Canada: On Risk e-Bulletin - October 2004

Last Updated: November 1 2004

Edited by Graeme Mew and Tanya Frizzell


  • Announcement
  • Marche v. Halifax Insurance Co., [2003] N.S.J. No. 121 (NSCA) -
  • Minor Injury Reforms (Alberta) -
  • Insurer Liable for Aggravated and Punitive Damages in Impaired Driving Case? -
  • No Conditional Consent to Drive? A Commentary on Mugford v. Kodiak Construction Ltd., 2004 ABCA 145 -
  • Expansion Of Employers' Liability In Their Dealings With Independent Contractors -


Gowlings is pleased to announce that the Right Honourable Donald F. Mazankowski has joined the Firm. Mr. Mazankowski will draw on his extensive background and experience in the health care, finance, transportation, agriculture and energy sectors to provide strategic business and government advice to Gowlings clients. Mr. Mazankowski's counsel is often sought in the private sector where he serves as a director or trustee for a number of Canada's leading companies, including Power Corporation of Canada, Shaw Communications Inc. and Weyerhaeuser Co. During his 25 years as a Member of Parliament, Mr. Mazankowski played a key role in launching tax reform, and the privatization of Petro-Canada and Air Canada.

Marche v. Halifax Insurance Co., [2003] N.S.J. NO. 121 (NSCA)

The Supreme Court of Canada granted leave to appeal from the decision of the Nova Scotia Court of Appeal in Marche v. Halifax Insurance Co., [2003] N.S.J. No. 121. In so doing, the Court will be afforded the opportunity, rarely taken, to provide guidance on the interpretation of certain mandatory fire insurance provisions that are contained in the insurance legislation in all common-law provinces.

This case involved a claim under a fire insurance policy on a residential dwelling. The property underwent a two-month vacancy period. The insured did not provide notice to the insurer of that vacancy. Ultimately, a fire loss was caused by persons unknown. Importantly, the fire occurred some months after the period of vacancy had ended. That is to say, it was understood that the property was occupied at the time of the fire.

The insurer resisted coverage. It did not rely upon a vacancy exclusion. Rather, the insurer relied upon the application of Statutory Condition 4, common to all provincial insurance legislation:

4. Material change - Any change material to the risk and within the control and knowledge of the insured shall avoid the contract as to the part affected thereby…

The Nova Scotia Court of Appeal found in favour of the insurer, finding that the vacancy was a material change of which the insured ought to have advised the insurer. Importantly, the Court held that subsequent "rectification" of the material change (namely reoccupation of the premises) prior to the loss, could not prevent the voiding of the contract by application of Statutory Condition. The insureds placed strong reliance on the fact that the property was no longer vacant at the time of the loss. They argued before the Court of Appeal that the operation of Statutory Condition 4 ought to be suspended, in the circumstances of the case, by the judicial application of the "saving provision" found in the fire insurance section of all common law provincial insurance legislation. It reads:

Where a contract

(b) contains any stipulation, condition or warranty that is or may be material to the risk including, but not restricted to, a provision in respect to the use, condition, location or maintenance of the insured property, the exclusion, stipulation, condition or warranty shall not be binding upon the insured if it is held to be unjust or unreasonable by the Court before which a question relating thereto is tried.

The insured argued that the application of Statutory Condition 4 would be unjust and unreasonable.

The Nova Scotia Court of Appeal held that the statutory "saving provision" could not possibly operate to suspend the application of Statutory Conditions, holding that the "saving provision" was, rather, directed at harsh policy provisions drafted by underwriters. Statutory Conditions are creatures of the legislature, not underwriters. Their inclusion in every fire insurance policy is mandatory. The Court held that they must therefore be presumed to be just and reasonable, and beyond the scope of judicial review under the "saving provision."

This would appear to be well reasoned. To apply the "saving provision" to a Statutory Condition is to suspend the application of a legislated mandatory contractual term. In effect, it is asking a Court to use one provision of the Insurance Act to suspend the application of another, by finding that it is "unjust and unreasonable."

