By Brandon I. Hillis

A decision from Ontario¹ highlights the caution that companies need to employ when characterizing those who provide services to them as “contractors.”

Lawrence and Marilyn Keenan commenced employment with the defendant in 1976 and 1983, respectively. In 1987, they were informed that they would be carrying on as contractors, and provided with contractor agreements. Despite this, their relationship with the defendant remained largely unchanged. They continued to work almost exclusively for the defendant, which continued to maintain effective control of all aspects of the business. The relationship came to an end in 2009 when the defendant wound up its operations and took the position that, as independent contractors, the Keenans had no entitlement to notice of termination.

At trial, the Keenans argued that they were dependent contractors and entitled to notice. The Court agreed and, in so doing, drew attention to the fact that, based on their nearly exclusive working relationship with the defendant, the Keenans were economically dependent upon the defendant and determined that 26 months’ notice was reasonable in the circumstances.

On appeal, the defendant asserted that the Keenans should have been considered independent contractors because they did not work exclusively for the defendant immediately prior to the cessation of their relationship, and that that notice periods were excessive. Both grounds were dismissed:

• in rejecting the first, the Court held that complete exclusivity is not required and that what needs to be shown is economic dependence “due to complete exclusivity or a high level of exclusivity”; and
• in rejecting the second, the Court observed that the Keenans held supervisory positions, “were Canac’s public face to the outside world” and had had spent the entirety of their working lives with the company.

What Can Be Learned?
This case serves as a reminder that, when considering if someone should be retained as an independent contractor, employers should be aware that:

• The Language of the Contract Will Not Dictate The Nature of the Relationship: In determining an individual’s status, the courts will not limit their enquiries to the language of a contract, but rather will give consideration to the nature of the relationship.
• All Agreements Should Include Termination Clauses: Regardless of whether an employer is entering into a contractor or employment agreement, employers can often substantially reduce their liability (and legal costs) by including clauses which limit an individual’s termination entitlements. While a truly independent contractor may not have any entitlement to notice upon termination, as can be seen from this decision, the consequences of a finding that a contractor is not truly independent can be significant.

As a final note, employers would be well-served to ensure that termination clauses – even those for contractors – comply with the statutory minimums set out in the applicable employment standards legislation so as to reduce the risk of a termination clause being deemed invalid if a “contractor” is found not to be a contractor at all, but rather an employee who would be entitled to the minimum protections set out in the applicable statutes.

Brandon I. Hillis practises in all areas of employment and labour law at Roper Greyell LLP, one of Canada’s leading workplace law firms. He regularly provides employers and employees with strategic advice, and has represented clients in the courts and before a wide range of administrative tribunals. Brandon can be reached at bhillis@ropergreyell.com. For more information about his practice and Roper Greyell, please visit www.ropergreyell.com.

While every effort has been made to ensure accuracy in this article, you are urged to seek specific advice on matters of concern and not to rely solely on what is contained herein. The article is for general information purposes only and does not constitute legal advice.

1. Keenan (c.o.b. Keenan Cabinetry) v. Canac Kitchens Ltd., a Division of Kohler Ltd., 2016 ONCA 79