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What If Your Independent Contractor Is Really a Dependent Contractor?

Many employers hire independent contractors to assist in their workplace and in most cases, the assumption is that doing so will result in minimal or no notice of termination having to be paid at the end of the relationship.  A recent case has confirmed that that assumption can be a risky one to make.

Earlier this year, the Ontario Superior Court of Justice released its decision in the case of Keenan v. Canac Kitchens.  For those familiar with employment law in Ontario, the name Canac Kitchens will be familiar as it has been on the losing end of a number of employment law cases.

In this particular case, Lawrence and Marilyn Keenan were employed by Canac Kitchens beginning in 1976 and 1983 respectively.  In 1987, both were advised that their employment was coming to an end but that they could carry on as independent contractors.  Independent contractor agreements were signed and the Keenans carried on as before.  They continued working for Canac until the company closed its operations in 2009.  No notice of termination or pay in lieu of notice was provided.

The court looked back at the 2009 Ontario Court of Appeal decision in McKee v. Reid’s Heritage Home Limited and confirmed that employment relationships exist on a continuum, with employees at one end, independent contractors at the other, and dependent contractors in the middle.  The court also confirmed that unlike independent contractors, dependent contractors are entitled to reasonable notice of termination.  In determining the status of the Keenans, the court looked to the following:

  • Whether the individuals were limited exclusively to the service of the company;
  • Whether the individuals were subject to the control of the company, not only as to the product sold, but when, where and how it was sold;
  • Whether the individuals had an investment in the “tools” relating to their service;
  • Whether the individuals undertook any risk in relation to their business, or had an expectation of profit apart from a fixed fee or commission; and
  • Whether the business was that of the individual or the company.

While there were some factors in this case which suggested an independent contractor agreement, the court was particularly fixated on the fact that the Keenans worked exclusively for Canac until 2007.  Although they did some small amount of work for a competitor between 2007 and 2009 due to a shortage of work at Canac, the judge accepted that Canac turned a blind eye to same.  In other words, for all intents and purposes the Keenans provided services only to Canac for almost the entire duration of the relationship.  Moreover, Canac had almost complete control of the work performed by the Keenans.

As a result, the court found that although the Keenans were contractors, they were in a dependent relationship to Canac and therefore entitled to notice of termination.  Due to the 32 and 25 years of service provided by Lawrence and Marilyn respectively (which resulted in an average length of service of 28.5 years between the two of them), the court found that a whopping 26 month notice period was reasonable.

As always, independent contractor agreements should be entered into with careful consideration as to the true nature of the relationship between the parties.  As the saying goes, “if it walks like a duck and talks like a duck, the chances are good that it’s a duck”.  In such a case, no amount of contractual drafting will lead to another conclusion.


What If Your Independent Contractor Is Really a Dependent Contractor?

Ontario’s Changing Workplaces Review

In May, Ontario’s Ministry of Labour commenced what is being called the “Changing Workplaces Review”.  The review is intended to take a close look at the Employment Standards Act, 2000 (“ESA”) and the Labour Relations Act, 1995 (“LRA”), with the special advisors making recommendations to the Ontario government.  The review has been ordered both to address the significant period of time which has passed since both statutes were enacted, and the changes that have occurred in the workplace and society since then.   The special advisors appointed to conduct the review and issue recommendations are Michael Mitchell, a former Toronto partner from employee-side law firm Sack Goldblatt Mitchell, and the Honourable John Murray, a former judge and former a management-side lawyer.

It is anticipated that the advisors’ report to the government will touch on such things as: (a) the increase in non-standard working relationships (eg. involuntary part-time work, temporary jobs, and self-employment); (b) greater workplace diversity; (c) technological change; and (d) minimum standards under the ESA and LRA.  More specifically, and with reference to the questions posed in the government’s Guide to Consultations, it can be expected that the advisors may look at things like: (i) whether there should be more or less (or different) overtime exemptions for different groups of employees; (ii) whether additional types of leaves of absence are recommended; and (iii) whether the notice of termination provisions currently set out under the ESA are sufficient.

