In Khan v. All-Can Express Ltd., 2014 BCSC 1429, the
British Columbia Supreme Court (the "Court") recently
confirmed that a contractor providing services on a long-term and
regular basis may be entitled to reasonable notice or pay in lieu
from a company where the contract is terminated without cause.
All-Can Express Ltd. operates a freight and parcel
transporting business under the name of Ace Courier. In June of
2007, Ace Courier engaged Mr. Khan as an owner/operator to provide
courier delivery services to customers of Ace Courier. The contract
relationship between Ace Courier and Mr. Khan continued until 2012
when the contract was terminated by Ace Courier, allegedly for
Mr. Khan commenced legal proceedings, alleging that he was in
fact an employee of Ace Courier, and accordingly was entitled to
reasonable notice or pay in lieu of notice. In response, Ace
Courier claimed that that Mr. Khan was an independent contractor
and accordingly his contract to provide services could be
terminated at any time, without notice. Further, Ace Courier
claimed that just cause existed to terminate the contract because
Mr. Khan had diverted or attempted to divert customers to a
competing courier company.
At the time of his engagement as a driver, Mr. Khan signed two
agreements with Ace Courier. The first agreement stipulated that he
was a self-employed subcontractor and was responsible to provide
his own vehicle and to pay all costs associated with maintenance
and operation of the vehicle and arrange for a relief driver when
necessary. In addition, Mr. Khan was to be responsible for filing
his own income taxes, declaring self employed status and for
arranging his own workers' compensation coverage. Mr. Khan
received no benefits of any kind from Ace Courier and was not paid
Mr. Khan also signed a non-competition agreement which provided
that during the period of his engagement as a driver with Ace
Courier, and for a period of 12 months thereafter, Mr. Khan would
provide exclusive services to Ace Courier.
Notwithstanding the facts which are summarized above, the Court
was not prepared to conclude that Mr. Khan was an independent
contractor of Ace Courier. Instead, the Court held that because Mr.
Khan had provided exclusive driver services to Ace Courier over a
long period of time this meant that he was in a position of
economic dependence upon Ace Courier.
Accordingly, the Court decided that the proper characterization
of the relationship between Mr. Khan and Ace Courier was that of a
dependent contractor, and not an independent contractor. In the
words of the Court, Mr. Khan was "a man with a truck looking
for a job. He was required to sign some forms to secure that job
and he did so".
The Court concluded that many workers perform services for
others in arrangements that are structured such that they are
neither strictly employment relationships nor are they properly
characterized as independent contractor relationships. In such
instances, where a dependent contractor relationship is found to
exist, there is a legal requirement to provide reasonable notice
where services are terminated without cause. The Court determined
that Mr. Khan was entitled to 16 weeks notice of termination
calculated at 3 weeks per year, based on his length of service from
2007 until 2012.
It is clear from this case that despite any particular agreement
between the parties, there may be an obligation to provide
reasonable notice or to pay severance in lieu of notice to persons
who do not meet the traditional definition of an employee but who
nonetheless provide services on a long-term and regular basis.
In order to avoid the unpleasant surprise of being obligated to
provide potentially onerous notice of termination or pay in lieu of
notice to dependent contractors consideration should be given to
including a contractual provision which specifically identifies the
right of contractors to receive notice or pay in lieu of notice on
the termination of the contract. Also, contractors should be
provided with the opportunity to receive legal advice before
entering into any such contractual arrangements.
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
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