Contract ends without word

A relationship characterized as one of intermediate nature, akin to employment, requires reasonable notice upon termination

In 1978 JKC Enterprises Ltd. began providing trucking service to Calgary Woolco stores delivering appliances and furniture from the stores to Woolco’s customers. This relationship continued for the next 14 years. Originally JKC dealt directly with the individual stores; however in the later years it dealt with the Calgary Woolco warehouse centre.

By 1993 JKC was providing service to Woolco stores outside of Calgary in Alberta and British Columbia. Woolco was JKC’s sole client.

In 1994 Wal-Mart purchased approximately 120 Woolco stores from Woolworths. In February 1994 JKC received a notice from Wal-Mart informing of the change in ownership. JKC was never notified that there would be any change in respect to its contract.

JKC spoke to a few of the store managers who assured JKC that the contract would carry on. Despite this, JKC learned that the contract was in jeopardy and had its lawyer write to Woolworth in April 1994. The letter indicated that Woolworth had breached its contract with JKC by not advising that the services of JKC were no longer required.

JKC was invited by Wal-mart to bid on trucking services, which it did. However another trucking company won the contract.

At no time was JKC formally informed by Woolco that its contract was terminated. It only learned that the contract was terminated when a JKC driver went to a store to pick up a delivery and was told by an employee in the delivery department that they were now using another company.

JKC maintains that its relationship with Woolworth and subsequently Wal-mart was of an “intermediate” nature, akin to employment, thus requiring that the relationship can only be terminated on reasonable notice. JKC brought an action against both Woolworth and Wal-mart, seeking damages in lieu of reasonable notice.

Woolworth and Wal-mart (the defendants) argued that JKC was an independent contractor and therefore reasonable notice to terminate was not required. Alternatively the defendants argued that if the relationship was of an “intermediate” nature that required reasonable notice, such notice was given when JKC was invited to bid on the new contract to provide trucking services. Lastly if the Court finds no notice was given, the defendants argued that JKC was only entitled to 90 days’ notice.

The concept of an employment relationship of an intermediate nature looks at relationships in a workplace on a continuum. At one end of the continuum is the employer/employee relationship where reasonable notice is required to terminate. At the other end are independent contracts where notice is not required.

To determine where on a continuum a relationship resides, consideration is given to factors such as: duration and permanency of the relationship; degree of reliance and closeness of the relationship; and degree of exclusivity. Economic dependence is often cited as a strong factor in favour of classifying the relationship in the intermediate category.

In this case the Court held that the relationship between JKC and the defendants fell in the “intermediate” category. There was an exclusive trucking services agreement supported by a very close interconnected working arrangement. There was a long-standing close relationship between two companies in which each placed complete reliance upon the other. JKC employees had been given Woolco employee discount cards and Woolco prepared JKC’s invoices.

The relationship was long-standing and the degree of reliance and closeness made the relationships more akin to an employer/employee relationship than that of employer/independent contractor. JKC serviced the defendants exclusively and JKC was economically dependent on the revenues it earned from the defendants.

Having found that the relationship was of an intermediate nature requiring reasonable notice, the Court went on to consider what would constitute reasonable notice.

Consideration was given to factors such as the: exclusivity and time required to re-establishment of a viable business; extent of staff and equipment that was need to be dealt with on termination; length of the relationship (16 years); type of business; and acquisition of inventory.

Based on these factors the Court awarded JKC damages equivalent to a notice period of nine months.

For more information:

JKC Enterprises Ltd. v. Woolworth Canada Inc., 2001 ABQB 791.

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