Dec 1, 2014

McKee v Reid's Heritage Homes: Identifying Employees

McKee v. Reid's Heritage Homes Ltd., 2009 ONCA 916 (CanLII)

FACTS: Mckee incorporates her own business. She signs agreement with Reid's Heritage Homes (Reid). Agreement indicates that Reid is going give McKee 69 homes that she will advertise and sell for a fee of $2500 per home sold. McKee is the only business providing this service to Reid. Agreement contains an exclusivity clause indicating that Reid can’t provide homes to any other sales agent. The agreement contains a termination clause that provides for a period of 30 days notice. McKee sells all the homes and Reid continues to provide her with more homes to sell. No new contract is ever signed. McKee's title is Senior Sales Manager and she has hired subagents. She continues to get commission on sales through the corporation which she spreads out between herself and people she has hired. This arrangement continues for 18 years. New ownership comes into Reid's and restructures the organization. The new management wants McKee to become an employee of the organization. The relationship breaks down, McKee leaves. McKee is 64 and sues for wrongful dismissal as if she were an employee.


    ISSUE 1: Is McKee an independent contractor?

    Court Analysis:

    a. The initial contract only applied for the first 69 homes. The trial judge performed a Sagaz analysis. McKee worked for Reids for 18 years. There must have been a tacit agreement that she couldn’t work for anyone else. Reid told Mckee what to sell, prices, when to sell and set the office hours. McKee did all of the advertising, all of the stationary, with no risk of loss.

    b. McKee is not an independent contractor.

    ISSUE 2: Is McKee a dependent contractor? As a dependent contractor is McKee entitled to same benefits as an employee

    Court Analysis:

    a. The category of dependent contractor does exist but does not apply to the current situation because McKee is an employee.

RESULT: McKee was given 18 months of common law notice.

This case was appealed to the Court of Appeal

The Court of Appeal agreed with the Trial Judge. The category of dependent contractor does exist but it doesn’t apply to McKee because she is an employee.

RATIO: Court endorses the Sagaz test to determine whether a worker is an employee or a contractor. This doesn’t end the analysis. If the worker is an contractor then take a second look at relationship to determine if he/she is an independent contractor or a dependent contractor.