Decision #121/02 - Type: Workers Compensation

Preamble

An Appeal Panel hearing was held between July 4, 2001 and July 6, 2001, at the request of legal counsel, acting on behalf of the third parties. The Panel discussed this appeal on several occasions, the last one being October 2, 2002.

Issue

Whether or not the plaintiff’s right of action is removed pursuant to Section 68(4) of the Act.

Decision

The plaintiff’s right of action has not been removed pursuant to Section 68(4) of the Act.

Decision: Unanimous

Background

The plaintiff suffered serious personal injuries on December 9, 1997, as a result of being a passenger on an airplane that crashed near Little Grand Rapids, Manitoba. At the time of the accident, the claimant was travelling to Little Grand Rapids for the sole purpose of providing medical services to members of that community.

After a thorough investigation into the case, the Workers Compensation Board (WCB) determined that a worker/employer relationship existed between the plaintiff and the employer and the plaintiff’s spouse was invited to file a claim with the WCB. On June 16, 1998, the plaintiff’s spouse’s legal representative withdrew the claim as he considered the claimant to be an independent contractor instead of a covered person under The Workers Compensation Act (the Act).

In May 1998, the plaintiff’s spouse commenced an action in the Court of Queen’s Bench against the defendants (the air transport business and two pilots), alleging that the plaintiff’s injuries were caused by the negligence or breach of duty of the defendants. In February 2001, legal counsel for the defendants requested the Appeal Commission convene a hearing under section 68(4) of the Act to determine whether or not the plaintiff had a right of action against the defendants.

On July 4, 5 and 6, 2001 a hearing was held at the Appeal Commission. Following several discussions of the case, the Panel requested that additional information be obtained from the plaintiff’s employer in the form of funding agreements, contractor information, policies, etc. On February 8, 2002, all parties were provided with copies of the additional information that was obtained by the Panel and were invited to provide comment.

On March 20, 2002, the Panel met further to discuss the case and requested that additional information be obtained from the WCB’s Employer Services, the plaintiff’s employer and from Manitoba Health. On May 28, 2002, all interested parties were provided with the additional information that was obtained by the panel and were invited to provide comment.

On June 14, 2002, the Panel met to further discuss the case and requested that additional information be obtained from the plaintiff’s employer. On September 3, 2002, all interested parties were provided with the additional information that was obtained by the panel and were asked to provide comment.

On October 2, 2002, the Panel met to render its final decision on the issue under appeal.

Reasons

Workers compensation was first introduced into Manitoba in 1916 as a disability scheme, which was devised to compensate workers who were injured as a result of workplace accidents. The system is based on no fault insurance principles designed to provide an expeditious remedy to an injured worker without resorting to litigation.

The Act establishes a social contract of insurance, whereby workers have relinquished their right to sue in exchange for reasonable compensation regardless of fault and on the other side of the equation, whereby employers have received immunity from suit in exchange for their funding the costs of the scheme. The contractual entitlement to compensation in lieu of other rights is set out in section 13(1) of the Act:

“The right to compensation provided by this Part is in lieu of all rights and rights of action, statutory or otherwise, to which a worker, or his legal representative, or his dependents, are or may be entitled against the employer, for or by reason of personal injury to, or the death of, the worker occasioned by any accident which happens to him arising out of, and in the course of, his employment; and no action in any court of law against the employer in respect thereof thereafter lies.”

The contractual entitlement to immunity from suit is set out in section 9(7) of the Act:

“In any case within subsection (1), the worker, his or her legal personal representative and dependents, and the employer of the worker have no right of action in respect of the accident against an employer in an industry, or against a worker of such an employer, where the accident happens within the conduct of the operations usual in, or incidental to, the industry carried on by the employer.”

According to section 9(1) of the Act a worker, who is injured in the course of his employment and who is entitled to compensation as a consequence thereof, has the right to claim compensation or to bring an action against some person other than his employer should the circumstances so warrant. However, as previously pointed out, section 9(7) restricts or limits this right as follows: a worker has “no right of action in respect of the accident against an employer in an industry, or against a worker of such an employer, where the accident happens within the conduct of the operations usual in, or incidental to, the industry carried on by the employer.”