The insureds/appellants have narrowly cast the issue for the Supreme Court of Canada as being whether the legislation's "saving provision" can operate to suspend the application of a statute mandated contractual condition on the grounds that it is "unjust and unreasonable" in the circumstances of that case.

It is suggested that the real issue is whether a material change that existed at one time, but is no longer there at the time of a loss, can still void an insurance contract. There is a reasonably solid body of law in favour of insurers on that question. It would appear that the appellants, by arguing that Statutory Condition 4 ought to be suspended on the grounds that it is unjust and unreasonable, are simply trying to do an "end run" around well-established law that historical material changes in the risk can and do void contracts, even when the material change is no longer in existence at the time of the loss.

At the time this article was finalized, the Supreme Court of Canada was scheduled to hear the appeal on November 2, 2004. We will follow the progress of this case and comment on the Supreme Court of Canada's decision in a future On-Risk publication. Should you wish to discuss this case in the meantime, please contact David Hendricks. The Nova Scotia Court of Appeal decision can also be accessed at:

Minor Injury Reforms (Alberta)

The Alberta Insurance Act (the "Act") has been amended effective October 1, 2004 to implement a minor injury non-pecuniary damage cap of $4,000 and incorporate Diagnostic and Treatment Protocols relevant to no-fault benefits insurers. In addition, the Act was updated to provide for past and future loss of income claims to be calculated on a net basis and the deductibility of collateral benefits. These latter amendments were in force prior to the October 1, 2004 amendments to the Act and relate only to motor vehicle accidents that took place after January 24, 2004.

The Diagnostic and Treatment Protocols (the "Protocols") apply if the insured person wishes them to apply and the health care practitioner chooses to diagnose and treat the insured person's strain, sprain or whiplash associated disorder in accordance with those Protocols. If the Protocols are followed, the healthcare practitioner, including a physician, chiropractor or physiotherapist involved in the insured's case, is to assess the insured's injury with reference to the Protocols and make recommendations for treatment based upon the Protocols. For a first or second-degree strain and a Whiplash Associated Disorder ("WAD") Type I injury, the insured will be entitled to one assessment and a cumulative number of 10 treatments by a physiotherapist, chiropractor or other adjunct therapist. If the strain or sprain is of the third degree and the WAD is Type II, the treatment available is increased to 21 treatments. There are provisions for the healthcare practitioner to refer to an injury management consultant if the insured's injuries are not healing as expected.

Under Section B of the Standard Automobile Policy, the insured can always seek additional treatments with the insurer's approval. Once 90 days from the date of the accident has passed, the insurer can then assess the claim and be involved in determining what further treatment is appropriate and will be covered pursuant to the policy.

These Diagnostic and Treatment Protocols are the stepping-stones to the Minor Injury Regulation, which is the legislation that sets the cap for non-pecuniary general damages for a minor injury at $4,000. If the Protocols are not applied, the insured is at risk of having the injury assessed as a minor injury regardless of whether it is really a minor injury. The cap applies to strains, sprains and Type I or II WAD's provided the injury does not result in serious impairment. Serious impairment is the insured's substantial inability to perform any of their essential tasks of employment, education or normal activities of daily living. If the insured has had a serious impairment since the accident and there is no expectation it will substantially improve, the injury is not a minor injury and is assessed as it would have been prior to the amendments. Otherwise, the injury is a minor injury and general damages are assessed at a maximum of $4,000.

If there is a non-minor injury in addition to a minor injury, general damages are assessed for the non-minor injury independent of the minor injury. If the total general damages for the minor injury plus the non-minor injury are still $4,000 or less, the cap of general damages is $4,000. If the general damages that would be awarded for both injuries are in excess of $4,000, general damages are $4,000 plus the remaining amount assessed for the non-minor injury.

If the insurer and the insured cannot agree on whether the injury is a minor or non-minor injury, notice can be given that a Certified Examiner (a medical doctor) is to perform an assessment. It is important to note that the certified examiner's opinion on whether the injury is a minor or non-minor injury is prima facie evidence to that effect.

