Decision #131/13 - Type: Workers Compensation

Preamble

The firm is appealing decisions made by the Workers Compensation Board ("WCB") that Mr. S was a "worker" of the firm and therefore the firm had to register with the WCB and report the labour portion of payments provided to Mr. S while working in the Province of Manitoba. A file review was held on August 21, 2013 to consider the matter.

Issue

Whether or not the firm is required to register with the WCB; and

Whether or not the firm must report the labour portion of payments made to Mr. S while working in the Province of Manitoba.

Decision

That the firm is required to register with the WCB; and

That the firm must report the labour portion of payments made to Mr. S while working in the Province of Manitoba.

Decision: Unanimous

Background

On January 25, 2012, the WCB advised Mr. S that he was considered to be a worker of the appellant firm as he did not meet the criteria for an Independent Contractor under WCB Policy 35.10.50 - Status of Workers, Independent Contractors and Employers. The decision was based on the following factors:

  1. He drove solely for the appellant firm.
  2. He had no workers.
  3. His business activities were integral to the business of the appellant firm.
  4. His vehicle bore the logo of the principal.

On January 25, 2012, the firm was notified that they were required to register with the WCB given that they employed a Manitoba resident as a worker in their business operation. The firm was advised that they would be assessed a premium based on their reported payroll information.

In a letter to the WCB dated March 12, 2012, the firm stated that all of their employees were domiciled in the United States and were covered under the appropriate state regulations. They stated that their trucking operations were completed by leased owner/operators and none were considered their employees.

On May 29, 2012, the WCB advised the appellant firm that: "Trucking comes within the compulsory provisions of The Workers Compensation Act of Manitoba. If your workers and/or owner-operators haul into or through Manitoba, you must cover them through our Workers Compensation Board (WCB) even though you may be registered in your own locale."

On June 20, 2012, the firm's controller informed the WCB that their drivers were independent contractors with their own personal coverage. He stated that these independent businesses are evidenced by several criteria under common law rules that established their independence.

A memo to file dated August 13, 2012, indicated that the WCB advised the firm that they were required to register the drivers who were residents of Manitoba and did not have their own WCB coverage. The WCB did not require registration for drivers resident outside Manitoba.

On December 21, 2012, legal counsel representing the firm appealed the WCB's decision that they were required to register with the WCB. The appeal stated that the firm was a Minnesota-based open deck carrier which had been in operation in excess of 50 years. They had a 100% owner-operator fleet of approximately 625. The tractor and trailers were owned and maintained by the independent owner-operators at their own cost. The firm did not own any transportation equipment and all of the trucks and trailers used to move freight pursuant to the firm's operating authorization were owned by corporations, other jurisdiction organizations or sole proprietorships. Legal counsel outlined a number of factors in its submission to support the conclusion that their drivers were independent contractors.

On February 7, 2013, the WCB's Assessment Committee determined that the firm had to register with the WCB. The decision found that the equipment owned and operated by Mr. S bears the logo of the firm, Mr. S does not employ any workers and he only hauls for the firm.

The Assessment Committee concluded that Mr. S is not an independent business as described in Policy 35.10.50 and therefore the firm must register with the WCB and report the labour portion of payments made to Mr. S while he is working in Manitoba.

In May 2013, the firm filed an appeal with the Appeal Commission stating that the Assessment Committee's decision was based on errors in fact and in law.

On May 21, 2013, the Assessment Committee reconvened to review the firm's submission to the Appeal Commission to determine whether any new information was provided that would have changed the earlier decision. Following its review, the Assessment Committee concluded that there was no new information that justified the Assessment Committee changing its original decision. On August 21, 2013 a file review was held at the Appeal Commission to consider the firm's appeal.

Reasons

Applicable Legislation and Policy

The Appeal Commission and its panels are bound by The Workers Compensation Act (the “Act”), regulations and policies of the Board of Directors.

Section 60(2.1) of the Act provides as follows:

60(2.1) Deemed worker and employer

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.

WCB Policy 35.10.50, Status of Workers, Independent Contractors and Employers, (the "Policy") explains how the WCB determines a person's status as a worker, employer or independent contractor for the purposes of the Act. It also describes the circumstances in which the WCB will deem one person to be the worker of another.

Firm’s Position

The firm objects to the determination that Mr. S is a worker of the firm and that the firm is required to register with the WCB as a result. It was submitted that the Policy is permissive rather than mandatory and that the WCB failed to consider the information on the firm's relationship with its independent owner-operators. In so failing, the WCB failed to exercise its delegated power and authority.

The firm relied on the Policy and common law indicia of employment/independent contractor relationships to assert that Mr. S was neither the firm's employee nor a "worker" under its material control. The points cited by the firm may be summarized as follows:

  • Mr. S was not paid T4 or business income. Rather, he operated his business through a separate corporation.
  • Mr. S did not work under the supervision and control of the firm. He set his own specific hours of work and was free to determine whether he wished to accept or refuse loads offered to him by the firm and other carriers.
  • Mr. S was not an integral part of the firm's business, nor were the loads he accepted from the firm a significant portion of the firm's operations.
  • Mr. S had significant financial investment in and full responsibility for the equipment used by him.
  • Mr. S through his corporation, had assumed significant financial risk.
  • Mr. S was offered various loads by the firm and was at liberty to accept or reject those loads.
  • Mr. S did not have an exclusive working relationship with the firm and was at liberty to accept loads from such other carriers or customers as he chose.
  • Mr. S was required to pay all business expenses and to remit his own tax and GST filings.