In this particular case, a legal action was taken by an injured person against a third party employer, who was registered under the Act. At issue is whether the injured worker himself had an employment relationship that qualified him as a worker under the Act (thus barring his claim) or whether he was an independent contractor (thus allowing his action to proceed).

As the background notes indicate, this case involves an application by the defendants requesting that the Appeal Commission determine, pursuant to section 68(4) of the Act, whether or not the plaintiff’s right of action against them has been removed by the provisions of the Act. Section 68(4) states as follows:

“Where an action in respect of an injury is brought against an employer or a worker of an employer by a worker or the legal personal representative or a dependant of the worker, the board has jurisdiction, on the application of a party to the action, to adjudicate and determine whether the right of action is removed by this Act; and the adjudication and determination is final and conclusive, and if the board determines that the right of action is removed by this Act, the action shall be forever stayed.”

Exclusive jurisdiction to make such a determination has been specifically conferred upon the Appeal Commission by virtue of section 60.8(1)(b) of the Act. It is also significant to note that the Appeal Commission’s decision and ruling with respect to such matters in question is final and conclusive. In addition, once it has been determined that the right of action has been removed by the Act, then the action or suit shall be forever stopped from going forward.

The material facts giving rise to this application are reasonably straightforward and in the main are not in dispute. The plaintiff, a passenger onboard the air transport business’ scheduled flight to Little Grand Rapids on December 9th, 1997, was injured when the plane crashed short of the runway. The pilots operated the aircraft and one pilot succumbed to injuries sustained in the crash and died. The plaintiff was journeying to Little Grand Rapids for the singular purpose of providing medical services to the members of that community. At the time of the plane crash, the employer, through the service provider, which is a unit of one of the employer’s departments, had retained the plaintiff to provide these medical services. The air transport business was a registered employer with the Workers Compensation Board of Manitoba (WCB) and both pilots were covered employees. The employer was also a registered employer with the WCB.

The application brought before this tribunal by the defendants contends that the plaintiff was a worker within the meaning of the Act employed by the employer and as a consequence he has no right of action against the defendants by virtue of section 9(7) of the Act. The plaintiff, through his litigation guardian, on the other hand asserts that at the time of the accident he was an independent contractor and not an employee of the employer and therefore he should be allowed to proceed with his right of action against the defendants.

The Act defines worker to include:

(a) a person, whether or not under the age of 18 years, who enters into or works under a contract of service or apprenticeship, written or oral, expressed or implied, whether by way of manual labour or otherwise,

(d) a person deemed to be a worker under subsection 60(2.1).

In addition, section 60(2.1) of the Act further provides:

“Notwithstanding the other provisions of this Act, where a person who is not a worker under this Part performs work for the benefit of another person, the board may deem the first person to be a worker, and the second person to be the employer of the first person, within the meaning of this Act; and the board may determine an amount that shall be deemed to be the earnings of the first person, for the purpose of this part.”

It is clear that what this Panel must decide is whether the plaintiff was an employee (worker) or an independent contractor in terms of his relationship with the employer. According to the evidence, the employer initially hired the plaintiff as an employee in 1995 to work for its service provider and the parties executed a written employment contract at that time. The employer established the service provider in 1970. The function of the service provider, its relationship to the employer, and the status of persons employed there was outlined in testimony by its Acting Director:

“The program has developed very substantially since 1970 to be involved in health service programs in principally First Nation communities in Manitoba and Inuit hamlets at Nunavut.

The relationship of the [service provider] to the [employer] is that it is an integral component of the [employer]. It is a unit under definition of the [employer’s] programs, I guess one would say, a unit of the [employer department], which is a population of the health department of the [employer].

The principal function of it, I think you asked, is basically to facilitate and coordinate professional resources to remote First Nation and Inuit hamlets. Its relationship with the, its current relationship with the Province and the federal government, I if its acceptable, will confine my comments to Manitoba, not Nunavut.