Public consultations are being held across the province from June through September, and written submissions can also be provided to the advisors by email, fax or regular mail prior to September 18th.  For further details on the dates and locations of public consultations, as well as where to direct written submissions, please click here.



Ontario’s Changing Workplaces Review

Another Ontario Termination Clause Decision in Favour of Employees…

The Ontario Divisional Court recently affirmed the lower court’s decision in the case of Miller v. A.B.M., an important case with respect to the interpretation of termination provisions in employment contracts. Regular readers of this blog may recall our earlier blog discussion about the lower court’s decision.

In Miller, the employee signed an employment agreement with the following termination clause: “Regular employees may be terminated at any time without cause upon being given the minimum period of notice prescribed by applicable legislation, or by being paid salary in lieu of such notice or as may otherwise be required by applicable legislation.” The termination provision did not expressly state that benefits would be continued during the statutory notice period under the Employment Standards Act, 2000 (the “ESA”). As a result, the court found that the termination provision contravened the ESA. In upholding the lower court’s decision that the termination provision was void and common law notice should instead be substituted, the Divisional Court made the following findings.

First, the court stated that the employment agreement in question distinguished salary, pensions and car allowance under the heading of ‘remuneration’, but that the termination provision specifically just referenced salary. As a result, it was clear that just salary was to be provided on termination.

Second, the court found that the employment agreement’s silence on providing benefits during the notice period did not lead to a presumption that benefits would be provided. At best, the court found that there was an ambiguity in the agreement with respect to the question of whether benefits would be continued, and ambiguities should be interpreted against the drafter (in this case, the employer).

This case confirms the law set out in earlier decisions such as Wright v. Young and Rubicam Group of Companies and Stevens v. Sifton Properties Ltd. In short, in order to ensure that the termination provision in an employment agreement is not set aside, it must be carefully drafted and it must not appear to undercut the minimum provisions of the ESA. If the termination provision does not expressly state that benefits will continue during the ESA notice period, then the employer risks having the termination provision set aside.

For employers who have not had the termination provisions in their employment agreement templates reviewed recently, now would be a good time to ensure that they are in order and to consider updating them if they are not.


Another Ontario Termination Clause Decision in Favour of Employees…

Required New ESA Poster for Ontario Workplaces

The Ontario Ministry of Labour has prepared and published a new Employment Standards Act, 2000 (“ESA”) poster entitled “Employment Standards in Ontario”. The poster is version 6.0 in a long line of ESA posters and Ontario employers were required to post it in the workplace effective as of May 1, 2015. The poster outlines for employees their rights under the ESA and the requirements of employers under the ESA.

The Ministry’s rules regarding the new ESA poster are as follows:

  • The poster must be in English but if the majority workplace language is other than English and if the Ministry has version 6.0 available in that language, then both posters must be posted side by side.
  • Version 5.0 should be removed at the time that version 6.0 is posted.
  • In addition to posting the poster in the workplace, employers are also required to give a copy of the poster to each employee by June 19, 2015.
  • New employees hired after May 20, 2015 must be given a copy of the poster within 30 days of hire.
  • The poster may be given to employees in hard copy form, as an email attachment, or as a link to an internet database (but then only if the employer ensures that the employee has reasonable access to the database, a computer and a printer).
  • The poster is available in English, French, Arabic, Chinese, Hindi, Portuguese, Punjabi, Spanish, Tagalog, Thai and Urdu.

An English copy of the poster can be obtained at http://www.labour.gov.on.ca/english/es/pdf/poster.pdf and a French copy of the poster can be obtained at http://www.labour.gov.on.ca/french/es/pdf/poster.pdf. For copies of the poster in other languages, please go to the following link: http://www.labour.gov.on.ca/english/es/pubs/poster.php.



