Recent case law on the distinction between an employee and independent contractor for wrongful dismissal purposes would suggest that even if the court does not find the individual to be an employee, it might nonetheless apply to the worker an intermediate status, imposing a reasonable notice of dismissal requirement. This may be because more and more employees in today's gig economy do not fit neatly into the category of either employee or independent contractor.
In 2009, the Ontario Court of Appeal (the "ONCA") affirmed the existence of the dependent contractor worker classification:
I conclude that an intermediate category exists, which consists, at least, of those non-employment work relationships that exhibit a certain minimum economic dependency, which may be demonstrated by complete or near-complete exclusivity. Workers in this category are known as "dependent contractors" and they are owed reasonable notice upon termination.1
The purpose of this category is to provide some protection for workers who are technically contractors, but are in a position of economic vulnerability.
Recently, in Thurston v. Ontario (Children's Lawyer), 2019 ONCA 640, this issue was back before the ONCA and it was a lawyer who provided legal services to the Office of the Children's Lawyer (the "OCL") over a period of 13 years who was seeking dependent contractor status. The OCL contracts with private practice lawyers to represent the rights of children in custody, access, and child protection matters on an as-needed basis.
The Summary Judgement Motion
The case began as a summary judgement motion brought by the OCL, in which it sought to dismiss the lawyer's dependent contactor claim. The key piece of evidence was a chart summarizing the lawyer's OCL work as a percentage of her law practice, which stated that OCL billings accounted for an average of 39.9% of her annual billings over her tenure.
The OCL's argument focused on exclusivity, submitting that the lawyer's private practice billings were significant throughout the relationship and her contracts with the OCL did not restrict her ability to work for others. The lawyer focused on control, noting that she was unable to choose her files, and economic dependence, highlighting the pattern of increasing work with the OCL.
While considering these arguments, in finding that she was a dependent contractor, the court relied heavily on the "permanency" of the relationship over 13 years and the fact that her work was "integral to the OCL, with the public perception of her as an OCL lawyer".
The Appellate Decision
The ONCA disagreed, finding that the motions judge misunderstood and misapplied the law. Referring back to its previous decisions, the ONCA reaffirmed that "exclusivity is determinative, as it demonstrates economic dependence". In this regard, the ONCA stated:
On no account can 39.9% of billings be said to constitute exclusivity or "near-complete exclusivity", such that economic dependence on the OCL is established.
"Near-complete exclusivity" cannot be reduced to a specific number that determines dependent contractor status; additional factors may be relevant in determining economic dependency. But "near-exclusivity" necessarily requires substantially more than 50% of billings. If it were otherwise, exclusivity – the "hallmark" of dependent contractor status – would be rendered meaningless.
The ONCA also highlighted relevant considerations missed by the motions judge:
- the lawyer's contracts with the OCL contemplated that she would continue her private practice and required her to confirm that she did not work exclusively for the OCL;
- the lawyer continued to operate her private legal practice during the entire period of her retainer;
- the lawyer had her own office, supplies, and staff; and
- the lawyer's private practice constituted the main source of her total income throughout the period.
The employer's appeal was allowed and the ONCA substituted an order granting the summary judgement dismissal.
Lesson for Employers
This decision is a reminder that exclusivity and economic dependency are the hallmarks of the dependent contractor classification analysis. At a minimum, "near-complete exclusivity" is required and the ONCA has now clarified that this requires "substantially more than 50% of billings". In other words, while more than 50% of billings does not necessarily mean that someone is a dependent contractor (additional factors will likely be relevant), workers who do not meet this threshold cannot be considered as such. Therefore, it is a good idea to ensure that your contractors do not meet this threshold to reduce the chances of inadvertently requiring reasonable notice of termination.
This article was originally published by The Lawyer's Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.
1 McKee v. Reid's Heritage Homes Ltd., 2009 ONCA 916.
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