Episode 3: Protections for Contract Workers
In 2016, Bram’s team successfully represented contract workers, Lawrence and Marilyn Keenan in a case against their employer, Canac Kitchens. They were let go after three decades of service without severance because of their so-called “independent contractor” status. This precedent-setting case influenced legislative changes and introduced the dependent contractor status in Ontario, one that has the same protections under the law as employees.
Transcript: Protections for Contract Workers
Bryan Goman: The Employee Rights Podcast is presented by Lecker & Associates, employment lawyers representing Ontario workers for over 35 years. Today on the podcast we’ll be speaking with Bram Lecker, principal of Lecker & Associates, about protections for contract workers. I’m Bryan Goman and this is the Employee Rights Podcast.
Bram, there is a growing trend for hiring workers on contract. Why is this problematic? When did you first start noticing these hiring practices?
Bram Lecker: It’s important to step back a minute. It’s not so much a trend. It’s the fact that businesses have always tried to operate by having some of their workforce or sometimes a large part of their workforce being classified as independent contractor.
As we’ve already spoken in previous occasions, it’s a good place to be in if you’re an employee in Ontario and all the provinces of Canada. If you’re terminated from your employment there are a whole panoply of rights that come to bear if you’re an employee. Largely, these are based on your age, length of service, and type of position.
The higher those variables are the more compensation you’ll obtain. It was always said or believed if you took a worker and made them a so‑called independent contractor that you were excluded from those laws. That you could terminate somebody often with very little notice or sometimes as they do in the States, at will.
That was never really the case. The knowledge had not gone out to the business community. When you ask me about a trend, it’s not a trend necessarily that companies are doing this more or trying to treat their workers as independent contractors, it’s that they were doing it and now it’s largely come to an end.
Bryan: One of the cases that turned this around was a case that you’ve worked on, Keenan versus Canac Kitchens. Can you tell us a little bit about that and why this was truly a watershed moment for contract workers?
Bram: Canac has a vainglorious reputation in the field of employment law. It was a Canadian company that was bought over by the Kohler Corporation, you know the ones that make the sinks, and the toilets, and that sort of thing.
They bought up a very large and successful kitchen company called Canac and, in the two years ‑‑ this is usually the case with these things ‑‑ proceeded to weed out and then close the company completely, shipping most of the manufacturing facilities out to South Carolina.
In the final phase of this restructuring campaign that was undertaken, they started terminating all their service workers. It was a kitchen company. They had a whole legion of people who drove around in trucks and installed the kitchens once people had bought them from the showroom and the like and they were produced.
These people had been set up for years and years. In fact, in the case of the Keenans, over 26 years, as independent contractors. She took care of the business end of the operations, in other words dealing with the clients. He was the actual person with the tool belt run around and installed. Sometimes she took up a tool belt as well.
They terminated them after 26 years, just before the company closed down. They thought that they were finished with their service obligations to their customers and offered them absolutely nothing for 26 years of service. Keep in mind that these people were in their late 50s, completely relied on the company Canac for their income.
Ordinarily, if they were employees it was a no‑brainer that they would have received close to 18 months to two years of severance. The company turned around and said, “Well, you were an independent contractor. You invoiced us every week. We didn’t give you a paycheck, per se. And, we’re paying you nothing.” That wasn’t acceptable both to the Keenans and to ourselves as well.
We went all the way to court. The judge, in this case, found that they were not employees, they were not independent contractors who were entitled to no rights, they were a hybrid somewhere in the middle. A classification that we used to call intermediate category employees.
In this occasion, the judge decided to call them dependent contractors because most of their income was derived from this company Canac and it was a permanent relationship, those two things. In this particular case, awarded them 26 months of severance, which was a record at the time. This was a major, major occurrence.
There are so many companies, travel agencies, tobacco companies, who have, in particular, salespeople on the road. Everybody who goes out and services customers, they were treated as independent contractors. This changed the whole legal landscape for them with regard to their protection.
