The distinction between an employee and independent contractor is not always clear as can be seen in the recent decision of Tetra Consulting v Continental Bank et al., 2015 ONSC 4610.
Lewis Cassar (“Cassar”), a 61 year old expert in the banking sector was the owner of Tetra Consulting (“Tetra”). Tetra was retained by the Defendants, Continental Bank of Canada (the “Bank”) and Continental Currency Exchange Canada Inc. (“CCEC”) to assist in obtaining federal approval to operate as a bank. It was the common intention of all parties that Cassar would become an employee of the Bank once federal approval was obtained from the Office of the Superintendent of Financial Institutions (“OSFI”).
Tetra started performing services for the Defendants in January 2013 and since the Bank was not yet up and running, Tetra invoiced its consulting fees to CCEC. Cassar was represented to third parties as being an employee of the Bank, had a business card identifying him as such, and also had an email address from the Bank. In addition, he was appointed as the Bank’s Chief Compliance Officer (“COO”) and Chief Anti Money Laundering Officer (“CAMLO”), worked from the Bank’s premises, was subject to the Bank’s Code of Conduct and signed an acknowledgement to be bound by the employee policies and procedures. Cassar worked exclusively for the Defendants between January 2013 and January 2015 and Tetra invoiced for the consulting services provided by Cassar. Moreover, the OSFI was presented with an organizational chart where Cassar was identified as the COO and CAMLO of the Bank and as part of the regulatory approval process, the OSFI was advised that Cassar would remain in those positions with the Bank into the future.
Approval for the Bank was obtained from the OSFI on December 8, 2014 and in January 2015, legal counsel for the Bank provided Cassar with correspondence indicating that his employment contract was in the process of being prepared. Before Cassar’s employment contract was finalized, the Bank’s majority shareholder decided to discontinue the venture. On January 14, 2015, Tetra and Cassar were advised orally of their immediate termination by the Bank and they subsequently brought an application to the Ontario Supreme Court of Justice for summary judgment seeking pay in lieu of notice.
Justice Morgan of the Ontario Supreme Court of Justice found that it did not matter whether Cassar was an employee since January 2013, when he started performing services for the Bank, or December 8, 2014, when OSFI approval was obtained. He held that if Cassar was not an employee prior to December 8, 2014, he was a dependent contractor and therefore entitled to the same reasonable notice as an employee. Based on Cassar’s two years of service, age and sophisticated position, Tetra was awarded 8 months’ pay in lieu of notice, which amounted to more than $158,000.00 in consulting fees.
Lesson for Employers
This decision reaffirms that it is the substance and not the form that will be considered by a court in making a determination as to whether a consultant is more akin to an employee as opposed to a true independent contractor. In addition to the obligation to provide notice or pay in lieu of notice where an employer/employee or dependent contractor relationship is found, employers should also be aware of other associated risks such as tax requirements where source deductions have not been remitted on the basis that an independent contractor relationship exists when in fact, all indicators support an employment relationship.
For the full decision, please click the link below:
Tetra Consulting v Continental Bank et al., 2015 ONSC 4610 (CanLII)
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Termination of Consultant Results in Award of 8 Month Notice Period