Since 1988 the provincial government has funded the [employer] to provide money to compensate physicians and, under the Canada Health Act, and the federal government contributes money to the [employer] to allow those physicians to access First Nation communities, in other words transportation costs and things like that. So under the Canada Health Act, the Province is responsible for physician remuneration and the federal government is responsible for issues of access and program coordination.”

In July of 1996, the employer and the plaintiff changed the nature of their relationship from an employment agreement to what was entitled as an “Independent Contractor Agreement”. The service provider’s Acting Director explained the background behind the change as follows:

“That was a transition that took place during approximately the fiscal year of 1995/1996, that affected a cohort of those 110 to 120 physicians. I believe it was first put in place in mid 1996, after I would say a substantial period of development of an independent contractor agreement.

Q. What prompted the change?

A. Well, principally a recognition that physicians don’t really make very good salaried employees and really didn’t fit the mold of a [employer] salaried employee. And there were some struggles that we were having increasingly in the 1990’s, that we acknowledged that they were working beyond the bounds of a salaried type employment and it was getting increasingly difficult to make them look like they were salaried.

The other, another reason, in 1995/1996, as you’re probably aware, recruitment for physicians all through Canada, but particularly in northern remote areas, was a very, very difficult process. And physicians, for us to compete with other northern and aboriginal health professions, health areas of northern Canada, we had to change the relationship we had to allow their independence, to allow them to move back and forth between different jurisdictions, different provinces.”

The Acting Director further outlined the difference in the relationship between the parties as a consequence of changes in the contract:

“Well, we allowed them, acknowledged and, therefore, allowed them to do things differently in 1996 than we did in 1995.

Very specifically, we knew that physicians were our salaried employees in the early 1990’s, but moonlighted. And we knew that after they were independent contractors that they could be much more open about the fact they were working for other people during times that they were not specifically rendering services for us. So that’s one thing.

Another thing is that we allowed them or they took advantage of the opportunity to have greater flexibility in their own life planning, so what weekends they wanted to work or what days they wanted to take their holidays. That became something that the physicians, in 1996, took very much great control over and, in fact, specifically [the plaintiff] was the coordinator of that for his team, looked after their own scheduling, which before they didn’t do.

And there were some other very specific things in the relationship. I mean they lost all their [employer] benefits and, therefore, they were free to make their own private arrangements for their personal affairs and personal business affairs. So they lost their, you know, their dental plans and medical plans, their life insurance and disability insurance and pension plans. They lost all of that, and that was a very substantial difference.”

Counsel for both the defendants and the plaintiff have discussed the potential applicability of WCB Board Policy 35.10.50, which deals with independent contractors, and the circumstances under which they might be brought under the ambit of the Act. In reviewing the policy, we note that it applies only to individuals or legal entities involved in the provision of work or services in compulsory industries. The evidence in this case suggests that the plaintiff was involved in the direct provision of medical services as a physician, which we find is not a compulsory industry as referenced in the policy and as defined in the Act. Accordingly, we find that WCB Policy 35.10.50 is not applicable to the case at hand.

Counsel for both the defendants and the plaintiff also referenced several cases that various tribunals and courts have relied on when making a determination between a contract of services and a contract for services. The Act prescribes that an Appeal panel should decide each case before it in accordance with the ‘real merits and justice of the case’ and that it ‘is not bound to follow strict legal precedent’. We do not, however, interpret this provision to mean that we can literally dispense equity and/or completely abandon or ignore what has become settled law. We most assuredly, as a matter of course, review the case law to which we have been referred for guidance and direction. The authorities are most instructive in terms of a guideline.

The question of whether a contract is one of service, in which case it indicates a master-servant or employment relationship, or for services, in which case it indicates the relationship of an independent contractor, has been the subject of innumerable cases. In Stevenson Jordan & Harrison Ltd. v. MacDonald & Evans, [1952] 1 T.L.R. 101 at 111, Lord Denning put forward his often cited test:

“One feature which seems to run through the instances is that, under a contract of service, a man is employed as part of the business and his work is done as an integral part of the business: whereas, under a contract for services his work, although done for the business, is not integrated into it but is only accessory to it.”

