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April 1, 2016

Court of Appeal Upholds 26 Months Notice to Dependent Contractor

The Ontario Court of Appeal considered whether the plaintiffs were employees, dependent contractors or independent contractors and what entitlement they had on termination.  The case is Keenan v. Canac Kitchens Ltd., 2016 ONCA 79 (CanLII).

Lawrence Keenan worked for the defendant, Canac Kitchen, from 1976 to 2009 (33 years).  He worked as a kitchen installer for 6 or 7 years, then became a foreman in 1983.  Although Lawrence’s job title changed to Delivery and Installer Leader, his duties were, essentially, unchanged.  Lawrence’s spouse, Marilyn, began working for Canac Kitchens in 1983 as a foreperson.  Before that, she had helped out her husband on an informal basis.  She, too, continued to work with the defendant until 2009 (26 years).

There was no doubt that until October 1987, the plaintiffs were employees of Canac. Then, in mid-October 1987, they were summoned to a meeting with Canac management, at which they were told that they would no longer be employees, but instead, would carry on their work for Canac as independent contractors.  The plaintiffs were also told that they should incorporate.

With the exception of some weekend jobs and work for friends and family, the Keenans continued to work exclusively for Canac until the end of 2006. Beginning in 2007, the Keenans started to do some work for Cartier Kitchens, a competitor of Canac.  They did so because the work from Canac had slowed down.  Canac turned a “blind eye” to the work that the Keenans performed for Cartier.

The Trial Judge determined that the Keenans were dependent contractors from 1987 until their termination in March 2009. They were entitled to reasonable notice on termination.  The trial judge awarded them damages of approximately $125,000 in lieu of 26 months’ notice.

Canac appealed.

Canac argued that the Trial Judge erred when he found that the Keenans worked exclusively for it.  It conceded that the Keenans worked exclusively for Canac until 2006, but after that, Canac argued, there was no exclusivity in the relationship.  They argued that the issue of exclusivity (which is a central factor in finding the relationship to be one of dependent contractor) is to be determined on the date of termination.

The Court of Appeal rejected this argument.  The trial judge commented that a finding that the worker was economically dependent on the company due to complete exclusivity or a high level of exclusivity weighed heavily in favour of the conclusion that the worker was a dependent contractor.

Justice Eileen E. Gillese on behalf of a unanimous Court of Appeal stated:

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.  [Emphasis added]

In the end, the Court of Appeal considered the totality of the relationship between the Keenan’s and Canac and agreed with the trial judge’s finding of the requisite high degree of exclusivity.

Canac also took issue with the trial judge’s conclusion that the Keenan’s were entitled to 26 months reasonable notice  of termination or compensation in lieu of such notice.  Canac argued, in part, that the upper limit of reasonable notice of termination in Ontario was understood to be 24 months and this “cap” could only be exceeded in exceptional circumstances.  Canac maintained that there were no such exceptional circumstances present in this case.

The Court of Appeal acknowledged that the trial judge “failed to expressly make a finding of exceptional circumstances”.  That being said, the Court of Appeal refused to disturbed the trial judges award.  Instead, the Court held that “given the Keenans’ ages and lengths of service, and the character of the positions that they held, I would not interfere with the award” which justified “an award in excess of 24 months”.

The appeal was dismissed.