Modern Cleaning Concept Inc. v. Comité paritaire de l’entretien d’édifices publics de la région de Québec, 2019 SCC 28

Labour relations — Collective agreements

On appeal from a judgment of the Quebec Court of Appeal (2017 QCCA 1237), setting aside a decision of Lavoie J. (2016 QCCQ 1789).

The provision of cleaning services in public buildings located in the Québec region are covered by a collective agreement, the Decree respecting building service employees in the Québec region. The Decree sets out minimum standards in the workplace, including wages, hours of work, holidays and overtime, and is governed by the Act respecting collective agreement decrees. The Act makes the Comité paritaire de l’entretien d’édifices publics de la région de Québec (“Committee”) responsible for overseeing compliance with the Decree, and it can therefore take any necessary action arising from the Decree on behalf of employees.

In 2014, the Committee commenced proceedings against Modern Cleaning Concept Inc., claiming $9,219.32 in unpaid wages and other benefits in relation to cleaning services performed by B. Modern provides cleaning and maintenance services in the Québec region through a network of franchises. It negotiates master cleaning contracts with clients, and assigns them for specific locations to its franchisees, who perform the cleaning and maintenance work. B became a franchisee in January 2014, agreeing to perform cleaning services exclusively through the franchise relationship. After five months of working within the Modern network, B terminated his franchise agreement. The Committee investigated the relationship between B and Modern. It was of the view that the language of the franchise agreement was not determinative of the reality of the relationship between B and Modern, and that B was in fact an “employee” as defined by the Act, not an independent contractor. He was therefore entitled to be paid the mandatory wages and benefits set out in the Decree.

The trial judge concluded that there was a common intention that B would be an independent contractor, not an employee. Accordingly, B was not entitled to the amount claimed by the Committee on his behalf. Allowing the appeal, a majority in the Court of Appeal was of the view that the trial judge made a palpable and overriding error in failing to consider the nature of the assignments of the cleaning contracts from Modern to B, and that by failing to recognize that Modern remained contractually liable to its clients, the trial judge erred in his analysis of whether B was an employee or an independent contractor. The majority concluded that B was an employee and ordered Modern to pay the $9,219.32 claimed by the Committee on behalf of B.

Held (Côté, Brown and Rowe JJ. dissenting): The appeal should be dismissed.

Per Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon and Martin JJ.:

The trial judge’s failure to consider the tripartite nature of Modern’s business model was a palpable and overriding error warranting appellate intervention. This error caused the trial judge to err in his assessment of whether B was an employee or an independent contractor. B is an “employee” within the meaning of the Act and Modern is correspondingly a “professional employer”. The mandatory provisions of the Act and Decree therefore govern the relationship between Modern and B, and B is entitled to the wages and benefits claimed on his behalf by the Committee.

The Decree can apply to any contract in which one can conclude that an individual is in a relationship determined to be that of “employee” within the meaning of the Act. Workers may be considered employees for the purposes of the Act and Decree even if they would not be considered employees pursuant to other laws of Quebec. The fact that the franchise agreement identifies B as a franchisee is not determinative. Nor is the fact that he is identified as an independent contractor with Modern. The Decree can apply to relationships other than those governed by employment contracts. The presence of a franchise agreement cannot function to disguise the true nature of the relationship between an employee and professional employer as those terms are defined in the Act. To the extent that the reality of the relationship between the parties reveals that a franchisee did not in fact assume the business risk and had no meaningful opportunity to make a profit, he or she is an employee and that relationship is subject to the Decree.

Modern’s business structure must be examined as a whole to determine who assumed the business risk and attendant prospect of making a profit. The business relationship in this case was tripartite: the client requesting cleaning services, the franchisor Modern who guarantees the quality and provision of services, and the franchisee who actually performs them. In the cleaning service agreements between Modern and its clients, the clients consented in advance to the assignment of the cleaning contracts to franchisees, but Modern remained liable to its clients if the cleaning services were not delivered in accordance with the contract between Modern and its client. By failing to consider the tripartite relationship, the trial judge did not consider the business as a whole, and, as a result, improperly concluded that B bore the business risk and was therefore not an employee. Because of its tripartite business model and ongoing liability to its clients, Modern placed extensive controls on B. B did not assume the business risk and therefore it cannot be said that he was an independent contractor, making him an employee under the Act.

Per Côté, Brown and Rowe JJ. (dissenting):

The appeal should be allowed and the trial judge’s decision restored. The trial judge made no reviewable error in concluding that B was not an employee within the meaning of the Act, because the fact that the assignments of contracts between Modern and B were imperfect did not significantly affect the business risk assumed by B. Furthermore, even if it were assumed that B was an employee, Modern could not have been considered to be his professional employer.