Finally, past and future loss of income claims are now assessed on a net basis. They are to be determined by deducting income tax, CPP contributions and Employment Insurance premiums. Moreover, the award is now to be reduced by no-fault benefits, non-Alberta Health Care Accident and Sickness benefits and proceeds of policies of insurance. As a result, with the exception of Worker's Compensation, most subrogated claims did not survive the legislation.

For more information about the Alberta Minor Injury Reforms, please contact Megan McMahon.The legislation can also be accessed at:

Insurer Liable For Aggravated And Punitive Damages In Impaired Driving Case?


A recent jury decision may make legal history in Canada. The unreported jury decision, from Hamilton, addressed damages for personal injuries suffered by a pedestrian. An allegedly drunk driver, Grigg, struck the Plaintiff, McIntyre, as she was walking home from a university bar. McIntyre commenced an action against Grigg and the drinking establishment that served him, seeking general damages in addition to punitive and aggravated damages.

The local newspaper, The Hamilton Spectator, reported a witness testified she believed Grigg was intent on running McIntyre and her friends (all pedestrians) off the road. A breathalyzer test indicated Grigg had consumed the equivalent of 15 drinks on the night of the accident. Grigg originally also faced a 5 count criminal indictment; however, he pled guilty to careless driving because police failed to properly advise him of his constitutional rights upon his arrest for impaired driving. As a result of this failure, the breathalyzer test results were inadmissible in the criminal proceedings.

Jury Decision

McIntyre's lawyer urged the jury not to let Grigg's reprehensible behaviour go unpunished. Grigg's lawyer advised the jury that punitive and aggravated damages were "rarely awarded and no civil jury in Canada has ever awarded them in a drinking and driving case." The jury awarded McIntyre $830,000 including $250,000 for pain and suffering, $100,000 in aggravated damages and a further $100,000 in punitive damages. Grigg was found 70% liable and the drinking establishment 30% liable.

Grigg's lawyer advised The Hamilton Spectator that Grigg's insurance policy indemnified him against liability "imposed by law upon the insured," including the aggravated and punitive damages. This is similar wording to that found in Alberta's Standard Automobile Insurance Policy.

Grigg's lawyer indicated both the drinking establishment and the insurer are appealing the decision.

Should you wish to discuss this unreported decision in greater detail, please contact Laurelle Funk.

No Conditional Consent To Drive?
A Commentary On Mugford v. Kodiak Construction Ltd., 2004 ABCA 145.

The Court of Appeal decision in Mugford significantly altered the law in Alberta with respect to the issue of conditional consent (s. 187 of the Traffic Safety Act, R.S.A. 2000, c. T-6, formerly s. 181 of the Highway Traffic Act).

In the Mugford case, the Court of Appeal examined the following issue:

When an employee has express consent to possession of an employer's motor vehicle, but does not have express or implied consent to drive the vehicle at the time of the accident and is in breach of the conditions attached to the possession of the vehicle, does section 181(b) of the Act apply to make the employer vicariously liable for the employee's negligence?

The Court characterized the issue as a question of statutory interpretation. For convenience, section 181(b) of the then Highway Traffic Act, R.S.A. 1980, c. H-7, is set out below.

181. In an action for the recovery of loss or damage sustained by a person by reason of a motor vehicle on a highway,

(b) a person who is driving the motor vehicle and who is in possession of it with the consent, express or implied, of the owner of it,

is deemed to be the agent or servant of the owner…and to be employed as such, and is deemed to be driving the motor vehicle in the course of that person's employment…

The above section is often referred to as the deeming provision. It deems a person who is in possession of a motor vehicle and driving with the consent of the owner to be the agent or servant of the owner, and driving the vehicle in the course of his employment. Accordingly, the owner is vicariously liable for any losses caused by anyone in possession and driving with consent of the owner.


