In 2009, Canac advised the Keenans that their services were no longer required. No notice of termination (or pay in lieu) was provided on the basis that the Keenans were considered to be independent contractors.
On the date their services were terminated, Lawrence Keenan was 63 years old and had 32 years of service with Canac. Marilyn Keenan was 61 years old and had 25 years of service.
The question for both the trial court and the Ontario Court of Appeal was whether the Keenans were independent contractors or dependent contractors. If the latter, what amount of notice were the Keenans entitled to receive upon termination of the relationship?
The Keenans were found to be dependent contractors and awarded damages equivalent to 26 months notice of the termination of their relationship.
Trial decisionThe trial court determined that the Keenans were dependent contractors and awarded them damages equivalent to 26 months notice of the termination of their relationship with Canac.
The common law has long recognized the existence of the dependent contractor relationship: a category of relationship that is neither employee nor independent contractor. A dependent contractor is said to be a contractor, but also economically dependent upon the company to which services are provided. Economic dependence is generally proven by demonstrating that the contractor worked primarily or exclusively for the organization.
Here, the court considered the Keenans to be contractors but noted that, for all but the last two years of their relationship, they worked exclusively for Canac and derived nearly all of their income from their relationship with Canac.
The Keenans’ relationship of exclusivity and economic dependence on Canac was determinative. Although they had worked for another company in the last two years of their relationship, the Keenans had derived most of their income from their relationship with Canac. On this basis, the Keenans were not independent contractors, they were dependent contractors.
Ontario Court of AppealThe Court of Appeal agreed that the Keenans were dependent contractors, despite having worked for another company in the last two years of their relationship with Canac. In coming to its decision, the court examined the entire relationship between the parties and determined that the Keenans were economically dependent on that company. The court also clarified that the exclusivity of a dependent contractor relationship cannot be determined simply by looking at the relationship on the date it is terminated. As is the case with most employment matters, a contextual approach is likely to be taken. In the case at hand, the Keenans had worked exclusively for Canac for most of their lives. In the period that they did not work exclusively for Canac, they worked for another company with Canac’s knowledge and permission.
The Ontario Court of Appeal also upheld the award of damages. Recognizing that only exceptional circumstances have permitted for notice periods exceeding 24 months, the court relied upon the Keenans’ ages, lengths of service, and positions, which included being “Canac’s public face to the outside world” for “over a generation.”
What’s next?A court will assess whether an individual is an independent contractor, dependent contractor, or employee based upon the facts of the relationship. The title given to the individual will not determine the outcome.
A dependent contractor relationship may exist even where an individual performs some work for other companies (e.g., even where the contractor does not work exclusively for one company).
The level of exclusivity required to create a dependent contractor relationship will vary from case to case.
An examination of the entire relationship, including its length and importance to the organization, will be assessed.
Dependent contractors will be entitled to receive notice of the end of the working relationship, on a scale mirroring common law reasonable notice of termination. This may require advance foresight into organizational needs; essentially, to plan for the end of the contractor relationship.
Madeleine Loewenberg is founding partner of Loewenberg Psarris Workplace Law LLP. She can be contacted at email@example.com