Some jurisdictions around the globe provide for “dependent contractor” status — adding another wrinkle to the independent contractor or employee debate. However, dependent contractor status can pose its own risks.
Recently, a Canadian court ruled Canac Kitchens Ltd. must pay C$125,000 to a married couple who served as dependent contractors because the company terminated them without warning. And the monetary award was in lieu of 26 months’ notice of termination.
The ruling was upheld in late January by the Court of Appeal For Ontario.
“Exclusivity” was the determining factor in the case.
“The trial judge observed that, in the jurisprudence leading to a recognition of the intermediate category of dependent contractors, a finding that the worker was economically dependent on the company due to complete exclusivity or a high level of exclusivity weighed heavily in favour of the conclusion that the worker was a dependent contractor,” Judge Eileen Gillese wrote. “In my view, this observation is not only correct, it is vital to understanding how the question of exclusivity is to be approached.”
Plaintiff Lawrence Keenan began working for Canac in 1976. His wife and fellow plaintiff, Marilyn Keenan, began working for the kitchen-cabinet maker in 1983. The couple were full-time employees until March 15, 2009, when the company made them contractors.
Their duties remained the same. However, the relationship with the company came to an end on March 15, 2009, when the company announced it was closing its operations. Canac gave no notice, no pay in lieu of notice and none of the statutory entitlements, according to the court file.
During the two-year period before their termination, the Keenans also worked for a competitor called Cartier Kitchens. The outside work was enough to qualify the Keenans as independent contractors, Canac argued. However, the Court of Appeal noted the Keenans still received a majority of their income from Canac. It upheld the lower court’s award of C$125,000 to the Keenans despite the work for Cartier.
“The trial judge was fully aware that the Keenans did some work for one of Canac’s competitors in the last two years of the relationship — but he considered that information in context,” Gillese wrote.
“Lawrence Keenan worked exclusively for Canac from 1976 to 2007,” she wrote. “Marilyn Keenan worked exclusively for Canac from 1983 to 2007. Their agreement with Canac demanded nothing less. The services that the Keenans provided to Cartier were for a relatively short period, and done in response to a slowdown in work from Canac. Canac turned a ‘blind eye’ to that work. Furthermore, on the findings of the trial judge, during the period that the Keenans provided services to Cartier, the ‘substantial majority’ of their work continued to be done for Canac.”
This decision confirms that the “dependent contractor” lies somewhere along the continuum of employment relationships, between an employee at one extreme and an independent contractor at the other; and that the dependent contractor has some employment rights. Employers should ensure that contractual terms reflect the physical arrangements both at the beginning of the relationship, and over time, and that the circumstances of the relationship reflect the parties’ intentions.
The Star newspaper noted the award was the highest notice period ever awarded to contractors in Canada.