Dismissal of dependent contractors

Differences between entitlement of dependent contractors and employees

Colin Gibson

Question: What are the main differences between “dependent contractors” and employees with regard to notice of dismissal and just cause for dismissal?

Answer: Traditionally (or as one judge described it, “in simpler times”), a distinction was drawn in the law between two types of workers: employees and independent contractors. The former were entitled to protections at common law and under statute (generally including an entitlement to reasonable notice of dismissal without cause), and the latter were not. More recently, courts — and in some jurisdictions, the legislatures — have recognized there exists a category of worker who has many characteristics of an independent contractor, but is sufficiently dependent economically on a particular employer or organization to justify providing the worker with legal protections an independent contractor would not enjoy. Workers falling into this “intermediate” category are commonly referred to as dependent contractors. In McKee v. Reid's Heritage Homes Ltd., the Ontario Court of Appeal identified dependent contractor relationships as“non-employment work relationships that exhibit a certain minimum economic dependency, which may be demonstrated by complete or near-complete exclusivity.”

The circumstances where an employer can terminate a contract — whether a contract of employment or one giving rise to a dependent contractor relationship — will depend on the express or implied terms of the contract. Generally speaking, an employment contract can be terminated for just cause without any notice or severance compensation. Similarly, an employer will usually be entitled to terminate the services of a dependent contractor summarily, if there is just cause for doing so. The same types of misconduct that would provide just cause for dismissal of an employee will normally be sufficient to terminate a dependent contractor relationship. For example, in Khan v. All-Can Express Ltd., the B.C. Supreme Court held that the plaintiff was a dependent contractor, he owed the employer the same duty of fidelity and good faith as an employee, and a breach of that duty would have provided just cause for the termination of his contract.

Where an employee is dismissed without cause, her entitlement to notice or severance compensation will be
determined by the terms of the applicable contract of employment. If the contract does not contain an enforceable termination clause, the common law will imply a term requiring the employer to provide reasonable notice of dismissal.

In general, the same principles apply to dependent contractors. There is some authority for the proposition that the reasonable notice period for dismissal of a dependent contractor should be shorter than the notice period an equivalent employee would be entitled to: see, for example, Jackson v. Norman W. Francis Ltd. However, this approach was rejected in JKC Enterprises Ltd. v. Woolworth Canada Inc., where the Alberta Court of Queen’s Bench found that the length of the reasonable notice period for a dependent contractor should reflect where the particular relationship falls on the continuum between employee and independent contractor. In the Khan decision, the court awarded the plaintiff a notice period based on the same factors that would have applied if he had been an employee, despite his dependent contactor status.

It is also important not to overlook
employment standards legislation, which outlines the minimum statutory entitlements of workers who are dismissed
without cause. In most jurisdictions in Canada, these entitlements apply to employees only. However, in the Yukon and Quebec, the definition of“employee”is wide enough to encompass dependent contractors as well.

For more information see:

· McKee v. Reid's Heritage Homes Ltd., [2009] O.J. No 5489 (C.A.)

· Khan v All-Can Express Ltd., 2014 CarswellBC 2246 (B.C. S.C.).

· Jackson v. Norman W. Francis Ltd., 1999 CarswellNB 122 (N.B. Q.B.).

· JKC Enterprises Ltd. v. Woolworth Canada Inc., 2001 CarswellAlta 1346 (Alta. Q.B.).

Colin G.M. Gibson is a partner with Harris and Company in Vancouver. He can be reached at (604) 891-2212 or cgibson@harrisco.com.

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