An individual’s relationship with an employer generally falls into one of three categories: employee, dependent contractor, or independent contractor. Determining the correct category is important because employees and dependent contractors are entitled to notice or pay in lieu of notice on dismissal; this is not necessarily true for independent contractors.
However, there are instances where a court may decide that an independent contractor is actually a dependent contractor. A significant consideration in this determination is the concept of exclusivity. Exclusivity is present when an employer does not allow an individual to work for other employers. Exclusivity, or a high degree of exclusivity, may weigh in favour of finding a dependent contractor relationship.
The recent Ontario case of Keenan v. Canac Kitchens Ltd. examined the importance of exclusivity when assessing whether a worker is a dependent or independent contractor. Both the trial and appeal court concluded that the plaintiffs, spouses Marilyn and Lawrence Keenan, had shown that their relationship with the employer, Canac Kitchens, had a high degree of exclusivity, such that they were in a dependent contractor relationship.
Lawrence and Marilyn commenced employment with Canac beginning in 1976 and 1983, respectively. In October 1987, Canac told them both that they would be independent contractors. However, for all intents and purposes, their working relationship and their duties with Canac remained unchanged after 1987. In 2007, their work with Canac slowed down and they began working part-time for a competitor, Cartier Kitchens. From 2007 to 2009, they worked primarily for Canac while performing some work for Cartier.
In 2009, Canac ended its relationship with both Marilyn and Lawrence. The employer did not provide them with notice, pay in lieu or any other statutory entitlements. In Canac’s view, Marilyn and Lawrence were independent contractors.
The Keenans sued Canac.
At trial, the Ontario court determined that Marilyn and Lawrence were dependent contractors from 1987 until the time of their employment was terminated. The court found that Marilyn and Lawrence were economically dependent on Canac due to the fact that they worked exclusively for Canac or at a high level of exclusivity.
Given their dependent contractor status, the court ruled that Marilyn and Lawrence were entitled to reasonable notice on termination, and awarded them damages of approximately $125,000 in lieu of 26 months’ notice.
Canac appealed the trial decision.
On appeal, Canac challenged the trial judge’s exclusivity finding. The former employer argued that exclusivity should be assessed at the time the relationship was terminated, and therefore asked the court to find that there was no exclusivity because Marilyn and Lawrence were working for both Cartier and Canac during the last two years of their relationship with Canac.
The Court of Appeal rejected Canac’s argument, and provided the following helpful guidance about assessing exclusivity:
Exclusivity cannot be determined on a “snapshot” approach because it is integrally tied to the question of economic dependency. Therefore, a determination of exclusivity must involve, as was done in the present case, a consideration of the full history of the relationship. It is for the trial judge to determine whether, after examining that history, the worker was economically dependent on the company, due to exclusivity or a high level of exclusivity.
For Lawrence and Marilyn, for all but two of the approximately 32 and 25 years of service they gave to Canac, they worked exclusively for Canac. Further, during the time they worked for Cartier, they still performed the majority of their work for Canac. For these reasons, the Court of Appeal found that exclusivity had been established, and dismissed Canac’s appeal.
The Keenan decision supports the proposition that a worker’s employment status (i.e. employee, independent contractor, dependent contractor) should be assessed based on the full course of his or her relationship with the employer, rather than at a single point in time.