“Worker” vs “independent operators” distinction clarified in Newfoundland and Labrador workers’ compensation decision

Richard Jordan

Is a worker under a contract “of” service or contract “for” service? The former means a worker is an employee whereas the latter means a worker is an independent contractor. The answer to that question has significant consequences for employers and workers alike. In the context of the Newfoundland and Labrador Workplace Health, Safety and Compensation Act (“the Act”), it determines whether employers must pay premiums for its workers, which are often significant.

As some businesses struggle to make ends meet with these rising costs, WorkplaceNL’s Injury Fund is funded by 123.4 per cent from employer premiums.

There has been an increased trend in which employers have to pay premiums for workers properly classified as independent operators – even in contexts where the employers do not even have “workplaces” where workers could be injured. We expect this to become more common as remote workplaces increase.

Stewart McKelvey St. John’s lawyers Twila Reid and John Samms successfully argued before the Workplace Health, Safety and Compensation Review Division (“WHCRD”) at External Review that insurance sales agents under contract to sell insurance policies to customers are not “workers” as defined under the Act – they were properly considered “Independent Operators”, otherwise known as independent contractors. This result overturned two prior lower level decisions whereby WorkplaceNL and the WHCRD Internal Division held these sales agents were “workers”.

In the decision, the review commissioner determined that that the workers were not “workers” under a contract of service because:

1. The employer’s business model was such that the initial sale of insurance was separate and apart from the rest of the business – which was the renewal of already existing business. The role of the agents in the employers business was therefore separate and distinct – the sales agents made first contact, but the employer had the burden of maintaining that business. Viewed through this lens, the first-contact sales agents were not necessarily integral to the business’ success.
2. More importantly, the employer did not exercise sufficient control over the agents in how they conducted their business, their right to sell products for multiple companies, and their overhead costs for which they were responsible. The decision is noteworthy and may be of interest to employers across Atlantic Canada given the legislative similarities across Atlantic Canada.

If you feel your business may have been wrongly classified for workers’ compensation purposes, the Labour and Employment group of Stewart McKelvey would be pleased to assist you.

This update is intended for general information only. If you have questions about the above, please contact a member of our Labour & Employment group.

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