The Role of Economic Dependency and Exclusivity in Determining Who is a Dependent Contractoredit
Last week, the Ontario Court of Appeal released a decision in which it reiterated the legal principles used to distinguish a worker’s status as an independent contractor from that of a dependent contractor.
The worker at issue was a sole practitioner lawyer who provided legal services to the Office of the Children’s Lawyer (the “OCL”) pursuant to a series of agreements over a period of 13 years, the last of which expired on March 31, 2015.
The worker was a member of the OCL Personal Rights Panel, one of approximately 380 lawyers retained by the OCL to provide legal services in regard to custody, access, and child protection matters. She was first appointed to the OCL panel of lawyers in 2002, for a two-year period.
She remained a member of the OCL panel for the next 13 years pursuant to a series of fixed-term contracts, each of which required her to apply for reappointment as each contract expired. There was no automatic right of renewal for the contracts. However, on each occasion she was reappointed to the panel, initially for two-year terms and then from 2012 on an annual basis.
During the time she was a member of the OCL panel, she also maintained an independent legal practice and that practice formed a majority of her billings. Her OCL work accounted for anywhere from a low of 14.8% to a high of 62.6% of her annual total billings. Over the 13-year period that she was on the OCL panel, OCL billings accounted for an average of 39.9% of her annual billings.
The worker’s last retainer agreement expired in 2015. On March 31, 2015, the expiry date of that agreement, the OCL informed the worker that her retainer was not going to be renewed. The worker was given one year to wind down her existing OCL files and was not subsequently appointed to the OCL panel.
As a result, the worker brought a claim alleging that she was a dependent contractor and was therefore entitled to 20 months’ notice of termination.
The OCL brought a motion for summary judgment dismissing her claim.
That motion was dismissed by the motion judge, who found that there were sufficient factors to militate in favour of a finding of dependent contractor status.
The OCL appealed.
Ontario Court of Appeal Decision
The Court of Appeal began by explaining that a dependent contractor status is a non-employment relationship in which there is “a certain minimum economic dependency, which may be demonstrated by complete or near-complete exclusivity”. Deciding whether there is “minimum economic dependency” is highly context-specific.
In distinguishing dependent from independent contractors, exclusivity of service provision, and therefore of income, is key:
“[E]xclusivity is determinative, as it demonstrates economic dependence.”
However, in cases in which a dependent contractor relationship was found to exist but exclusivity was not absolute, substantially more than a majority of the dependent contractor’s income was earned from the contracting party.
In this case, the worker did not work exclusively for the OCL as she was expected to maintain a private legal practice throughout the entire time that she was retained, and she did so.
The court stated that the fact that an average 39.9% of her annual billings came from the OCL indicated a significant percentage of the worker’s billing. The court acknowledged that the loss of the OCL retainer would have had a substantial impact on the worker’s legal practice and her income.
However, the court found that was not determinative of her status as a dependent contractor, stating:
“On no account can 39.9% of billings be said to constitute exclusivity or “near-complete exclusivity”, such that economic dependence on the OCL is established.”
Exclusivity is a categorical concept – it poses an either/or question, and “near-complete exclusivity” must be understood with this in mind. “Near-complete exclusivity” cannot be reduced to a specific number that determines dependent contractor status; additional factors may be relevant in determining economic dependency. But “near-exclusivity” necessarily requires substantially more than 50% of billings. If it were otherwise, exclusivity – the “hallmark” of dependent contractor status – would be rendered meaningless.”
Ultimately, the court found that while the OCL was one of the worker’s clients, a very important client, it remained only one of her clients. It concluded:
“In this case, the [worker]’s loss of the OCL retainer results in a 39.9% reduction in the billings generated by her legal practice. That is a significant loss, but it is insufficient to establish the requisite economic dependency.”
In addition, it found that the longevity of the worker’s retainer with the OCL did not transform it into a relationship of “enduring dependency”.
As a result, the court allowed the appeal and dismissed the worker’s claim.
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