To understand the impact of Mugford, it is helpful to review the facts of the case. From 1996 to 1999, Myron Weber was a seasonal employee of Kodiak Construction Ltd. ("Kodiak") and was given possession and use of the company vehicle. When not using the company vehicle, it was kept at Weber's home. Weber signed an agreement with Kodiak that he would not use the vehicle for personal use. The agreement stated:

I agree that the vehicle is only to be used to travel directly to and from work. In the event that I am found in breach of these terms, I covenant and agree to be personally responsible for all costs related thereto including any damages sustained to the said vehicle.

Weber also acknowledged a company prohibition against operating the company vehicle if he had been drinking.

In 1999, Weber was involved in an accident while driving Kodiak's vehicle. Prior to the accident, Weber had been drinking, had taken a detour home from work, stopped to have dinner with his girlfriend and then visited a co-worker. Kodiak denied liability on the basis that Weber did not have consent to drive at the time of the accident.

The Court of Appeal Decision

The Court of Appeal held that the deeming provision applied to make Kodiak vicariously liable. The Court found that the deeming provision did not permit conditional consent, because to do so would interpret the s.181 too narrowly and undermine its remedial object.

The Court stated the deeming provision was enacted to modify the common law of master and servant. Under the common law, an employer was not liable for the negligence of an employee if the employee was engaged in some activity beyond the course and scope of his employment. The Court of Appeal found the deeming provision was enacted to avoid the common law result and to ensure vicarious liability of an employer would not be avoided on the basis an employee was on a separate "frolic" outside the scope of his employment.

The Court of Appeal also looked at the intent of the legislators in enacting the deeming provision, namely to protect the public. The deeming provision was enacted to deem an employer/employee relationship when a driver was in possession of the owner's vehicle and driving with consent. It was intended that the owner be liable since the owner was more likely to have assets and insurance from which innocent victims could recover. Thus, owners should not be careless in allowing others to use their vehicle.

Court's Interpretation of the Deeming Provision

The Court of Appeal stated the purpose and policy underlying the deeming provision were key to interpreting the deeming provision. The overriding policy in this case was public protection. In that context, conditional or limited consent is not appropriate. It is not appropriate that an innocent member of the public be prejudiced by some secret arrangement between the owner and driver. The onus is on the owner to ensure that the person who is lent the vehicle is trustworthy and responsible.

Further, the Court stated where an owner has essentially relinquished day-to-day control over the use and possession of a vehicle to an employee, the owner will be vicariously liable even when the employee is in breach of the conditions imposed by the owner. Any specific agreement or conditions on use imposed by the employer will not vitiate consent.

Practical Implications

Even prior to the decision in Mugford, employers had to exercise caution with respect to who they permitted to operate company vehicles because of the deeming provision. After Mugford, employers ought to exercise even greater caution. Now, employers will be liable where they have relinquished day-to-day control over the vehicle, even if the employee is in breach of an agreement as to possession or use imposed by the owner. As the Court noted:

Placing conditions upon the use of the vehicle or the manner of driving is not sufficient to exculpate the owner from the vicarious liability imposed … because, in most cases, another purpose of the section, giving victims of negligent driving recourse to mandatory insurance, would be subverted and could give rise to absurd results.

Requiring consent at the precise time of the accident operates in the same manner as conditional consent. The general consent to use and possession will prevail over any conditional consent agreement to make the owner liable. If an employer wants to avoid the operation of the deeming provision, the employer may have to resort to requiring employees to obtain permission to possess a company vehicle for every use of the vehicle (i.e. by picking up and dropping off the vehicle on a daily basis).


The Court of Appeal is not very helpful in stating the parameters of the Mugford decision. A narrow reading of the case suggests that in an employer/employee relationship, general consent to possession and driving will override any conditional consent between the employer and employee, even when the employee exceeds the consent.

Alternatively, the Mugford decision may apply to all situations where an individual lends his vehicle to another. In other words, when there is consent to driving and possession for any period subject to a conditional consent agreement, even if it is exceeded, the consent given initially will prevail making the owner liable for any losses.

