Employment Law Archives - Page 4 of 4

As an employer, it is critical to ensure that an employment agreement is properly drafted in accordance with the applicable legislation and correctly sets out the intended employment relationship. If not, there could be serious consequences for an employer in the event of a wrongful dismissal claim.

A recent decision from the Ontario Superior Court of Justice illustrates such consequences and the dangers of an employer not complying with minimum legislative standards regarding an employee’s termination. The Court allowed the employee’s claim in part and awarded damages of approximately $70,000.

Plaintiff Claims He Is Employee of the Defendant, Not Independent Contractor

In the case of Baker v. Fusion Nutrition Inc., the plaintiff formerly worked for the defendant, Fusion Nutrition Inc. The parties’ relationship was governed by a fixed term contract that stated the defendant hired the plaintiff as an independent contractor. The contract also contained a termination clause.

The plaintiff claimed that he was an employee misclassified as an independent contractor under the agreement. He also claimed that the termination clause was unenforceable as it contradicted the minimum standards of the Employment Standards Act.

Plaintiff Sues Employer for Breach of Contract and Employee Entitlements

The plaintiff served the Statement of Claim on the defendant and despite emails from the plaintiff’s counsel to the employer, a Statement of Defence was not filed, and the defendant was noted in default. The plaintiff sought default judgement and damages for breach of contract, unpaid wages, unpaid vacation, unpaid holiday pay, and punitive, aggravated, bad faith and/or moral damages.

Two key issues were before the Court. The first was deciding whether the plaintiff was an employee or an independent contractor, and the second was assessing whether the termination clause was enforceable.

Nature of Working Relationship Found to Be Employer-Employee

The Court found that although the plaintiff had been labelled as an independent contractor in the agreement, the evidence was that the plaintiff met the criteria for the definition of employee and was therefore entitled to damages. The Court’s conclusion was based on various factors, including:

The plaintiff worked full-time, five days a week, from the employer’s premises;
He performed work activities that the employer controlled;
He could not refuse or contract out of the employer’s work;
He had no opportunity for profit or loss in the performance of his work tasks;
His pay did not fluctuate regardless of the quantity or quality of his work; and
He was required to advertise himself as a representative of the employer to customers.

The Superior Court noted that an agreement purporting to describe the nature of the relationship is not determinative on the classification of whether an individual is an employee or independent contractor. Instead, this classification is a question of fact to be determined by the evidence.

Termination Clause Deemed Unenforceable

The plaintiff argued that the termination and notice provisions in the agreement were vague and ambiguous, rendering them unenforceable. He further claimed that the termination clause contracted out of the requirements of the Employment Standards Act when it provided for termination for cause without further payments, and termination with notice, with a fixed notice payment of four months.

The Court noted that a termination clause must comply with the minimum standards under the Employment Standards Act and found that the termination clause in question was unenforceable as it allowed the employer to terminate the plaintiff for cause without complying with such minimum standards. Further, the clause must be clear and unambiguous, but the Court did not need to decide on this matter given that they found the clause to be unenforceable due to its lack of compliance with the legislation.

Court Allows Claim in Part, Employee Awarded Damages

Since the plaintiff was found to be a fixed-term employee, he was entitled to reasonable notice under the Employment Standards Act. Further, as an employee, he was entitled to the earnings he would have received up to the end of the fixed-term contract in the absence of a notice period.

Overall, the Court awarded the plaintiff approximately $70,000 in damages representing the balance of the contract term, unpaid vacation and unpaid holiday pay to the date of termination. The employer was also ordered to pay partial indemnity costs to the plaintiff.

The Court dismissed the plaintiff’s claims for future vacation, future holiday pay, and punitive, aggravated, bad faith and/or moral damages.

Contact Willis Business Law for Trusted Advice on Navigating Employee Termination

The trusted employment lawyers at Willis Business Law provide employers with proactive advice and unique solutions on a variety of employment law matters, including employment contracts and employee termination. The firm’s knowledgeable litigators also skillfully advocate for employers in wrongful dismissal claims.

Located in the heart of Windsor’s financial district, our firm proudly serves clients throughout Windsor-Essex and the surrounding areas. To schedule a confidential consultation with a member of our employment law team, contact us online or call us at 519-945-5470.

The classification of a worker as either an employee or independent contractor is significant because it determines the worker’s entitlements and the employer’s responsibilities. The existence of a third category of worker (the dependent contactor) and the recent passing of the Working for Workers Act 2022, which creates rights and protections for digital platform workers, makes worker classification a complex area for employers to navigate.

This article looks at the various categories of workers, along with a decision of the Ontario Superior Court of Justice from earlier this year in which a worker argued that he was a dependent contractor and therefore entitled to reasonable notice.

