The distinction between an employee and independent contractor
is not always clear as can be seen in the recent decision of
Tetra Consulting v Continental Bank et al., 2015 ONSC
Lewis Cassar ("Cassar"), a 61 year old expert in the
banking sector was the owner of Tetra Consulting
("Tetra"). Tetra was retained by the Defendants,
Continental Bank of Canada (the "Bank") and Continental
Currency Exchange Canada Inc. ("CCEC") to assist in
obtaining federal approval to operate as a bank. It was the common
intention of all parties that Cassar would become an employee of
the Bank once federal approval was obtained from the Office of the
Superintendent of Financial Institutions ("OSFI").
Tetra started performing services for the Defendants in January
2013 and since the Bank was not yet up and running, Tetra invoiced
its consulting fees to CCEC. Cassar was represented to third
parties as being an employee of the Bank, had a business card
identifying him as such, and also had an email address from the
Bank. In addition, he was appointed as the Bank's Chief
Compliance Officer ("COO") and Chief Anti Money
Laundering Officer ("CAMLO"), worked from the Bank's
premises, was subject to the Bank's Code of Conduct and signed
an acknowledgement to be bound by the employee policies and
procedures. Cassar worked exclusively for the Defendants between
January 2013 and January 2015 and Tetra invoiced for the consulting
services provided by Cassar. Moreover, the OSFI was presented with
an organizational chart where Cassar was identified as the COO and
CAMLO of the Bank and as part of the regulatory approval process,
the OSFI was advised that Cassar would remain in those positions
with the Bank into the future.
Approval for the Bank was obtained from the OSFI on December 8,
2014 and in January 2015, legal counsel for the Bank provided
Cassar with correspondence indicating that his employment contract
was in the process of being prepared. Before Cassar's
employment contract was finalized, the Bank's majority
shareholder decided to discontinue the venture. On January 14,
2015, Tetra and Cassar were advised orally of their immediate
termination by the Bank and they subsequently brought an
application to the Ontario Supreme Court of Justice for summary
judgment seeking pay in lieu of notice.
Justice Morgan of the Ontario Supreme Court of Justice found
that it did not matter whether Cassar was an employee since January
2013, when he started performing services for the Bank, or December
8, 2014, when OSFI approval was obtained. He held that if Cassar
was not an employee prior to December 8, 2014, he was a
dependent contractor and therefore entitled to the same
reasonable notice as an employee. Based on Cassar's two years
of service, age and sophisticated position, Tetra was awarded 8
months' pay in lieu of notice, which amounted to more than
$158,000.00 in consulting fees.
Lesson for Employers
This decision reaffirms that it is the substance and not the
form that will be considered by a court in making a determination
as to whether a consultant is more akin to an employee as opposed
to a true independent contractor. In addition to the obligation to
provide notice or pay in lieu of notice where an employer/employee
or dependent contractor relationship is found, employers should
also be aware of other associated risks such as tax requirements
where source deductions have not been remitted on the basis that an
independent contractor relationship exists when in fact, all
indicators support an employment relationship.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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