Some employers prefer to place employees on independent contractor agreements because benefits are twofold: i) this type of contract allows for flexibility; and ii) employers save financially both during and following the agreement. Similarly, certain employees prefer these agreements because they can often earn more money by way of deducting their expenses and taking on other “gigs” or “side-hustles”. Recently, the Court awarded an independent contractor the value of the balance of his one-year term independent contractor agreement; despite the contract having an early termination clause.
In 2000, while still in high school, the plaintiff, Mitchum Mohamed (“Mr. Mohamed”) was convicted of assault with a weapon. Years later, in 2015, Information Systems Architects (“ISA”) hired Mr. Mohamed as an independent contractor to provide IT services to its client, Canadian Tire. On November 1, 2015, Mr. Mohamed consented to a background check and disclosed his conviction. The background checks would take two to three weeks to perform. On November 2, 2015, Mr. Mohamed and ISA signed an Independent Consulting Agreement for part-time work. The termination clause of the contract stated that Mr. Mohamed’s consultancy term could be terminated if:
- ISA determined Mr. Mohamed’s work to be substandard
- ISA’s project with Canadian Tire were cancelled;
- ISA determined it was in ISA’s best interest to replace Mr. Mohamed; and
- upon written notice from ISA, for any breach of the agreement by Mr. Mohamed.
At the same time, ISA had a consultancy agreement with Canadian Tire which provided that Canadian Tire reserved the right to reject any consultant who had a criminal record.
On November 5, 2015, Mr. Mohamed commenced work for Canadian Tire on site. He continued his day-job. Around this time, Canadian Tire retained ISA for a second project; six months in duration. Mr. Mohamed signed a second agreement; quit his day job, and commenced working full-time at Canadian Tire on December 1, 2015.
On December 4, 2015, the background check was forwarded to Canadian Tire. Canadian Tire asked for Mr. Mohamed to be “rotated out”. On December 10, 2015, ISA cancelled the second agreement, relying on clause c); above. Mr. Mohamed sued for the balance of the six-month contract. Justice Perell of the Superior Court of Justice found that the termination clause was unenforceable because it was vague; as such the contract had to be read as if it contained no termination provision at all. As the contract was for a defined term, Justice Perell found that, as a matter of law, Mr. Mohamed was entitled to the balance of the term and ordered ISA to pay Mr. Mohamed $81,937.50 plus interest.
For businesses: This case highlights the importance of having properly drafted, enforceable term contacts for independent contractors. Though employers may believe these contracts provide an extra level of protection, the opposite is often true. If you are an employer using independent contractor agreements, you may face considerable exposure to lawsuits if you decide to terminate a contractor early. If you are concerned about the risk and enforceability of your contracts, feel free to call us at 613-234-2500 or email us: firstname.lastname@example.org
For individuals: Despite what your independent contractor agreement or what your employer says, you may be entitled to the value of the balance of your contract. Many independent contractors are party to contracts that are unenforceable. If you are an independent contractor and want to know if you may be entitled to further payments, feel free to call us at 613-234-2500 or email us: email@example.com.
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The above-noted content is not intended to be legal advice and should not be taken as such. Professional legal advice should be sought to address specific events and situations.