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Pam Frampton: When an independent contractor is not a contractor

Nalcor Energy
Nalcor Energy

Nalcor’s claim of 'commercial sensitivity’ might not hold water

 

So, Premier Dwight Ball is pushing back against Nalcor’s board of directors’ refusal to divulge billing rates for its large contingent of so-called “embedded contractors” working on the Muskrat Falls project.

Those independent contractors, as The Telegram’s James McLeod discovered last month, are in some cases being paid from $100 to more than $200 an hour to fulfil duties that can be as routine as human resources and accounting. And they make up the overwhelming majority of the people working on the project’s management team.

And Ball should be pushing back. The board of directors’ claim of commercial sensitivity about the rates of pay only goes so far when you’re talking about a publicly funded, $12.7-billion hydroelectric behemoth that has roughly doubled in cost and is at least three years behind schedule.

Board chairman Brendan Paddick told the premier in recent correspondence that it’s standard practice when building a megaproject to use large numbers of contractors paid by the hour.

But an expert in law, corporate governance and ethics, who has worked with Crown companies around the world for two decades, says the situation seems odd, particularly the board’s refusal to tell the premier and the public how much of their money is being spent on lucrative contracts that may or may not have been necessary.

“I don’t like what I see,” said Richard Leblanc, an associate professor at York University. “This is now a political situation. I think the whole board is on thin ice. The premier has the power to fire the entire board. … Other public projects trend towards accountability.

“This raises a red flag in my mind that the board could be beholden to management somehow.”

"This is now a political situation. I think the whole board is on thin ice." — Richard Leblanc, York University

Leblanc says the situation at Nalcor, with its inner shadow management workforce of independent contractors, raises a fundamental question.

The premier has said the setup doesn’t pass the sniff test, but does it pass the Montreal Locomotive test?

That’s a test in labour law that can be used to determine whether workers are independent contractors or employees of a company.

It’s based on four criteria applied in 1947 by the Privy Council in the tax dispute of Montreal vs. Montreal Locomotive Works Ltd. Those criteria are:

1) Is the worker under the control of the overarching company it is working for? (In this case, Nalcor)

2) Is the worker using the company’s materials, equipment or tools of production as opposed to supplying his or her own?

3) Does the worker stand to profit from the main enterprise (Muskrat Falls)?

4) Does he or she stand to lose if the company posts a loss?

In the case of Nalcor’s embedded contractors, I would suggest the answers are: a) yes; b) yes; c) no (at least not in addition to the lucrative contracts they’re already working under); d) not a chance.

“If the contractor doesn’t have other clients and doesn’t own the tools of production and is under the control of the employer, are they even contractors?” Leblanc said.

He points out there are benefits to both worker and employer if staff are hired as employees. Employees have better benefits and bargaining power, for example, while the employer can exert more strenuous controls over employees and can more easily collect tracking data for the purposes of public disclosure and accountability.

According to a 2002 ruling of the Alberta Labour Relations Board in an unrelated case that involves the same Montreal Locomotive test, “The main distinction between an independent contractor and an employee is whether or not the principal retains the power not only to direct what

work is to be done but also to control the manner of doing the work. If a person can be overseen and directed as to the manner of doing their work, such person is not an independent contractor.”

If Nalcor’s contracted-out management personnel are, in actual fact, employees in contractors’ clothing, then there’s no reason in the world why we shouldn’t be told what we’re paying them.

 

Pam Frampton is The Telegram’s associate managing editor. Email pframpton@thetelegram.com. Twitter: pam_frampton

 

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