Independent contractor had duty to mitigate but company couldn't prove failure to do so
The Ontario Court of Appeal has dismissed a company’s attempt to avoid paying an independent contractor for the balance of a six-year contract after it fired him seven months into it.
The worker was an independent contractor who worked as a truck operator. On March 7, 2017, he entered a contract with Metro Freightliner Hamilton and Metro Truck Niagara in which he would provide his services for a 72-month term.
On Nov. 22, Metro terminated the worker’s services without cause. He sued Metro for compensation for the balance of the contract, which was 65 months.
The trial judge found that the contract did not have a termination provision and it clearly and unambiguously set a 72-month fixed term. As a result, Metro was ordered to pay the worker for the balance of the fixed-term contract, totalling more than $500,000.
Calling someone an independent contractor is a huge area of exposure for employers, according to experts.
Contract term not guaranteed: company
Metro appealed the decision, arguing that the trial judge made several errors, including failing to address an internal email that added a provision to the contract ensuring that the worker would be paid up until the last day of active service – which indicated that the 72-month term was not guaranteed, said Metro – that the worker saw.
Metro also argued that the trial judge erred in finding that the worker was not required to mitigate his damages and resolved ambiguity in favour of the worker. The company said that, although the worker searched for alternate employment, he looked for work that was beyond the scope of his experience and qualifications.
In addition, Metro said that the trial judge erroneously conflated independent contractors with employees working under fixed-term contracts – the latter having entitlement to damages equal to the loss of remuneration for the balance of the fixed-term contract without a duty to mitigate.
The Court of Appeal found that Metro could not rely on the email that purportedly added a clause that made the 72-month term not guaranteed. The email was ambiguous and was not actually added to the contract. On the other hand, the contract itself contained an “entire agreement clause” that clearly indicated that nothing else would form part of the contract – “a clause plainly designed to avoid the sort of argument raised here,” said the appeal court.
A worker paid by commission was an employee, not a contractor, the Ontario Labour Relations Board ruled.
Contract was clear and unambiguous
The Court of Appeal also noted that the trial judge found the contract to be clear and unambiguous, which was reasonable absent any evidence of fraud, misrepresentation, undue influence, or mistakes. Given this finding, there was no ambiguity to resolve in anyone’s favour.
The appeal court noted that in an earlier decision, it found that employees under fixed-term contracts did not have a duty to mitigate but it had never reached that conclusion regarding independent contractors. In this case, the worker was not in an exclusive, employment-like relationship with the company, he wasn’t dependent on it, and the contract permitted him to perform services for others, the court said.
However, although there was a potential duty to mitigate, the court noted that the onus was on the company to establish that the worker failed in his duty to mitigate. Although Metro argued that the worker looked for work beyond his qualifications, it didn’t provide any evidence, while the worker provided evidence of his job-search efforts. As a result, although the trial judge erred in determining that the worker didn’t have a duty to mitigate, Metro was unable to show that the worker failed to mitigate, the court said.
The Court of Appeal upheld the trial decision, leaving Metro on the hook for the balance of the fixed-term contract. See Monterosso v. Metro Freightliner Hamilton Inc., 2023 ONCA 413.
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