Court Upholds 26 Month Notice Award for Dependent Contractors

In a recent decision, the Ontario Court of Appeal has revisited the law surrounding dependent contractor relationships and upheld an award of 26 months’ pay in lieu of notice for the plaintiff dependent contractors.

The plaintiffs, Marilyn and Lawrence Keenan, had been working for Canac Kitchens since 1985 and 1976, respectively. In 1987, they were informed that their employment was ending but that they could continue working for Canac as independent contractors. They were offered independent contractor agreements and continued working for the company until operations closed in 2009. At the time of their termination, the Keenans were not given any notice or pay in lieu of notice based on their status as independent contractors.

At trial, the judge awarded the Keenans 26 months’ pay in lieu of notice. Canac appealed the decision on two main grounds: that the lower court erred in its assessment of exclusivity in the relationship and secondly, that the amount of the notice award was excessive. On the first ground, the Court of Appeal found that while the Keenans had provided a small amount of services to a competitor towards the end of their employment, they had provided services only to Canac for almost the entire duration of the relationship. The Court of Appeal observed that a determination of exclusivity must not be based on a “snapshot of time” but rather, involves a consideration of the full history of the relationship. Ultimately, while the Keenans were contractors, they were in a dependent relationship with Canac. As a result, they were entitled to notice of termination.

On its appeal of the amount of notice, the employer argued that because past case law indicated that only exceptional circumstances will support a notice period in excess of 24 months, the trial judge erred by failing to make a finding of such circumstances before awarding 26 months. Given the Keenans’ ages, lengths of service and the character of the positions they held, the Court of Appeal declined to interfere with the award.

This decision reaffirms that dependent contractors, a category of worker distinct from employees and independent contractors, are entitled to reasonable notice at common law. This decision also serves as a reminder that simply characterizing a worker as an “independent contractor” is not determinative. The Court’s ruling further highlights the benefits of using contracts with termination clauses for employees and contractors alike as this provides an opportunity to limit and fix notice entitlements for both categories of worker.

Keenan v. Canac Kitchens Ltd., 2016 ONCA 79

Questions relating to the content of the article may be directed to Scott McCann.