“I hope this finds you well during these unprecedented times.”
This is a phrase I’m sure most Canadians are sick of reading and sick of typing.
During these unprecedented times, Canadian workers have taken the time to re-evaluate their needs and priorities. We are asking ourselves if we want to continue living our lives the same way we did “PP” Pre-Pandemic. We’ve transitioned to work from home models, closed physical offices, are considering a 4-hour workweek. The landscape of employment is changing as people want more control, more autonomy and more flexibility.
In light of this, many people are considering a switch from being an employee to being an independent contractor. Below are some preliminary considerations when making this transition.
Benefits of being an independent contractor
- Determining your own work/life balance.
- Setting your own schedule.
- Seeing a direct correlation between the time spent and the money earned.
- Working for multiple companies at once.
Downsides of being an independent contractor
- No employment benefits.
- No guarantee of consistent income.
- No protection under the Employment Standards Act.
- Taxes are not withheld on your behalf.
Things to consider before getting started
- Do you require liability insurance?
- Do you need to be registered with WSIB?
- Do you require any licenses to complete your work?
- Are you required to charge H.S.T. on your goods/services?
- Are you providing goods/services to individuals or businesses?
- If you are providing goods/services to individuals, are you compliant with the Consumer Protection Act?
- What warranties will you provide?
Independent Contractor Agreements
Any experienced contractor will tell you that scope creep is one of the primary issues they face in ensuring that they are paid fairly for their efforts. Independent contractor agreements are useful tools to clarify the scope of work and protect you from scope creep. Additionally, having a formal written contract will clarify cost, time lines, warranties, and more. This can prevent disagreement and clarify any ambiguity between the parties regarding what was agreed upon and can save significant costs in the event of litigation. When it comes to these contracts, we typically see is contractors using a “master agreement” which sets out their terms and conditions which apply to all jobs, followed by shorter subsidiary contracts which set out the specific scope of the current project, as well as any project-specific elements. Regardless of the format, an independent contractor agreement is a key part of your upfront cost, which can save you the headache and cost of unpaid services to clients and litigation in the event of a disagreement.
If you would like to learn more about independent contractors or would like to speak to one of our lawyers regarding your independent contractor agreement, contact us by phone at 905-471-6161 or email us at firstname.lastname@example.org.
Author: Syrah Y. Yusuf
Last year, the Ontario Court of Appeal in Waksdale v. Swegon North America Inc., 2020 ONCA 391, slapped employers across the face causing an upheaval in employment law, resulting in the possibility that your employment contract might no longer be enforceable. Specifically, employers may be required to review and revise their termination provisions with their employees, otherwise, upon termination, the employer may find themselves paying a lot more to the employee than anticipated.
In Waksdale, the employer terminated Mr. Waksdale “without cause”. Pursuant to his employment agreement with the employer, the termination clause provided that the employer only had to pay him the minimum statutory entitlement set out in the Employment Standards Act. Mr. Waksdale was only employed for eight (8) months, thus under the ESA, he was only entitled to one (1) week pay-in-lieu of notice. Rather than accept this, Mr. Waksdale brought an action against his employer for six (6) months pay-in-lieu of notice under common law.
At trial, counsel for Mr. Waksdale argued that the termination clause was void, and thus the employment contract was unenforceable. Specifically, that a separate “termination for just cause” clause elsewhere in the employment agreement contravened Regulation 288/01 of the ESA Regulations. The Ontario Court of Appeal agreed and held that the wording in the “termination for just cause” section was inconsistent with the ESA Regulation, and that alone voided the remaining termination provisions in the employment contract.
“That’s Fine, I have a Severability Clause” No, apparently it is not fine. Despite the employment agreement in Waksdale having a severability clause, the Court of Appeal declined to apply it since it would not have any effect on a contract term which was void by statute.
What Is Just Cause Then?
The Courts have held that “just cause” includes actions where an employer can terminate an employee without paying reasonable notice at common law. These include actions by the employee such as dishonest conduct, insubordination, violence, sexual harassment, harassment, repeated breached of employee policies etc. However, even though the employee is not entitled to common law reasonable notice, they still entitled to be paid ESA notice and severance.
Employers may only terminate an employee without pay where the employee has been guilty of, “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.” In order for your employment agreement to be enforceable, it must explicitly distinguish between termination for “just cause” and termination for “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.” Because of the decision in Waksdale, your “termination without cause” clause may also be unenforceable, and that the termination provisions in an employment agreement must be read as a whole to determine whether it violates the ESA, rather than on a piecemeal basis.
Revising Your Employment Agreements
As a result of the decision in Waksdale, as an employer, you should consider immediately reviewing your existing employment agreements to ensure that they are in compliance with the ESA.
In the event that the employment agreement violates the ESA, you should consider entering into a new employment agreement with an enforceable termination clause. However, you must always remember that if you are amending the employment agreement, you must offer fresh consideration such as pay increase, bonus, promotions, additional vacation time, or some other benefit to the employee.
To find out more about how to protect yourself or if you need assistance navigating your employment agreement, contact us by phone at 905-471-6161 or email us at email@example.com.
COVID – 19 (Coronavirus) and Force Majeure or Act of God Clauses
As Ontario declares a State of Emergency and begins shutting down many businesses in light of the continued spread of COVID-19 across Ontario, many companies and individuals are left asking whether or not they are required to honour their contractual commitments.
The question we are being asked again and again, is whether or not COVID-19 can be deemed a force majeure event, specifically, whether COVID-19 constitutes an “Act of God” sufficient to discharge a party’s contractual obligations. Here are the essential questions that need to be considered in order to determine if COVID-19 affects your contractual obligations:
Does your contract have a “Force Majeure” or “Act of God” clause?