Counsel for the defendants cited Wiebe Door Services Ltd. v. M.N.R., [1986] 5 W.W.R. 450 (Fed. C.A.) as authority for the proposition that Canadian courts are moving away from the strict application of a test and will consider a variety of factors. “There is no authority presented before you to overrule Wiebe Door. There is no reason to depart from the principles that it sets out. The approach present in Wiebe Door and the cases that follow it is that the totality of the circumstances must be considered. The factors are not to be looked at in isolation. You must look at the total picture.”

The headnote of this case reads as follows:

“It is the total relationship between the parties that determines whether the relationship between them is one of a contract of services or a contract for services. All the relevant factors, including control, ownership of equipment, the degree of management and responsibility, the chance of profit and risk of loss must be examined and carefully weighed. Although the integration or organization test may provide acceptable results when applied from the perspective of the putative ‘employee’, in situations of mutual dependency it will always result in an affirmative answer, although the mutual dependency may be a consequence of the surface arrangement of the parties and not expressive of their intrinsic relationship.”

Counsel for the plaintiff, on the other hand, suggests that the plaintiff and the employer clearly attempted to redefine their relationship in writing by entering into the July 17th, 1996 “Independent Contractor Agreement”. In this regard, he stated: “You have a contract, which according to Article 7.1 of the contract makes it clear that the parties turned their mind to what the nature of their relationship would be. Section 7.1 says this is not an employment contract. The status of the physician in this relationship is that of independent contractor.”

Counsel for the plaintiff further urged that the question of control was fundamental to our making a decision in this case. “At the very core of the decision is the determination of the nature of the control which is alleged to exist. In all relationships between the employer of services or the contractor for services there will always be some element of control but generally in a master and servant relationship the control will be more encompassing, and lead to a subordination of the employee to the employer.”

Control or true subordination remains the most important feature when determining the employment relationship between parties. As counsel pointed out, Justice DeCarry emphasized this issue in the decision of Charbonneau v. Canada MNR (1996) F.C.J. No. 1337 (Fed. C.A.):

“The tests laid down by this Court in Wiebe Door Services Ltd. v. M.N.R. – on the one hand, the degree of control, the ownership of the tools of work, the chance of profit and risk of loss, and on the other, integration – are not the ingredients of a magic formula. They are guidelines which it will generally be useful to consider, but not to the point of jeopardizing the ultimate objective of the exercise, which is to determine the overall relationship between the parties. The issue is always, once it has been determined that there is a genuine contract, whether there is a relationship of subordination between the parties such that there is a contract of employment or, whether there is not, rather, such a degree of autonomy that there is a contract of enterprise or for services. In other words, we must not pay so much attention to the trees that we lose sight of the forest – a particularly apt image in this case. The parts must give way to the whole.”

After thoroughly reviewing the materials filed in this application, the case law and the arguments presented, we believe that the following conclusions and findings can be drawn.

