Independent Contractor or Dependent Contractor?

June 16, 2015

A recent case from Ontario analyzed the employment status of two long-serving workers.

The two plaintiffs worked as installation supervisors for the employer, a kitchen cabinet manufacturer, for 32 years and 26 years, respectively. Up to 1987 both plaintiffs had a formal employment relationship with the employer.  In 1987 the employer advised both plaintiffs that they would no longer function as employees but would continue to work as independent contractors. The plaintiffs signed a contract, and carried on work for the next two decades almost exclusively for the employer. Only when work from the employer slowed down substantially did they take on other work, and they never incorporated a separate business. To the outside world and to the employer’s customers, the plaintiffs appeared as employees of the employer, wearing employer t-shirts, carrying employer business cards, and enjoying employee discounts.

In 2009 the employer began winding down its business and soon work stopped flowing to the employees. The employer did not provide notice of termination of employment, and took the position that it was not required to do so because the plaintiffs were independent contractors.

The Ontario Superior Court considered whether the plaintiffs were ‘dependent contractors’ entitled to reasonable notice of the termination of their employment, or independent contractors who have no such common law rights to notice or pay in lieu. Based on the following facts, the Court was persuaded that the status of the plaintiffs was that of ‘dependent contractors’:

• The plaintiffs were economically dependent on the employer;
• The plaintiffs worked almost exclusively for the employer, and believed they were required to do so;
• The employer maintained control of the business;
• The employer provided cars, phones, and office space and other ‘tools’ for the plaintiffs to perform their work;
• The plaintiffs had no genuine opportunity to generate additional profits; and
• The business belonged to the employer with no benefit accruing to the plaintiffs.

On the basis of their status as dependent contractors, the Court awarded each of the plaintiffs 26 months of pay in lieu of notice of the termination of their employment.  This case underscores that the determination of the legal relationship between a worker and employer is a matter of substance, not form, and that courts will look at a number of factors to assess employment status.

Keenan v. Canac Kitchens, 2015 ONSC 1055

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