Bryan: We’ll talk a little bit more about salespeople. That’s an interesting classification. I want to get back into that worker classification that the judge had decided in this case of terming them, dependent contractors.
This verbiage also has made it into Bill 148, which, among other things, has brought legislative protection for contract workers through a mandatory worker classification. We created these classifications of the independent or dependent contractor. Can you talk a little bit about that and what dependent contractors are entitled to?
Bram: This was a perpetual problem. There’s a lot of workers out there who ordinarily would have been protected. We’re not only talking about severance obligations. We’re talking about Worker’s Comp. We’re talking about EI. We’re talking about CPP. The Liberal government in power at the time had seen this trend, as you say, developing. It was an existing situation.
In Bill 148 decided to do something about it. Coincident with this case, the case occurred first. In all humbleness, I don’t know, it was regarded as 1 of the 10 most leading cases in Canada at the time and sent shockwaves through the business community. I don’t know whether the government looked at that or coincidentally had its own plans.
They did create a provision, at least in Ontario, that deemed that individuals working in a very close relationship with their employer, i.e. regarding pay, hours of work, where they work, who owns the tools, all these things that we’d always used to determine whether or not somebody’s an employee or not.
The person is deemed to be a dependent contractor and, in this particular case, under the protection of the Employment Standards Act as well as under the protection of the courts for severance obligations and the like.
Bryan: We have the term independent contractor, dependent contractor. There’s obviously some incentive from the company’s perspective for classifying their workers as independent. Are there any penalties for these companies when they misclassify workers as dependent contractors?
Bram: Under the previous legislation that the Liberals brought in, and speaking completely apolitically, not taking a position one way or the other, it certainly was a better thing because the original legislation had penalties that could be levied against employers if they misclassified. As the world turns, there was a new government put into place.
That government didn’t deem it necessary, A, to put in penalties or put teeth into that particular provision of the Employment Standards Act and, secondly, decided that the presumption, the deeming provision that was in the previous legislation was reversed. Now, it’s employees who have to prove that they are dependent contractors.
Bryan: Let’s talk a little bit about commission sales agents, how they’re classified and if businesses can change territories and compensation structures simply because they are commissioned contractors.
Bram: Commission agents by their very nature ‑‑ my dad was one ‑‑ they’re like the Don Quixote of the business world. They travel place to place usually with a joke in their head and a little pen in their pocket and go to different business enterprise trying to sell their manufactured goods by either their principal, which would be an independent contract relationship, or their employer.
The problem is that, very often, especially in the industrial sector, they rely solely on commission income. These people had become very, very vulnerable.
Once again, if they were terminated from their employment, the so‑called employer or principal would say, “Well, we don’t owe you anything because you’re an independent contract. You were just earning commissions. I don’t even pay you a salary.” Out they would go.
That was the difficulty. We have situations of termination and we have situations that are akin to what we call constructive dismissal where the employer or the principal says, “I’m just changing your territory,” or, “I’m taking your commissions away,” or, “I’m turning all your accounts into house accounts.”
All these things which are designed to pressure the person to leave the job. Normally, that would be a constructive dismissal if they’re an employee. An independent contractor would have to take it on the chin.
This whole classification of employees, which is very, very large, largely unseen, but very large was left largely unprotected until this bill came along, until this case came along as we’re discussing which puts them on an equal footing to those individuals who are employees.
If you terminate them outright, you’re going to have to pay notice or severance based on their age, their length of service with the employer or principal, and the type of position they had. Were they a technical sales rep? Were they a national sales manager and the like? The higher the better.
That was written into the act. That was presumed, of course, when they changed the classification. All these people who otherwise would not have been protected or it would have been difficult to protect were now less vulnerable.
Bryan: Bram, thanks once again.
Bram: Thank you.
The Employee Rights Podcast is presented by Lecker & Associates
Podcast produced by Bryan Goman; Transcription by CastingWords.
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