The firm also took issue with the WCB's factual determination that Mr. S's equipment bore the firm's logo. By definition, a logo is a graphic representation or symbol of a company name, trademark or abbreviation, uniquely designed to promote instant public recognition. It was submitted that the firm did not have a logo nor was any such logo on Mr. S's equipment. Pursuant to requirements of the United States Department of Transportation ("USDOT"), the firm's owner-operators were required to have the firm's USDOT number and name on their equipment. The owner-operators were at liberty to decide where to place the firm's name on their equipment and to choose the size, style, and colour of the font they preferred.

Analysis

There are two issues before the panel:

  1. Whether or not the firm is required to register with the WCB; and
  2. Whether or not the firm must report the labour portion of payments made to Mr. S while working in the Province of Manitoba.

In order for the firm's appeal to succeed, the panel must find that Mr. S should not be deemed to be a worker of the firm. On a balance of probabilities, we are not able to make that finding.

As noted earlier, the Policy explains how the WCB determines a person's status as a worker, employer or independent contractor for the purposes of the Act and describes the circumstances in which one person will be deemed to be the worker of another. In particular, the Policy provides as follows:

2.(d) The WCB also has the authority under the Act to deem someone who is not otherwise a worker under the Act, for the purposes of this policy someone who is an independent contractor - to be the worker of the principal who is then deemed to be the employer. The WCB may use this authority when the person performing the work exhibits some, but not necessarily all, of the characteristics of a worker or when there is a close economic or business relationship between the service provider and the principal.

…

4. Deeming a person to be the worker of the person for whom the work is performed. (emphasis in original)

Independent contractors are entitled to purchase WCB coverage under the Act. This coverage is voluntary. If an independent contractor has purchased voluntary coverage, the WCB will not deem him or her to be the worker of a principal.

In some cases, the relationship between the service provider and the principal exhibit some of the characteristics of a worker and some of the characteristics of an independent contractor. In those circumstances, if the service provider does not have voluntary coverage, the WCB will deem the service provider to be the worker of the principal and will deem the principal to be the employer. The following are examples of situations in which the service provider will ordinarily be deemed to be the worker of the principal, who will be deemed to be the employer:

· Work crews will be deemed to be the workers of the principal unless the principal is a homeowner contracting for services on his or her home;

· Owner/operators such as truckers and couriers will generally be deemed to be the worker of the principal if the equipment owned and operated or hauled by the service provider bears the logo of the principal;

· Service providers will be deemed to be the workers of the principal for whom they work exclusively or primarily.

This case deals with a fairly standard owner-operator relationship in the trucking industry. While the legal relationship between the firm and Mr. S may be structured as an independent contractor relationship, we find that for WCB purposes, Mr. S was properly deemed to be a worker under the Act. It is notable that section 2(b) of the Policy acknowledges that other agencies may make determinations regarding worker, employer and independent contractor status, but then states; "While the WCB will consider those determinations and the basis upon which they are made, determinations by other agencies do not determine a person's status under the Act."

In making our finding that Mr. S was properly deemed to be a worker, the panel relied on the following:

  • In section 4 of the Policy, the trucking industry is specifically addressed and is included as a situation where the service provider will ordinarily be deemed to be the worker of the principal.
  • The panel finds that the requirement that the service provider's equipment bears the logo of the principal has been met. We do not interpret the logo requirement to refer only to a graphic representation or symbol of the firm which promotes instant public recognition. We find that it is sufficient if the equipment is clearly identified or "branded" as having a definite association with the firm. The logo is anything which identifies the equipment as being part of the firm's operations. We find that the placement of the firm's name on the side door of the cab clearly identifies Mr. S's tractor as being part of the firm's operations and satisfies the requirement that the service provider's equipment bears the logo of the principal.
  • We find that there was nothing unusual or unique about Mr. S's arrangements with the firm which would cause us to vary from the general proposition that owner-operators in the trucking industry will be deemed to be workers where the equipment bears the logo of the principal.
  • Although the firm correctly pointed out that Mr. S did not have an exclusive relationship with the firm and was at liberty to accept loads from other carriers or customers, the information on file indicates that in actual fact, Mr. S employed no workers and drove solely for the firm. The panel finds that this fact would support the third point in section 4 of the Policy which provides that: "Service providers will be deemed to be the workers of the principal for whom they work exclusively or primarily." Thus two of the three specific situations described in section 4 are met in this case.

The consequences of being deemed a worker are set out in section 5 of the Policy which provides as follows:

5. Consequences to deemed employers of having deemed workers

Once a service provider is deemed to be a worker, the deemed employer has the same obligations to that worker as to any other worker. This includes paying WCB assessments on the assessable earnings of the deemed worker. Determining assessable earnings in these situations is not as straight forward as determining assessable earnings on T4 income. The guidelines attached to this policy will provide guidance in determining assessable earnings for specific industries.

The WCB has developed a labour Percentage Schedule for determining the labour portion of a contract when the price includes materials and equipment. Appendix B of the guidelines sets out a standard labour percentage of the total contract or piecework price for various industries. The labour percentage reflects an average for the industry or the type of equipment. If an employer disagrees with a labour percentage used, the WCB will consider documentation provided from the employer to support a different labour cost.

Given our determination that Mr. S was properly deemed a worker, it follows that the firm is required to register with the WCB and must report the labour portion of payments made to Mr. S while working in Manitoba.

The employer's appeal is therefore dismissed.

Panel Members

L. Choy, Presiding Officer
A. Finkel, Commissioner
P. Walker, Commissioner

Recording Secretary, B. Kosc

L. Choy - Presiding Officer

Signed at Winnipeg this 17th day of October, 2013

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