Welcome to my “man cave”.

Motta v. Clark, 2016 ABQB 211 (CanLII)cropped-img_0468.jpg

Once in a while, a case comes along provoking some sobering thought.  Motta v. Clark is one such case.   It raises the issue about the potential liability for personal injury damages arising from the seemingly simple act of inviting a friend over to the house for a social evening.

Ronald Clark invited his good friend Joe Motta over to his house on a Friday evening for a social night in Clark’s “man cave”, his garage.  There was a history of Clark entertaining friends in his garage and Motta had been invited to drink beer and socialize on numerous prior occasions.  While the evidence showed that both Motta and Clark had consumed a substantial amount of beer both in the time leading up to and during the evening in question, alcohol was found not to factor into what ultimately transpired.

Historically, when Clark entertained friends in his garage, it was his practice and that of his guests to urinate in the backyard when the need was called for.  They did not use the bathroom in the house.  On this particular night, however, Motta apparently needed to have a bowel movement and asked Clark if he could use the bathroom in the house.  Clark was happy to oblige telling Motta to use the upstairs bathroom.

For reasons unimportant to this review, Clark several weeks prior had disabled the motion sensor lighting meant to illuminate the back of the house at night in the vicinity of the outside entrance.  The house was in complete darkness with no lights turned on inside or out.  Motta was able to find the back door entry to the house.  He opened the door, stepped onto the landing inside the door with his left foot and began reaching around in the dark with his right arm for a light switch which he thought was on the wall to the left just inside the entrance.  He then brought his right foot through the door expecting to place it on the landing inside the door.  Instead, his right foot came down  on the first step of the staircase leading to the basement from the left side of the landing inside the back entrance.  He tumbled down the staircase suffering significant injuries.  At trial, only the question of liability for the injuries remained to be determined by the court.

Liability in this case, turned on the Occupiers’ Liability Act of Alberta, a statute very similar to occupiers’ liability legislation in other parts of Canada including Nova Scotia.  All versions of occupiers’ liability legislation across Canada impose some variation of the duty on the occupier of a property to “take such care as in all the circumstances of the case is reasonable to see the visitor will be reasonably safe in using the premises for the purposes for which the visitor is invited or permitted by the occupier to be there or is permitted by law to be there.”

The court determined that it was reasonably foreseeable by Clark that a visitor entering the back door of his house in the dark and without any light on in or outside the house might, even if exercising care, risk falling down the basement stairs.  That reasonable foreseeability gave rise to a duty of care owed by Clark to Motta to ensure the house was reasonably safe for the purpose for which Clark invited Motta to use it.

The trial judge found that Clark breached his duty of care to Motta.  Clark had invited Motta to join him for a social evening in his garage.  He permitted Motta to access the Clark residence for the purpose of using the upstairs washroom.  Clark knew that the outside lights at the back door of his house had been disabled.  He also knew that there were no lights on in the house when he told Motta he could enter the house and use the bathroom.  Clark knew that Motta would have to reach out over the stairwell to get the light switch he needed to turn on in order to see where he was going.  The first step down the staircase to the basement was virtually on the immediate left as one entered the door from outside.  In all of this, Clark was found to have breached his duty to Motta to ensure that the house was reasonably safe under the circumstances to authorize Motta to enter the house and use the washroom.

On the other hand, the court also found that Motta contributed in some measure to the cause of his own injuries.  He could have returned to the garage to request Clark’s assistance in finding the lights in the house.  He had a lighter and a cell phone that he could have used to provide enough illumination to note the stairs and find the light switch.  In the end, the court apportioned liability 2/3rds to Clark and 1/3rd to Motta.

The case reminds us that unintended accidents can happen on our properties whenever we invite people to our homes for social reasons or otherwise.  While we all carry house insurance that in many cases will cover these accidents, there may be things we’ve done (e.g., like disabling motion sensor lights designed to illuminate important areas at night)that might possibly void our coverage.  Even with insurance protection, it is useful to be reminded from time to time, that when we invite friends over to our homes, we owe them a legal duty to ensure our properties are reasonably safe for their use.

 

 

Implied Terms in a Dependent Contractor Relationship

Keenan v. Canac Kitchens Ltd., 2016 ONCA 79 (CanLII)

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In a recent post, we looked at the question of whether a worker was an employee,  a contractor, or something in between, and why the answer to that question might be important.

Another recent Ontario Court of Appeal case, Keenan v. Canac Kitchens, has provided an opportunity for the court to comment further on the nature of the exclusivity factor required to establish an dependent contractor relationship.  In addition, the court in Keenan elaborated on how the length of notice for termination of a dependent contractor relationship should be determined.