The reasoning behind the decision in Mugford suggests that the broad interpretation will result. The Court stressed the purpose of the deeming provision (to remedy the common law) and the policy behind it (to protect the public). Any conditional consent to either possession or driving would effectively negate the purpose and policy underlying the deeming provision. Therefore, whenever a driver lends a vehicle to another, he should be prepared to be liable for any damage or loss incurred as a result, absent a true theft.

To discuss the implications of this decision in greater detail, please contact Laurelle Funk. A copy of the Mugford decision can be obtained from the Alberta Courts Web site at:

Expansion Of Employers' Liability In Their Dealings With Independent Contractors

The following article is the first in a three part series dealing with the expansion of employers' liability in their dealings with independent contractors. The articles are based on a paper written by Mark Josselyn1, who is a partner in the Gowlings Ottawa office.

Part one of the series will look at the increasing liability of employers for the actions of their employees and how this principle is expanding to include independent contractors. It will also include a discussion of the tests to determine who is considered to be an independent contractor and the advantages and disadvantages of such a status when dealing with vicarious liability.

By examining developing case law, part two of the series will continue the discussion on vicarious liability by looking at vicarious liability and agency. This article will focus on the distinction between actual and apparent or ostensible authority, and how this distinction can effect and employers liability.

The final part of the series will examine the risk employers now face of being found vicariously liable as a result of the development of the Enterprise Theory. It will go on to illustrate the problems facing employers by reviewing recent insurance company cases. Finally, the series will conclude will some practical considerations and tips on how to reduce the risk of liability in dealings with independent contractors.

Part One

Increasing Employer Liability For Employees And Independent Contractors

A review of recent developments in the common law dealing with vicarious liability has not given employers much reason to celebrate. Many people felt things had hit an all time low when Linda Hunt sustained serious injuries in a motor vehicle accident and the Ontario Superior Court of Justice found her employer to be contributorily negligent in connection with an award exceeding one million dollars. In order to understand what made this award even more disturbing, one has to be aware that her employer was held contributorily negligent notwithstanding that the accident took place three hours after her departure from the office Christmas party, at which she was consuming alcohol, and from which she moved on to a pub where she continued to consume more alcohol.

Employers can take some heart in the fact that a year and a half later the Ontario Court of Appeal sent the matter back to be re-tried, allowing the appeal on the technical ground that the trial judge ought not to have discharged the jury.2

However, employers are far from safe from unwanted exposure to liability. The expansion of vicarious liability for employees has already seen employers having to pay out increasing awards for things such as bad faith, stock options, punitive, aggravated and exemplary damages. Employers will now have to prepare themselves for the possibility of being found vicariously liable for the acts of individuals who they engage as independent contractors.

Liability is no longer limited to employees.

Who is an Independent Contractor?

The determination of whether a worker was an employee (under a contract of service) or an independent contractor (under a contract for services) has never been a simple matter and courts have wrestled with the application of many so called tests: the control test; the four-fold test; the permanency test; and the organizational/integration test.

The Supreme Court of Canada's recent decision in 671122 Ontario Limited v. Sagaz Industries Canada Inc.3 is now the leading Canadian authority with respect to this issue. The proposition remains that there is no one conclusive test that ought to be applied to determine whether a worker is an employee or an independent contractor. Ultimately the court must engage in a search for the "total relationship of the parties" with the central question being "whether the person who has been engaged to perform the services is performing them as a person in business on his own account."

The parties' own categorization of their relationship is not determinative. In looking at the totality of the relationship between the parties, the Court will consider a number of factors including the level of the employer's control over the worker's activities, ownership of equipment, whether the worker hires his or her own helpers, the degree of financial risk taken by the worker, the degree of responsibility for investment and management held by the worker and the worker's opportunity for profit in the performance of his or her tasks.

This is of course a non-exhaustive list. Other cases involve an examination of other factors, including the degree of management supervision and responsibility, hours of work, method of payment and exclusivity of the relationship.

