Supreme Court also considers worker's 12-year stay, level of control
The Supreme Court of British Columbia recently dealt with a case involving a music therapist and a music therapy company, highlighting important issues surrounding employment status, just cause for termination, and reasonable notice periods.
The worker argued that she was wrongfully dismissed from her position with the company. She contended that despite not being a traditional employee, her long-term relationship with the company entitled her to reasonable notice of termination.
The worker also challenged the company's claims of just cause for her dismissal, asserting that her actions did not warrant immediate termination. Furthermore, she questioned the enforceability of a restrictive covenant in her contract, which the company sought to enforce after her departure.
Blurred lines between employee and contractor
The case involved a music therapist who had been providing services to a music therapy company for 12 years. The company, which provides its services to individuals and groups at various facilities, had engaged the worker through a written agreement entitled "Terms of Agreement" signed in 2010.
The court first had to determine the nature of the working relationship between the music therapist and the company.
Despite the worker not receiving a T4 slip, benefits, or statutory deductions, the court found that she was a dependent contractor rather than an independent contractor or employee.
The court applied the factors outlined in previous cases to assess the worker's status:
- Economic dependency
- Control by the employer
- Ownership of tools
- Risk and profit potential
- Integration into the employer's business
- Length of service
- Reliance and coordination between parties
After considering these factors, the court concluded that the worker was a dependent contractor, emphasising her economic reliance on the company and the level of control exerted over her work.
Just cause for termination
The employer claimed they had just cause to terminate the worker's contract based on two main issues: the worker taking on entertainment work at a client facility and unprofessional communications.
The first issue arose when the employer learned that the worker had been providing music entertainment services at a facility called the Waterford House, which was also a client of the employer. The second issue related to the worker's communications with the director of care at another facility and with the owner of the music therapy company.
However, the court found that neither of these reasons met the high threshold for just cause. The judge stated:
"[The worker's] interaction with the Director of Care nor her communications with [the employer], even on [the employer's] version of the events, were sufficiently egregious to justify immediate termination of the Contract."
This highlights the importance for employers to carefully consider their grounds for termination and to follow proper disciplinary procedures before resorting to immediate dismissal.
Is there reasonable notice?
Having determined that the termination was without just cause, the court then had to decide on an appropriate notice period. The judge considered various factors, which include:
- Character of employment
- Length of service
- Age of the worker
- Availability of similar employment
The court noted that the worker had been providing services to the employer for 12 years and was 37 years old at the time of termination. After weighing these factors, the court awarded a 12-month notice period, stating:
"Taking all of the above into account, and subject to the issues of mitigation and aggravated damages which will be addressed below, I consider a notice period of 12 months (the "Notice Period") to be reasonable in all of the circumstances."
This decision underscores the importance of considering multiple factors when determining reasonable notice periods, especially for long-term workers in specialised fields.
Calculating damages
The court's approach to calculating damages and considering mitigation efforts provides valuable insights for both employers and workers.
The judge examined the worker's earnings during the notice period and applied the principle of "avoided loss" to reduce the damages awarded.
The court found that during the notice period, the worker had earned more from her own business, Music for Life, than she would have if she had continued working for the employer. In explaining this approach, the court quoted from a previous case:
"It is not all income from the second job that is excluded from the damage calculation, but rather income from the second job that could have been earned had the employment from the first job continued. In other words, the question is whether the new income is replacement income regardless of the source of the income or a continuation of supplementary income being earned prior to the dismissal."
This emphasises the importance of considering a worker's entire income situation when assessing damages in wrongful dismissal cases.
Enforcement of restrictive covenants
The employer's counterclaim based on a non-competition clause in the contract was ultimately unsuccessful. The clause prohibited the worker from soliciting or accepting work from the employer's facilities for a period of three years after termination.
The court found the clause to be unenforceable due to ambiguity and unreasonable scope. The judge stated:
"Overall, it is my view that the Restrictive Covenant is unreasonable and therefore unenforceable, both because it is ambiguous and because its scope is excessive geographically and temporally."
This serves as a reminder for employers to carefully draft restrictive covenants that are clear, reasonable, and necessary to protect legitimate business interests.
Consequently, the court awarded the worker damages for wrongful dismissal, taking into account the avoided loss principle. The judge summarised:
"I have concluded that [the worker] was a dependent contractor, that a notice period of twelve months is reasonable, but that the damages to which she is entitled ought to be reduced by the avoided loss principle. After subtracting the loss that [the worker] has avoided, her damages for wrongful dismissal total $12,090."
This case highlights the importance of clearly defining working relationships, following proper termination procedures, and carefully considering the enforceability of restrictive covenants.
It also demonstrates the calculations involved in determining damages in wrongful dismissal cases, particularly when dealing with dependent contractors.