The determination of B’s status under the Act raises a question of mixed fact and law, since it involves applying a legal test — specifically the business risk test — to the facts of the case. Unless an exception applies, the standard for intervention in respect of questions of mixed fact and law is that of palpable and overriding error, which is a highly deferential standard. If no palpable and overriding error is properly established, this Court must restore the trial judge’s decision.

The Act provides for the juridical extension of a collective agreement, by means of a government decree, so that it binds all employees and employers working in a specific field of activity. The Act’s purpose is to guarantee minimum conditions of employment and to prevent abuses in the industries concerned. Whether the conditions provided for in a decree apply to a worker must be determined by first considering (1) whether the worker is an employee within the meaning of the Act and, if so, (2) whether he or she is within the scope determined in the decree. It is then necessary to identify a debtor bound by the decree, that is, a professional employer that employs the employee covered by the scope of application of the decree.

The concept of employee in the Act is broader than it is under the Civil Code because of the inclusion of the term “artisan” in the definition of “employee” in the Act. Unlike an employee within the meaning of the Civil Code, an artisan is not, in any true sense, subordinate to an employer in the performance of his or her work. Generally speaking, an artisan is a natural person who does manual work on his or her own account, alone or with the help of family members, journeypersons, workers or apprentices. An artisan will generally be a contractor in the civil law. The legal subordination that distinguishes a contract of employment and a contract of enterprise within the meaning of the Civil Code is not essential to the status of employee under the Act. An artisan who is a contractor — and not an employee — within the meaning of the Civil Code may therefore be considered to be an employee to whom the Act applies.

However, not every contractor who personally, on his or her own account, performs manual work to which a decree applies is necessarily an artisan within the meaning of the Act. There are some contractors who prima facie fit the definition of an artisan but to whom the Act does not apply because their activities are organized with a view to making a profit and, as a corollary, involve a business risk. This business risk must go beyond the risk that any artisan assumes, such as the risk of defective work tools or inefficient work methods. Further, the court must ask whether the worker intended — in fact and in light of the evidence — to accept a real business risk in order to make a profit.

In assessing the business risk test, the court must consider a series of factors. The relevant secondary factors include ownership of the work tools, the method of remuneration and the degree of freedom in the performance of the work, to the extent that these factors reflect the risk assumed. The terms of the contracts entered into by the worker and his or her clients or business partners are relevant but not in themselves determinative. The business risk test remains the same regardless of whether the contractual relationship in issue is bipartite or tripartite in nature, including in the context of a franchise agreement. In each case, the purpose of the analysis is simply to determine whether the worker assumes a business risk. It is not a matter of establishing which party to a contract assumes the business risk, as if there could be only one risk. The parties each incur such risks at the same time. Fundamentally, the level of risk assumed by the party performing the work is what determines whether that party can be characterized as an artisan within the meaning of the Act, regardless of the fact that another party also incurs a business risk, for example by assuming liability for the same contractual obligations.

The fact that the assignments of contracts were imperfect affected B’s business risk only to a limited extent, if at all. In the instant case, failure to deal with this aspect was not a palpable and overriding error. In the absence of such an error, the conclusions reached by the trial judge cannot be called into question. Despite the tripartite relationship among Modern, B and their clients, it was open to the trial judge to find that B had assumed a business risk in order to make a profit and that he was not an “employee” for the purposes of the Act. That conclusion is entitled to deference.

A franchise agreement cannot function to disguise the reality of a relationship between an employee and an employer, as those terms are defined in the Act. The trial judge shared this concern in the instant case. Far from relying blindly on the terms of the agreement, he rendered his decision on the basis of extensive evidence concerning the reality of the relationship between B and Modern.

Furthermore, not every person who has work to which a decree applies done by an “employee” can, on that basis alone, be treated as a professional employer and be required to assume the obligations that flow from that status. There are “employees” within the meaning of the Act who quite simply do not have a professional employer. For a “professional employer” to be required to meet the obligations provided for in a decree, the work must be done in the context of a relationship that is sufficiently similar to an employment relationship within the meaning of the Civil Code, which is to say that a certain degree of control or economic dependence is required. Here, even if it is assumed that the concept of “professional employer” has a meaning broader than that of an employer under the Civil Code, the franchise agreement does not readily support a conclusion that Modern was subject to the Decree, since the supervision it exercised did not suffice to characterize it as a professional employer. Modern’s powers as a franchisor cannot be confused with the relationship of subordination that characterizes a contract of employment. As well, B was not in a position of economic dependence toward Modern.

Reasons for decision by Abella J.

Dissenting Reasons by Côté, Brown and Rowe JJ.

Neutral Citation: 2019 SCC 28