What is a Dependent Contractor?
A workers relationship generally falls into one of three classifications: employee, dependent contractor or independent contractor. Dependent contractors are seen as the in-between category of workers—basically if one is held to be a contractor and not an employee at first instances, the legal test will assess whether the worker is an independent or dependent contractor.
The concept of dependent contractor is not new. In the Ontario Court of Appeal (“ONCA”) decision of Carter v. Bell and Sons (1936), the court endorsed the notion of an “intermediate” position between employee and independent contractor for work relationships of a “more permanent character” where an agreement to terminate upon reasonable notice could be implied. Unlike independent contractors, dependent contractors are required to receive reasonable notice or pay in lieu of notice following termination given the degree of exclusivity and the extended length of time they may have worked for one business.
What Makes a Worker a Dependent Contractor?
Exclusivity or the degree of exclusivity is a major factor in determining whether one is a dependent contractor or not. Exclusivity is seen where the employer prohibits the worker from working for others. A high degree of exclusivity weighs in favour of a dependent contractor finding by the courts. The precedent setting case of Keenan v. Canac Kitchens Ltd., 2016 ONCA 79 examined the concept of exclusivity and its importance when assessing a workers status. Both the trial and ONCA decision held that the plaintiffs, Marilyn Keenan and Lawrence Keenan were dependent contractors given the high degree of exclusivity.
The Court of Appeal Stated:
Exclusivity cannot be determined on a “snapshot” approach because it is integrally tied to the question of economic dependency. Therefore, a determination of exclusivity must involve, as was done in the present case, a consideration of the full history of the relationship. It is for the trial judge to determine whether, after examining that history, the worker was economically dependent on the company, due to exclusivity or a high level of exclusivity”
Legal Obligations to Consider when Terminating Dependent Contractors
It is important to keep in mind that employers are obligated to given reasonable notice or pay in lieu of notice when terminating dependent contractors. If they do not, there will be significant legal consequences.
Evidently, it is easy for the divide between independent and dependent contractors to be blurred. To protect your company, ensure a clear written contract is in place for every contractor that is hired. Ensure if responsibilities change over time, that the necessary measures are in place so your organization is not faced with an unintended classification by the courts and keep in mind that courts will always look at the substance of the relationship rather than the job title ascribed to a worker.
An experienced employment lawyer can help you craft contracts, and advise on whether the status of an independent contract may have changed.
Stacey Reginald Ball is your source for expert legal advocacy and advice on dependent contractor/employee classifications. Stacey Reginald Ball is also versed in constructive dismissal, wrongful dismissal and other employment related issues. We serve the Toronto and Greater Toronto Area, as well as other national and international clients. For a Toronto wrongful dismissal lawyer, contact our office at 416-921-7997.