Jul 21

Independent contractors can be owed notice

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In a world of increasing contract and part-time work many people believe that they are not entitled to receive notice due to termination of their contact because they are independent contractors. However, the law is clear that in some instances those labelled as independent contractors can be entitled to notice notice.

Many Independent Contractors are actually Employees
When determining if someone is an employee or an independent contractor the important factor is the job actually done and not what the contract says the person is. The criteria courts look at to decide if someone is an employee or an independent contractor include a number of factors such as: who provides the tools, what uniform is worn, who controls the hours worked, the supervision of the employee, the chance for profit and chance of loss for the person in question.

For instance in McKee v. Reid’s Heritage Homes Ltd. [2009] O.J. No. 5489 (ONCA) a sales and advertising agreement between two companies gave rise to an employment relationship. The owner of a consultant services firm supervised her own company. She hired, fired, trained, and managed her staff with no input from the company she was consulting for. She was not paid directly but instead into her holding company and the parent company left her on her own to do what she was supposed to do.

Nevertheless, the Court ruled that she was a full employee and was entitled to notice. The category of employees was found to be very broad and contextual on the circumstances of each case. Therefore, many persons labelled as ‘independent contractors’ may be considered full employees under the law.

Even true Independent Contractors can be Owed Notice
Independent contractors can potentially receive notice if the company providing them with a substantial amount of work ceases using their services. This occurs when the independent contractor is in a relationship of dependence, sometimes known as a dependent contractor. These persons have even more independence than the most independent employees, discussed above, however, they are still owed notice.

Any independent contractor who is dependent on another company is in a relationship of dependence and may be owed notice of the parent company ceasing to give them work (effectively terminating them). Dependent relationships have been found in the provision of trucking services (JKC Enterprises Ltd. v. Woolworth Canada Inc. [2001] A.J. No. 1220 and Erb v. Expert Delivery Ltd. [1995] N.B.J. No. 381) and where an accountant who worked mostly for one company (Jackson v. Norman W. Francis Ltd. [1999] N.B.J. No. 147). The category is broad and encompasses many independent contractors who are, therefore, owed notice upon cessation of work from the parent company.

Economic dependency of one party on the other party is key in finding a dependent contractor relationship. Once dependence is established, then the notice is based on the duration of the dependency and degree of exclusivity. Since independent contractors are, generally, less exclusive than employees they, often, receive less notice than employees of comparable seniority. However, it is possible for them to still receive significant notice.

Since the key factor is economic dependency of the contractor, parent companies might not even know that a contractor of theirs is dependent and therefore owed notice!

Be Careful
For employers: Consider that you need to be very careful when dealing with ‘independent contractors’ to ensure that they are not really employees, dependent contractors.

For employees: The important take-away is that if you stop receiving significant income from a source, then you need to contact an employment lawyer to see what category you fall into. That notice period that you deserve might be worth an awful lot of money.

All in all, the difference between employees and independent contractors is complex and shifting. If you do not know your rights make sure to contact Andrew Monkhouse to discuss your case.