“WHAT IS AN INDEPENDENT CONTRACTOR AND WHAT DOES IT MEAN FOR YOU?

Almost every logging contract contains a provision which states that the logger’s relationship to the licensee is that of an “independent contractor”. What does this mean?

In the traditional sense, being an independent contractor comes down to control of the work process; to enjoying the profits of a successful operation and risking the loss of an unsuccessful project; and to ownership of the capital, i.e. the equipment.

It is easier to define “independent contractor” by what the relationship isn’t: the relationship is not one of employee and employer. An employee typically works for a wage and is paid for the time spent working, regardless of how profitable the work was. A contractor works for a price (or a rate), and pays his expenses out of revenue, and hopes for a profit. The employment relationship is highly regulated, with laws that speak to overtime, holidays, severance pay, WCB coverage, income tax remittances, and Employment Insurance coverage. The independent contractor relationship is, by comparison, very unregulated and lacks a social safety net.

An employee doesn’t own his or her own equipment; doesn’t pay for the fuel that goes into that equipment; and doesn’t pay for the cost to maintain, repair, insure, or replace that equipment. The employee has limited opportunities to claim deductions in order to reduce income taxes.

The employee is told when to start, when to finish, and how to perform his or her task. The independent contractor agrees to perform work or services for a price (or rate), and that contractor decides the most effective method of utilizing its resources to perform that work efficiently and profitably.

Also, an independent contractor relationship is not a partnership. Partnership implies that the partners are in the same boat, and that they share in the profits or losses of the partnership. Partners owe special obligations to each other, called “fiduciary duties”. Independent contractors do not usually owe such duties.

Further still, the relationship is not one of agency. Agency brings with it the agent’s ability to bind the principal to certain legal obligations, and will often fix the principal with the agent’s knowledge, even if the agent failed to tell his principal.

While this article is meant to speak to the logging contractor’s relationship with his licencee, it is useful to put the shoe on the other foot. Consider the logger’s relationship with those that supply services to him—the dealer that repairs his equipment, or the logger’s lawyer or his accountant. That supplier of services might have dozens of customers. These are traditional independent contractor relationships.

Why is the “independent contractor” clause found in logging contracts? In my view, there are three main reasons.

One reason is an effort to impose responsibility upon the logger if something goes wrong. If something goes wrong, the tendency of the licencee is to say, “You were in control of this operation—you are responsible for what went wrong.” The logger will typically reply by saying, “I was only following your directions, and you never complained that I was operating wrongly, and so I should not be liable.” The logger’s position might prevail if he were a mere employee, but it’s a much tougher argument to make as an independent contractor.

Also, the law will impose vicarious liability on an employer for the acts of his employee. In other words, if an employee’s negligence causes a third party to suffer a loss, that person’s employer is liable for his employee’s negligent acts. But, the law will not generally impose vicarious liability onto a licensee for the negligent acts of its independent contractors.

The third reason, in my view, has to do with the termination of the relationship. An employee may only be terminated, absent just cause, by giving reasonable notice. A true independent contractor is not entitled to such notice.

Working relationships are not black and white, though. Rather, they are made up of shades of grey. In the log harvesting industry, for example, the licencee often exercises large elements of control over the contractor. The licencee prepares the logging plan, and participates in a pre-block walk. The contractor is told when he will be starting work, where to start the block, how many loads a day he will be producing, and the hours for delivery. The licencee might suggest what equipment the logger should use or purchase.

Unlike a typical independent contractor relationship, the contractor may find that all, or almost all, of his work is performed for only one customer. And, that there are no opportunities to work elsewhere, for other licencees. Also, government does not want licencees to hide behind the independent contractor clause to avoid vicarious liability in connection with workplace safety, forest practices, or forest fire issues. So, the statutes have been written to impose liability on licencees for the acts of their contractors, notwithstanding the independent contractor relationship.

The law now recognizes something called the “dependent contractor relationship”, also known as the “intermediate relationship”. For example, in the case of log truck owner-operators, who work predominantly for one licencee, there is an ability to unionize. (True independent contractors could not join a union.) In the case of logging contractors with long-time exclusive, or near-exclusive, relationships with one licencee, the law would impose an obligation on the licencee to give reasonable notice prior to the working relationship being terminated.

If you find that your licencee is breathing down your neck, trying to exert more control than you feel is right, or demanding from you more information than you think should be revealed, you might want to pull out your contract and remind your licencee of the independent contractor clause.

Blake Tancock is a Kamloops lawyer practicing in the areas of civil law.