Interpretation Guidelines Manual
British Columbia Employment Standards Act and Regulations

Employment Standards Act Part 1 – Introductory Provisions

(a) a person, including a deceased person, receiving or entitled to wages for work performed for another,

(b) a person an employer allows, directly or indirectly, to perform work normally performed by an employee,

(c) a person being trained by an employer for the employer's business,

(d) a person on leave from an employer, and

(e) a person who has a right of recall;

Example

An employee who wants some time off work, with the employer’s knowledge, arranges for a friend to cover the shift. That friend is considered to be an employee of the employer.

Example

In a small restaurant, a server who also has dishwashing duties, without the employer’s permission or knowledge hires a person to wash dishes. That new dishwasher is considered to be an employee since he or she is performing the work normally performed by an employee.

• training specific to the employer's business that employees are required to take prior to starting regular work;
• training specific to the employer's business, even if it is conducted off the employer's premises; and
• trial periods for prospective employees.

Activities performed to meet a condition of employment, prior to hiring, such as acquiring or maintaining skills (for example, getting air brake ticket or a first aid certificate) are not considered training for the purposes of determining employment under the Act.

An evaluation or test given to prospective employees as part of the interview process is not considered employment.

Example

An employer requires an applicant to take a test to check their word processing abilities during a job interview.

An evaluation that involves performing work for the employer’s benefit would be considered as employment, even if no offer of employment was forthcoming.

Example

An employer requires an applicant to work a 4 hour shift to see if they can handle the work.

• pregnancy and parental leave
• illness or injury leave
• family responsibility leave
• compassionate care leave
• bereavement leave
• reservists' leave
• jury duty
• temporary layoff

• Control test
• Four-fold test
• Organizational or integration test
• Permanency test
• Specific Result test
• Economic Reality test

Control test

One of the most important factors in distinguishing between an employee and an independent contractor is the nature and degree of control exercised by the payer over the payee. The “control test” determines whether one person is in a position to order not only what is to be done, but also how it is to be done. Where such control exists, the courts have generally regarded the relationship as that of an employer and employee.

There are four factors traditionally used in the control test:

1. Selection - the payer retains the power to select the worker.
2. Dismissal - the payer has the right to suspend or dismiss the worker.
3. Method of work - the payer has the right to control the method in which the job is carried out.
4. Remuneration - the payer sets the payment scale for wages or other remuneration to the worker.

Four-fold Test

This determines who in the relationship has:

Control — See Control Test above.

Ownership of tools — Does a person use tools, space, supplies, and equipment owned by another person? If so, this would indicate an employment relationship. In a clear-cut case of an employment relationship, employers provide all the necessary equipment and tools for the employee to do their job, including maintaining the equipment and purchasing supplies. Individuals who are forced to purchase and/or finance equipment through the company to retain or get work are generally employees. In other words, regardless of whether the individual owns their own equipment, because he/she has very little choice in critical matters, such as financing, they are an employee.

Independent contractors own their own equipment; if necessary, finance the purchase of equipment through a financial institution of their choosing; and, maintain the equipment as they see fit using service providers of their own choosing. Companies with whom independent contractors contract may, because of customer requirements, set specifications for equipment; however, may not establish brands, makes or colours.

Chance of profit — Does a person have little or no chance of profit? If so, this would imply an employment relationship.

An employee will generally receive a salary or wage rate based on a time period; that is, hourly, daily or monthly. An employee’s earnings are not dependent on whether or not the employer makes a profit. A person who is compensated in this manner has no chance of profit.

An independent contractor bidding on a contract for service has a chance of profit arising out of their ability to perform the tasks in a more efficient manner through controlling costs and increasing efficiencies, or by sub-letting the contract. The more control the independent contractor has over how and when the work is done, the greater the chance of profit.

A large capital investment in machinery or equipment has a direct bearing on entrepreneurial chance of profit.

Risk of loss — Does a person carry the financial risk involved in the provision of the work or services? If so, this would indicate a contractual relationship.

(Note: Commission or other forms of pay incentive do not indicate chance of profit or risk of loss.)

An employee generally will receive a salary or wage rate based on a time period; that is, hourly, daily or monthly. An employee’s earnings are not dependent on whether or not the employer makes a profit. A person who is compensated in this manner has no risk of loss.

An independent contractor bidding on a contract for service has a chance of profit arising out of their ability to perform the tasks in a more efficient manner through controlling costs and increasing efficiencies or by sub-letting the contract.

A large capital investment in machinery or equipment has a direct bearing on entrepreneurial risk of loss.

In general, the greater the degree to which the employer supplies goods and services, retains direction and control, or has economic dominance, the greater the likelihood of employment status.

Organizational or Integration Test

The organization or integration test determines if the work a person performs is integral to, or contributes to, the operation of the business. The more integrated the work is with the employer’s business, the more likely it is that the person is an employee.

Example

A pizza restaurant that also delivers pizza cannot operate without pizza delivery drivers. These drivers are employees of the restaurant.

Permanency Test

This test determines the duration of the relationship. The longer and more continuous the relationship, the greater chance that it is an employment relationship.

An employee who is hired and paid by one company and assigned to work under the control of a second company may become an employee of the second company. This relationship will depend on many factors, including the duration of the stay, the degree of control of the employee, and the control and direction between the two companies.

If the assignment is temporary, the employee remains employed by the first employer, unless there is another agreement. A contract of employment cannot be transferred from one employer to another without the employee’s consent.

Specific Result Test

This test attempts to determine whether a contract is for a single service leading to a specific result or whether it is for general services. Two factors must be considered under the specific result test:

1. Specific Work
   
   If it is agreed that certain specified work would be done for the payer, the payee is an independent contractor. It is an employer/employee relationship where the payee agrees, for either a period of time or indefinitely, to work for the payer, either full or part-time.
   
   
2. Personal service
   
   A contract of employment normally requires a specific individual to place his/her own services at the disposal of the payer. An independent contractor’s only obligation is to see that a certain agreed-upon task is completed. In other words, it doesn’t necessarily matter who actually carries out the work.

An employee/employer relationship usually has an employee putting their personal services at the disposal of an employer during a given period of time, without reference to a specific result and, generally, the work is done on an ongoing basis.

Where a person agrees to perform certain specified work on behalf of someone else, it may be inferred that they are an independent contractor.

Economic Reality Test

This test examines the relationship between the parties in order to determine whether a particular individual is carrying on business for himself/herself. There are five criteria normally used in the assessment of the relationship:

1. Control - see Control test
2. Risk - see Four-fold test
3. Financial investment - is there a capital outlay by the person performing the contract?
4. Lasting relationship - is there a permanent relationship between the person providing the service and the person paying for the service?
5. Diversity - is the person performing the service permitted to provide similar services to other parties and actively involved in searching out other work?

Generally where the payee receives direction from the payer, supplies no capital in the form of equipment, takes no financial risks, has no liability, has formed a lasting relationship and does not have the opportunity to render services to others, it is generally held that he/she is an employee.

This test looks at the question of employee/employer relationships not by defining who is an employee but from the viewpoint that all employed people are either employees or self-employed (including independent contractors).

A self-employed person includes:

• a person who employs themselves; and
• a person who is employed but on his own behalf. That is the individual doing the work in the course of their business on their own account, not for someone else.

For Control and Risk – see above under Four-fold test.

Financial Investment:

An individual who provides a high-ticket item such as a tractor-trailer would generally be looked upon as self-employed. However, if a person owns only one truck and provides services to one employer, this would indicate an economic dependence and thus an employee.

A person who owns several trucks, although working for only one employer, would probably be doing work on his own behalf and would be self-employed.

Consideration should also be given to whether the individual has an investment in the company he/she is working for and if this investment is substantial. A person who owns a truck but also has an ownership in the company he/she is working for would probably be self-employed.

An individual would generally not look upon a lease payment as a financial investment; that is, an individual who leases a truck from the company to perform services for that company would probably be an employee.

It is important to note that ownership of a truck or tractor-trailer, by itself, is not determinative of the employment status of an individual.

Lasting Relationship:

Lasting relationship is not specifically tied to the length of the contract; it is tied to the expectation of a continued relationship.

An indefinite relationship is one where there is an expectation of a continued relationship. Where contracts provide an end date which are subject to competitive bidding, there would most likely not exist an expectation of a continued relationship. Where there is no end date to a contract or there is little or no expectation the contract will not be renewed, there exists an indefinite relationship.

Diversity:

An individual who can only provide services for one company would not generally be doing the work in the course of his own business but on behalf of someone else and therefore would be an employee. The greater the opportunity for an individual to work for different companies, the greater the probability that person is doing work on his own account and therefore, is self-employed.

Cheryl Balcilek, BC EST #002/11

Mickey Transport Ltd., BC EST #012/10

Court Decisions

671122 Ontario Ltd. v. Sagaz Industries Canada Inc. [2001] 2 S.C.R. 983 (S.C.C.), at paras. 47 and 48

ESA
• s. 1, Definition “employer”
• s. 1, Definition “work”
• s. 3, Scope of this Act
• s. 4, Requirements of this Act cannot be waived
• s. 63, Compensation for length of service
• s. 97, Sale of business or assets

ESR
• s. 37.3, Truck Drivers