-page agreement in which the provider specifically acknowledged she was an independent contractor… There can be no doubt the parties had a clear understanding of their legal relationship, and significant weight ought to have been accorded the agreement. It is in plain language, contains no fine print and is not, on its face, oppressive, unfair or difficult to understand.”

Justice Aston stated that he viewed the Tribunal as having “twisted the evidence to suit its conclusion”. Noting that the Tribunal majority had concluded that the providers were subject to a level of control and supervision consistent with an employment relationship, Justice Aston held that the Tribunal’s conclusion was unwarranted by the facts:

    “The providers’ ability to charge supplemental fees and expenses directly to parents, to take on additional children not referred to the provider by the County, to refuse to accept children, etcetera, should have been significant factors in favour of independent contractor status. No sound reasons are given for discounting or altogether ignoring these factors.”

DISSENT: TRIBUNAL’S DECISION “NOT UNREASONABLE”

In dissent, Justice Dennis Lane stressed the fact that, under the Pay Equity Act, decisions of the Tribunal are protected by a privative clause – that is, a clause that limits the grounds on which a court can overturn these decisions. Moreover, while the Tribunal was exercising no specialized expertise to which a court should defer when it applied the common law test for determining whether a person is an employee, Justice Lane observed that the Tribunal was making its determination in the context of its statute, the Pay Equity Act. Accordingly, it was bound to approach the term “employee” in a manner that advanced the purposes of the Act. By not defining “employee”, the dissent held, the Legislature had left it to the Tribunal to determine employment status in light of the Act’s objectives.

Justice Lane also took issue with the views of the majority on the significance of the providers’ contract with the County. In his view, the Tribunal was justified in minimizing its importance:

    “It is a common form contract and in no meaningful sense was it negotiated. The Tribunal gave it little weight. It did not accept that this unilaterally imposed document amounted to a joint expression of intention. In my view the Tribunal was not wrong nor unreasonable in that analysis.”

In Our View

The task of differentiating an employee from an independent contractor is a complex and uncertain undertaking. Not only is there more than one common law test for determining employment status, but these tests are extremely difficult to apply to the facts with any certainty. Consider this statement on the “total relationship test” quoted by the Tribunal in its decision:

    “No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of considerations which are relevant in determining [the question of whether the person is in business on his or her own account], nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered although it can no longer be regarded as the sole determining factor”

The three providers have filed for leave to appeal the Divisional Court’s decision. We will advise readers of any further developments in this case.

For further information, please contact Carole Piette at (613) 563-7660, Extension 227.