At common law, both employees and dependent contractors are entitled to reasonable notice of termination or payment in lieu thereof. In determining the length of the reasonable notice period in any particular case, courts will look at the Bardal factors, which include: character of employment, length of service, the plaintiff’s age, and the availability of alternative employment. Generally, “length of service” is given a significant amount of weight. Until recently, “length of service” was generally assumed to refer to time spent as an employee or dependent contractor. However, a recent decision by the Court of Appeal for Ontario has raised questions as to whether time spent working as an independent contractor qualifies as providing “services” to an employer for the purpose of calculating the reasonable notice period for someone terminated while an employee or dependent contractor.
Dependent contractors fall somewhere between an employee and an independent contractor. A very basic definition would be a contractor that is economically dependent on its principal, with the primary factor in such a determination being whether the contractor is predominantly working for one principal. This is why they are granted some of the same common law entitlements as employees. Independent contractors, on the other hand, do not receive most of their income from one client or principal and do not have a right to reasonable notice of termination – their terminations will be governed by their contracts.
It is clear that someone can transition from being an independent contractor into either a dependent contractor or an employee. In Cormier v 1772887 Ontario Limited (St. Joseph Communications), 2019 ONCA 965 [Cormier], the Court of Appeal for Ontario affirmed a decision by a motion judge that considered the implications of such a situation for determining a plaintiff’s “length of service” for the purposes of determining reasonable notice. The motion judge suggested that years spent working as an independent contractor prior to becoming a dependent contractor or employee count towards determining “length of service” when calculating reasonable notice periods in some circumstances.
The Plaintiff worked as a wardrobe stylist and, later, as a fashion studio manager for the Defendant from 1994 until her dismissal without cause in 2017. Until 2004, she worked for the Defendant as a Freelance Wardrobe Stylist based on an oral agreement. She was paid both hourly and on a project basis, and her work arrangements were day-to-day. Between 1996 and 2004, she worked exclusively for the Defendant during busy periods (10 months of the year) and did occasional work for others during the slow periods (May and November). On June 3, 2004, she was hired by the Defendant as a Wardrobe Stylist pursuant to a written employment contract. The Defendant terminated her employment on July 6, 2017.
Motion Judge’s Decision
The Defendant argued that the Plaintiff was an independent contractor prior to 2004, and the reasonable notice period should be based on a “length of service” of thirteen (13) years. The motion judge disagreed, finding that she was a dependent contractor from 1994 until 2004, and her “length of service” was 23 years. This was in line with prior jurisprudence on dependent contractors. However, the motion judge expanded on this, finding that the nature of the Plaintiff’s work rendered the indicia of independence or dependence unhelpful in defining the relationship between the parties. What was relevant was the twenty-three-year solid workplace relationship between the Plaintiff and the Defendant.
The motion judge went further, stating:
“[I]n my opinion, even if I had concluded that Ms. Cormier was an independent contractor from 1994 to 2004, it would have been wrong in principle to ignore these years of their relationship in determining the reasonable notice period. The court should take all of the circumstances into account and in the immediate case even if I had found Ms. Cormier to be an independent contractor, I would not have ignored those years of their relationship.”
The Defendant employer appealed the decision.
Court of Appeal’s Decision
Although the Court of Appeal for Ontario did not explicitly endorse the motion judge’s discussion on years spent as an independent contractor, it did “defer to the motion judge’s ultimate conclusion that ‘[w]hat stands out is that [the respondent] had a twenty-three [year] solid workplace relationship with [the appellant],’” in upholding the motion judge’s decision.
This case opens up the possibility that “length of service” for the purposes of determining reasonable notice periods will depend on whether a “solid workplace relationship” existed, rather than on whether a plaintiff was an independent versus a dependent contractor (or employee). We can expect terminated employees and dependent contractors who previously provided services as independent contractors to use this case to argue as much in actions for wrongful dismissal.
Note that, even if such arguments are successful, this case is unlikely to influence independent contractors’ entitlements to common law notice, as entitlement to notice is distinct from the calculation of notice.
Employees and dependent contractors should be aware of this opportunity to argue that the length of their service to a company includes time spent providing services as an independent contractor. Meanwhile, employers should be prepared to have to rebut such arguments, as Cormier has opened the door to a new way of viewing “length of service.”