Employee vs. Independent Contractor

While many employees in Ontario enjoy the entitlements set out in the Employment Standards Act, 2000 such as minimum wage, reasonable notice for termination without cause, sick leave, and vacation time, these do not apply to independent contractors.

Independent contractors tend to have more control over how they perform their work and can work simultaneously for multiple clients. Unlike employees, they are responsible for paying tax and pension contributions.

In determining whether a person is an employee or independent contractor, courts look at a range of factors, including:

Whether the worker can control the method of completing their work;
Whether the worker works exclusively for the employer;
Whether the worker uses their own tools; and
Whether the worker bears the risk of loss and chance of profit.

It’s important to note that the wording used in an employment contract is not necessarily determinative. Under section 5.1 of the Employment Standards Act, an employer must not treat a person as an independent contractor if they are in fact an employee.

Dependent Contractors Under the Common Law

The common law also recognizes the concept of a dependent contractor. While not employees, they primarily work for one employer and are entitled to reasonable notice of termination.

Again, courts look at various factors on a case-by-case basis, such as whether the worker is subject to the employer’s control, whether the worker owns their tools, whether the worker has undertaken any risks, and whether the worker’s activity is part of the employer’s business organization.

Rights for Digital Platform Workers

The new Working for Workers Act, 2022 in Ontario creates the Digital Platform Workers’ Rights Act, 2022. This new Act will provide rights to digital platform workers; i.e., workers that provide ride share, delivery or courier services through the use of a digital platform, such as an app. These “gig” workers are normally classified by companies as independent contractors.

Under the Digital Platform Workers’ Rights Act, digital platform workers have the right to be provided with certain information relating to the work to be undertaken, the right to receive minimum wage for each work assignment, and the right to tips and gratuities.

The Digital Platform Workers’ Rights Act will come into force on a day set by the Lieutenant Governor (not yet set).

Plaintiff Sought Reasonable Notice of Termination, Arguing He Was a Dependent Contractor

In 1159273 Ontario Inc. v. The Westport Telephone Company Limited, the plaintiff corporation, which was controlled and owned by an individual by the name of Tom, provided contracting services to the defendant prior to being terminated. There was no written agreement between the parties.

Tom, on behalf of the plaintiff provided engineering and technical advice on telecommunication network design. He was also responsible for supervising the defendant’s employees. While Tom used his own laptop and vehicle, he was granted the use of the defendant’s office space, support staff, and tools. He was also a shareholder, officer, and director of the defendant.

In 2019, the plaintiff was told that its services were no longer required. The defendant was prepared to pay three months of consulting fees after terminating the arrangement. The plaintiff commenced proceedings against the defendant, arguing that it was a dependent contractor and was therefore entitled to reasonable notice of termination.

Factors Pointed to Independent Contractor Status

The Ontario Superior Court of Justice applied various factors to determine whether the plaintiff was a dependent or independent contractor.

Exclusivity

Firstly, the Court considered whether the plaintiff worked exclusively or near exclusively for the defendant, such that he was economically dependent. The Court found that the plaintiff did not work for the defendant on a near-exclusive basis. Upon review of the plaintiff’s income tax returns for 2014 to 2019, the Court noted that only 70% of consulting fees received by the plaintiff were from the defendant.

Control & Provision of Tools

Secondly, the Court found that the plaintiff was not controlled by the defendant as he also worked for other companies. Further, the plaintiff’s ownership of shares in the defendant’s business provided it with a certain amount of control over the way the defendant operated. The plaintiff also had some control as an officer and director of the company. The fact that the plaintiff held these positions explained why the defendant provided an office and tools.

Business Risk & Integration

On the issue of business risk or expectation of profit, the Court found that there were sources of revenue that provided an expectation of profit, such as its shares in the defendant’s corporation.

Finally, the plaintiff argued that it was not differentiated from the defendant and was presented as part of the defendant’s organization to the public. The Court rejected this argument, noting that while the plaintiff’s owner appeared on organizational charts, his company was not integrated in this way.

As a result, Justice Kershman decided that the plaintiff was an independent contractor and dismissed the claim.

This case is illustrative of the importance of employers to understand the consequences that flow from worker classification and why proactive legal advice on this issue is key to avoiding liability in the future.

Willis Business Law Provides Proactive Advice to Windsor-Essex Employers on Worker Classification

The knowledgeable employment lawyers at Willis Business Law provide forward-thinking legal solutions to employers throughout the Windsor-Essex region. The firm helps clients reduce risk and increase productivity through careful review of all worker contracts and provides robust advice on employee and contractor status. The employment law group ensures clients receive attentive, responsive service and is invested in each client’s success.

Willis Business Law is located in the heart of Windsor’s financial district, overlooking the beautiful riverfront. The firm proudly serves clients throughout the entire Windsor-Essex region and surrounding areas. To schedule a consultation, please reach out online or call 519-945-5470.