Dependent contractors are becoming an increasing portion of the
working population, and an Ontario court recently confirmed that
protections available to them are at the top end of the scale.
In the case of Keenan v. Canac Kitchens,2015 ONSC 1055,
the Ontario Superior Court of Justice considered a case where a
married couple (the "Keenans") had worked as installers
and foremen with Canac — a manufacturer, distributor,
and retailer of kitchen cabinets and accessories — since the
mid-1970s. In March of 2009, the Keenans were informed that their
services would no longer be required, as Canac was closing its
doors. No notice or pay in lieu was given.
The Keenans brought an action for wrongful dismissal, asserting
that they were dependant contractors and as such, were owed notice
or pay in lieu. Canac argued that the Keenans were independent
contractors because they were paid by invoice rather than salary,
and also had subcontractors working under them.
The Keenans had begun their relationship with Canac as
employees, but in 1987, this changed when Canac notified them that
they would be contractors for Canac as "Delivery and
Installation Leaders." Under this arrangement, the Keenans
were paid (as when they were employees) on a piece-work basis for
units installed, but without deduction for income taxes, employment
insurance, and the Canada Pension Plan. The Keenans were required
to devote "full time and attention" to their Canac
duties. Canac would set the rates to be paid to the installers. The
Keenans paid the installers with funds provided by Canac. In 2007,
the Keenans began working for a competitor due to a slow-down in
Canac's work, but still devoted approximately 75 percent of
their work hours to Canac.
The Keenans were successful before the Superior Court, and were
awarded approximately $125,000 in lieu of 26 months'
Canac appealed on the basis that the trial judge erred in
finding that the Canacs met the requirement of exclusivity, since
around the time of the termination, the Keenans were working for a
competitor and, as such, were not dependant contractors.
The Ontario Court of Appeal denied the appeal on this ground,
agreeing with the trial judge's observation that, "in the
jurisprudence leading to a recognition of the intermediate category
of dependent contractors, a finding that the worker was
economically dependent on the company due to complete exclusivity
or a high level of exclusivity weighed heavily in favour of the
conclusion that the worker was a dependent contractor." The
Court held that exclusivity could not be determined at one moment
in time because it is integrally tied to the question of economic
dependency and must involve a consideration of the full history of
Canac further argued on appeal that the trial judge had erred in
setting an award greater than 24 months, which was previously
thought to be the unofficial "cap" on reasonable notice,
without finding exceptional circumstances. In the 2006 case
of Lowndes v. Summit Ford Sales Ltd., the Ontario
Court of Appeal had stated that "generally only exceptional
circumstances will support a base notice period in excess of 24
months." Canac requested that pay in lieu of notice be set
between 16 and 18 months instead.
The Ontario Court of Appeal affirmed the lower court's
decision, finding that the award should not be reduced although
there had been no explicit finding of exceptional circumstances.
There was also no finding that dependant contractor status
automatically leads to a lesser notice entitlement. In the
circumstances, the Court found that an award in excess of 24 months
was justified and saw "nothing wrong in the trial judge's
finding that 26 months' notice was reasonable." This was
the first time the Ontario Court of Appeal had endorsed a notice
period of 26 months.
As such, although there will still likely be few cases of
employees or dependant contractors entitled to reasonable notice
periods in excess of 26 months, the "cap" identified
in Lowndes v. Summit Ford Sales will be
surpassed in the right circumstances. For employers, written
contracts describing the nature of the relationship and carefully
limiting the worker's notice entitlement in the event of
termination will help to avoid the imposition of such a large
award. With regard to the dependent contractor determination, it is
clear that this area of the law continues to evolve. Employers must
be diligent in not assuming a particular relationship is one of an
independent contractor, particularly where the relationship has an
element of exclusivity or near-exclusivity. Field Law can assist
with this determination and help to fashion solutions designed to
minimize employer risk.
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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