Doctor on long-term contract found to be ‘dependent contractor’
The Alberta Court of Queen’s Bench has ruled that even though a long-term oral employment contract is unenforceable, it may have an impact on the notice period required for termination. The court also recognized the existence of “dependent contractors.” These workers, while not exactly employees, are economically dependent on their “employers” and, as such, are entitled to some form of reasonable notice.
Melvyn Lavellee was a doctor who had been working at the Siksika Nation near Calgary. When he started working there at age 50, he and the nation agreed that he would work there until he retired at 70. In October 2005, after working there for about ten years, he was informed that his services would no longer be required after January 2006.
Lavellee sued the nation on the basis that they had a 20-year contract and that he was owed damages based on the length of time left in the contract — 10 years.
The agreement
Courts are generally reluctant to find fixed-term employment contracts, usually requiring explicit language defining the fixed term. In Lavellee, although the arrangement was never put in writing, there was only one version of events. Lavellee had held steady work previously and only agreed to come and work at the Siksika Nation if he was guaranteed work until he retired at age 70. There was not a mere expectation that he would remain for that long — he would never have come without the agreement, said the court.
Since the evidence that there was a contract was undisputed, the court found there was a 20-year employment contract in place when Lavellee started working at the Siksika Nation.
Statute of Frauds
Even though the court found that there was an agreement for Lavellee to work until he was 70, the contract was unenforceable because of the Statute of Frauds — an old law from the United Kingdom that has been adopted by Canadian provinces in one form or another — which makes certain contracts unenforceable unless they are made in writing. For example, contracts that are to be performed over the length of more than one year must be made in writing. Otherwise, they will be unenforceable.
In this case, the contract was for a 20-year term and not in writing, and therefore unenforceable. In spite of this, the court found that the understanding between the parties must still be considered.
“Although this contract is not in conformity with the Statute of Frauds...the reasonable notice requirement must reflect this understanding,” said the court.
Dependent contractor
Since the fixed-term contract was unenforceable, the court had to consider the precise nature of the relationship between the parties to determine how much notice was required.
Both sides agreed Lavellee was not an employee, but the court found it to be closer to an employment relationship than an independent contractor relationship. It fell into the intermediate category of “dependent contractor.”
A dependent contractor is a contractor who is economically dependent on his employer. Three indicators of a dependent contractor are exclusivity, permanence and control. In such cases, reasonable notice of termination is required, even though the worker is not technically an employee.
The facts that made this a dependent contractor relationship were:
•The relationship was permanent. Lavellee had worked for the Siksika Nation for ten years and was under the impression that he would be there for another ten years.
•The Siksika had a substantial degree of control over Lavellee. He worked out of and used all the supplies at the defendant’s clinic and he relied on the nurses at the defendant’s clinic.
•Initially, Lavellee’s relationship with the nation was exclusive.
Dependent contractors are entitled to reasonable notice of termination. The well-known factors from Bardal v. Globe and Mail Ltd. though not exclusive, must be considered. They are character of the employment, length of service, age and availability of similar employment, having regard to the experience, training and qualifications.
Lavellee also claimed inducement should be a factor, since he was persuaded to sell his practice in Fort McMurray to work at the Siksika Nation. The effect of inducement fades over time, however. Since ten years had passed since he started work for the nation, this factor did not affect the calculation of reasonable notice.
After considering the Bardal factors and the understanding between the parties that the contract was to last 20 years, the court awarded Lavellee 12 months’ pay in lieu of notice.
This case is notable for the following principles:
•The Statute of Frauds can operate to make an oral employment contract of more than one year unenforceable.
•Even if a contract is unenforceable because of the Statute of Frauds, it may operate to lengthen the notice period.
•Dependent contractors are recognized in Alberta and must receive reasonable notice of termination. Many employers call their workers “contractors” and assume they can terminate them with little or no notice. However, courts will look beyond the name of the relationship to its actual substance. If it bears the indicators of exclusivity, permanence and control, it may well be a dependent contractor or employee relationship.
For more information see:
•Lavellee v. Siksika Nation, 2011 CarswellAlta 123 (Alta. Q.B.).
•Bardal v. Globe and Mail Ltd., 1960 CarswellOnt 144 (Ont. H.C.).
