Court of Appeal Questions Employment Relationship
August 23, 2022
There is no question that the world of work has changed over the last decade, especially in terms of how people work. The rise of the “gig economy” which sees people enter into non-traditional employment relationships either as full-time work or as a “side hustle” has brought us questions on what constitutes an employer-employee relationship. And while the employment law world may be slowly changing its understanding of what an employee is, it is important to remember that even if someone is in a contract position, there are still rights afforded to them. This is demonstrated in a recent decision from the Court of Appeal of Alberta where the sole owner and operator of a business were released early from a contract he had running a festival.
Associate of music festival hired to produce the event
There are a couple of layers of organizational structure to unpack before we get into the details of the case. The defendant in the original action was a regional exhibition and agricultural society “the Society”) who owns a production company (“PPLP”), the late of which operates a large country music festival that takes place annually in Alberta. The plaintiff, “TG” is a long time associate of the Society, having held numerous executive roles with PPLP.
TG now owns a company (“PT”) which was hired by the Society on September 19, 2012. PT’s contract stated it was to provide business planning, development, operations, and marketing of its business interests and activities for the society’s events, including the music festival. The initial contract was for one year, while subsequent contracts were for two years. The last contract was signed in 2016, but on December 1 of that year, the Society terminated the contract for cause, eleven months ahead of schedule. We won’t spend too much time getting into the termination details, but in short, the Society was not happy with how TG managed relationships with its partners and members. Specifically, the Society was unhappy with how TG handled the departure of a long-time employee of the music festival. This event included the former employee not being invited to the festival the year after he concluded working with it, even though he had originally been told he would be publicly acknowledged at the festival. TG later re-invited the employee, but he chose not to attend. In addition, the Society also complained that TG exchanged music festival tickets for rounds of golf and a gym membership.
Contractor claims he is an employee
The original trial had tasked the court with determining which of the parties had breached the contract between them. Ultimately, the trial judge determined that TG should be considered an employee of the Society and that the actions leading to his firing did not breach the terms of the management services agreement. The court said that his handling of the outgoing employee was a “single incident of bad judgment” and not sufficient to terminate a long-term employee.
The trial judge found that the Society should also pay TG aggravated damages since the reasons it says led to his dismissal were ultimately not true.
The Society appealed the decision, arguing that the trial judge made an error in determining TG was an employee as well as the trial judge’s decision that the management contract had not been breached by TG’s actions.
The trial judge mischaracterized the employment relationship
The court began its analysis by asking If TG performed his services as a person in business on his own account (as opposed to being part of his company, PT). TG had asked for the contract to be structured in such a way that PT was paid for services, which then paid out money to TG. He had wanted to be an independent contractor for tax purposes, and specifically asked not to be an employee. This was outlined in the management contract. In addition, PT was responsible for paying TG, and could also provide similar services to other parties at the same time it worked the Society.
The court found that neither party provided evidence to contradict those findings. Additionally, TG did not state that the relationship was entered into with unequal bargaining power, failing to provide any reason at all why the contract should be ignored, rescinded, or deemed of no force and effect. The court wrote simply, “there is no legitimate reason to ignore the express wording of the agreement.”
The court ultimately concluded the trial judge’s determination that the structure of the relationship between the parties was more consistent with an employment relationship to be an error, even if the trial judge was correct in stating that the contract between the parties cannot by itself rule out such a relationship.
The plaintiff was acting in the best interests of the Society
The next question to ask was whether this changes the trial judge’s finding that the Society breached the contract between the parties, terminating it without sufficient cause to allow it to escape without paying damages. In this regard, the court sided with the trial judge and found that TG’s actions, even if they played out unfavourably for those involved, were carried out with the best interests of the Society. Because the termination letter referenced only the mishandling of the relationship with the outgoing employee of the festival, and not any of the other alleged misdeeds of TG, the Society could only rely on the former to support its decision to terminate the contract for cause. The court supported the trial judge’s conclusion that the termination was not proportionate to the misconduct.
Even though the court overturned the trial judge’s decision that TG was an employee, it made no difference to the amount of damages the Society was liable for.
HMC LAWYERS WORKS WITH EMPLOYERS AND EMPLOYEES ON ALL MATTERS RELATED TO EMPLOYMENT LAW
At HMC Lawyers, our employment law lawyers regularly work with employees to draft employment contracts that accurately represent the intentions of the parties. We also work with employees to help understand contracts and pursue damages in the event that a contract is breached. To make an appointment and get advice about an employment matter, including wrongful or constructive dismissal claims, call 1-800-480-3534 or contact us online. We represent clients in Calgary, throughout Alberta, and across Western Canada.