Contract salesman gets 3 months’ notice

Relationship between salesman and company was much like employer and employee; contract originally for one year became indefinite, court says
By Jeffrey R. Smith
|hrreporter.com|Last Updated: 02/06/2009

An Ontario company should have given notice when it fired a salesman a year after his initial contract expired, but it didn’t defame him when it sent him a letter accusing him of improper sales activities while working for a competitor, the Ontario Superior Court of Justice has ruled.

Don Moseley-Williams, 64, was working for a construction equipment dealer in Sudbury, Ont., in 2000 when he was contacted by Hansler Industries, a dealer of the same line of equipment. Hansler offered him a sales territory in the Toronto area and also told him there was a company benefit package “if you eventually join us as an employee.”

12-month contract

In April 2000 Moseley-Williams received a contract for his services as a sales representative that stipulated he would be paid on commission. Hansler gave him a car allowance, a company credit card for gas and paid his monthly cellphone bill. The contract stated Moseley-Williams would provide his services for “a period not exceeding 12 months.” There was no further discussion about his joining Hansler as an employee. Moseley-Williams signed the contract and began working for Hansler on May 8, 2000. Williams said he understood he joined Hansler as a contractor because he was paid solely by commission.

Despite the period outlined in the contract, Moseley-Williams continued to work for Hansler past the 12-month period. Neither Hansler nor Moseley-Williams formally extended or renewed the contract, but Moseley-Williams said it was his understanding that “if things were going well after the 12 months, the relationship would just carry on.” In July 2002, the new sales manager expressed concern Moseley-Williams was not meeting targets discussed with him earlier that summer. The sales manager gave him until the end of July to meet the targets or his contract would not be extended.

On July 16, the sales manager informed Moseley-Williams he was transferring part of his sales territory to another sales representative. Three days later, Moseley-Williams was told Hansler was “making some changes” and he was being terminated.

Demanded pay in lieu of notice

Moseley-Williams’ counsel wrote to Hansler in March 2003 asking for pay in lieu of notice as well as unpaid commissions. Hansler’s response was that he had been hired on a contract basis and his contract had expired, so no notice was required. Moseley-Williams argued the contract didn’t have a specific expiry date and didn’t allow termination without notice.

Moseley-Williams also claimed Hansler had defamed him in a letter to him and two other former sales representatives accusing them of engaging in unlawful conduct such as misrepresenting Hansler to its customers and trying to induce them to breach their contracts with Hansler.

Contract term became indefinite once initial period ended

The court found once the contract’s initial 12-month period was over and the parties continued, it became a contract of an indefinite term. Moseley-Williams’ view that the relationship continued on the same terms was right, the court said.

The court also found the sales manager’s claim the contract had expired and would not be renewed was “pre-termination posturing by the company to justify its pending termination of Mr. Moseley-Williams.”

Though the contract didn’t say whether Moseley-Williams was limited to working exclusively for Hansler, the court found this was the case. He moved from Sudbury to Toronto at Hansler’s urging and worked full-time for Hansler, reporting to the company’s sales manager. The initial discussion about the possibility of Moseley-Williams becoming a Hansler employee lent further credence to the expectation that he would be working exclusively for Hansler.

Hansler exerted a significant amount of control over Moseley-Williams’ work, the court said, when it gave him targets to meet and paid for his car and cell phone expenses. Moseley-Williams also worked primarily during the hours the Hansler office was open.

“Mr. Moseley-Williams worked as part of a group of Hansler sales representatives…which was a crucial element of Hansler’s business,” the court said. “The principles point to a relationship between Mr. Moseley-Williams and Hansler close to the employer-employee end of the spectrum, with the result that the contract between them was one under which Hansler was required to give reasonable notice of the termination of the contractual relationship.”

However, though the court found Hansler’s letter was defamatory, it said Hansler was within its rights to defend itself from what it understood to be threats to its business. “Hansler believed (Moseley-Williams and the other salesmen) were engaging in conduct that unlawfully interfered with and harmed its business interests,” the court said. Accordingly, the letter was written on an occasion of qualified privilege.”

The court ruled Moseley-Williams was entitled to three months’ notice, minus a one-month vacation he took that affected his duty to mitigate, plus unpaid commissions, for a total of $24,392.28. His claim for damages for defamation were dismissed. See Moseley-Williams v. Hansler Industries Ltd., 2008 CarswellOnt 6550 (Ont. S.C.J.).

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