Dependent Contractors and Employment Law

Dependent Contractors and Employment Law | Lecker & Associates

Dependent contractors/agents are common in the business world. As a group, Dependent Commissioned Agents (DCAs) make their income in commissions generated from the sales of a commercial enterprise’s products or services. Whether engaged as door-to-door salespeople or as owners of incorporated sales agencies, DCAs have two things in common: economic dependency and minimum security in the relationship with their principals.

Using DCAs is a quick, inexpensive, and safe way for many small- and medium-sized businesses to build a sales force. Presumably, paying commissions upon sales received is a low-risk alternative to “carrying” a salaried employee in a new sales market. Below, we’ll discuss some common issues DCAs encounter when faced with termination and how employment lawyers can help.

The Traditional Approach

Commercial travellers, as they were once called, are free to seek out customers at will. Indeed, their independence has often perplexed the Courts. Generally, DCAs are not restricted by set work hours, inundated with mounds of paperwork, or involved with office politics.

Traditional legal texts categorize them as independent contractors; however, closer examination suggests that contractors do not have control of their terms of employment and economic independence, which is crucial in determining legal rights when unjustly terminated. Previously, this large portion of the workforce was banished to a legal netherworld in which the full protection of the law was not readily available.

Conventional wisdom maintains that while an unsuitable employee can only be dismissed with reasonable notice in the absence of cause, an independent contractor can be dismissed regardless of justification, with no compensation. In this situation, such “cracker-box” law has an element of truth.

Previously, in Ontario, a judicial determination that the salesperson was not acting as an employee was sufficient to shield the principal from legal liability. Thus, an independent contractor could be fired in the blink of an eye.

Changing Times: Keenan v. Canac Kitchens Ltd.

Fortunately, in the recent case of Keenan v. Canac Kitchens Ltd., (2016), a decision obtained by this firm, the court settled and reaffirmed the question of exclusivity – a significant factor in determining whether a person is a dependent or independent contractor in the commercial world.

The plaintiffs, Lawrence and Marilyn Keenan, began working for Canac Kitchens Ltd. In 1976 and 1983, respectively. Their employment relationship ended in 2009. Canac Kitchens Ltd. Did not provide a notice period, pay in lieu of notice, or other statutory entitlements because they believed the Keenans were independent contractors.

According to Canac Kitchens Ltd., the Keenans worked exclusively for them until 2006. From then until their termination, the Keenans also worked for one of Canac’s competitors (Cartier), which arguably did not make them exclusive contractors.

However, evidence determined a long-lasting employment relationship between the two parties that resembled economic dependency on a complete, or at least on a high level, of exclusivity. Despite the plaintiffs’ additional source of income from Cartier, the Keenans did most of their work for Canac.

Furthermore, Canac turned a blind eye to the Keenans’ two years of work with Cartier. Given the history of the working relationship between the two parties, the court agreed that a high degree of exclusivity was met.

This important decision follows the principle of the so-called “intermediate class,” where the plaintiff is expanded to protect a wide variety of parties, from truckers to door-to-door salesmen, much to the disappointment of the lean and mean corporate defendant.

In all such cases, where the termination of the relationship is unjustified, thereby depriving the dependent contractor of financial security, an experienced employment lawyer provides a powerful remedy to those parties who wish to stand up for their interests.

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