Wednesday, April 13, 2011

Wrongful Dismissal Damages for Contractors

Usually, when we think about wrongful dismissal, we're talking about employees. You can't fire someone not in your employ, after all.

Independent contractors are usually retained for particular tasks, then their engagement ends on completion of the task, so there's really no such thing as wrongful dismissal in that context, right?

But, as is common in law, there are grey areas.

The employee/independent contractor distinction is the subject of a lot of jurisprudence, and there are fairly well-established tests for the distinction. Putting in the contract that the worker is an independent contractor is only one factor. When the worker doesn't control his or her hours of work, doesn't own his or her tools, doesn't control the timing and manner of completion of the task, and/or doesn't bear a risk of loss or chance of profit in the arrangement, it is more likely that the worker will be found to be an employee.

There is also an intermediary category, however, often referred to as a "dependent contractor". This is a contractor who doesn't meet the definition of an employee, but who relies so heavily upon one client that the relationship is akin to an employment relationship. Recently, in the Sarnelli v. Effort Trust Company case, a locksmith contractor was blacklisted for no apparent reason by a mortgage company. Effort Trust had made up 2/3 of the locksmith's total billings. (You might ask why a mortgage company would so extensively need a locksmith: Unfortunately, mortgagees occasionally have to take possession of the mortgaged property.)

The Court found that the contractor was a dependent contractor, and awarded an estimate of what profits he might have made through a six month notice period, being $18,900.

It is, however, a small victory for the plaintiff. The relationship was terminated was in August 2005; the judgment was in April 2011. Devastated by the loss of his major client, he basically gave up on the business and closed it down in 2006.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

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