Cabinet-making couple started off as employees then became subcontractors but employer still essentially controlled their business
An Ontario couple who were dependent contractors with three decades of service have been awarded almost $200,000 in wrongful dismissal damages and costs by the Ontario Superior Court of Justice.
Lawrence Keenan, 63, was hired by Canac Kitchens — a company in the business of delivering and installing kitchen cabinets, vanities and countertops — in 1976 as an installer of kitchen cabinets. In 1983, he became a foreman supervising other installers. Also in 1983 his wife Marilyn, 61, joined Canac as a foreman after previously assisting her husband on an informal basis.
In October 1987, Canac informed the Keenans they would no longer be employees. Instead, they would be independent contractors while performing the same work for Canac. The Keenans would responsible for paying installers, who would provide their own trucks and pick up materials from Canac. Canac would set the rates paid to installers and pay the Keenans money from which the installers would be paid. Canac would also pay the Keenans on a piecework basis for each box or unit installed.
Canac recommended the Keenans set up an incorporated company, as they would be responsible for their own employment insurance, Canada Pension Plan and income tax deductions. They would also be responsible for any damage to cabinets and their own insurance.
The Keenans set up a business called Keenan Cabinetry — though it was never incorporated — and Canac drafted a subcontractor agreement that stated “as a subcontractor of Canac, you will devote full-time and attention to the business of Canac and shall report to Canac’s installation manager.”
Job duties continued under subcontractor agreement
The Keenans’ job duties and income remained essentially the same under the subcontractor agreement, so they signed it without seeking legal advice. Canac issued them each a record of employment that said the reason for issuance was “quit.”
The Keenans worked exclusively for Canac until 2007, with the exception of a few weekend jobs that were not invoiced through Keenan Cabinetry. In 2007, work from Canac slowed down, so they did some work for a competitor of Canac. The Keenans thought their agreement prevented them from working for a competitor, but they thought Canac “turned a blind eye” to this because of the slowdown in Canac work. Canac continued to supply more than two-thirds of Keenan’s business, with this rising to 80 per cent by 2009.
Despite the subcontractor agreement, the Keenans still considered themselves employees of Canac. They received employee discounts, wore shirts with Canac logos, had Canac business cards, and Lawrence Keenan received a signet ring from the company for 20 years of loyal service. Canac also supplied a pager, car phone, mobile phones, and an office at its location to the Keenans.
In March 2009, Canac informed the Keenans it was closing its operations and their services would no longer be required. No notice of termination or pay in lieu of notice was offered, as Canac was of the position the Keenans were independent contractors, not employees, and as such weren’t entitled to any severance.
The Keenans sued for wrongful dismissal.
The court noted it has been established that employment relationships can be classified as in-between that of employee and independent contractor, to that of “dependent contractor.” Dependent contractors may not fully be employees, but they have a close enough relationship with their employers that they are entitled to reasonable notice upon termination, said the court.
Relationship closer than that of independent contractor
The court found the Keenans’ relationship with Canac favoured a finding that they were dependent contractors, due to “a high level of exclusivity” with the company and significant economic dependence. It was notable that they were employees of Canac for years before the subcontractor agreement as well.
The court also found the subcontractor agreement signed in 1987 “could reasonably be interpreted as requiring exclusivity,” since it mentioned devoting “full-time attention to the business of Canac.” Though Canac argued this referred only to times when the Keenans were performing work for Canac, Keenan testified he didn’t consider himself able to work for other kitchen cabinet companies — which he didn’t until 2007 when work from Canac slowed down. This gave little opportunity for the Keenans to generate additional profit, and Canac received most of the benefit out of the arrangement, said the court.
“Other than some occasional, and in my view, inconsequential, weekend work and work for friends and family, the (Keenans) worked exclusively for (Canac) for 20 years, from 1987 to 2007,” said the court. “Even, when out of economic necessity because of a downturn in (Canac’s) business, the (Keenans) started to do some work for (a competitor), they did so because Canac turned, to use Mr. Keenan’s phrase, ‘a blind eye,’ the clear implication being that Canac knew and acquiesced.”
The court found Canac “maintained effective control of the business” by setting rates for both installers and the Keenans, service standards and handling customer relations. The court agreed with the Keenans’ argument that Canac essentially set them up as a buffer between it and installers — as well as responsibilities it has with employees such as workers’ compensation, paid vacation, benefits, and payroll deductions — but still took charge when it came to the business.
Ultimately, the court found the business was Canac’s and the Keenans were almost completely dependent on Canac, despite Canac’s attempt to distance itself from the employment relationship. It found the Keenans were dependent contractors.
Because Lawrence had 32 years of service with Canac and Marilyn 25, the court determined 26 months of notice was reasonable.
Canac was ordered to pay the Keenans $124,484.04 plus $70,000 in legal costs.
For more information see:
- Keenan v. Canac Kitchens
