54 LEXPERT MAGAZINE
|
JANUARY/FEBRUARY 2017
| THE MODERN WORKPLACE |
So there's a "great worry" in Ontario's
employer community about having this
expanded role among companies that sub-
contract out part of their business, use tem-
porary help or even a recruitment agency.
He says some see the government's review
as a conscious look at: "Should we expand
the circle of liability? Where business is see-
ing its needs met in the market, the govern-
ment is looking for deeper pockets."
FRANCHISOR EARTHQUAKE
One group of businesses that would be hard
hit by "related-and-joint" employment clas-
sification is the franchise industry. Franchi-
sors are ubiquitous, and not just the giants
like McDonald's and Starbucks but small
ones like Aroma or Pet Valu. e impact
would be tremendous, says Larry Wein-
berg, who practises franchise law at Cassels
Brock & Blackwell LLP. In fact, he says,
there's been a "chilling effect" on the num-
ber of new franchises opened since the re-
port was issued in July. "I have clients who
have already expressed concern to me about
coming to Ontario, even with the sugges-
tion the Ontario government might do
this. People have said they're going to wait
and see what happens."
e way it works now is the franchisor
just leases its name in return for a percent-
age of the profits. Each franchisee, says
Weinberg, is "a small business owner" who
puts their own money at risk. "ey're en-
trepreneurs. ey just happen to be fran-
chisee entrepreneurs."
the review, says Sherrard, and how it echoes
what's going on in the United States, where
there's been a fair bit of litigation before the
US National Labor Relations Board.
While the NLRB has had a longtime
standard where two or more businesses can
be counted as joint employers of a single
group of workers, to be considered an em-
ployer under US law, employers had to have
"direct and immediate" control over terms
and conditions of employment. e NLRB
revised that 30-year-old definition in a
landmark 2015 decision to add "indirect
control," or even the ability to exert such
control — even if it's not used.
ere are multiple implications of bring-
ing the same standard in to Ontario. In a
case where the manufacturing company
and the maintenance subcontractor have
joint responsibility, for example, the sub-
contractors' employees become addition-
ally eligible to vote on any move to union-
ize the company, says Sherrard. All things
considered, he says, this kind of change can
have a "dramatic change on the respective
parties' responsibilities."
at means the people you see serving
you at a Boston Pizza or behind the coun-
ter of a Dairy Queen are employees of the
franchisee, not of Boston Pizza or Dairy
Queen. "e franchisee is the one who
hires and fires and trains and disciplines
and deals with severance. e franchisor
doesn't even have a list of franchisee em-
ployees. e franchisor isn't involved in
buying the turnips either."
Even many lawyers don't really under-
stand the relationship between a franchisor
and franchisee, Weinberg says. While, by
law, the franchisee has to exert controls in
order to use the name, "it's a contractual li-
cence relationship that oen goes on 10, 20
or more years, with the franchisor getting
a royalty of, say, six per cent of sales. If the
government all of a suddenly comes along
to franchisors and says, 'You must become
involved and you're responsible for the em-
ployees,' your costs are going to increase.
e franchisor doesn't have the right to go
to the franchisee and say, 'Oh, by the way,
you need to give me more money.' ose
contracts are fixed.
"So those established contractual rela-
tionships are going to be screwed up. I don't
know a better term than that, if this were to
go through."
So what happens to all the legal licence
contracts that were signed for 10 or 20
years? "Nothing legally, except the under-
pinning, the foundation, the ground under
which they were written will have been hit
by an earthquake. It will all have shied."
ROBERT SIDER
LAWSON LUNDELL LLP
"IF YOU HAVE employees in
your workplace and contractors
doing exactly the same thing,
in BC at least, you're running
a very significant risk of an
Employment Standards [Act]
finding that they're employees."
