Court Looks At What Is Needed To Determine If A Contractor Is Dependent
January 16, 2020
The use of contract workers in employment situations has long been practiced, but with the advent of terms such as “side hustle” and the rise or disrupters in the technology sector, performing contract work either as a main form of employment or as a secondary job seems to have become more popular. For employers, hiring contractors makes sense if they’re looking to avoid things such as long-term commitments, payroll deductions, reasonable notice, etc. But the line isn’t as clear as it may seem. The idea of a “dependent contractor” has come up through common law. Dependent contractors are those who are dependent on the work they perform as contractor, and as such are entitled to benefits such as reasonable notice. But, as seen in a recent decision, the line between dependent and non-dependent isn’t always that clear.
The employment relationship
The employer is a lawyer who worked as a sole practitioner. She provided services to the employer for 13 years. She had a number of work agreements with the employer over that time, with the most recent expiring on March 31, 2015. The employee was one of over 380 lawyers hired by the employer in the most recent two-year period of her work with them.
The employee maintained an independent legal practice during this period, with her work for the employer accounting for anywhere from 14.8% to 62.6% of her annual total billings.
Upon the expiration of her last employment agreement, the employer decided not to renew. The employee was given one year to wind down her files with the employer.
A claim for reasonable notice
The employer claimed it owed no reasonable notice to the employee. The contract stated, “The (employer) makes no guarantee of the total value or volume of work to be assigned to you. You confirm that in your capacity as an (agent of the employer), you are not an employee of (the employer).” It also said, “(the employer) reserves the right, at her sole discretion, to terminate this retainer agreement at any time, without fault and without liability.”
The employee argued that she was a dependent contractor and was entitled to 20 months of reasonable notice.
Motion judge’s decision and the appeal
The motion judge determined that even though both parties admitted she was not an employee, the work relationship had gone on for 13 years without break. An average of 39.9% of the employee’s work came from the employer. The employee was also perceived to be an employee of the employer, all leading to the motion judge to find that a hearing was necessary. The employer appealed the motion judge’s decision to call for a hearing.
The court found that since she admitted she wasn’t an employee, the only issue left to determine was whether she was a dependent contractor. The court stated that a dependent contractor status can only be gained if there is “a certain minimum economic dependency, which may be demonstrated by complete or near-complete exclusivity”.
The court cited common law decisions which state that when a contractor does not work exclusively for an employer, they must be able to demonstrate that a significant amount of their income must come from the work. The court found that “on no account can 39.9% of billings be said to constitute exclusivity or ‘near-complete’ exclusivity.”
As a result, the motion judge’s decision was overturned and the issue was dismissed.
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