Employee or Independent Contractor - Why Does the Status Matter?

The status of the worker has important consequences. For example, the protections and minimum standards provided for by provincial employment standards legislation across the country are applicable only to employees and not to independent contractors. Similarly, the common law concept of reasonable notice was something applicable only to employees and not to independent contractors. The contractual relationship with an independent contractor was terminable "at will" by either party without the requirement of reasonable notice or pay in lieu.

Typically, workers seek to be treated as independent contractors because of the beneficial tax consequences flowing from the status of being self-employed. In that event, employers are relieved the statutory obligations owed respecting employees, including, the requirement to remit source deductions for income tax, CPP and employment insurance and the requirement to provide coverage under workers compensation legislation.

For a period of time the use of independent contractors became an increasingly widespread practice in the workplace because of the perceived mutual benefits to both the organization and the worker.

While courts appeared less sanguine about the reduced protections afforded to workers, the Federal Government was even more upset about the source deductions that were being avoided. In response, the CCRA (Revenue Canada) has become increasingly vigilant in terms of policing and re-assessing the parties' own categorization of the status of particular workers. With this increased vigilance of course comes increased potential exposure to the employer not only for source deductions for income tax, CPP and employment insurance but also interest and penalties for the entire period of reassessment.

Another significant common law advantage for an employer engaging an independent contractor is the common law respecting vicarious liability, which as a very general proposition renders an employer liable for the acts of its employees but not for the acts of its independent contractors.

While there have always been exceptions for things like legislated duties and inherently dangerous or hazardous works, in the vast majority of cases a master is liable for the negligent acts of his servant while acting within the course and scope of his employment. A principal is not however liable for negligent acts of an agent, who is not a servant, but is instead an independent contractor.4

While the employer's statutory obligations with respect to independent contractors have not generally changed, there have been any number of developments in the common law that have resulted in an expansion of potential liability for employers in their dealings with independent contractors.

Potential Exposure to Employers for Dealings with Independent Contractors - The Evolution of the Intermediate Category

As far back as 1936 courts have shown their discomfort with the notion that a contract with an independent contractor could be terminated at will. In Carter v. Bell,5 the Ontario Court of Appeal reviewed the nature of the relationship between the parties and although the court was not prepared to find that the worker was an employee, the court held:

The established rule in the case of master and servant requiring notice in accordance with customer usage, and the other rule permitting discharge without notice in the case of a free agent operating on commission alone, do not exhaust the field of notice or no notice. They are each a particular portion of the broader field of an implied obligation which may attach to the contract of the parties, having regard to its other terms and to the surrounding circumstances.6

The court seemed very focused upon the factors indicative of a more permanent relationship:

There are many cases of an intermediate nature where the relationship of master and servant does not exist but where an agreement to terminate the arrangement upon reasonable notice may be implied. This is I think such a case. The mode of remuneration points to a mercantile agency pure and simple, but the duties to be performed indicate a relationship of more permanent character. 7

In 1975, the Ontario Court of Appeal again dealt with this issue in Paper Sales Corporation Ltd. v. Miller Bros. Co. (1962) Ltd.8 In addition to the permanency of the relationship emphasized by the court in Carter v. Bell, Justice Evans considered the degree of exclusivity and reliance as well as the closeness of the relationship in finding that the contractor was entitled to reasonable notice of termination:

The trial Judge found that the plaintiff [company] had become both by oral agreement and by a course of business conduct carried on over a period of 36 years, the exclusive sales agent for the defendant's product in the Provinces of Ontario and Quebec. The plaintiff was entitled to reasonable notice of termination of the existing relationship and the failure to give such notice gives rise to a right in damage.9

In 1996, the Ontario Court of Justice (General Division) reviewed the issue in a case in which the court had to deal with the termination of a Sales Agency Agreement.10 Justice Potts concluded that the dispute involved an intermediate category of agency relationship, in the middle of the continuum between employment and strict agency, requiring reasonable notice of termination. Again the analysis focused upon factors such as the exclusivity of the relationship, the degree of reliance, the duration of the relationship and the maintenance of an inventory by the independent contractor.

