As employment counsel, it not infrequent to hear clients and others claim that this or that person is a “contractor” as if such characterization answers, for example, questions of entitlement to notice upon termination. The reality is not as simple as that.
In a recent case, Keenan v. Canac Kitchens Ltd., 2016 ONCA 79, the Ontario Court of Appeal set aside a lower court decision (2015 ONSC 1055).
At trial the issue before the court was whether the two Keenans, husband and wife, who had worked for the employer for many years were dependent or independent contractors.
Initially the Keenans were employees. In 1987 the employer changed the relationship to the effect that they were to be “independent contactors.” Mew J. found:
[6] The plaintiffs were informed that under the new arrangement, they would be responsible for paying installers. The installers would provide their own trucks and would pick up kitchen from Canac and deliver them to job sites, where they would be installed. Canac would set the rates to be paid to the installers and pay the plaintiffs, who, in turn, would pay the installers. The plaintiffs, as Delivery and Installation Leaders, would, as before, also be paid on a piece work basis for each box or unit installed. But, the amount paid would be increased to reflect the fact that the Delivery and Installation Leaders were being paid gross, without deductions for Unemployment Insurance, Canada Pension Plan, or Income Tax. Delivery and Installation Leaders would now be responsible for damage to cabinets while in transit, and were expected to obtain insurance to cover such liability.
The written contracts provided, among others, that the Keenans were to “devote [their] full-time and attention” to the employer’s business and were to report to its installations manager. The Keenans agreed and signed the contracts.
Until 2007 the Keenans worked exclusively for the employer. At time the workload dropped off and they started doing some work for one of the employer’s competitors.
The trial court noted: “Employment relationships exist on a continuum; with the employer/employee relationship, at one end of the continuum, and independent contractors at the other end. Between those two points, lies a third intermediate category of relationship, now termed dependant contractors: McKee v. Reid’s Heritage Home Limited, 2009 ONCA 916 (CanLII) ….” In case of the Keenans, the court concluded that the “evidence overwhelmingly favours the conclusion that the plaintiffs were dependent contactors, and, as such, entitled to reasonable notice of termination, and I so find.” The court concluded that 26 months was reasonable notice.
Canac Kitchens appealed.
The issues before the Court of Appeal were:
[1] The first question relates to exclusivity. Exclusivity is a significant factor in determining whether a person is a dependent or independent contractor. Is exclusivity to be determined at, or about, the time of termination of the business/employment relationship? The second question relates to reasonable notice. Were there exceptional circumstances in the present case which support an award for a period in excess of 24 months?
The employer argued that as the Keenans did not work exclusively for Canac in the two-year period immediately preceding termination, the trial judge erred in finding that the Keenans were dependent contractors.
The Court of Appeal rejected the employer’s submissions:
[25] In my view, this observation is not only correct, it is vital to understanding how the question of exclusivity is to be approached. Exclusivity cannot be determined on a “snapshot” approach because it is integrally tied to the question of economic dependency. Therefore, a determination of exclusivity must involve, as was done in the present case, a consideration of the full history of the relationship. It is for the trial judge to determine whether, after examining that history, the worker was economically dependent on the company, due to exclusivity or a high level of exclusivity. (Emphasis added)
The employer also argued, in the alternative, that the 26 months notice was excessive.
In Lowndes v. Summit Ford Sales Ltd., 2006 CanLII 14 (ON CA), [2006] O.J. No 13 (C.A.), the Court had “stated that while the reasonable notice period is a case-specific determination and there is no absolute upper limit on what constitutes reasonable notice, generally only exceptional circumstances will support a notice period in excess of 24 months.” The Court of Appeal agreed that the trial judge had failed to expressly make a finding of exceptional circumstances. Nevertheless, “given the Keenans’ ages and lengths of service, and the character of the positions that they held, [the Court] would not interfere with the award,” and upheld the award of 26 months notice.