Businesses: Beware of who depends on you- it could cost you!

May 4, 2018

In Lamontagne c. Distribution financière Sun Life (Canada) inc.[1], the Quebec Superior Court decided that an individual providing services under a service contract was entitled to reasonable notice of termination. This decision introduces the concept of a third category of workers into Quebec law, i.e. "dependent contractors", a concept already well known in Ontario.

In this case, Ginette Lamontagne ("Lamontagne") was providing services for over five (5) years to Distribution Sun Life (Canada) Inc. ("Sun Life") under an indefinite term service contract. In 2009, Sun Life terminated the relationship by providing Lamontagne with 14 days prior notice, as set out in the contract.

Following its analysis of whether Lamontagne was an employee or an independent contractor, the Court determined that Lamontagne and Sun Life were not bound by an employment contract but rather a service contract. Although the Court determined that no relationship of subordination existed, the Court considered that Lamontagne was economically dependent on Sun Life by virtue, notably, of the fact that all of her revenue came from Sun Life.

Further, the Court decided that sections 2125 and 2129 of the Civil Code of Quebec, which allow a client to unilaterally terminate a service contract, did not apply to this case. Indeed, the Court stated that the objective of these sections is to protect the client and that the client (Sun Life in this case) did not need such protection given the nature of the parties' relationship and the imbalance in power. Further, the Court stated that Lamontagne's situation is best compared to the third category of contracts created by Ontario Courts and described in the Ontario Court of Appeal decision McKee v. Reid's Heritage Homes Ltd.[2]:

I conclude that an intermediate category exists, which consists, at least, of those non-employment work relationships that exhibit a certain minimum economic dependency, which may be demonstrated by complete or near-complete exclusivity. Workers in this category are known as "dependent contractors" and they are owed reasonable notice upon termination.

As such, the Court determined that Lamontagne was entitled to a reasonable notice of termination of six (6) months.

This decision is a strict reminder that companies engaging the services of independent contractors must pay close attention to the true nature of the relationship between the parties, as courts are not necessarily bound by the relationship defined in any contract.

Please note that this decision was appealed to the Quebec Court of Appeal and we will keep you apprised of any developments.

[1] 2018 QCCS 6 (CanLII).

[2] 2009 ONCA 916 (CanLII).

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