  • It is clear from the evidence that employer and the plaintiff originally operated under an employer-employee environment.
  • In 1996 the employer and the plaintiff clearly attempted to restructure their contractual relationship. This was part of a broader reclassification of the relationship of all the doctors at the services provider as independent contractors.
  • The employer did write to the Manager of Manitoba Health on September 24th, 1994 advising of a proposed change in relationship together with a request for concurrence. We note that in the absence of a reply, and given that the changes were in fact ultimately implemented, that there were no concerns about this change from a broader public policy perspective.
  • The employer and the plaintiff participated fully and equally in making the decision to change the initial relationship to better reflect their dealings with each other.
  • It is also clear that both parties intended these changes and knew exactly what was being negotiated.
  • Experienced legal counsel drafted and prepared the new agreement.
  • The plaintiff was an intelligent man and knew what he was signing when he executed the “independent contractor agreement’ in 1996 and again in 1997.
  • The physicians contracted by the employer’s service provider are now independent contractors.
  • Most physicians working inside hospitals, except for those who have administrative positions, are also independent contractors, even though a number of control tests, in particular, the ownership of tools and provision of facilities by the hospital could be used to argue the contrary.
  • The employer’s service provider is not in the business of providing direct clinical services, but rather, its business is simply facilitating and contracting with people to provide such services.
  • It is clear that the core function of the service provider is facilitation of the provision of clinical medical services by independent physician contractors to the First Nation communities in northern Manitoba on behalf of the federal and provincial governments on a flow-through cost recovery basis in a non profit atmosphere.
  • The service provider does not own medical facilities or provide any tools to its physicians.
  • Neither counsel was able to introduce a single case where the validity of this designation for physicians as independent contractors had ever been challenged, either in hospital environments or in remote environments such as the ones in this case.
  • We find that the employer and the plaintiff clearly turned their attention to what sort of legal relationship they were creating and their intention was to create the relationship of an independent contractor. This was not a unique case, but rather part of a broader reclassification of the relationship between physicians and the service provider and between physicians and the healthcare system in general at that time.
  • The terms of the “independent contractor agreement” and the manner in which the plaintiff and the service provider carried out their day to day activities are entirely consistent with the plaintiff’s being classified as an independent contractor. There is a preponderance of evidence supporting this conclusion, and, without intending to restrict, includes the following findings:
    • The plaintiff and his peers worked without direct supervision in remote communities, and with minimal contact at any time with the director of the service provider.
    • There were no performance evaluations undertaken by the director of the service provider with either the plaintiff or his peers, on a regular basis or otherwise. The evidence of the director of the Service provider was that this would only occur in exceptional circumstances, where the terms of the contract may have been breached.
    • Meetings with the director of the Service provider were held approximately quarterly (four times per year). The evidence of the director of the Service provider was that these meetings were casual and not formally scheduled.
    • Most meetings held at the Service provider are peer-based and peer-organized. The director considered attendance at those meetings by the plaintiff to be optional, and his own attendance was sporadic, when broader issues such as community health concerns would be discussed.
    • There were no special practice standards or reporting practices, or administrative guidelines or practice directives required by the Service provider of the plaintiff, over and above those required of any general medical practitioner.
    • Patient records are kept at remote locations, are considered to be part of the relationship between the doctor and patient, and are not shareable with the director of the Service provider, or the Service provider itself.
    • Under the terms of the agreement, the plaintiff was required to provide invoices for services rendered. Although equal monthly payments were made to the plaintiff, the evidence indicates that financial reconciliations were undertaken by the service provider on approximately a quarterly basis, which rationalized the Service provider’s payments made to the plaintiff against the actual service levels provided by the plaintiff.
    • There were no deductions taken by the Service provider for Canada Pension Plan, Employment Insurance, or income tax. The evidence of the Service provider director was that the plaintiff and his peers were paid the gross amount of the services, as invoiced, and that these matters were held to be the responsibility of the plaintiff.
    • All doctors with the Service provider, including the plaintiff, were able to work out service schedules directly with the remote communities they were servicing, and had the flexibility to trade coverage with other approved physicians, with the simple provision of notice to that effect to the service provider.
    • The contract contained no vacation provisions. The plaintiff was given the opportunity to work elsewhere, provided that the service levels stipulated in the agreement were met.
    • The contract between the plaintiff and the service provider included an indemnification clause under which the physician would indemnify the service provider against any damages or losses incurred as a result of his actions or inactions, and stipulated that the plaintiff be required to give notice to the Service provider of any legal action taken against him while providing services under the contract.

In conclusion, after having taken into consideration all of the evidence, we ultimately find that the plaintiff was an independent contractor with the employer at the time of his injury and that his right of action against all defendants has not been removed by the provisions of the Act.

Panel Members

R. W. MacNeil, Presiding Officer
A. Finkel, Commissioner
M. Day, Commissioner

Recording Secretary, B. Miller

R. W. MacNeil - Presiding Officer
(on behalf of the panel)

Signed at Winnipeg this 4th day of November, 2002

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