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Determining the "Real Employer" - IPG-068

Effective date: April 3, 2006

Revised date: February 14, 2023

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Issue

Many businesses use temporary help/employment agencies to meet their requirement for workers. These agencies are intermediaries, in that they supply businesses with the services of the workers they recruit. The legal relationship between the agency, their client and the worker is not always clearly defined. Therefore, guidance to identify the "real employer" is needed. This Interpretations, Policies and Guidelines (IPG) will assist in identifying where the employer/employee relationship exists within the tripartite relationship.

Background

Temporary help/employment agencies supply qualified workers to businesses under varying terms and conditions. The agency therefore creates a "tripartite" relationship consisting of the worker, the agency, and the client business who uses the temporary help services. Accordingly, the worker in this type of relationship is in a tripartite relationship.

Application

Part III of the Canada Labour Code (the Code) applies to federally regulated employees who have an employer/employee relationship. This includes persons often referred to as “interns”.

On September 1, 2020, changes to the Code recognizing “interns” and “student interns” came into force. Individuals seeking to obtain knowledge or experience via an internship that is not part of an educational program, often referred to as “interns”, are not considered “employees”. However, they are treated as employees for the purpose and application of the Code. They also receive all labour standards protections, including the right to be paid at least minimum wage.

Students undertaking internships that fulfil the requirements of an educational program are known as “student interns”. Student interns are also not considered "employees” because they are primarily in the workplace to acquire knowledge and/or experience. Student interns, who may be unpaid, are not entitled to the full range of labour standards protections. They are entitled to certain protections under the Standards for Work-Integrated Learning Activities Regulations.

The Code and associated regulations therefore govern bipartite relationships that go beyond that of an employer and employee.

Determining the real employer

A number of factors are used in determining who the real employer is. Appendix A is a useful guide.

This may be accomplished by imagining a continuum with:

As the facts of the relationship are examined, assessed and weighed, the employee will ultimately move to one side of the continuum. They will be classified as an employee of the agency or the client business. Questionnaires will be used to assist with the gathering of facts to complete the assessment.

A comprehensive approachFootnote i shall be taken when attempting to identify the real employer. This will be done to consider which party exercises the most control over all aspects of the work on the facts of each caseFootnote ii. The criteria of legal subordination and integration into the business are significant, "they must not be used as exclusive criteria for identifying the real employer"Footnote iii.

Jurisdiction

It shall be determined if the business where the worker is assigned, and/or the agency employer, falls under federal or provincial jurisdiction. This is because, when dealing with an issue under the Code, it is imperative that the work, undertaking or business is subject to federal jurisdiction.

Assessing the information and making a decision

The identity of the real employer shall be made using factual determination, with specific reference to each situation. No single factor among those contemplated shall be, in itself, determinative.

When analyzing the information gathered, the Labour Program shall look beyond the form of a transaction and analyze its substance. For example, who is responsible for:

Even though the agency may implement disciplinary actions, the client business could regulate the worker's daily responsibilities. Consequently, this could move the worker to the client business side of the continuum. Although remuneration may originate from the agency, the contract between the latter and the client business could dictate the amount to be paid. Accordingly, this may move the worker to the client business side of the continuum.

Weighing the facts

Weighing the facts is a crucial aspect of deciding who the real employer is. The evidence for each of the factors in Appendix A shall be reviewed and each category will be weighed in making the decision. Many of the facts, such as recruitment and training, may indicate that the employee was that of the agency. However, more weight may be given to facts such as direction and control, ultimately leading the employee to be that of the client business.

Once the total relationship has been examined and assessed, the parties must be notified of the decision in writing.

Other tripartite relationships – road transport

In the road transport industry, there may also be tripartite relationships involving intermediaries between:

These intermediary businesses may be an agency or may be another road transport business such as an owner-operator.

In these cases, the tripartite relationship consists of:

The legal relationship in these situations may not be clearly defined. Therefore, the concepts, principles, and questions contained in this policy may be applied as part of the investigation to determine the real employer.

Student interns fulfilling the requirements of their educational program

A student intern is carrying out their internship to fulfill the requirements of their educational program. The kinds of activities that would meet the requirements of their educational program must be described in documents produced by the student intern’s educational institution. The documents must be provided to the employer prior to the start of the internship.

A student intern must only perform activities in the workplace that align with those identified in the internship documents.

If a student intern is subject to a tripartite relationship (for example, a student intern is performing activities for an owner-operator of the company that was named on the internship agreement), the Labour Program will investigate the “real employer” relationship. They will use the approach and principles described in this IPG.

Although the Labour Program would be making a determination on the “real employer” it is important to keep in mind that a student intern does not have an “employer” per se. This is because he is not engaged in an employer/employee relationship. The Labour Program determines who the real employer is for the sole purpose of:

At the conclusion of the investigation, the student intern may be treated as an employee under the Code if it is determined that:

Conclusion

The Code governs the relations between bipartite relationships which involve:

The characteristics of an employer may be shared in a tripartite relationship between 2 separate employer entities, the agency and the client business. In order to determine who the "real employer" is, the total relationship shall be examined and assessed. Bear in mind that no 1 factor is determinative and there is an exhaustive list of factors that must be examined.

Appendix A: List of factors used to determine the real employer in a tripartite relationship

The following factors will be considered when determining who the real employer is in a tripartite relationship. Which party:

Appendix B: List of cases

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