The most comprehensive treatment of this subject is found in the majority decision of the B.C. Court of Appeal in Marbry v. Avrecan International Inc.11 After summarizing the historical developments in the case law, Justice Braidwood suggested that the so called "intermediate category" requires a consideration of the following factors:

1. Duration/Permanency of the Relationship

The longer the duration of the relationship or the more permanent it is militates in favour of a reasonable notice requirement. Amongst other evidence, the purchase and maintenance of inventory, which contains a permanency aspect, should be considered;

2. Degree of Reliance/Closeness of the Relationship

As these two interrelated sub-factors are increased the more likely it is that the relationship falls on the employer/employee side of the continuum. Included in this factor is whether the sale of the defendant's products amounted to a significant percentage of the plaintiff's revenues; and

3. Degree of Exclusivity

An exclusive relationship favours the master/servant classification.

None of these factors are by themselves conclusive and not every factor need be present in order to classify a relationship as one requiring notice to terminate.

In the final analysis Justice Braidwood concluded:

For all the reasons expressed above I would classify the relationship between Marbry and Avrecan as more akin to employee/employer than that of independent contractor or strict agency. As such, this relationship falls in that intermediate category as identified in Carter v. Bell, supra, where the agreement may only be terminated with reasonable notice.12

What Does this Mean for the Employer?

In the past, an employer has been able to retain the services of an independent contractor, without having to undertake the same obligations owed to employees. Among other things this allowed the employer to avoid providing coverage and/or benefits for employees and having the freedom to terminate "at will" without having to fear a large award for reasonable notice if the employee choose to bring an action against the employer for wrongful dismissal. Furthermore, an employer could not be held vicariously liable for the acts of persons they engaged as independent contractors.

Simply put, the categorization of workers as independent contractors reduced an employer's risk of liability.

With the evolution of the intermediate category independent contractors can be viewed as "employees" for the purpose of litigation. Employers are then opened up to potential liability for the acts of their independent contractors. To avoid potential liability it is crucial for an employer to set up a relationship that does not in any way resemble that of an employee rather than an independent contractor.

The intermediate category has created an environment where the distance created between the employer and independent contractor is diminished and where the employer is now being considered potentially responsible for the acts of their independent contractors. Employers no longer have immunity from liability by using an independent contractor.

The next article in this series will discuss several recent cases in the area of employer liability and agency agreements. It will explore agency relationships and how the determination of actual and apparent or ostensible authority, can effect and employers' liability. If you wish to discuss this topic in the meantime, you may contact Heather Wilson or Mark Josselyn.


1. Mark Josselyn, Partner and Heather Wilson, Student-at-Law, Expansion of Employers' Liability in their Dealings with Independent Contractors (Gowling Lafleur Henderson LLP - 2004).

2. Hunt (Litigation Guardian of) v. Sutton Group Incentive Realty Inc. (2002), 215 D.L.R. (4th) 193 (Ont.C.A.).

3. 671122 Ontario Limited v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983.

4. J.G. Fleming, The Law of Torts, 7th ed. (Sydney, Australia: The Law Book Company, 1987) at 360.

5. Carter v. Bell, [1936] 2 D.L.R. 438 (Ont.C.A.).

6. Ibid at 440 - 441.

7. Ibid at 440.

8. Paper Sales Corporation Ltd. v. Miller Bros. Co. (1962) Ltd. (1975), 55 D.L.R. (3d) 492 (Ont.C.A.).

9. Ibid at 498.

10. Wayne Stephenson Sales Agencies Inc. v. Avrecan International Inc. (1996), 11 O.T.C. 327 (Ont. Gen. Div.).

11. Marbry v. Avrecan International Inc. (1999), 171 D.L.R. (4th) 436 (B.C.C.A.).

12. Ibid at 453.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions