Court of Appeal Confirms Years Spent as a Contractor are Included in Calculation of Reasonable Notice
By: Chris Justice
- Earlier this year, the Ontario Superior Court, in Cormier v 1772887 Ontario Ltd (St. Joseph Communications), addressed the issue of whether or not previous years worked as a contractor are to be included in the calculation of reasonable notice following termination.
- Cormier worked for St. Joseph Communications (“St. Joseph”) first as a wardrobe stylist and then fashion studio manager from 1994 until her dismissal in 2017. From 1994 to 2004, in her capacity as wardrobe stylist, Ms. Cormier was compensated as an “independent contractor”. From 1996 to 2004, she worked near exclusively for St. Joseph, at between 37 and 40 hours per week.
- Beginning in 2004 until 2017, Ms. Cormier worked exclusively for St. Joseph. In 2012 she was promoted to Fashion Studio Manager. She signed an employment agreement with the following termination clause:
Termination without Cause
(a) The Company may terminate your employment at its sole discretion, at any time for any reason, without cause, upon providing you the minimum notice, pay in lieu of notice and/or severance pay required by the Ontario Employment Standards Act, 2000, as amended from time to time. You will have no other entitlement to notice of termination, pay in lieu of such notice, and/or severance pay.
(b) In addition to the foregoing and subject to the consent of the Company’s insurers, you will be entitled to continue to receive Company benefits (excluding STD and LTD benefits) during the notice period specified above.
The decision to provide actual notice of termination or pay in lieu of such notice or any combination thereof shall be in the sole discretion of the Company. Pay in lieu will be subject to all required tax withholdings and statutory decisions and will be provided by way of salary continuation as per our regular payroll.
These payments are all inclusive of all amounts owing to you under the Ontario Employment Standards Act or other applicable legislation. Your receipt of any payments is conditional upon your signing the Company’s form of Release. [emphasis added]
- Following her dismissal, Ms. Cormier commenced legal action against St. Joseph for damages relating to wrongful dismissal. The matter was eventually heard by the Court by way of a summary judgment motion.
Motion Judge’s Key Findings
Summary Judgment Motion is Appropriate
- The motion judge found that summary judgment was appropriate in this case, taking into account the factual dispute regarding Ms. Cormier’s length of employment and credibility concerns.
Ms. Cormier’s Length of Service
- Cormier argued that she had been effectively employed by St. Joseph beginning in 2004, with St. Joseph taking the position that she was only an employee from 2004 onward.
- The judge found that regardless of Ms. Cormier’s job title from a contractor to an employment contract, there was little discrepancy between her years as a contractor and her years as an employee. The judge found that Ms. Cormier had been employed for a total of 23 years and awarded her a notice period of 21 months.
The Employment Agreement and Termination Clause
- The judge found that having the provision of benefits subject to “the consent of the Company’s insurers” was a violation of the employee’s obligation to continue benefits under the Employment Standards Act. The judge took specific issue with the fact that the clause excluded STD/LTD benefits during the statutory notice period.
St. Joseph Appeals the Motion Judge’s Decision
St. Joseph decided to appeal this decision, following the Court finding in favour of Ms. Cormier. The appeal was heard on October 21, 2019 and a decision was released on December 6, 2019.
The Court of Appeal’s Key Findings
- Was this case appropriate for summary judgment motion?
- The Court of Appeal answered in the affirmative, as there was no genuine issue requiring trial. There were only two facts in dispute: (1) how to classify the working relationship between 1994 and 2004; and (2) whether there was a failure to mitigate on Ms. Cormier’s part
- Was the respondent a dependent contractor between 1994 and 2004?
- The Court of Appeal answered in the affirmative as Ms. Cormier was both economically dependant on the income earned and was working under an exclusive working relationship
- Was the termination clause unenforceable?
- The Court of Appeal answered in the affirmative, confirming the rationale used by the motion judge.
- Employers need to pay particular attention to their employment agreements, and, specifically, the termination provision. It is very common to see termination clause entitlements “subject to the consent of the Company’s insurer”. As confirmed by the Court of Appeal, these clauses will not be effective in ousting an employee’s common law entitlements.
- It is a common argument from employer counsel that issues such as classification of worker status are not appropriate to be dealt with by way of summary judgment. This is just another decision confirming that summary judgment motions are, in fact, appropriate to deal with such issues.
- Where an individual is deemed to be a “dependent” contractor for a given period of time, that period gets assessed as it normally would in the case of the individual being an employee, for the purposes of calculating that individual’s entitlements following termination.