In the recent decision of Keenan v. Canac Kitchens, the Ontario Superior Court of Justice provided some helpful interpretation of what is a dependent contractor and whether they are entitled to notice upon termination.
Lawrence Keenan started working for Canac in 1976 as an employee as an installer of kitchen cabinets and, ultimately, became a supervisor of the delivery installation and service of the defendant's kitchen cabinets. His wife, Marilyn Keenan joined as a foreman in 1983. In 1987 the Keenans were summoned to a meeting with management where they were told that they would no longer be employees but would carry on their work as independent contractors. This is done to shift risk and expenses to workers. The Keenans would be responsible for paying the installers, provide their own trucks, pay source deductions and WSIB and they would set the rates that they would pay their installers and the Keenans were to be paid on a piecework basis. They would also be responsible for any damage that they caused and would be expected to obtain insurance to cover such liabilities. They signed a four page agreement with Canac whereby they were to devote themselves full time to the business of Canac and report to the installation manager of Canac. They were told that if they wanted to keep their jobs they had no other choice but to agree to Canac's terms. They therefore signed the agreement. They received a record of employment and the reason for the termination was stated as "quit".
The Keenans generally worked full time for Canac except for certain periods of time where there was a lack of work at Canac and they obtained work with other companies. The percentage of work from Canac varied from 66% to 80% for a few years with the balance of the work being with other companies who were, in fact, competitors.
However, the Keenans received employee discounts from Canac and wore shirts with the company logos and they considered themselves to be loyal employees of Canac. In 2009 the Keenans' contract was terminated. The Keenans sued for termination pay.
The court said that employment relationships exist on a continuum; with the employer/employee relationship at one end of the continuum, and independent contractors at the other end. Between those two points, lies a third intermediate category of relationship, now termed dependent contractors. The court followed the general principles distinguishing independent contractors from employees which deals primarily with whether the individual was limited exclusively to service of the principal, the control, whether the individual provided his own tools, whether there was risk, and whose business it is. The court adapted the principles distinguishing independent contractors from employees to dependent contractors and stated that the following test applied to dependent contractors: "..in the development of the jurisprudence on the existence of an intermediate category between employee, on the one hand, an independent contractor, on the other hand, a finding that the work was economically dependent on the defendant due to complete exclusivity or a high level of exclusivity weighs heavily in favor of the conclusion that the intermediate category should apply". The court then reviewed the general principles distinguishing independent contractors from employees and found that in the factual circumstances the Kenyans were dependent contractors and were entitled to notice.
As a result, the court ordered 26 months notice to the Keenans plus interest and costs.
This decision clearly shows that when a business tries to have its cake and eat it too, they can face substantial financial punishment if they fail to treat workers fairly on termination no matter what the contract provides.