Exclusive Contractors Are Entitled to Severance

Not all workers in Ontario are entitled to a severance package upon their dismissal. Are you?

A person’s right to a severance will ultimately depend on the nature of their relationship with their employer.  The law draws a distinction between employees and contractors.  Years ago, it may have been accurate to say that only those who are classified as employees are entitled to a severance.  However, this is no longer true.  Courts now recognize that some contractors fall within a special class of workers who are entitled to receive a severance just like employees.

When deciding if a contractor is entitled to a severance, the answer lies in the nature of the contractor relationship: is the person a dependent or an independent contractor?  If the facts establish that the worker is a dependent contractor, they are entitled to a severance.   Like most legal tests, a number of factors must be assessed and weighed in making this determination.

In Thurston v. Ontario (Children’s Lawyer), 2019 ONCA 640, the Court of Appeal dealt with this very question, and shed some light on the facts that can tip the scale either way.   The Thurston case involves a lawyer who, in addition to having her own law practice, was remunerated for work performed on behalf of the Office of the Children’s Lawyer.  She was hired and paid by the Office of the Children’s Lawyer as a contractor, and when her contract was not renewed after 13 years of service she sued claiming that she was a dependent contractor entitled to a severance package.

The Court of Appeal rejected Thurston’s arguments.  It established that she was an independent contractor, and consequently that she was not entitled to any severance.  In making this determination, the court focused on one particular factor: exclusivity of the relationship between the parties.  The court found that Thurston did not meet the necessary level of “near-complete exclusivity” in her relationship with the Office of the Children’s lawyer in order to fall within the class of dependent contractor.  The fact that Thurston earned the majority of her compensation (60.1%) from other sources (i.e. her own law practice) was fatale to her claim because she was not sufficiently financially dependent on the Office of the Children’s Lawyer to be entitled to a severance.

Thurston is a helpful case in that it enables experienced employment counsel to predict with more accuracy how a court will decide a particular case where the classification of a contractor is at issue.  At Singh Lamarche LLP, we regularly act on behalf of employees and employers in similar circumstances, and pride ourselves on our ability to guide and advise our clients proficiently and cost-effectively based on current and up-to-date legal principles.

Heidi LeBlanc is an employment lawyer at Singh Lamarche LLP. She advises both employees and employers with respect to all aspects of employment law. If you have any questions regarding an employment matter, Heidi can be reached directly by telephone at 647-799-0499, or by email at heidi@singhlamarche.com.