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“Dependent” Contractors Entitled to Reasonable Notice of Termination

May 30, 2024

A worker’s classification as an employee, independent contractor, or dependent contractor comes with significant legal implications, which affect the rights and obligations of both workers and employers. While many businesses are familiar with the categories of employee and independent contractor, some may not be aware of the intermediary: dependent contractors. As dependent contractors are increasingly recognized by the courts, it is important that employers become aware of this status and its legal significance. The recent BC Supreme Court case Cvjetkovich v. Breezemax Web (Ca) Ltd., 2024 BCSC 808, explored the classification of dependent contractors.

Background

In this case, the 44-year-old plaintiff, Mr. Cvjetkovich, was terminated after 13 years working as Senior Vice President of Sales for Breezemax, a digital marketing agency. Breezemax had considered Mr. Cvjetkovich to be an independent contractor, but Mr. Cvjetkovich alleged he was an employee, and brought a civil claim for wrongful dismissal. 

Decision

The judgement can be summarized into three primary issues:

  1. Whether Mr. Cvjetkovich was an employee or a contractor;
  2. Whether Mr. Cvjetkovich was an independent or dependent contractor;
  3. What period of reasonable notice was Mr. Cvjetkovich entitled to?

Employee vs Contractor

While a worker’s job title or contract may nominally classify them as an employee or a contractor, this designation is not definitive. British Columbia courts will examine the context of the entire working relationship to determine whether a worker is actually a contractor or an employee in law.

In this case there were factors supporting an employee and a contractor relationship. However, the judge was ultimately persuaded by evidence that pointed to the parties’ intentions. Because Breezemax had never issued Mr. Cvjetkovich any T4s, and both parties filed taxes as if Mr. Cvjetkovich was a contractor, the court was sufficiently convinced that the parties had intended, and in fact created, a contractor relationship.

Independent Contractor vs Dependent Contractor

There are two forms of contractor relationships: independent, and dependent. A dependent contractor relationship is a hybrid status, which falls between that of an employee and an independent contractor. Like employees, dependent contractors are entitled to reasonable notice of termination under the common law, as an implied term of their agreement.  Independent contractors, on the other hand, are not entitled to an implied term of reasonable notice at common law. 

The judge considered the economic dependency of Mr. Cvjetkovich.  Since he worked exclusively for Breezemax for the preceding decade, the court found that he was a dependent contractor.  Since he did not have a written agreement, the court held he was entitled to reasonable notice of termination.

Reasonable Notice Period

With respect to the reasonable notice period for a dependent contractor, the judge found that an appropriate notice period ought to reflect where the relationship falls on the continuum between employee and independent contractor. As with employment relationships, the reasonable notice period must be decided in reference to the contractor’s character of position, age, length of service, availability of alternate comparable work, and any other relevant factors.

Although Mr. Cvjetkovich was a contractor, the judge held that actual substance of his relationship with Breezemax brought the situation very close to that of employee/employer, thus the reasonable notice period ought to be close to that of an employee. The court determined that, had he been an employee, Mr. Cvjetkovich would be entitled to 13 months of notice. After making a slight deduction on account of his status as dependent contractor, the court awarded him with 12 months of notice, including commission and benefits which would have accrued during that period.

Key Takeaways:

This case serves as a reminder that courts will consider the entire working relationship in determining whether a worker is an independent contractor, dependent contractor, or employee.

When working with contractors, businesses should keep in mind that if the contractor works exclusively for their company, a dependent contractor relationship may arise. Where a dependent contractor relationship exists, and there is no written agreement with a clear termination clause, a business can be required to provide reasonable notice of termination or payment in lieu of notice.  Therefore, it is important for businesses to properly set up and document their relationship with the worker, including to agree on parameters of termination. 

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Expertise

Important Notice: The information contained in this Article is intended for general information purposes only and does not create a lawyer-client relationship. It is not intended as legal advice from Harper Grey LLP or the individual author(s), nor intended as a substitute for legal advice on any specific subject matter. Detailed legal counsel should be sought prior to undertaking any legal matter. The information contained in this Article is current to the last update and may change. Last Update: May 30, 2024.

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