2009 ONCA 916 (CanLII)
McKee began working for Reid’s Heritage Homes (“RHH”) in 1987 under an exclusive contract to sell 69 homes. That contract was completed within a year, however the working relationship between the parties continued for nearly two decades. McKee’s affiliation with RHH finally came to an end during a restructuring of RHH’s sales division. The proposed restructuring had the effect of significantly altering McKee’s role with the company. Additionally, McKee felt “uncomfortable” as a result of a disparaging email that she received in response to her concerns about the deleterious affects that the intended reorganization would have on her role with RHH. RHH offered McKee employment in a modified capacity, however McKee rejected that offer.
Following her departure from RHH, McKee brought an action for wrongful dismissal. At trial, RHH contended that McKee was as a dependant contractor rather than an employee. The trial judge disagreed with RHH’s position, finding that McKee and RHH were parties of an employment relationship. McKee was awarded 18 months compensation in lieu of notice. RHH unsuccessfully appealed that decision, and subsequently brought their case to the Supreme Court. The main issue before the Court was whether McKee was an employee or a dependant contractor.
The Court confirmed that dependant contractors are a subset of the larger category that encompasses contractors generally, within which both dependant and independent contractors exist. The test necessary to determine whether an individual is an employee or a contractor is not affected by this distinction. Determining the nature of the contractor’s relationship can be settled once a position is classified as one of a contractor generally.
The factors used to classify a relationship as one of contract or employment are:
- whether the worker was limited exclusively to the service of the principal2;
- an agent’s control over the performance tasks;
- an agent’s investment in tools or materials relating to their tasks;
- an agent’s expectation of profit/risk of loss; and
- whether the agent’s activities fall within the scope of the business for which he works.3
The Court held that the exclusive nature of McKee’s relationship with RHH, the control that RHH exercised over the manner in which sales were completed, and the fact that McKee’s activities were an integral part of RHH’s business, all pointed to the fact that McKee was an employee.4
The Supreme Court found that the trial judge had correctly determined that McKee was an employee. The Court noted that deference should be given to the decision of the trial judge where such a finding is made. The task is seen as an attempt to characterize the relationship of the parties in its totality, and is best performed by he “who is closest to the facts of the case and has the best handle on the true nature of the work relationship.”5 In the absence of a palpable and overriding error, the decision of the trial judge will stand.
Finally, the Court considered the distinction between independent and dependent contractors. A contractor is dependent if two factors exist: near, or complete exclusivity, and a certain level of minimum economic dependency on the principal (employer). Despite this intermediary category, it would likely not have benefited RHH to characterize McKee as a dependent contractor. The nature of the relationship between businesses and dependant contractors requires that reasonable notice is still required6. Having found that McKee was an employee, the Court declined to comment on what would have constituted appropriate notice for a dependent contractor.