A thorough review of your contract is necessary to determine whether there is a clause which can be interpreted as a “Force Majeure/Act of God Clause”. In the absence of an express contractual term stating that a party will not be required to honour their obligations in the event of a Force Majeure event or an Act of God, to date, Canadian courts have been unlikely to interpret the contract to have an implied Force Majeure Clause. This is not to say, that in the aftermath of COVID-19, we may see changes to this in common law. However, as the situation currently stands, if you do not have an express Force Majeure/Act of God Clause, you should not rely on COVID-19 as a reason for not honouring your contractual commitments.
Does your Force Majeure/Act of God Clause Cover COVID-19?
If your contract contains a Force Majeure/Act of God Clause, then it must be determined if the clause applies to the circumstances surrounding COVID-19. The Force Majeure/Act of God Clause will typically list the specific events which will be covered by the clause. If the clause does not specifically state “pandemic”, “disease” or something which can be applied to COVID-19, Canadian Judges may be required to rely on common law to determine if the clause covers COVID-19.
The Supreme Court of Canada, in Atlantic Paper Stock Ltd. v. St. Anne-Nack, , was forced to do just that and held that the “common thread” in all the events listed in the clause was an event that is “unexpected, something beyond reasonable human foresight and skill” and applied the clause to an event which was not specifically named in Force Majeure/Act of God Clause as being covered as it fit this criterion.
Even if you intend to rely on a Force Majeure/Act of God Clause, it is important to note that you must always do your best to mitigate/reduce your damages, and take all reasonable steps you can to comply with your contractual obligations. If an event can be mitigated, courts may consider the event to be one that is not beyond the control of the party.
What if your contract does not have a Force Majeure Clause, or your Force Majeure clause does not apply?
In the event that you cannot rely on a Force Majeure/Act of God Clause to discharge your obligations under a contract, you may be able to rely on the Doctrine of Frustration. Frustration of contract takes place when an unforeseen event, at the fault of neither party, significantly changes the nature of the parties’ obligations or abilities to perform the contract.
For example, you enter into an agreement to rent a property and the property burns down, at the fault of neither party. The purpose of this contract, to rent the property, is frustrated by the lack of a property to rent. As such, the parties cannot reasonable be expected to comply with their contractual obligations.
The onus is on the party seeking to rely on the force majeure clause to prove that the force majeure event has hindered, delayed or altogether prevented the performance of the contract.
The language used is key when drafting a Force Majeure clause in a contract. Parties who seek to broaden the scope of the clause, specifically regarding COVID-19 or other pandemics, should include phrases such as “communicable disease outbreak” rather than simply stating “epidemic” or “pandemic”.
On the other hand, parties may seek to limit the risk of COVID-19 triggering a Force Majeure event might consider implementing language that solely describes Force Majeure as an “act of God” with no additional events stated. With COVID-19’s long existence, people can better prepare, lowering the chances of an event being declared an “act of God” by the courts.
Further, the language of the contract should address the threshold of impact in clear language. Courts have found uncertainty occurs where a force majeure clause does not precisely define the impact required from the event. As an example, “preventing” performance may be too strict of a standard, whereas “hindering” performance can be considered too lenient.
Lastly, in order to ensure the party seeking to rely on the clause notifies the other party, a notice provision must be drafted. This provision outlines the time within which notice must be given, the facts the notice must contain, and where the notice should be served.
It is important to note that many Canadians are being affected by COVID-19, we can all do our part to work together to reduce the financial burden on individuals and businesses. Some contracts can be delayed or extended by mutual agreement, and parties may choose not to enforce certain contractual provisions immediately. We always strongly recommend seeking independent legal advice prior to taking any definitive actions with respect to your contracts.
To find out more about how to protect yourself or if you need assistance navigating your contracts, contact us by phone at 905-471-6161 or email us at firstname.lastname@example.org.
Authors: Syrah Y. Yusuf, Alvin W. Leung, and Tiana Terrigno
We all encounter contracts day in and day out in our personal lives. Often, such as with the iTunes terms and conditions, we do not even bother to read them before we hit “I accept”. The importance of clear and carefully drafted contracts cannot be overstated.
What should I be looking for in my contracts?
1. The Parties being bound by the contract are clearly defined.
2. The roles, or promises, of each Party are clearly stated.
3. The contract clearly sets out how to tell if a Parties isn’t fulfilling their end of the bargain.
i.e. What constitutes a “breach” of the contract?
4. The contract clearly states what will happen if a Party “breaches” the contract.
5. The “Term” of the contract is clearly defined.
How long will the contract last? This can be based on the completion of a certain task, or the termination of a certain event or be a set amount of time.
6. The contract clearly describes how, and for what reasons, a Party can terminate the contract before the “Term” is over.
7. The contract states what laws govern the contract.
For example, if you are from Toronto contracting with someone in Montreal, does the contract state whether the laws of Ontario or Quebec govern the transaction?
What are some of the pitfalls of bad contracts?
The contract may not be enforceable.
The point of a contract is to:
- clearly set out the intention of the Parties; and
- to make sure that the Parties do what they are supposed to.
If your contract turns out to be unenforceable, then you lose half the utility of your contract!
Ambiguous terms and conditions in a contract, where it becomes difficult to determine what the Parties intended, can lead to a breakdown of the relationship between the Parties as time goes on. This can lead to expensive and time consuming litigation.
As you can see, you can incur significant legal fees trying to correct a badly drafted contract or trying to enforce a poorly drafted contract. As small business advisors at Erudite Law LLP, we consistently try and stress this to our clients. By having a contract correctly drafted by a lawyer, you may save yourself the time, stress and money of trying to correct something that should have been doing correctly from the start.
If you wish to have your contract reviewed, contact the lawyers at Erudite Law LLP by email at email@example.com or call us at 905-471-6161.