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Contractors: when are they entitled to reasonable notice or pay in lieu?

The legal status of contractors in an employment context frequently arises in litigation, reflecting the potential implications of whether or not someone is an employee in law.

Rogerson Law Group provides commercial litigation services in the entire GTA including Toronto, Scarborough, Mississauga, Vaughan, Brampton, Richmond Hill, Etobicoke, and
Barrie and surrounding areas with offices located in Downtown Toronto and Barrie with an associated in Ottawa.

The employment and civil litigation lawyers at Rogerson Law are experienced in advising clients on employment issues, including whether or not an individual is an employee or contractor in law.

In a recent case, at issue was whether a contractor was independent of another company or not – and this impacted on whether he was entitled to reasonable notice or pay in lieu. Ace Courier was a freight and parcel transporting business and, in 2007, took on the contractor in question as an owner/operator to provide courier delivery services to its customers. Ace Courier terminated the contract in 2012 allegedly for misconduct.

Employee or independent contractor?

The contractor claimed he was an employee and therefore entitled either to reasonable notice or pay in lieu of notice. Ace Courier argued he was an independent contractor and the contract could, therefore, be terminated at any time without notice (in any event, the company argued it had just cause to end the contract because the contractor had, it said, diverted customers to a competitor).

The British Columbia Supreme Court found in favour of the contractor: he had provided exclusive driver services to Ace Courier over a long period of time and was therefore in a position of economic dependence on the company. The ruling clarifies that where a contractor provides services on a long-term, regular basis he or she is likely to be entitled to reasonable notice, or pay in lieu, from a company where the contract is terminated without cause.

In this case the contractor had signed an agreement to the effect he was (among other matters) self-employed and responsible for filing his own income taxes, declaring self-employed status and for arranging his own workers’ compensation coverage. He also signed a non-competition agreement, so that during the period of his engagement as a driver with Ace Courier, and for 12 months thereafter, he would provide exclusive services to the company. Despite these agreements, the court found on the facts that there was a dependent contractor relationship.

Therefore, there was a legal requirement to provide reasonable notice where services are terminated without cause. Although this case is not binding law in Ontario, it is of persuasive value in this province and employment lawyers will likely keep a watchful eye on developments in this area.

What does this mean?

Whether you are an employer, employee or an independent contractor you are advised to revisit your existing contractual arrangements. If there is any doubt as to your liabilities or rights in relation to future termination of the contract seek legal advice.

If you are negotiating new contracts, particularly if you are sub-contracting work, take specialist legal advice to ensure the terms adequately protect your position.

How can we help?
We have specialist employment and civil litigation solicitors who can advise on the terms of employment and other contracts, taking into account all the circumstances of your contractual relationships with others. Contact us as soon as possible for expert strategic advice.

Contact us at enquiries@rogersonlaw.com to talk to a civil litigation lawyer at Rogerson Law Group.

1 Khan v. All-Can Express Ltd., 2014 BCSC 1429

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Posted in Civil Litigation, In the News