The recent decision of Keenan v. Canac Kitchens (Keenan), confirms that dependent contractors are entitled to reasonable notice of employment termination. The required notice period can extend to years, and such as in this case, amount to 26 months.
In Keenan, two long-term contractors of a kitchen cabinet manufacturing firm, with a total of over 50 years of experience with the company, were dismissed without notice. The pair were first hired as employees, but were later told that they would be classified as contractors, and signed new agreements for this purpose. They were required to use their own cars as well as purchase their own insurance. The pair sued for wrongful dismissal and claimed damages in lieu of reasonable notice of termination.
The Court emphasized that the totality of the parties’ work relationship must be looked at in order to determine whether a party is an employee or a contractor. In other words, the language of the agreement between the parties is not determinative, and cannot be used to avoid respecting the employee’s legal rights, such as the right to reasonable notice of termination. In this case, the judge focused on five factors, namely the exclusivity of service, control, ownership of tools, participation in risk and opportunity of profit, and the general question of whose business it is. The judge found that these factors supported the conclusion that the plaintiffs were dependent contractors, an intermediate category between independent contractors (not entitled to reasonable notice), and employees (entitled to reasonable notice). As dependent contractors, they were also entitled to reasonable notice. The substantial time the pair had spent with the company further entitled them to a very long notice period of 26 months.
The fact that the totality of the parties’ relationship will determine whether one is an employee or a contractor is an important reminder to employers and those that are hired on a contractor basis. Even if hired on a contractor basis, you may have common law rights stemming from the details of the relationship with your employer. In addition, as mentioned in our previous blog post, employers are required to provide fresh consideration for employment contracts entered into mid-employment, if they introduce new material terms.
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