In Keenan, a husband and wife (the “Keenans”) had been in the employ of Canac Kitchens since 1976 and 1983 respectively.  At the time of Mrs. Keenan’s employment by Canac in 1983, both of the Keenans worked as foremen for the company.  It was common ground that until October of 1987, the Keenans were employees of Canac and the company deducted and remitted Income Tax, EI and  CPP on behalf of all its employees, as required by law.

In 1987, Canac advised the Keenans that the working relationship between the company and the Keenans was to be changed.  The Keenans would no longer be employees of Canac, but would continue on as contractors.  As evidence of the change, the Keenans received Records of Employment  from Canac, and Canac no longer made statutory deductions or remittances on behalf of them.  The Keenans commenced making their own remittances to the CRA and were responsible to do so for their own employees.  Notwithstanding these changes, the Keenans continued to qualify for Canac employee discounts, wear Canac uniforms, and be provided with Canac business cards.  In addition, Canac gave Mr Keenan a special ring in 1996 in recognition of 20 years of service to the company.

Until 2007, the Keenans worked exclusively for Canac.  Thr0ughout 2006, however, business at Canac went into decline and in order to maintain their income, the Keenans commenced working part of their time at another company.  Canac was aware of this and the bulk of the Keenans’ revenue continued to be generated through Canac.

In 2009, Canac decided to shut down operations for business reasons.  It did not provide the Keenans any notice, pay in lieu of notice, or severance.  It did not provide the Keenans with any the minimum statutory notice prescribed by legislation.  Canac’s position was that the Keenans were independent contractors.

At trial, and on appeal, Canac argued that since the Keenans were not working exclusively for Canac at the time of the termination of their contracts, there was no element of exclusivity at that point and they were not, therefore, dependent contractors.  As independent contractors, Canac believed the Keenans were not entitled to notice or pay in  lieu of notice.  The trial judge rejected this argument on the basis the Keenans continued to be either exclusive, or “near exclusive” contractors to Canac up until the time of their dismissal.  While it might have been true technically, that the Keenans were contracting to two companies at the time of their termination from Canac,  there continued to be a substantial long-term economic dependency on Canac.

The court of appeal upheld the trial judges decision, adding that the question of exclusivity cannot be answered by looking what at might be happening at a given point in time, as Canac was attempting to do.  It was necessary to look at the entire term of the relationship.  In the last two years of their relationship to Canac, the Keenans did a modest amount of work for a competitor of Canac. Canac knew and chose to disregard this knowing the reason was the decline in Canac’s business.  When the appeal court looked at the whole term of the relationship between Canac and the Keenans, it concluded that the minor aberration 0f the last two years could not disturb the fact they were economically dependent on Canac throughout their relationship with the company, including the last two years.  This economic dependency, born of exclusivity, is the hallmark of the dependent contractor relationship.

Canac also appealed the trial court’s award of 26 months of notice for both Mr. and Mrs Keenan.  In its appeal, the company relied on an earlier Ontario Court of Appeal case that established a maximum notice period of 24 months, which could only be exceeded on a finding of exceptional circumstances.  There was no finding made by the trial judge in Keenan of the exceptional circumstances which would justify a notice award exceeding 24 months, though there was evidence that a 26 month notice period had been discussed.

Using the Bardal factors (the Bardal factors have been discussed in an earlier post), the Court of appeal chose to uphold the trial court’s award of 26 month’s notice for each of the Keenans.  In arriving at this decision, the Court of Appeal had regard to the length of service of the Keenans, their respective ages at the time of termination, the supervisory nature of their positions, the fact they were the public face of Canac for the best part of a generation, the degree of dependency they had on Canac and the difficult they would likely encounter in replacing their income with alternative employment.

The important takeaways from the Keenan case include the court’s emphasis on having to look at the entirety of the relationship in assessing whether there is the kind of exclusivity and economic dependence required to establish a relationship of dependent contractor.  Exclusivity does not have to be absolute where economic dependency clearly continues to exist.  The second takeaway is that the determination of reasonable notice for terminating a dependent contractor relationship is the same as that for an employee.  Most importantly, there is no hard and fast limit in determining the maximum length of notice that may be awarded.  The court will continue to have regard to the facts and circumstances of each individual case and making this determination.

 

 

Employee? Independent Contractor? Something in between? What’s the differance and does it matter?

McKee v. Reid’s Heritage Homes Ltd., 2009 ONCA 916 (CanLII)

Aandrew-montgomery-lgre you an employee, an independent contractor or possibly something in between the two? The answer is not merely academic. It can have important and perhaps even unanticipated implications.  To make things just a little more complicating, the answer to the question is not so much found in the wording used in a contract to describe the relationship,  it is more in the character and in the nature of the relationship.  In other words, just because a written document may refer to an individual as an employee, or as an independent contractor, or something else, the words themselves do not necessarily make the individual one or the other.  The presence or absence of certain salient characteristics in the relationship must be examined in order to determine whether the relationship is one of employment or that of an independent contractor.

