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Case Summary: Shamac Country Inns Ltd. v. Sandy’s Oilfield Hauling Ltd.
Defence + Indemnity

An employer cannot sue an employee common with a defendant employer where the employee is a common employee of both employers.    

Shamac Country Inns Ltd. v. Sandy’s Oilfield Hauling Ltd., 2015 ABQB 518, per Master Wachowich       

I. FACTS AND ISSUES

On January 18, 2010, a fire occurred at the Fort Hotel, owned and operated by the Plaintiff, Shamac. The Plaintiff’s insurers brought this action as a subrogated claim to recover the money they paid to Shamac.

The Plaintiff and the corporate Defendants are related companies, and both were owned by MacDonald. She was the sole director and also the direct and indirect owner of the Plaintiff, while she was either the sole or majority owner of the three corporate Defendants.

The fire was allegedly started by the defendant Leroy Linkivic when he was using a propane torch to thaw ice build­up in a drain pipe at the hotel.

Linkivic was hired in 2001 as a handyman/driver. His work as a handyman was to be primarily at the Fort Hotel and another hotel owned by Shamac, as well as other rental properties owned by one of the corporate Defendants. He was to be a driver for two of the other corporate Defendant’s, who were in the oilfield hauling business. MacDonald and her husband owned all the companies, and determined Linkivic would be on the payroll of Jolane (one of the oilfield hauling companies) due to that company having better cash flow. Jolane and the other oilfield hauling company, Sandy’s, arranged benefits for Linkivic. 

Both the Plaintiff and the Defendants brought applications for summary judgment, with the Defendant’s applying for summary dismissal. 

The Defendant’s argued that Linkivic was a common employee of both the corporate Defendants and the Plaintiff Shamac, such that Shamac could not sue him. Shamac argued that Linkivic was an employee of the Defendants, and only a “borrowed” employee of Shamac such that he could be sued.

II. HELD: For the Defendants; application allowed and action dismissed.

1. The Court held that Linkivic was a common employee of the Plaintiff and the Defendants at the time of the fire.

(a) The test for determining whether a common employer situation exists was described in Sinclair v. Dover Engineering Services (1987) 11 B.C.L.R. (2d) 176 (B.C.S.C.) as “a sufficient degree of relationship between the different legal entities”. Wood J. in that case went to say that whether there is a sufficient degree of relationship will depend on the facts of each individual case. The Court, using a review of the relevant case law on the doctrine of a common employer, listed several factors that are considered when determining who the employer is when there is a group of related companies. These include:

(i) Whether the worker performs services for other entities forming part of a group

(ii) The closeness or integration of the relationship between the various entities 

(iii) Whether there are common shareholders and directors of (or common control over) the various entities

(iv) Whether one entity holds the worker out as an employee

(v) Whether an entity exercises control over the work

(vi) Whether an employment contract exists between one entity and the worker – however, a written contract is not determinative on its own 

(vii) Evidence of an intention to create an employer/employee relationship between the work and the respective corporations within a group

(viii) The worker’s relationship with and conduct towards the various entities

(b) Regarding the Plaintiff’s argument, the Court found that the legal test for determining whether the employee is a borrowed employee is the same as the one used in determining whether a person is an employee or an independent contractor. Citing the Supreme Court in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59, the key consideration is the level of control the potential employer has over the worker’s activities. The Court came to the conclusion that regardless of whether they look at the doctrine of common employer or of a borrowed employee, the considerations are similar in that what must be determined is who the actual employer is. This determination hinges on who exercises control over the employee in question.

(c) The Court found that the doctrine of common employer was more appropriate than the borrowed employee principle in this case. The Court found that the Plaintiff and the corporate Defendants collectively employed Linkivic. At the time of the fire, Linkivic did do work for Shamac on ongoing basis. He spent a majority of his time doing maintenance work for Shamac’s two hotels, notwithstanding the fact that his salary was paid by another one of the companies. As well, MacDonald was the controlling mind of the group of companies consisting of the corporate Defendants and the Plaintiff.

2. The Court held that, as his employer, Shamac (and consequently, Shamac’s insurer) could not sue Linkivic.

(a) The Court reviewed the case law in regards to potential liability of employee to their employer. The Court relied on Douglas v. Kinger (Litigation Guardian of), 2008 ONCA 452 for the principles that an employer cannot bring an action against its employee in simple negligence. Older case law suggested a division between “skilled” and “unskilled” employees, where the former could result in success in such an action, while the latter will not unless the conduct is intentional or reckless.

(b) The Court found that Linkivic was an “unskilled worker” and therefore Shamac, as the employer, would only have liability against him if he started the fire intentionally or recklessly. This was not the case here, and therefore Shamac (and its insurer) are not able to bring an action against him. 

(c) The court also discussed that, as an employee of Shamac, Linkivic is possibly an unnamed or implied insured under the company’s insurance policy. Therefore, the insurance company would have no subrogation rights against him.

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