Insights Header image
Insights Header image
Insights Header image

Employee vs. Contractor: Court Willing to Declare Status in Sock War

October 2017 Employment Law Bulletin 2 minute read

With the proliferation of contractors in the modern economy, the number of debates about employee status – is this an employee or a contractor? – continues to increase. The recent decision in Howard and Associates Inc. v. Tomasek Agencies Inc. 2017 ONSC 4291 provides helpful procedural guidance, confirming that, in appropriate cases, judges will issue a declaration about the status of workers.

Howard and Associates Inc. (“HAI”) is the Canadian distributor of the Wigwam brand of socks. Tomasek Agencies Inc. (“Tomasek”) was a regional sales agent in Alberta. The parties did not have a written agreement but had done business together for many years.

HAI claimed that one of the terms of their agreement with Tomasek was mutual exclusivity. This was explained by HAI as a commitment by HAI not to sell Wigwam socks to anyone else in Alberta except Tomasek, together with an obligation by Tomasek not to sell socks that were competitive with the Wigwam line of products.

Tomasek disagreed and claimed that it was not restricted to only selling the Wigwam brand of socks.

In 2015, HAI terminated the agreement to supply Wigwam sock to Tomasek on the grounds that Tomasek continued to sell competitive products despite prior warnings.

After receiving notice of termination, Tomasek advised through counsel that although Tomasek was not an employee of HAI, there was a dependent contractor relationship. As a result, Tomasek sought compensation based on HAI’s failure to provide reasonable notice of termination.

In litigation which ensued, HAI sought a declaration that Tomasek was not a dependent contractor of HAI. This was based on the admission that the parties had been in a commercial relationship.

The judge agreed with HAI and noted that relationship of economic dependency as understood in the employment context was not claimed by Tomasek. As a result, there was no genuine issue for trial about the possibility of the relationship being one of dependent contractor. In other words, the status was “contractor” based on admitted facts, so HAI was entitled to the declaration sought.

Takeaway for Employers

This brief decision confirms the importance of properly assessing worker status at the outset of any relationship as well as in the context of a dispute. While the outcome in the case very much turned on specific facts, the procedural step followed is potentially available in many cases, including those decided in the courts and tribunals. Narrowing the legal issues through a declaration can be very useful. One particularly notable aspect of the case is that it involved an unwritten agreement which the parties recognized was not employment. This may well be the rare exception, but many contractor arrangements also involve “non-employees”. Companies who engage workers should also note that these types of proceedings may well have be entirely unnecessary if a proper agreement and termination provision is in place.

by George Waggott

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2017

Insights (5 Posts)View More

Featured Insight

Investor Relations Activities Require Clear and Conspicuous Disclosure

BC Notice 51-703 emphasizes that investor relations activities must be “clearly and conspicuously” disclosed pursuant to Section 52(2) of the Securities Act.

Read More
May 22, 2024
Featured Insight

Unpacking Ontario’s Proposed Strengthening Cyber Security and Building Trust in the Public Sector Act, 2024

Unpacking Ontario's Bill 194: Strengthening Cyber Security and Building Trust in the Public Sector Act, 2024. Key changes & compliance strategies detailed.

Read More
May 17, 2024
Featured Insight

Navigating International Student Worker Restrictions: Post-Expiry Guidelines for Employers

On April 30, 2024, Canada’s temporary waiver allowing international students to exceed 20 hours of work per week expired.

Read More
May 14, 2024
Featured Insight

Understanding the Consumer-Driven Banking Framework: Key Insights from the Budget Implementation Act, 2024, No.1

On April 30, the federal government introduced the Budget Implementation Act, 2024, No. 1, which provides the legislative framework for open banking in Canada.

Read More
May 13, 2024
Featured Insight

Legal Risk Assessments – An Essential Risk Management Tool

The best way to address the legal issues that arise in any business is to focus on their identification and resolution before they become legal problems.

Read More
May 9, 2024