Required New ESA Poster for Ontario Workplaces

BC and Ontario Employers Take Note: Upcoming Minimum Wage Changes

Last fall the Ontario Employment Standards Act, 2000 was amended to index increases to the minimum wage to Ontario’s Consumer Price Index.  Putting that into effect, Ontario is raising the general minimum wage from $11 to $11.25 per hour, effective October 1, 2015.  The minimum wage rates in Ontario for jobs in special categories (liquor servers, homeworkers, students, etc.) are increasing at the same time, and those can be found here:  Minimum wage rates.

The B.C. government has announced that it will also index increases in the general minimum hourly wage and the liquor server wage to B.C.’s Consumer Price Index.  As a result, effective September 15, 2015, the BC general minimum wage will increase from $10.25 to $10.45 and the liquor server wage from $9.00 to $9.20 per hour.  Also effective September 15, 2015, the daily rate for live-in home support workers and live-in camp leaders, as well as the monthly rates for resident caretakers and the farm worker piece rates (for harvesters of certain fruits and vegetables) will be increased proportionate to the 20-cent increase in the general minimum hourly wage.


BC and Ontario Employers Take Note: Upcoming Minimum Wage Changes

Update on the new, mandatory Ontario Retirement Pension Plan

On December 8, 2014, the Ontario government introduced Bill 56: An Act to require the establishment of the Ontario Retirement Pension Plan regarding the establishment of the new, mandatory Ontario Retirement Pension Plan (ORPP) effective January 1, 2017.  Bill 56 provides information about additional ORPP legislation to come.  It also provides details about the administrative entity that will need to be set up to administer the ORPP and the collection of information that’s necessary for the purpose of establishing the ORPP.

The ORPP was introduced in the 2014 Ontario budget as a new “made-in-Ontario” solution to the federal government’s decision to not expand the CPP.  It will be similar to, and build on key features of, the CPP and will be publicly administered at arm’s length from the Ontario government.  Employers and employees who are required to participate in the ORPP would be required to contribute up to 1.9% each (total of 3.8%) on the employee’s earnings, up to a maximum earnings threshold of $90,000. Additional details about proposed features of the ORPP can be found in our earlier blog posting here.

All Ontario employers should be aware of the ORPP and how it might impact their business.

The main concern for most Ontario employers is whether they will be exempt from mandatory participation in the ORPP.  The only information released by the Ontario government so far is that employees who participate in a “comparable workplace pension plan” will be exempt.  It’s unclear what “comparable” means.  The legislation doesn’t tell us exactly what types of retirement savings plans will exempt employers from the ORPP.

We will continue to provide updates on the ORPP as information becomes available.

If you have questions about the ORPP or would like more information, please do not hesitate to contact one of the pensions and benefits experts at Dentons.

For more information from the Ontario government on the ORPP and Bill 56, click here.


Update on the new, mandatory Ontario Retirement Pension Plan

An Offer They Can’t Refuse – The Dangers of Recruiting High Level Employees

An employer is paying the price for dismissing an employee who was recruited with an attractive job offer.

Bruce Rodgers had been the president of a transportation company for 11 years when CEVA Freight Canada Corporation approached him with a job opportunity. After being flown twice to Houston, attending 7 interviews, and meeting the CEO of the global parent company, Rodgers was offered a position as CEVA’s Country Manager. He turned it down, and was given a second offer with a higher salary and a signing bonus, which he accepted. Rodgers was also told that he was required to invest in the company to demonstrate his commitment, so he borrowed $102,000 to purchase CEVA’s shares.

A little less than 3 years later, Rodgers was dismissed by CEVA without cause. He was paid 2 weeks’ salary, along with severance of just under one additional week and outstanding vacation pay. His employment agreement had a termination provision that stated: “[y]our employment may also be terminated by our providing you notice, pay in lieu of notice, or a combination of both, at our option, based on your length of service and applicable legal requirements.” CEVA argued that while Rodgers was entitled to some damages, they should be limited by the fact that this provision highlighted length of service and Rodgers was there for less than 3 years.

The Court disagreed, finding that a reasonable notice period for Rodgers would have been 14 months. In the end, CEVA was ordered to pay Rodgers $345,985.

