Ontario Court Ruling on Contractors: Be careful when categorizing employees.

A recent decision of the Superior Court of Justice in Ontario has granted payment in lieu of notice to a consultant who was found to be a dependent contractor. In the case of Tetra Consulting v. Continental Bank et al., the defendant (“the Bank”) retained the services of the plaintiff (“Tetra”), a consulting firm owned by Mr. Lewis Cassar, to provide expertise in obtaining approval from the federal regulator to operate as a Schedule 1 bank.

It was the common intention of all parties that although Mr. Cassar commenced work as a consultant (through Tetra), he was to become an employee of the Bank following approval from the federal regulator. Mr. Cassar commenced work in January 2013, and with this common intention in mind, was appointed the Chief Compliance Officer and Chief Anti Money Laundering Officer. The Bank received approval in December 2014. In January 2015, prior to the finalization of Mr. Cassar’s employment contract, the business plans for the Bank were changed and Tetra was orally advised that it was being terminated immediately.

Tetra and Mr. Cassar commenced this action seeking reasonable notice. Counsel for the Bank contended that Tetra/Mr. Cassar had remained a consultant up until his termination. The Court concluded that he had not only become an employee following the Bank’s approval in December in absence of a formal employment contract, but that Mr. Cassar, even when wearing his “Tetra hat”, was a dependent contractor prior to that time. The Court noted that he worked exclusively for the Bank, used the Bank’s tools, had an office and email address, was subject to the Bank’s control, and represented himself to third parties as an employee of the Bank. The Court awarded Mr. Cassar 8 months of notice as a dependent contractor, noting his holding of a senior position, his sophisticated knowledge of operations, his specialized skill to the job, his high salary, and taking into account the short term of employment.

This decision serves as a cautionary reminder to employers that a formal categorization of a worker as an employee or a consultant/contractor does not necessarily make them so. Employers cannot avoid their responsibilities to an employee through a label. It has been well established that courts will take into account a variety of objective factors in classifying an employment relationship, however this decision opens up the possibility of taking into account subjective factors such as a common intention between the parties in making this determination.