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Contractors found to be Dependent and Awarded 24 Month Notice Pay

Whitten and Lublin | Jan 17, 2018

Under the law, independent contractors are not covered under employment law as they are not bound to a particular employer. Rather, they are seen as more powerful than dependent contractors or employees, with more leverage to set their rates and negotiate with various clients. In contrast, individuals that are economically dependant on one source (client or business) but under independent contractor agreements may not be seen as independent contractors under the law. They would either be deemed, employees or dependent contractors.

Employees are at the opposite end of the independent contractor on the employment relation spectrum. They are strictly tied to one employer and are covered under employment law legislation. In between lies the dependent contractor, which depends on a sole individual or company for the majority of their income. In both instances, however, the employee and dependent contractor would be owed a common law reasonable notice period or payment in lieu of the event that their services are no longer needed.

Keenan v Canac (2016):

A case that articulates the above is Keenan v. Canac Kitchens Ltd., (2016 Ontario Court of Appeals). The Keenans were husband and wife that each worked for Canac for over 25 years. They started as regular full-time employees and eventually took on supervisory roles in kitchen installations for Canac. In 1987, however, Canac unilaterally imposed an independent contractor agreement which the Keenans signed. The agreements stated that the Keenans were ‘subcontractors’ and were to dedicated full-time service to Canac. The terms of employment were essentially unchanged, with the exception that the Keenans now were paid a higher piece rate since they were required to own their own trucks and pay their own EI and CPP. In 2007 the Keenans started to receive less work from Canac, so in response, they started doing some work for a competitor which Canac knowingly allowed. The Keenans’ work was still over 70% with Canon at any given point from 2007-2009. In 2009 Canac advised the Keenans that their services were not longer needed. Canac offered no severance as they claimed the Keenans were independent contractors.

Ruling:

At the trial, it was determined that the Keenans were dependent contractors and entitled to 24 months of payment for the dismissal. The court maintained that the amount of work the Keenans received from Canac’s competitors was not sufficient to change the fact that the Keenans were dependent upon Canac as contractors. The court, rather, considered the entirety of the Keenans 25 plus years of service and determined that they were, in fact, dependent upon Canac. Due to their age (over 60 years old), their supervisory positions, their role as public faces of Canac, and long tenure, the Keenans were entitled to 24 months worth of payment.

Concluding Remarks:

Individuals under independent contractor agreements must be aware that the agreement itself is groundless unless the relation is in practice an independent relation. If the individual rendering service is economically dependent upon one source, they maybe placed in a vulnerable position if services are no longer required. The courts seek to protect dependant contractors by ensuring they are either given adequate notice or payment equivalent to the notice period in the event services are no longer required. The notice period or pay in lieu is imposed to allow the individual to find comparable employment. As such, there is no set amount of notice or limits prescribed; each case must be viewed holistically. If you feel you are dependent upon a particular employer but are labeled an ‘independent contractor’ it is important to seek the assistance of a legal expert in the event services are no longer needed. Even if a severance is offered, it may be well below your common law entitlement.

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