Employee or Franchisee (Independent Contractor)? Definitive guidance from the Supreme Court of Canada

Introduction

In a recent decision of the Supreme Court of Canada, the analysis of whether an individual is considered an employee or independent contractor is given a thorough review, and brings into question the interplay of previous cases that have considered the nature of this relationship in a franchise context.

B. Modern Cleaning Concept Inc. v. Comité paritaire de l’entretien d’édifices publics de la région de Québec

The Modern Cleaning[1] case relates to a claim for unpaid wages and benefits arising out of cleaning services provided via a franchise, brought by the statutory committee (the “Committee”) responsible for overseeing compliance with the collective agreement (the “Decree”) that governs cleaning services in public buildings in the Québec region.

Modern Cleaning Concept Inc. (“Modern”) is a franchisor that provides cleaning and maintenance services via a network of franchisees, including Mr. Francis Bourque (“Mr. Bourque”). Modern negotiates the cleaning contracts and assigns contracts specific to a particular location to a franchisee, who then performs the actual cleaning work. In each instance, Modern remained on the contract and was responsible to the client for the performance of the services. 

In 2013, Mr. Bourque engaged in cleaning work as a subcontractor for Modern, until, in January 2014, Mr. Bourque became a franchisee, and was termed an ‘independent contractor’ pursuant to the terms of the franchise agreement. Only five (5) months later, Mr. Bourque terminated his franchise agreement due to his frustration with the lack of profits and inability to develop his business.

Among other things, the franchise agreement stipulated that Mr. Bourque agreed to perform cleaning services exclusively through the franchise relationship, not to compete with Modern and to use his own tools and equipment. Clients were billed directly by Modern, but in Mr. Bourque’s name. Mr. Bourque was then paid by direct deposit, after Modern had deducted its fees, royalties, etc. (which could amount to up to 43% of Mr. Bourque’s revenue). Mr. Bourque had limited interaction with the clients.

After termination of the franchise agreement, Mr. Bourque returned to his own independent cleaning business and the Committee began investigating the relationship between Modern and Mr. Bourque. Concluding that Mr. Bourque was in fact an “employee”, despite the language of the franchise agreement, the Committee determined that Mr. Bourque was entitled to the mandatory wages and benefits set out in the Decree.

As a result of this determination, the Committee commenced proceedings against Modern for $9,219.32 in unpaid wages and other benefits in relation to the cleaning services provided by Mr. Bourque and his wife, who had assisted him in providing such cleaning services.