Even a fixed-term independent contractor deserves to be treated with respect when facing a termination of contract. Employers must act in good faith toward employees and independent contractors alike.
The recent case of Radikov v. Premier Project Consultants Ltd et al. is a cautionary tale of the importance of good faith in consulting contracts after the Ontario Superior Court of Justice dismissed Premier’s appeal, finding Premier had acted as a “puppeteer” by keeping Mr. Radikov at its “beck and call” before terminating his fixed term contract two days before completion and refusing to pay the outstanding fixed-term contract price.
Mr. Radikov and Premier Project Consultants entered into a six-month fixed term contract for consulting services from May 6, 2015, to November 6, 2015, with Mr. Radikov submitting biweekly invoices. The contract contained an early termination provision whereby Premier could terminate Mr. Radikov’s services on two weeks’ written notice. Mr. Radikov provided services pursuant to the contract until approximately August 14, 2015, after which he was asked to stay home due to a shortage of work. Thereafter, Premier elected not to use Mr. Radikov’s services did not provide written notice of termination until two days before the fixed term consulting agreement was to end. Sloan J. held that there was nothing to show either party viewed what happened in August as a “layoff”.
Deputy Justice Winny of the Small Claims Court, whom heard this case at first instance, summarized the puppeteering by Premier as follows:
“…Premier has played hardball with Mr. Radikov: it laid him off without terminating the contract, then claimed at almost the end of the fixed term that it had terminated the contract previously, then denied the termination in its pleading, and at one point proposed to allege in the alternative that it had terminated the contract for cause, then later abandoned that proposal. In my view Premier’s treatment of Mr. Radikov is anything but a model of good faith performance of contractual relations.”
On appeal before the Divisional Court, Justice Sloan upheld the Small Claim’s Court decision and dismissed the appeal, stating that Mr. Radikov was essentially a puppet and Premier the puppeteer. Whilst Premier made the argument that there should be no payment obligation where Mr. Radikov provided no services, perhaps similar to a retainer agreement at a law firm where no fee is owed for services not yet rendered, Sloan J. found the submission and analogy unconvincing. A better analogy is that of a limousine driver who would have to arrange his schedule to be on call when required.
Ultimately, as no notice of termination was given until near the end of the contract, the Superior Court held that it was “disingenuous” for Premier to keep Mr. Radikov at its “beck and call” until the end of the contract, and then try to limit its damages in accordance with a clause in the contract which Premier itself saw “fit not to use”. Accordingly, Premier was ordered to pay the contract balance in the amount of $15,798.71 plus interest.
This case provides ample lessons for employers, employees and parties of fixed-term consulting contracts. The main message appears to be that exercising a termination clause at the eleventh hour or alleging that a contract was terminated at an earlier point in time despite no written notice as the contract may require, will not displace the obligation to pay the outstanding balance of a fixed-term service agreement. Unlike a lawyer who bills for services already rendered, independent contractors can be more akin to limousine or snow removal drivers often at the “beck and call” of their masters. The fact that an independent contractor hasn’t been “called” for some time will not be construed by the courts as a repudiation of the contract or equivalent to termination, at the arbitrary convenience of the master, and is therefore not something that can be relied on to avoid the obligation to pay for services agreed in a fixed-term independent contractor agreement.
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