The ‘dependent contractor’ category of worker is gaining more ground in Canadian law. In recent cases, dependent contractors have been increasingly found by courts to be entitled to some employee-like protections when it comes to termination. Considering these recent decisions along with the proposed changed in the Employment Standards Act we detailed in another post, dependent contractors are inching closer to employee status than their independent contractor counterpart when it comes to protections upon termination.
Dependent contractors, like employees, have been found to be entitled to reasonable common law notice for the termination of their employment. Despite being an ‘intermediate category’ of worker between employee and independent contractor, dependent contractors have been found to receive notice periods that are just as long, if not longer than an employee in the same position.
In Keenan v Canac Kitchens Ltd, 2016 ONCA 79, the Plaintiffs (husband and wife in this case) worked for Canac Kitchens Ltd. (“Canac”), beginning in 1976 and 1983. In October 1987, the Plaintiffs were informed that their employment with the company would continue under the classification of contractors. They provided draft agreements as sub-contractors which stipulated they would devote “full-time and attention” to Canac.
Only one Plaintiff signed the new agreement however both Plaintiffs carried on business as usual. Their working relationship, duties and pay structure remained the same and they considered themselves loyal employees. They received employee discounts, wore Canac logos and had Canac business cards. One Plaintiff also received a signet ring for 20 years of loyal service.
In 2007, the Plaintiffs began to do some work for a competitor. On March 15, 2009 the Plaintiffs were advised that their services were no longer needed, and were terminated effective immediately. Canac failed to provide any notice or pay in lieu therefore. Canac took the position that the plaintiffs were Independent Contractors and therefore not entitled to notice.
The trial judge found that the plaintiffs were dependent contractors and awarded the 26 months’ notice. In reaching this conclusion, the judge relied on principles relating to exclusivity and their economic dependence on Canac. The test, as laid out in Belton v. Liberty Insurance Company of Canada 2004), 70 O.R. (3d) 81, at paragraph 11 and adapted by McKee v Reid’s Heritage Homes Ltd 2009 ONCA 916:
- Whether the agent was limited exclusively to the service of the principal;
- Whether the agent is subject to the control of the principal, not only as to the product sold, but also as to when, where and how it is sold;
- Whether the agent has an investment or interest in what is characterized as the “tools” relating to his service;
- Whether the agent has undertaken any risk in the business sense or, alternatively, has any expectation of profit associated with the delivery of his service as distinct from a fixed commission;
- Whether the activity of the agent is part of the business organization of the principal for which he works. In other words, whose business is it?
Canac appealed the decision, claiming that the trial judge erred in finding the plaintiffs were dependent contractors and for finding 26 months’ notice as reasonable.
On appeal, the court upheld the trial judge’s findings on worker status and notice. Although courts have typically held that notice had a ‘soft cap’ of 24 months, the court held that in this case, even without exceptional circumstances, the plaintiffs award of notice was reasonable.
There is no doubt that dependent contractors are getting more protection. As the nature of employment shifts, so will the law surrounding the protection of workers. If this trend continues, contract workers may gain additional protection in the future, above and beyond the existing termination provision. With the rapid development within this area of law, it is crucial for workers to carefully assess their working relationship with their employers to determine their rights. Contact Monkhouse Law today for a free 30-minute consultation.
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