Court of Appeal upholds notice period for dependent contractors

30 mars 2016

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In a recent decision, Keenan v. Canac Kitchens Ltd., the Ontario Court of Appeal upheld a lower court decision, confirming that two “dependent contractors” were owed 26 months payment in lieu of notice at termination.

You may recall from the original decision that Lawrence Keenan and his wife began working as employees of Canac Kitchens Ltd. (Canac) in 1976 and 1983 respectively, supervising the installation of Canac kitchens.  In 1987, Canac ended its employment contract with the Keenans and hired them on as contractors.  The contract indicated that the Keenans would be sub-contractors of Canac and devote their full-time and attention to the company.  Despite their change in status to independent contractors, the Keenans’ working relationship with Canac remained unchanged.  They continued to work exclusively for the company until 2006 when, as a result of declining Canac orders, they picked up some work for another kitchen installation company.  Throughout the relationship, the Keenans continued to earn the majority of their income from the work they did for Canac.

In 2009 Canac told the Keenans that it was closing its operations and the Keenans’ services were no longer needed.  The Keenans, aged 63 and 61 were provided no notice or payment upon termination, as Canac took the position that they were independent contractors.

Dependent or Independent Contractors

The appeal focused on the finding of exclusivity by the trial judge.  The lower court’s decision was based on the fact that Mr. and Mrs. Keenan had worked exclusively or near exclusively for Canac since 1976 and 1983, respectively.  On appeal, Canac had argued that exclusivity is a matter to be determined at the time of termination of the relationship and, at the time of termination, the relationship was not exclusive.

The Court of Appeal stated that the trial judge’s understanding of exclusivity was correct and that exclusivity cannot be determined on a “snapshot” approach, as suggested by Canac.  The concept of exclusivity was found to be tied to the determination of economic dependency and, as such, consideration of the full history of the relationship is required.

The Notice Period

Canac also argued that the award of 26 months in lieu of notice should be set aside as being too high.  The Court stated that the reasonable notice period is determined by case-specific facts and there is no absolute upper limit on what constitutes reasonable notice.  However, generally only exceptional circumstances will support a notice period in excess of 24 months.  The Court of Appeal upheld the lower court decision finding that the parties had submitted an agreed statement of facts including an agreed damages calculation for up to 26 months’ notice.  Further, factoring in the ages of the Keenans, their length of service and positions, the notice period was considered reasonable and the Court of Appeal refused to interfere with the decision.

Our Views

This case reaffirms what the lower court decision in Keenan v. Canac Kitchens Ltd taught us: where contractors work exclusively or near exclusively for one company, there is a significant risk that they will be considered “dependent” rather than independent contractors.  As this case demonstrated, dependent contractors can be entitled to notice periods which are akin to notice periods to which similarly situated employees would be entitled.  In this case, exceptional circumstances, including the individuals’ ages, length of service and the character of the positions that they held, warranted awarding compensation reflecting a 26 months’ notice period.

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