Employee or Dependent Contractor

In order to access the protections and rights of the Employment Standards Act, an individual typically needs to be considered an “employee” as opposed to an “independent contractor”

EMPLOYMENT RELATIONSHIP

Reasonable Notice of Termination

Importantly, independent contractors are excluded from legislation relating to rights upon termination and reasonable notice. The dividing line between these two types of workers has been developed over many years, and is still evolving today. “Dependent contractor” is a third category of worker that must be considered. Dependent contractors are entitled to reasonable notice of termination for their services, just like employees, yet they act in many ways like independent contractors. Dependent contractor status is to be considered a “carve out” from the non-employment category and does not affect or reduce the scope and applicability of existing employment tests. Essentially, an individual may be a dependent contractor when a traditional employment relationship does not exist, yet some of the indicia of independent contractor status are missing. In determining whether an individual is a dependent contractor, and therefore entitled to reasonable notice of termination, the courts will first determine whether they are an employee or a contractor. The courts will ask: Who supplies the equipment? What degree of control does the employer have over the work? How is the worker paid? Can the worker subcontract out their work? Who bears the benefit of profit and the risk of loss? Is the relationship exclusive? What did the parties intend?

If the worker is a contractor, then the courts consider whether they are an independent or dependent contractor. Exclusivity is determinative is making this decision. This means that if the worker is only allowed to deal with one employer, they are dependent on that employer and therefore are owed reasonable notice. As with a typical employment relationship, if there is cause for dismissal there is no obligation to provide reasonable notice upon termination of the relationship. See Mckee v. Reid’s Heritage Homes Ltd., 2009 ONCA 916 and Boettcher v. Stremecki (1980), 25 A.R. 372 (Q.B.) for relevant cases. Please note that the above information does not constitute legal advice. It is general information about the law. If you require legal advice and assistance in an employment matter, please contact the experts at Ball Professional Corporation.

The Ontario Court of Appeal (“ONCA”) allowed the appeal of the OCL in Thurston v. Ontario (Office of the Children’s Lawyer), 2019

In this case it was held that the motion judge erred in concluding that the respondent was a dependent contractor.

The Respondent was a lawyer who was occasionally retained by the OCL to provide legal services regarding custody and access and child protection issues. She was a member of a panel of lawyers on a list to provide such services to the OCL for approximately thirteen years pursuant to several fixed-term contracts each requiring her to submit her application for reappointment every year. The respondent also had her own separate legal practice which formed the bulk of her earnings.

When the OCL failed to renew her contract following expiration of the last one, the respondent claimed she was a dependent contractor and hence was entitled to 20 months’ notice of termination. The OCL brought a motion for summary judgment to dismiss her claim, which failed and hence, the OCL appealed the motion judge’s decision.

The ONCA found that the motion judge mis-characterized the nature of the legal standard for a dependant contractor. As seen in the Keenan v. Canac decision, a high degree of exclusivity is often required to establish economic dependency for a dependent contractor. In the case at bar, such factors were not present. The Respondent had her own practice and was hence not dependent on OCL for work. At the higher end only 39.9” of her annual billings were from OCL and this was held to not meet the threshold of “near complete exclusivity” required to satisfy the economic dependence test. Furthermore, the respondent was one of several lawyers on retainer to provide legal services to OCL.

Ultimately, there was no dependent contractor status. If you are an employer looking to clarify your employment relationships with independent contractors, we can help. For employees, if you feel your employment relationship has changed such that you are now in a dependant contractor relationship with a particular organization, contact us at 416-721-7997 extension 225.