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When is a Salesperson an “Employee” Under Employment Standards Laws?

A person is retained by Company X to sell newspaper subscriptions door-to-door.  She is driven to a neighbourhood at a set hour, given a list of addresses and a script.  She signed a contract that says she is an “independent contractor”, and not an employee.   After a while, she asks why she isn’t being paid minimum wage and vacation pay.  She is then terminated by X, allegedly for poor sales.

The employee files a complaint under the ESA, claiming unpaid wages, vacation pay, and damages for reprisal on the basis that she was dismissed for asking for her ESA entitlements.  Company X argues the ESA does not apply, because the complainant was not their employee.  Who wins?

These were the facts in a recent decision of the OLRB in Schiller v. P&L Corp. The Board found in favour of the employee.

First, the Board found that Schiller was an ‘employee’, notwithstanding her contract said she was an independent contractor. How a contract characterizes a worker (‘employee’ or ‘independent contractor’) is not very important in these cases.  That’s because tribunals and courts know that the employers write the contracts, and the employees just sign them.  If employers can just call someone a ‘independent contractor’ and thereby avoid all laws that protect employees, then employment laws would be meaningless.  Therefore, we need to look at what the workers actually do.  Are they in business for themselves, as entrepreneurs, or are they really just working for the employer?

Here, the Board finds that the employer controlled virtually every aspect of the work:

In my view it is clear that in performing the work, Ms. Schiller was not engaged in business on her own account.  Based on Mr. Cupido’s own evidence, he exercised substantial control over Ms. Schiller’s activities.  Mr. Cupido provided a script and materials, including most significantly the list which allowed Ms. Schiller to solicit subscriptions on behalf of the Ottawa Citizen.  Ms. Schiller could not negotiate with the Ottawa Citizen for a different commission, and could not increase her ability to earn the predetermined commission by doing the work at times or in neighbourhoods other than those determined by Mr. Cupido.  Mr. Cupido testified that Ms. Schiller was free to work on weekends; however, he also testified that he provided the list to Ms. Schiller at the beginning of the week and reclaimed the list at the end of the week, making it impossible for Ms. Schiller to work on the weekends.  Accordingly, I find that Ms. Schiller was an employee within the meaning of the Act.

Second, Schiller was a ‘route salesperson”, and therefore did not fall into the obscure exemption buried in Reg. 285/01, Section 2(h). That section excludes from minimum wage and vacation pay coverage commissioned salespeople who work outside of the workplace.  ”Route salespeople” are  not included in that exemption.  The Board discusses the meaning of Section 2(h), and explains that the intent of the section (citing a 1976 decision),

is clearly to remove the burden from an employer of paying vacation pay to those salesmen over whose time sheets he has little or no control.  The prime example would be the door to door salesman whose employer is not aware of how many hours the employee works on a day by day basis.

A route salesperson is someone who follows a particular route over the course of a day where the “employer exercises substantial control over the hours of work and the manner in which the work is performed”.  That was the situation in this case.  The employer controlled the list of potential customers, stayed in the area throughout the shift to keep an eye on her, decided the neighbourhood where Schiller was to work, and provided her with a script of precisely what to say.  Therefore, Schiller was not exempt from ESA coverage under the salesperson exemption.

Third, the Board finds Schiller was dismissed as a reprisal for claiming her ESA rights, dismissing the employer’s argument that the terminated was due to poor sales. The employer has the burden to prove the dismissal was for reasons unrelated to the employee’s claim for ESA entitlements, and it failed to do so.  The dismissal took place 1 day after Schiller asked for her ESA entitlements.  Therefore, this was an unlawful reprisal, contrary to Section 74 of the ESA.


The Board ordered the employer to pay:

$ 501.28, unpaid wages based on minimum wage for hours worked, plus two months pay to compensate for lost income for the time it reasonably should have taken to find a new job (Schiller claimed it took her 7 months to find new work, but provided no evidence of her job search efforts, so the Board set the time at 2 months), plus one month’s pay for loss of the “reasonable expectation of employment”, plus vacation pay based on all of these lost wages, for a grand total of $3, 219.84.

Issue for Discussion

What do you think about the tribunal’s decision to ignore the contract term saying Schiller was an “independent contractor”?

Neoclassical law and economics scholars argue that courts and tribunals should just enforce whatever the contract says.  On their theory, if the worker wants to be an “employee”, they will bargain that.  Alternatively, if there is value to the business in having workers treated as “independent contractors”, they will offer the worker something of value in exchange for the term declaring them to be ‘independent contractors’.   So the contract represents the give and take of ‘free’ bargaining, and the courts/tribunals should respect that.  Do you agree with that argument?  Why or why not?



2 Responses to When is a Salesperson an “Employee” Under Employment Standards Laws?

  1. Sean Keane Reply

    April 17, 2012 at 3:05 pm

    There are many sides to this argument dating back 100 years. Governments and unions have tried to solve this issue, they base their opinions on revenue leakage, many court cases at all levels have established a basis and tools to be used in deciding who is or who is not. The top is who is in control, does source of income come from one entity or does the individual have the ability to derive the income from any other source. Is their a risk of profit or loss by the individual based on performance, or is the individual at financial risk for losses. This is an example of a few aspects courts use to determine whether an individual truly self employed.

    The question here is should the contract signed be honored. The answer is both yes and no. Depending on the specifics of the relationship. For example in this particular case it is clear the company exerted a lot of control over the individual in setting the where, when and how. The contract would simply be seen as the employer avoiding their responcibility to not only the individual but their reporting responsibilities to the respective government institutions. On the other hand if this individual set their own terms, schedules and amount of clientele then the contract is understood and should be honored..

    Many industries utilize independant operators and for good reason. The problem governments are trying to solve as u said earlier is the revenue leakage they assume is caused by this use. For example in Ontario independant operators are seen as major contributors to the underground economy. A propaganda tool the Ontario government and Ontario unions use to pass bogus legislation such as bill 119. The province of Ontario seems to think forcing self employed individuals into the WSIB system will have a two fold effect. 1) the workers in construction would be much safer. I am at a loss to how my far superior personal private coverage vs. WSIB coverage makes me safer. 2) this legislation will level the playing field. Again begs to be questioned. If I am a union contractor that utilizes independent operators I pay 20% more in labor costs than a non union competitor. Under the new plan I as well as the non union contractor will pay a 10% premium to WSIB for those independants. Where is the balance. The union contractor is still 20% higher than the non union contractor.

  2. Rob Reply

    April 18, 2012 at 2:30 pm

    Neoclassical economics ignores the existence of power. According to them, power only exists when miscreants like monopolists/monopsonists/oligopolists such as unions, governments and other assorted bad company throw perfectly competitive markets out of equillibrium. Of course, anyone with a shred of intellectual honesty recognizes the existence of power in the employment relationship. An examination of power is crucial to determining whether parties should be able to ‘freely’ characterize the nature of their dealings with each other. In that sense, the LRB clearly got it right in this case. However, the wider issue is whether we should continue to use “employment” as the basis for providing protection to the less powerful. The broader common law of contract could use a shake up, if you ask me. See Fudge, Tucker & Vosko, “Changing Boundaries in Employment: Developing a New Platform for Labour Law” (2003) 10 C.L.E.L.J. 329.

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