In Ursic v. Country Lumber Ltd., the Supreme Court of British Columbia affirmed that employment relationships exist on a continuum between pure employee and pure independent contractor. Whether or not a contractor is really an employee is an issue that comes up frequently for employers to wrestle with and can have far-reaching effects (see Dentons insight, “Is your contractor really an employee?”). Somewhere in between contractor and employee, however, is a category known as “dependent contractors,” which includes individuals who are economically dependent on a single entity, but whose engagement includes a combination of traits commonly applicable to both employees and independent contractors. The classification of an individual as an employee, independent contractor or dependent contractor is important because, unlike independent contractors, employees and dependent contractors are entitled to prior notice, or pay in lieu of notice, in the event of the termination of their engagement.

In this matter, Country Lumber engaged Borly Holdings Ltd. (Borly), which was wholly owned by Mr. Ursic. For 14 years, Borly provided trucking and transportation services for Country Lumber pursuant to an exclusively oral agreement. The agreement was terminated on March 15, 2024, without notice or cause.

Borly sued seeking notice of termination on the grounds that it was a dependent contractor for Country Lumber. Borly’s arguments included that it was economically dependent on Country Lumber as 100% of its revenue over the preceding fourteen years were directly attributable to work performed for Country Lumber, and that Borly’s services were essential to Country Lumber’s business.

Country Lumber argued that Borly, and Mr. Ursic specifically, were not entitled to notice of termination, as it was at all times an independent contractor. Specifically, Borly was responsible for providing all tools and equipment necessary to provide services at its own expense, and Borly was paid on an hourly basis, pursuant to biweekly invoices, which invoices included an amount for GST.

The Court took notice of the fact that the parties did not have a written contract, and accordingly the terms of the engagement were determined by past practice. Ultimately, the Court concluded that Borly was a dependent contractor, and it was therefore entitled to damages equal to the value of the contract over ten months, less any amounts that were earned during this period in mitigation. In making this award, the Court specifically noted that dependent contractors are not entitled to the same quantum of notice of termination as an employee as it is unjust to allow an individual to structure their business for tax benefits, and then deny such a relationship exists for employment law purposes.

Key takeaways for employers

This case demonstrates the importance of a written contract between an employer and its contractors. In the event of an absence of a written agreement, the Court will be required to assess the relationship based on past practice to determine whether the individual in question was an employee, an independent contractor, or a dependent contractor and their resulting entitlements on termination.

To determine where a particular engagement exists on the continuum of employment relationships, a court will look at a number of factors including:

1. Whether the individual provided services exclusively for the company;
2. The degree of control by the employer over the individual;
3. The individual’s risk of loss and possibility of greater profit;
4. The degree of integration and reliance between the individual and the employer; and
5. Whether the individual had an investment in the tools necessary to perform the services for the employer.

Finally, although dependent contractors are not entitled to the same quantum of notice of termination as an employee may receive on similar facts, their entitlement may nevertheless still be significant. In assessing damages over the notice period, the Court will consider the amount that the dependent contractor corporate entity may have received over the notice period, and will award the same, less any amounts actually earned in mitigation. The amount paid by dependent contractor to the individual service provider as salary is not relevant in this assessment.

If you have any questions about independent contractors in your organization, please contact Victoria Merritt, Salim Visram, Catherine Coulter or Maggie Sullivan.