While the Court acknowledged that Rodgers’ short length of service was a relevant factor, it found that it did not deserve any particular weight because the employment agreement was not clear that his length of service would outweigh all other considerations. Instead, the Court turned its focus to the way Rodgers was recruited to the position.

The case serves as an important reminder that even where job security is not explicitly promised, or even discussed, the method of recruitment can be viewed by the Court as an implicit promise of job security. Here, the Court noted the “attractive” financial package Rodgers was offered, and that this was an improvement over the original offer that he declined. The Court was also persuaded by the fact that Rodgers was forced to make an investment in the company, giving him the impression that he could expect above average job security. As such, Rodgers was “induced” to join CEVA, and deserved a longer notice period.

Since inducement tends to be considered alongside other factors, it is difficult to gauge how it will affect the Court’s assessment of the notice period. In this case, there were other issues at play, including the employee’s age, his high level of responsibility, and the difficulty in finding a replacement position. However, the Court was clear that CEVA’s recruitment of Rodgers from a secure position of employment contributed to the long notice period awarded.

Employers should be aware of the unspoken commitments they make when recruiting employees who are already employed in secure positions. An employer’s efforts to convince someone to leave employment to join its organization may commit that employer to more than it had ever intended on termination. In these cases, it is particularly important to consider termination at the point of hiring, and to give serious thought to whether an appropriately drafted termination provision should be included as part of the employment contract, to avoid disputes as to entitlements on termination of employment.

Rodgers v. CEVA, 2014 ONSC 6583 (CanLII)



An Offer They Can’t Refuse – The Dangers of Recruiting High Level Employees

The Dangers of Unpaid Employment in a Start-Up Company

Unpaid internships were discussed in an April 8th posting in this blog and it is clear that most Ontario interns have to be paid.  But what about employees in start-up companies?  Can employers provide them with stock options, shareholdings or the promise of future payment in lieu of current payment of wages?  The short answer is that except in certain defined circumstances, employees must be paid wages, and they must be paid on a regular basis from the time that they begin working for a company.

The Employment Standards Act, 2000 (Ontario) (the “ESA”) defines an employee as “someone who performs work for an employer for wages”.  In turn,  the term “wages” is defined as “monetary remuneration”.  Section IX of the ESA requires employees to be provided with “at least the prescribed minimum wage”.

The Regulations under the ESA have some exemptions in relation to Section IX, but they are limited and generally only apply to certain defined professionals (eg. doctors, lawyers, engineers, architects, teachers), commissioned salespeople, and other specified groups of employees (certain student employees such as camp counselors, and janitors/superintendents who reside in the building that they are responsible for).  It is particularly important for start-up companies to note that there is no wages exemption under Section IX of the ESA for information technology professionals, managers, supervisors or executives.

In addition, because the ESA expressly prohibits employers and employees from entering into an agreement to circumvent the provisions of the ESA, it is not possible for a company founder or similarly-placed employee to agree to forego wages during the start-up period.  The potential risk to a company which permits employees to work without receiving at least minimum wage, is that the employee can make an unpaid wages claim, which in turn can also be a liability to the directors and officers of the company.  In addition, a failure to pay wages as earned can lead Canada Revenue Agency to have a claim for unpaid tax and other withholdings which should have been made.

While there are risks with entering into independent contractor agreements, particularly if the contractors are actually employees under various legal tests, sometimes the safest path for a financially strapped start-up is to consider short-term contractor arrangements until the company is on its feet and generating revenue which can be used to cover payroll for employees.  This can be a tricky area to navigate and should never be done without legal advice, but done properly, it is a better and safer option than failing to pay employees during the initial start-up period.

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The Dangers of Unpaid Employment in a Start-Up Company

Yet Another Reminder on the Importance of Careful Drafting of Termination Clauses…

As if employers needed one, we now have yet another decision invalidating a termination provision for failure to comply with the Employment Standards Act, 2000 (the “ESA”)Miller v. A.B.M. Canada Inc., 2014 ONSC 4062 (CanLII).

