“Independent Contractors” can get severance?

Jeff Dutton of Dutton Employment Law brings our attention to a Superior Court case that may change the law in Ontario: Cormier v. 1772887 Ontario Limited c.o.b. as St. Joseph Communication.

Ms. Cormier had been an independent contractor with St. Joseph Communication [“StJC] from 1994-2004, an employee from 2004 to 2012, and a manger with them from 2012 to 2017, when she was terminated without cause pursuant to her employment contract which gave StJC that right. She was given the Employment Standards Act, 2000 minimums as per the contract, calculated on the basis of an employment start from 2004.

Ms. Cormier sued and won. The court held that her time as an independent contractor (i.e. 1994 to 2004) should have been used in calculating severance. The court come to that conclusion on the basis that she was a dependent contractor, a reasonably common way of doing so (and one which fitted the facts). Rather, the SCJ said that even if she had been a wholly independent contractor that time calculation would still have been made. Mr. Dutton posits that

“…there may be no distinction so long as the independent contractor worked for some length, without disruption, in approximately the same role before they were hired as an employee. This theory makes sense practically because the substance of the relationship was never changed, only the terms and conditions were changed…”.

While that does rather encourage one to discuss why on earth the “terms and conditions” weren’t the “substance” — at least in part — of an employment agreement, it does put a finger on the key point, for employers: “employers need to know that if they hire their independent contractors into a genuine `employee’ position, that time they spent as an independent contractor may be calculated in establishing their right to severance.”

Amongst other things, employers will have to consider language in contracts for such employees whereby the new employee agrees to waive the independent contractor timeframe for the purposes of severance and other calculations.

There were other reasons why the termination clause was held to be unenforceable (especially those regarding conditionality of benefits), but the reader is encouraged to read Mr. Dutton’s article in full: “Time as an independent contractor can be considered in the calculation of severance“. (The article can also be found on his firm’s website, under the different title, “Severance for Employees who used to be Contractors“.)

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