Reasonable Notice: Employees and Dependent Contractors

Slepenkova v. Ivanov – Ontario Superior Court of Justice – July 26, 2007

Despite a written agreement which indicates that an individual is an independent contractor, Courts may find them to be an employee or a dependent contractor and therefore entitled to reasonable notice on termination.

The July 26, 2007 decision by the Ontario Superior Court of Justice on Slepenkova v. Ivanov [2007] O.J. No. 4708 (“Slepenkova”) highlights the willingness of the Courts to expand outside the wording of an employment contract in order to determine whether an individual is an employee or an independent contractor for the purposes of reasonable notice on termination. Also, the Trial Judge’s comments in this case regarding dependent contractors further identifies the Court’s leniency on this issue.

Slepenkova is a situation where the employee was employed as a buyer’s agent for an employer. The employer was employed by Re/Max. From 2003 to 2006, the employee signed three agreements to work for the employer, each of which specified that the employee was an “independent contractor.” Additionally, when the employee began working for the employer, she also signed an agreement with Re/Max which contradicted those she signed with her employer.

In 2006, the employer wished to restructure the then current signed agreement with the employee. However, the restructuring would remove all available bonuses. When asked to sign the new agreement by the employer, the employee refused. In response, the employer terminated the employee and gave her two weeks notice. The employee brought an action against the employer for damages of pay in lieu of reasonable notice.

In reaching a decision, the Trial Judge first determined whether the employee was truly an employee of the employer, or whether she was better characterized as an independent contractor. The answer would determine whether the employee should have received reasonable notice from the employer when terminated. The Trial Judge considered that: the employer had substantial control over the employee; the employer owned and provided the majority of the tools the employee used in the course of her employment duties; the employee’s chance for profit was limited; the employer bore most of the risk of loss; and, the business was clearly the employer’s. Based on these findings, the Trial Judge found that the employee was truly an employee to the employer and not an independent contractor, which the agreements stated, therefore indicating that the employee should have received reasonable notice when terminated.

Additionally, the Trial Judge stated that even if it was not found that the employee was truly an employee of the employer, the Trial Judge would not have found the employee to be an independent contractor, but rather a dependant contractor due to “…the relationship being of a permanent and close nature giving rise to an implied obligation to give reasonable notice of termination.”

Slepenkova indicates that both employees and employers should be aware that Courts will not simply determine the status of an employment relationship based on the wording of a signed written agreement. Rather, certain factors surrounding the parties will be considered when the courts are making such decisions. The Trial Judge’s additional comment regarding dependent contractors further demonstrates the Court’s position on this issue. Employers are therefore not able to limit an employee’s right to reasonable notice on termination by simply stating in a written agreement that the employee is actually an independent contractor. The employer must ensure this classification is accurate by treating the employment relationship as it is stated in the written agreement, otherwise the Courts may find that the individual is truly an employee or dependent contractor and therefore entitled to reasonable notice on termination.

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