Organizations are increasingly retaining the services of
individual contractors rather than hiring employees in order to
increase the organization's flexibility and obtain special
expertise on an as-needed basis. Historically, organizations have
been subject to statutory and common law duties in relation to
their employees which have not been applied when organizations
retain independent contractors. Case law over the past ten years
suggests that the classic distinction between employees and
independent contractors is becoming blurred.
The distinction between an employee and an independent
contractor is not as clear as it once was. Even where an
organization enters into an agreement that explicitly contemplates
that the individual is an independent contractor, courts have
increasingly found that it is the substance of the relationship,
and not the parties' intentions, that determines whether an
individual is an employee or an independent contractor. Not only
does this make it difficult for an organization to know what
obligations it owes to an individual, but it exposes an
organization to liability in circumstances where it characterizes
an individual as an independent contractor and is subsequently
found to be wrong by a court or tribunal. Two recent cases bring
these concerns to light: Braiden v La-Z-Boy Canada
Ltd1 and Rennie and VIH Helicopters Ltd,
The Ontario Court of Appeal's decision in Braiden
demonstrates the court's movement away from acknowledging a
bright line between employees and independent contractors. Even
though Mr. Braiden's agreement with La-Z-Boy Canada Limited
referred to Mr. Braiden as an independent contractor, the Court of
Appeal found that an employer-employee relationship existed. The
Court of Appeal explained that relationships between organizations
and individuals lie on a continuum: the employer-employee
relationship lies at one end and the independent contractor
relationship lies at the other. However, between these two extremes
lies a third category of relationship where reasonable notice is
also required in order to terminate the relationship. The Court of
Appeal found that Mr. Braiden fell within this third category
because: 1) Mr. Braiden worked full-time and exclusively for
La-Z-Boy; 2) Mr. Braiden was subject to La-Z-Boy's control; and
3) Mr. Braiden's financial compensation consisted solely of his
commissions from La-Z-Boy. Accordingly, Mr. Braiden was entitled to
common law reasonable notice.
In Rennie the Federal Court of Appeal held that the
true relationship between the parties was that of employer and
employee, even though Mr. Rennie had signed an independent
contractor agreement. The Federal Court of Appeal found the
following factors to be significant: 1) Mr. Rennie received
training from the organization and worked under the direction and
overall supervision of the organization's maintenance
supervisor; 2) payment for Mr. Rennie's labour was based on an
hourly rate and not a contract price; 3) the organization provided
Mr. Rennie with tools, including coveralls, gloves, transportation
to job sites and specialized tools; 4) Mr. Rennie's sole income
was from the work he did for the organization; and 5) the work Mr.
Rennie did was an integral part of the organization's work.
Even though Mr. Rennie had described himself as an independent
contractor in other court proceedings, the Federal Court of Appeal
overlooked this and held that Mr. Rennie was an employee and thus
entitled to damages for unjust dismissal.
The lessons from these two cases are clear: the classic
distinction between an employee and an independent contractor is no
longer as clear as it once was. Organizations need to be careful
about how they end their relationship with individuals, even where
the organization believes the individual is an independent
contractor. Organizations should maintain their position that
the individual is an independent contractor, although practically
speaking, organizations may want to consider giving more notice
than is required under the agreement. In many cases, it may be a
mistake for an organization to rely solely on the notice provision
in their agreement with an independent contractor to determine the
reasonable notice to which an individual is entitled.
1. Braiden v La-Z-Boy Canada Ltd,  OJ No
2791; Braiden v La-Z-Boy Canada Ltd, 2008 ONCA 464
2. Rennie and VIH Helicopters Ltd, Re, 
CLAD No 75; Rennie and VIH Helicopters Ltd, Re, 2014 FC
22; Rennie and VIH Helicopters Ltd, Re, 2015 FCA 25
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