Decision #13/19 - Type: Workers Compensation
The employer is appealing the decision made by the Workers Compensation Board ("WCB") that the firm was considered to be the deemed employer. A hearing was held on November 8, 2018 to consider the employer's appeal.
Whether or not the appellant firm should be considered the deemed employer.
The appellant firm should be considered the deemed employer.
On November 30, 2017, the appellant firm requested reconsideration of a March 15, 2017 decision by the WCB Assessment Services Department that individuals providing services through the appellant firm were workers of the appellant firm. The appellant firm provided thirteen reasons for why they disagreed with the WCB's decision and believed the workers were self-employed contractors. The appellant firm included copies of the Contractor Agreement, which the appellant firm required, completed by its workers and a copy of a July 28, 2017 letter from Revenue Canada regarding a worker with the firm who was deemed by Revenue Canada to be a self-employed worker.
At a meeting held on January 23, 2018, the Assessment Committee upheld the WCB's decision that the appellant firm was considered the deemed employer. The Assessment Committee noted that twelve of the thirteen points listed in the appellant firm's November 30, 2017 letter were associated with human resource requirements of the appellant firm and were written in a manner to support that the workers were independent contractors.
The remaining point in the appellant firm's letter dealt with the obligation of their workers to take personal responsibility for training, licensing by the appropriate body, taxation and insurance coverage, including Workers Compensation. This was supported by the firm's submission of a copy of their Contractor Agreement. The Assessment Committee noted that as they have upheld the WCB's decision that the workers were deemed workers, the appellant firm was reminded of Sections 14 and 15 of the Act.
On May 16, 2018, the advocate for the employer appealed the issue of whether the appellant firm was considered the deemed employer. On November 8, 2018, a hearing was held at the Appeal Commission to consider the appellant firm's appeal.
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.
The preamble to the Act provides, in part:
WHEREAS Manitobans recognize that the workers compensation system benefits workers and employers in Manitoba;
AND WHEREAS Manitobans recognize that the historic principles of workers compensation should be maintained, namely
(a) collective liability of employers for workplace injuries and diseases;
(b) compensation for injured workers and their dependents, regardless of fault;
(c) income replacement benefits based upon loss of earning capacity;
(d) immunity of employers and workers from civil suits;
(e) prevention of workplace injuries and diseases;
(f) timely and safe return to health and work; and
(g) independent administration by an arm's-length agency of government;
The Act provides definitions to assist with determination of the status of a party:
1(1) In this Act,
(a) a person
(i) who has in service under a contract for hiring or apprenticeship, written or oral, expressed or implied, a person engaged in work in or about an industry, or
c) a person that the board has determined under subsection 60(2.1) to be an employer for the purposes of Part I,
(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),
The Act provides the WCB with broad authority to deal with assessment matters. Subsection 60(2) provides that the board has exclusive jurisdiction to determine whether an employer's undertaking is in an industry within the scope of the Act and whether a worker is employed in an industry within the scope of the Act. Subsection 60(2.1) provides the board with the authority to deem that a person who performs work for another person is a worker and the other is an employer and to include the worker's earnings in the assessment of the employer.
Pursuant to its authority under the Act, the Board of Directors of the WCB established WCB Policy 35.10.50 Status of Workers, Independent Contractors and Employers (the "Policy") which deals with how the WCB determines the status of a party under the Act.
In this appeal, the firm disagrees with the WCB's decision that certain health care providers be deemed workers of the firm and that it must pay for coverage of the deemed workers.
The firm was represented by legal counsel who made an oral submission on behalf of the firm. The firm's President/CEO (the "CEO") and its accountant attended the hearing. The CEO answered questions from legal counsel and the panel.
In reply to questions, the CEO advised, in part, that:
• in addition to being CEO he is also a registered nurse;
• the firm is a health care placement agency;
• the firm provides services to four regional health authorities ("RHAs");
• the firm provides RHAs with health care providers on both short notice and for longer term needs;
• the health care providers include registered nurses (RNs), licensed practical nurses (LPNs) and health care aides (HCAs);
• Manitoba Health and the RHAs set the contract amount for each classification of health care service provider, the firm does not negotiate the price;
• the firm retains a set dollar amount on each contract and pays the balance to the health care provider;
• the health care provider gives an invoice to the firm, which in turn, bills the RHA;
• the firm does not make any statutory deductions (including taxes, unemployment insurance or any other deductions);
• none of the health care providers work for the firm on a regular basis;
• the firm has no control over the health care providers and no ongoing relationship;
• the health care providers do not attend at the firm's offices;
• the firm is not responsible for how the health care workers perform their services;
• a health care provider referred by the firm could serve in a "in charge position" at a facility;
• the firm does not provide any equipment for use by the health care providers at the health care facility;
• the health care providers are responsible for their own scrubs, uniforms, cell phones, etc.;
• the health care providers are responsible to have insurance coverage through their professional organization and pay their own membership fees;
• the firm has its own liability insurance but this is not for the benefit of health care providers;
• there are many placement agencies in the industry and they pay different fees for the services of health care providers;
• the firm makes more income if the health care provider works extra hours;
• the firm does not provide any training;
• the Canadian Revenue Agency has ruled that for the purpose of income taxes and employment insurance and other federal government benefits, the workers are independent contractors.
The agency's counsel outlined its legal arguments. He said there are six components to his submission specifically:
1. Procedural fairness and "institutional creep." He stated:
And the comment of institutional creep is that people tend to accept the word of these larger institutions because they are the government, we recognize them as being benevolent and as doing in the right things, and we have significant trust in these entities. So it’s just human nature that I find that these institutions can be preferred and accepted as being trustworthy and benevolent.
But in this instance, they are just a party, they have just made a decision, and it’s just, I’m just, with all due respect to the panel, just bringing this concept of human nature to the forefront in this concept of institutional creep.
2. An overview of the legislative framework and some of the important sections of the Act, the regulations and the policies of the WCB.
3. A summary of the relevant principles of law.
4. A review of the board decision of March 15, 2017
5. A review of the Assessment Committee decision February 1, 2018
6. A summary and questions from the panel.
The counsel noted that The Workers Compensation Act regulation 196/2005, identifies the industries, employers and workers that are excluded from the Act. With respect to subsection 16(1) of the Regulation, counsel commented that it deals with exclusions, specifically exclusions from the exclusions. He noted that the regulation purports to exclude a firm from the regulation if the firm provides medical services at a hospital or home care services to the elderly or infirmed.
He submitted that:
So the question is who’s providing the medical services at a hospital? If [the firm] is determined to be the employer…by extension of their employee, they would be providing the services at the hospital.
He submitted that the firm that is not providing services, "it is the nurse providing the services at the hospital, the independent contractor."
He noted Policy 35.10.50 and stated that it "does summarize most of the major points of the law in this issue of when is an independent contractor an independent contractor, and when is an independent contractor deemed the worker of an employer?"
He also provided a copy of Paragraph 46 from the Canadian Encyclopedic Digest (CED) dealing with Independent Contractors, specifically paragraph 46 which provided in part:
Essential question is whether a person who has been engaged is performing them as person in business or his or her own account. The courts look at all possible factors which have been referred to in each of the tests listed previously as bearing on the nature of the relationship. Not all factors will be relevant in all cases, or have the same weight in all cases. The factors to consider include the level of control the employer has over the employee. Whether the employee provides his or her own equipment, whether the employee hires his or her own helpers, the degree of financial risk undertaken by the employee, the degree of responsibility for investment in management, the employee’s opportunity for profit, the court has emphasized this as a non-exhaustive list. The distinction between an employee and an independent contractor is thus not always clear, and depends to a large degree upon the particular facts of the case.
He also noted that:
Paragraph 47 (of CED) says that if you are 50/50 and having a difficult time balancing the scales as to whether or not they are employees or independent contractors, the manner in which the parties have described their relations through a contract should be the final blade of grass, and should tip the scales in favour of how they’ve chosen to characterize it.
Finally he referenced correspondence from the CRA which he called "the third source of law". He referred to a letter from the CRA which he said "confirmed that the workers are, in fact, they are independent contractors, they are not employees." He noted that the factors identified by the CRA in determining that the workers were independent contractors were similar to those noted in the Policy and CED.
The counsel described the firm as a conduit, a broker, and a headhunter. He stated:
They have recognized a void for the health authorities, and they have filled it, and they just take a small commission, that’s their job, they are headhunters.
He also submitted that standards are set by the health care providers' regulatory body and not the firm. With respect to control, he stated that the health care facilities exercise control and supervision. He also stated that risk is not a factor as the health care facilities pay the bill.
Counsel submitted that the fact that the money flowed through the agency does not make it an employer and noted that money flow is not one of the tests for determining an employer-employee relationship.
Regarding reference to a health care provider's comments about working for the Agency, he stated it is evidence of what the health care provider believed the relationship to be, but it does not override the contract entered with the firm.
Regarding other indicia of the relationship between the parties, he noted that the firm cannot cancel the contractors' shifts only the RHA can do this. With respect to the issue of control, he advised that the firm is not able to cancel the health care providers' shifts, only the RHA or the health care provider can cancel a shift.
Counsel submitted that the parties entered a contract for services, and it doesn't fall under the Act.
As a preliminary matter, there was discussion at the commencement of the hearing regarding the scope of the panel's authority with respect to the variety to health care providers that are covered under the issue at the hearing. It was noted that the Assessment Committee specifically addressed the issue of coverage for nurses providing health care services. The decision did not specifically address other classifications of health care providers. The firm indicated that the WCB has applied the decision to all health care providers who receive assignments through the firm. The firm's counsel advised that the firm would like the panel decision to consider all the health care providers who provides services through the firm. The panel undertook to review the extent to which its decision would apply.
The panel finds that the issue is sufficiently broad to include all health care providers who provide services through the firm and is not limited to determining the status of nurses.
The issue before the panel was whether the service providers should be deemed to be workers of the firm. For the firm's appeal to be approved, the panel must find that it is not appropriate to deem the health care providers to be workers of the firm for the purpose of the Act. The panel was not able to make this decision. The panel finds, based upon the facts before it, that the health care providers are workers of the firm for the purposes of the Act.
The panel has considered the information provided by the firm and arguments made on behalf of the firm in support of its position that the health care providers are, for the purposes of the Act independent contractors and are not employees of the firm.
Independent Contractor Agreement
The panel considered the indicia of independent contractor status referenced by the counsel, including the sample agreement which the firm provided is entitled "Independent Contractor Agreement". The firm asserts that all health care providers are required to sign this agreement.
In reviewing the sample agreement the panel notes that the agreement includes provisions which are consistent with a finding that the health care provider is an independent contractor, such as responsibility for payment of taxes, scope of services, provision of liability insurance, the lack of exclusivity, and no entitlement to the firm's benefit programs.
However, the panel notes that the agreement does not address the status of the parties with respect to inclusion under the Act. There is no reference to workers compensation coverage in the agreement. The exclusion of reference to this issue supports a finding by the panel that the parties did not have an agreement on this issue.
The panel notes that Paragraph 17 of the agreement provides:
17. Complete Agreement
This Agreement constitutes the complete agreement and sets forth the entire understanding and agreement of the parties as the subject matter of this Agreement and supersedes all prior discussions and understandings in respect to the subject of this Agreement, whether written or oral.
The panel relies on this provision to confirm that the issue of coverage under the Act is not included in the terms of the Agreement.
The panel finds that the parties did not, by contract, agree that the health care providers were to pay their own WCB coverage.
At the hearing there was reference to the agreement between the firm and the RHAs. After the hearing, the panel requested that the firm provide a copy of an agreement between the firm and an RHA. The firm provided copies of agreements with two RHAs. These were noted to be "Multi Service Agency Agreements" hereinafter referred to as the "agency agreements". The agency agreements were for the most part the same.
The panel finds that these agreements specifically address the relationship of the firm to the RHAs and also purport to define the relationship between the firm and the health care providers.
The panel refers specifically to sections 19, 20 and 21 of the agency agreements.