Mr. Miller applied for and obtained the position of “Director, Finance and Business Process Improvement”.  Prior to commencing employment, he had signed an employment contract, which contained the following elements of “remuneration”:

  • A base salary of $135,000 per year;
  • Pension contributions up to a maximum of 6% of base salary; and
  • A car allowance of $680 per month.

The employment contract contained the following provision in respect of termination without cause:

“Regular employees may be terminated at any time without cause upon being given the minimum period of notice prescribed by applicable legislation, or by being paid salary in lieu of such notice or as may otherwise be required by applicable legislation.”

 Mr. Miller commenced employment on September 1, 2009 and was dismissed on a without cause basis on January 26, 2011. The primary issue was whether the termination provision limited Mr. Miller’s entitlement to the ESA minimum (two weeks), or whether he was entitled to common law pay in lieu of notice.

After examining the clause and considering case law (including Wright v. Young and Rubicam Group of Companies and Stevens v. Sifton Properties Ltd.), the Court came to the following conclusions:

  • the length of the notice period in the contract, being “the minimum period of notice prescribed by applicable legislation”, was effective to rebut the presumption of reasonable notice according to common law, and as such (provided the remainder of the contract was valid), the amount of notice was legitimately established in the contract as being the ESA minimum; but                                     
  • the contract breached the ESA requirement that if pay in lieu of notice is provided, all benefits must be continued.  The contract only required the payment of “salary” in lieu of notice. The failure of the contract to require payment of the 6% pension contribution and the car allowance rendered the clause contrary to the ESA, and void for all purposes, such that Mr. Miller was entitled to common law pay in lieu of notice.

The Court also made the observation (although technically this was not a required part of the decision and would be considered obiter), that the wording of the provision at issue will determine whether it is enforceable, rather than the actual actions of the parties.  In other words, if a provision is unenforceable because it does not comply with the ESA in some respect, the fact that the employer does actually comply with the ESA will not render the provision at issue enforceable.

Interestingly, the Court held that although the termination provision was invalid, Mr. Miller “cannot escape bearing some responsibility for the fact that both parties entered into a contract which fell below ESA standards”, which seems to suggest that the Court still considered the contract when assessing the common law notice period. Ultimately, after considering Mr. Miller’s age (39), length of service (17 months) and position (Director, Finance and Business Process Improvement), the Court awarded three months of pay in lieu of notice at common law.

Mr. Miller thus received three months of pay in lieu of notice, rather than the minimum two weeks pursuant to the ESA.  This case stands as yet another reminder that termination provisions must be carefully drafted to meet the ESA in every respect, or they will be subject to attack, resulting in the employee potentially being entitled to common law pay in lieu of notice.

Miller v. A.B.M. Canada Inc., 2014 ONSC 4062 (CanLII)


Yet Another Reminder on the Importance of Careful Drafting of Termination Clauses…

Join us May 1st for Dentons’ Spring Employment and Labour Law Update

Please join us on May 1st for a complimentary seminar /webinar on the following topics:

July 1st Deadline Looming: How to Comply with Ontario’s New Safety Awareness Training Regulation
Adrian Miedema

Internal Fraud — Managing Termination and Asset Recovery Options
Mark Evans and Blair McCreadie

An Update on Ontario’s Workplace Violence and Workplace Harassment Law
Saba Zia

CHRP Accreditation
This program may be eligible for recertification points.

CPD Accreditation
This 1.5 hour program can be applied toward 9 of the 12 educational hours for Continuing Professional Development required annually by the Law Society of Upper Canada. Please note that these CPD hours are not accredited for the Professionalism Requirement.

Event Details

May 1, 2014
Registration & Breakfast
8:00 – 8:30 a.m. EDT
8:30 – 10:00 a.m. EDT

Dentons Canada LLP, 77 King St West, North Building, 5th Floor, Toronto

Or by webinar


RSVP to Carla Vasquez, Specialist, Marketing and Events at carla.vasquez@dentons.com.


Join us May 1st for Dentons’ Spring Employment and Labour Law Update