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The Question

I’ve been a contract employee with the same company for 10 years, but I was just released with no notice. I only work for this one organization. I invoice them for my services and charge HST. Although on paper I am a contractor, my role is very similar to that of an employee. Am I entitled to any severance pay?

The First Answer

Daniel Lublin, partner, Whitten & Lublin, Toronto

After 10 years of working for only one company, you will be viewed as a dependent contractor, which is essentially an employee in disguise. A dependent contractor is someone who invoices for services and pays his or her own taxes, but otherwise behaves very similar to an employee. This usually includes working for only one company, spending most of his or her time in that workplace, using the employer’s tools and resources, sending and receiving e-mails from the employer’s domain address and performing the same or similar work that other employees at that business perform, among other factors.

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Much like employees, dependent contractors cannot be dismissed without advance notice or severance, the amount of which is based upon the same or similar factors that are used for employees such as age, tenure and re-employment prospects.

True independent contractors work for various clients and are not economically dependent upon one employer. They can generally be dismissed with minimal advance notice.

You can file a lawsuit for damages or, in some provinces, you can instead file a complaint with your provincial ministry of labour for termination and severance pay on the basis that you were not a true independent contractor. However, be aware that a finding of employment could expose you to back taxes as if you were an employee.

In either case, you should consider having a lawyer communicate your concerns to the company before legal action. Based on your facts, it would be difficult for the company to genuinely assert a right to terminate you without any notice or pay.

The Second Answer

Lindsay Mullen, partner, Norton Rose Fulbright, Calgary

There are a number of factors to be considered in determining whether an individual is providing services to a company in the capacity of an “employee” or an “independent contractor," including the level of control the company has over that person’s activities, whether the individual provides his or her own tools, vehicles, equipment, machinery or materials in performing the services for the company, whether the individual has hired his or her own subordinates to assist in performing the services, and the degree of financial risk or opportunity for profit by the individual.

Where the factors demonstrate that the services are being performed for the company by a person in business for themselves, there will be no entitlement to severance unless it has been agreed to between the company and the contractor (for example, as a term of a consulting agreement). However, if an individual holds an intermediate position, known as “dependent contractor," they may be entitled to reasonable notice of termination in the absence of a binding contractual provision. Such a position is understood to be a non-employment work relationship that demonstrates a certain level of economic dependency, which may be demonstrated by complete or near-complete exclusivity, as well as a high level of subordination to the company.

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