The Ontario Court of Appeal recently revisited the subject of workers who are found to be dependent contractors.
The key factors that determine whether a worker will be characterized as a dependent contractor are: exclusivity of service (demonstrating economic dependence), permanence of the relationship and accountability to the “employer”. The usual significance of a finding that a worker is a dependent contractor, rather than an independent contractor, is that the worker will be entitled to reasonable notice of termination of the agreement, absent a breach of the agreement amounting to repudiation. This term of reasonable notice is implied by the court to safeguard workers who are formally contractors but who are in a position of economic vulnerability.
In Richards v. Rainy River Cattlemen’s Association1, reasonable notice was not an issue. Richards’ contract with the Association was for a fixed term and there was no provision for earlier termination. Therefore, unless the Association had legal reason to terminate the contract because of Richards’ breach of contract, he would be entitled to all reasonable losses suffered during the remainder of the term, subject to his obligation to mitigate.
Commencing in 1997, Richards worked as Sales Barn Manager and was responsible for organizing the Association’s quarterly cattle auctions. In 2004, the parties entered into a six-year “manager’s contract”. As indicated above, the contract did not contain a termination clause.
By 2007, a number of problems had arisen in the relationship between the parties and the Association terminated the agreement. Richards sued for breach of contract.
The trial judge dismissed the lawsuit, finding that Richards’ misconduct – his defiant refusal to work with the President of the Association; his persistent and unfounded allegations about underhanded and dishonourable conduct by the President; his refusal to accept direction from the Association’s Board of Directors; and his public accusations that the President and the Secretary-Treasurer were “in bed together” and “cooking the books” — went well beyond any reasonable boundaries and amounted to repudiation of the parties’ contract.
The Court of Appeal considered whether the Association had “sufficient reason” to terminate the contract without further compensation. The Court confirmed that the same analysis that courts use to determine whether an employer had “just cause” to terminate the employment of an ordinary employee — namely, whether the employee has engaged in misconduct that is incompatible with continued employment — applies equally to dependent contractors.
The Court of Appeal upheld the dismissal of Richards’ claim. Although the contractor’s behaviour in this case was extreme, amounting to repudiation of his contract, the decision illustrates that, in the absence of misconduct that would give rise to a finding of just cause in the employment context, dependant contractors will be entitled to compensation under their contract if the employer chooses to terminate the relationship. The courts will permit summary termination only where there is exceptional misconduct by a contractor.
1[2012 ONCA 260]