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professional development
The employment classification typically hinges around control: Who has control over the advisor’s business, and when and how they work?
Of course, there’s still “room for creativity,” he adds, meaning organizations and workers can come up with dif- ferent models and try to fit them along this spectrum.
Defining employment relationships in the initial con- tract is crucial and the onus is on the company to make sure it’s done right, Smith says. Some organizations and workers want an independent contractor relationship
— at least initially — because it involves a lower tax bill. However, the law does not prohibit an individual from “shifting gears,” he says, if the contract is terminated and they feel they’re entitled to notice or other benefits.
Establishing the employment relationship a certain way doesn’t guarantee the law will view it as such, Smith says. Failure to properly structure relationships could lead to costly consequences.
For example, companies need to consider the legal obli- gations that come with an employee relationship, such as the requirement to remit income taxes, employment insur- ance and Canada Pension Plan contributions, as well as to make matching contributions to these benefits.
Advisors also have cost-related issues to consider about their working relationship. For example, if they have been reporting their taxes to the Canada Revenue Agency as an independent contractor and have been writ- ing off work-related expenses, the agency may reassess them should the advisor claim to be an employee of the company at the time of termination. AE
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Related cases
Mazraani v. Industrial Alliance Insurance and IFinancial Services Inc.
n 2012, Industrial Alliance (IA) terminated the
position of insurance agent Kassem Mazraani. Mazraani asked the Canada Employment Insurance Commission to consider his employment status
as that of an employee so that he could receive unemployment benefits. The commission refused
to do so, and its decision was upheld by the Canada Revenue Agency. When Mazraani appealed to the Tax Court of Canada (TCC), IA became involved in the proceedings as the outcome could affect the com- pany’s business model. During the proceedings, IA witnesses and lawyers were told to speak in English despite stating a preference to converse in French. The TCC judge decided in favour of Mazraani, meaning he should be considered an employee.
In 2018, the Supreme Court of Canada ruled that the Tax Court must hear the case again based on a violation of language rights.
IRosen v. BMO Nesbitt Burns Inc.
n 2016, BMO Nesbitt Burns reached a $12.5-million settlement (including costs) in a class action involving overtime pay for investment advisors.
The lead plaintiff, Yegel Rosen, worked for Nes- bitt Burns between 2002 and 2006, first as a trainee and then later as an investment advisor. Rosen stated that the management team encouraged him to work overtime and that he averaged about 60 to 80 hours per week. In the class action, Rosen’s lawyers argued that he, and other class members, were entitled to overtime pay because they did not fit into the two exemptions outlined in the Employment Standards Act: if the employee’s work is “supervisory or manag- erial in character”; and if there is a “greater benefit,” such as compensation from commissions. Nesbitt Burns did not admit to any liability as part of the settlement but did implement an overtime pay policy for the six-month supervision period of trainees.
CFulawka v. Bank of Nova Scotia
indy Fulawka, the lead plaintiff in this class action, worked for Scotiabank in Saskatchewan
and Ontario for almost 20 years, mainly as a personal banker. The case was an example of “off-the-clock” overtime: the members alleged that the bank’s over- time policies required them to obtain approval for overtime even though such work was done without said approval.
As part of the settlement, personal banking officers, senior personal banking officers, financial advisors and account managers for small businesses could claim unpaid overtime going back 13 years, depending on the province. In 2016, a second settlement was finalized bringing the total amount paid to approximately 1,600 claimants to $39.3 mil- lion. Scotiabank also agreed to pay $12.5 million in legal fees.
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