Written by David Doorey, York University
It’s not only gig workers and other precarious workers who risk being misclassified as “independent contractors” with the result that employment laws don’t protect them.
In a lawsuit filed this week, two “Regional Directors” of financial services giant Investor’s Group Financial (IG) claim millions of dollars in damages for wrongful dismissal and breach of contract. A threshold issue in the case is whether Consultants and Directors working for IG are “employees” or “dependent contractors” and therefore entitled to “reasonable notice of termination”.
Here is the Statement of Claim, filed by Nancy Shapiro of Koskie Minsky in Toronto (published with permission). The statement of defence has not yet been filed, so we are only looking at the plaintiff’s case at this point.
The two executives were hired as Consultants in 2000 and signed the standard IG consultants contract, which describes the workers as contractors but nevertheless confers on IG a significant measure of control over the Consultants. Read paragraph 16 and 17 and then, assuming the facts are as pleaded (we don’t have the statement of defence yet) decide for yourself, considering the Scorecard factors from my Law of Work book, whether you think the workers more closely resemble entrepreneurs in business for themselves or employees (or dependent contractors) of IG.
Section 10 of the contract permitted either party to terminate the contract “with or without cause and with or without notice or compensation”. If the plaintiffs are either employees or “dependent contractors”, then that clause isn’t even close to being legal. It is in clear violation of employment standards legislation requirements for notice of termination as well as the common law requirement for notice to be provided to terminate the contract of an employee or dependent contractor. Therefore, if the plaintiffs are found to be “employees” or “dependent contractors”, they are likely entitled to common law “reasonable notice”.
There are a number of other issues raised in the pleading. Eventually both workers were promoted to Regional Director positions, leading to substantial unilateral changes to their compensation formulas and eventually to their termination without notice. According to the pleading, IG took the position that as independent contractors, the plaintiffs were bound to a non-compete clause and not entitled to notice of termination.
We’ll keep an eye on this case. It has the potential to shake up the financial services industry if it leads to a finding that investment advisors (aka “consultants”) and their direct managers are all “employees” of the investment firm. The wave of alleged employee misclassification cases that sweeping almost all industries in Canada continues….
David Doorey, “Real Pleadings: Employment Status Lawsuit Set to Shake Up Financial Advice Industry?” Canadian Law of Work Forum (June 24 2020): http://lawofwork.ca/?p=12756