The court in McKee cited a test referred to as the Sagaz/Belton analysis that is used to determine whether a relationship is one of employment or that of an independent contractor.  The Supreme Court of Canada stated the test in its decision in 671122 Ontario Ltd. v. Sagaz Industries Inc., [2001] 2 S.C.R. 983, 2001 SCC 59:

“The central question is whether the person who has been engaged to perform the services is performing them as a person in business on his own account.  In making the determination, the level of control the employer has over the worker’s activities will always be a factor. However, other factors to consider include whether the worker provides his or her own equipment, whether the worker hires his or her own helpers, the degree of financial risk taken by the worker, the degree of responsibility for investment and management held by the worker, and the worker’s opportunity for profit in the performance of his or her tasks.”

The Ontario Court of Appeal re-stated the Sagaz test in Belton v. Liberty Insurance Co of Canada, 2004 CanLII 6668 (ON CA) in the following five principles:

  1. Whether or not the agent was limited exclusively to the service of the principal;
  2. Whether or not the agent is subject to the control of the principal, not only as to the product sold, but also as to when, where and how it is sold;
  3. Whether or not the agent has an investment or interest in what are characterized as the “tools” relating to his services;
  4. Whether or not the agent has undertaken any risk in the business sense or, alternatively, has any expectation of profit associated with the delivery of his service as distinct from a fixed commission;
  5. Whether or not the activity of the agent is part of the business organization of the principal for which he works.  In other words, whose business is it?”

As stated at the outset, the result of the application of the Sagaz/Belton test is not merely academic.  Numerous practical implications follow from the determination that a worker is an employee or an independent contractor.  What follows here is neither an exhaustive list of the implications, nor an in depth discussion of any one of them.  Included in the list of implications, however, are the following examples:

Statutory Remittances

Employers must deduct and remit on behalf of each of their employees, Income Tax, Employment Insurance premiums and Canada Pension Plan contributions.  Independent contractors make all of their own statutory remittances but, when it comes to Income Tax, they have the advantage of deducting all reasonable business expenses against income earned.  Subject to certain legal differences and procedures associated with different types of business entities, this advantage will apply whether the independent contractor is a sole proprietorship, partnership or corporation.

Pension Plan

Where made available, employees often pay into a pension plan with their employer and the employer will make contributions to the plan on behalf of each employee.  Independent contractors will not have this advantage, though they may create such a scheme for their own employees.

Compensation

Employees are generally paid a wage or salary.  They generally do not share in the financial risk with the employer and, consequently, have no expectation of sharing in the profits of the business.  Independent contractors  bear the financial risk of the  their business and, consequently, share in the profits of the business.  Depending on how they are organized legally as a business, they might take the profit in the form of a salary , dividends or some combination of the two.  They might also have the option of leaving some of the profit in the corporation, as an investment in the business.

Federal and/or Provincial legislation

Certain Federal and/or Provincial labour statues and workplace safety statutes which provide safeguards for employees will not have any application to independent contractors.

Entitlement to Reasonable Notice or Pay in Lieu

Barring just cause for dismissal, employees have both a statutory right and common law right to reasonable notice of dismissal or pay in lieu thereof.   Independent contractors have no entitlement to reasonable notice or pay  in lieu thereof.

Many more differences could be listed and much more could be said about the examples cited above.  One other very important legal distinction that McKee does remind us of, however, is that the courts have long recognized a special type of business relationship that falls somewhere in between that of the employee and that of the independent contractor.  It is the relationship of the “dependent contractor“.

In the case of a “dependent contractor” there is still no employer/employee relationship but, because of certain peculiar characteristics of the business relationship, the courts have been prepared to imply that reasonable notice of termination is a legally binding term of the agreement creating the relationship.  A dependent contractor relationship arises where there is a certain exclusivity and permanence of service being provided by a contractor that makes the contractor economically dependent on the business entity being served in the relationship.  For example, the courts have recognized a relationship of dependent contractor where self employed truckers have exclusive long term contracts with a mining company.  A dependent contractor relationship has also been found where self employed individuals act as exclusive distributors for a paper company.  The important thing to remember here is that where the relationship of dependent contractor is established, the contractor may well be entitled to reasonable notice of termination of the contract because of the economic dependency that often ensues with such a relationship.

Finally, to come full circle, a dependent contractor relationship, cannot be avoided simply by calling the business relationship in the wording of the contract that of an independent contractor.  It is the nature of the relationship that is all important.

If you are working as a self employed individual and providing services exclusively and  over the long term to one client, you may well be a dependent contractor and entitled to reasonable notice in the event of termination of your contract.  As always, if you have concerns about your specific circumstances, you should speak to a lawyer.