Independent Contractors Impact Wrongful Termination Cases
The use of independent contractors has become more prevalent in the workplace as businesses look to reduce their overhead costs and legal responsibilities. However, in doing so they may be jeopardizing themselves if the individuals are misclassified as independent contractors instead of employees. Independent contractors do not enjoy the protections of employment standards and cannot be terminated with just cause. This means that wrongful termination cases are likely to arise more often as those that are considered to be independent contractors bring wrongful dismissal suits against companies for wrongly terminating them.
For example, suppose a company hires a person as an independent contractor but then decides that it no longer needs their services and provides them with the 10 days notice required by the contract. This is not just cause for termination but a violation of the employee rights under the Employment Standards Act (ESA).
As a result, the individual files a wrongful termination claim against the company and obtains monetary compensation for their lost wages, emotional distress, and loss of future earnings. The company will likely have to pay for the services of a lawyer as well as litigation and court costs. These fees can significantly erode the amount of damages awarded in the case.
How Does the Use of Independent Contractors Impact Wrongful Termination Cases?
When a person has been fired from their job due to the misclassification of their status, it is important for them to maintain documentation as proof that they were wrongfully dismissed. This includes the written contract that indicates the relationship and the terms of employment as well as the notice period given upon termination. The person should also have access to witnesses who can testify that they were not given the proper amount of notice.
In addition to monetary damages, a successful wrongful termination claim can result in compensation for aggravated and punitive damages as well as the loss of future earnings. Damages can also include the loss of benefits that would have been provided if they had been properly classified as an employee including meal breaks, rest periods, health insurance and worker’s compensation.
As the law continues to develop on the classification of workers, it is important for businesses to carefully consider their use of independent contractors and ensure that the individual fits within the legal confines of the term. Taking the time to do so could help prevent costly wrongful termination lawsuits and protect the business from liability for wrongfully terminating an independent contractor.
The courts have determined that a person is a dependent contractor if they fit two criteria: near or complete exclusivity and economic dependency. A full assessment of the individual’s history must be made in order to determine whether these conditions are met.
In addition to a thorough assessment of the person’s background, it is important for businesses to avoid exclusivity clauses and non-competes in their contracts with independent contractors. These types of restrictions can be strong indicators of an employment relationship and can lead to a recharacterization of the relationship as employer-employee rather than independent contractor.
