Keenan v Canac Kitchens: A Victory for Precarious Workers in Ontario

Being laid off close to the age of retirement can be quite a devastating experience. It is all the more devastating when you have worked for the same company for three decades and your skills may not reflect current job market needs. Add to this the fact that, because of your employment contract, you are not entitled to any notice or compensation and you get a worker’s worst nightmare. Earlier this month, the Ontario Court of Appeal (“ONCA”) in Keenan v Canac Kitchens Ltd, 2016 ONCA 79 [Keenan 2] delivered a strong statement against companies who try to avoid obligations towards their workers by calling them independents contractors. It also confirmed that in the spectrum between employees and independent contractors, dependent contractors will be treated closer to the former than the later.

For The Love of Cabinets

Canac Kitchens (“Canac”) was a manufacturer, distributor, and retailer of kitchen accessories. Mr. Keenan started working for Canac in 1976. He was originally employed as an installer of kitchens but eventually became a foreman, supervising the work crews installing kitchens (Keenan 2, para 2). Mrs. Keenan, who met Mr. Keenan when he showed up to fix her chesterfield, officially started working for Canac in 1983. The Keenans continued as employees of Canac until 1987 at which point they were told that they would carry on their work as contractors instead (para 6).

Canac informed the Keenans that their new job title would be “Delivery and Installation Leader” (para 7). Canac would set the rates to be paid to the installers, transfer the money to the Keenans, and the Keenas would be responsible for paying the installers. The Keenans were also made responsible for damages to cabinets and had to get insurance, were asked to incorporate their company and would be paid in gross, without deduction for income taxes (para 8). Most importantly, the new agreements required the Keenans to devote “full-time and attention” to Canac (para 10). The Keenans record of employment for 1987 showed that they had quit their jobs with Canac. The Keenans did not seek legal advice nor did they incorporate. They did register their company name.

For all intents and purposes, after 1987 the Keenans’ working relationship with Canac remained unaltered. With the exceptions of some weekend jobs and work for friends and family, the Keenans worked exclusively for Canac until 2006 (para 12). In 2007 they started to do some work for a competitor because work with Canac had slowed down (para 13). Canac was fully aware of the extra work and did not object. In 2009, their relationship with Canac came to an end when the Keenans were told that Canac was shutting down. The Keenans were not given notice or pay.

Analysis

The issue was first heard in 2015 in Keenan v Canac Kitchens, 2015 ONSC 1055 [Keenan 1]. It immediately became clear that the real issue was not whether the Keenans were employees, but whether they were dependent or independent contractors.

At trial, the judge considered the five principles set out in Belton v Liberty Insurance Co of Canada, (2004) 70 OR (3d) 81 [Belton] for distinguishing employees from independent contractors. The factors to be considered according to Belton are as follows:

1. Whether or not the agent was limited exclusively to the service of the principal;
2. Whether or not the agent is subject to the control of the principal, not only as to the product sold, but also as to when, where and how it is sold;
3. Whether or not the agent has an investment or interest in what are characterized as the “tools” relating to his service;
4. Whether or not the agent has undertaken any risk in the business sense or, alternatively, has any expectation of profit associated with the delivery of his service as distinct from a fixed commission;
5. Whether or not the activity of the agent is part of the business organization of the principal for which he works. In other words, whose business is it? (para 11).

The trial judge noted that the Belton principles also apply in distinguishing employees form dependent contractors (Keenan 1, para 19). The judge also found that the Keenans were economically dependent on Canac because they worked exclusively for Canac (Keenan 1, para 21).

On appeal Canac took issue with the judge’s finding of exclusivity. Canac acknowledged that the Keenans worked exclusively for the company until the end of 2006, but contended that exclusivity is a matter to be determined at the time of termination of the relationship (Keenan 2, para 22). The Court of Appeal rejected this view. It stated that “exclusivity cannot be determined on a ‘snapshot’ approach because it is integrally tied to the question of economic dependency” (para 25). Exclusivity must therefore be determined with consideration of the full history.

In this context, the Court of Appeal pointed out that the Keenans worked exclusively for Canac from 1976 to 2007 and even when working for another company, post 2007, the “substantial majority” of their work continued to be with Canac (para 26). Of the 32 and 25 years of service that Mr. and Mrs. Keenan respectively gave Canac, all but two of those years exclusively served Canac (para 28). As such, the Keenans had worked exclusively for Canac and they were dependent contractors.

The Court of Appeal also confirmed the trial judge’s award of 26 months of pay. Canac argued that generally only exceptional circumstances will support a notice period over 24 months and the judge had made no finding of exceptional circumstances (para 30). The Court of Appeal noted that together, the Keenan’s average length of service was 28.5 years, they were 63 and 62 years of age at the time of termination, and they had held supervisory positions (para 32). Because their income and support of their family had come for Canac, there was nothing wrong with the trial judge’s 26 month award. 

Importance of Employment Contracts

Keenan is an important reminder that the nature of employment is not determined only through the employment contract terms but also from the behaviour of the parties. The Keenans did not consult a lawyer because they did not see much that would change in their contract. Canac also turned a blind eye to the Keenans’ work with other companies and the fact that they had not incorporated. Further, the contract would probably have been saved it was a fixed term contract that required renewal and provided a sense of finality. If they had signed a fixed term contract, the Keenans presumably could have been classified closer to independent contractors than employees.

Another important point is the award of 26 month pay which is quite high. In fairness, the Keenans had worked for Canac exclusively for three decades and they were in their sixties when they were laid off. Surely the Court was right in taking this to account. But Canac also did have had a point in saying that these were not exceptional circumstances, and thus such a high award could not be justified. However, the 26 months sends a message to companies out there that they cannot use employees and expect to get rid of them without having to pay. It just isn’t fair.

And as a final note, this case and the media attention it has received should make workers more aware of the dangers of employment contracts. Sometimes it is indeed best to seek legal advice before signing.