It is expressly understood and agreed that the RHA is contracting with the Agency to provide health care providers. All Agency health care providers who render these services pursuant to this Agreement are health care providers of the Agency only and are not health care providers of the RHA or agents of the RHA. The Agency acknowledges that it is solely responsible for all matters relating to the employment of its health care providers. The Agency will maintain direct responsibility as employer for payment of wages and other compensation and for any applicable mandatory withholdings and contributions including, but not limited to, Canada Pension Plan, Employment Insurance, Workers Compensation, and federal and provincial taxes. The Agency shall indemnify and hold harmless the RHA for any liability resulting from claims relating to failure to make payments, remittances or withholdings of any kind whatsoever, which duty shall survive the termination of this agreement.
The parties agree that the health care providers that the Agency utilizes to service this Agreement are solely under control and direction of the Agency and are the health care providers or agents of the Agency. The Agency maintains responsibility for the instruction, supervision and evaluation of all its employees. [note: one agreement included: The Agency is responsible to supply competent health care providers and shall take the necessary steps to ensure their employees maintain that competency to ensure proper performance of their duties.]
The agency agrees that it will advise all health care providers employed by the Agency before rendering service to the RHA that they continue to remain health care providers of the Agency, are not health care providers of the RHA, the receipt of which advice shall be acknowledged in writing by said health care providers. [underlining added by the panel]
The panel attaches significant weight to the agency agreements and accepts these provisions as an accurate description of the status of the parties. The panel finds that the agency agreements provide, in clear unequivocal language, that the health care providers are to be employees of the firm. These provisions are inconsistent with the position taken by the firm at the hearing, in its dealings with the WCB, and in its agreement with health care providers.
Counsel referred to the CRA as the "third source of law." The panel attaches little weight to the CRA ruling. The panel finds that the CRA decision deals with the status of the health care providers under its legislation.
The panel is not bound by the CRA decision. The panel notes that the WCB has considered the impact of CRA decisions and has expressly provided in Policy 35.10.50, Status of Workers, Independent Contractors and Employers that:
c) Other agencies, such as Canada Revenue Agency and the Employment Standards Branch of the Manitoba government, also make determinations regarding worker, employer and independent contractor status for the purposes of their legislation. 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.
Regulation 196/2005 identifies industries, employers and workers who are excluded from the scope of Part I of the Act. The panel notes that subsection 16(1) of the regulation identifies certain healthcare professionals who are excluded from the Act and that it includes "nurse". However, this subsection provides further that subsection 16(1) does not apply to health care services provided by a regional health authority or "(ii) by a firm that provides medical services at a hospital…"
The panel finds that the firm provides medical services at a hospital by supplying health care providers. The panel finds that the firm and the health care providers are included under the Act pursuant to this regulation.
WCB Policy 35.10.50
The panel notes that the Policy identifies certain factors to be considered in determining the status of a party, but provides that "No one factor is determinative of the matter. The relationship as a whole will be considered."
The panel notes that, based on the evidence, particularly the Agency Agreements, that the firm:
• is solely responsible for all matters relating to the employment of its health care providers;
• is responsible for the instruction, supervision and evaluation of all its health care providers;
• is responsible to supply competent health care providers and to take necessary steps to ensure their employees maintain that competency to ensure proper performance of their duties.
The panel also notes that the firm can control which job postings it shares with its healthcare providers.
The panel finds that the firm has significant control over the health care providers.
The panel finds, based on a balance of probabilities, that the health care providers, who are referred by the firm to perform services at facilities run by the RHAs are workers of the firm for the purpose of workers compensation. In making this decision, the panel attached significant weight to the Agency Agreement, Board Policy and Regulation 196/2005.
Given the panel's findings that the health care providers are workers and the firm is the employer, the panel notes that had there been a clause in the Independent Contractor Agreement contracting out of the terms of the Act, such a clause would be void pursuant to Section 14 of the Act. This section provides:
Contracting out of Act forbidden
14 It is not competent for a worker to agree with his employer to waive or forego any of the benefits to which he or his dependents are or may become entitled under this Part; and every agreement to that end is void.
The firm's appeal is dismissed.
A. Scramstad, Presiding Officer
P. Challoner, Commissioner
M. Kernaghan, Commissioner
Recording Secretary, J. Lee
A. Scramstad - Presiding Officer
(on behalf of the panel)
Signed at Winnipeg this 28th day of January, 2019