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Clausehound CEO Rajah Lehal is hosting a CPD Webinar on the Top 10 Things You Should Know about Hiring a Contract Employee

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Toronto, ON
November 8, 2016

On November 14, 2016, Rajah Lehal, Founder and CEO of Clausehound, will be hosting a legal Webinar on the topic of hiring contract employees in the context of operating a social enterprise. Rajah will also be discussing his journey as an entrepreneur, and how his experience training lawyers led to his founding of Clausehound. The Webinar session will be accredited for 1 hour towards your yearly substantive CPD requirements.

For further details on this Webinar, please click here.

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Contractors need to specify payments for incomplete tasks

When drafting a work related contract, ensure that payment due for the completion of the task, as well as payment due for partial completion of the task is included and specify the degree of completion for each respective payment amount.

Generally, in a lump sum contract, there is no right to partial payment if the task specified within the contract is not completed. If a contract indicates that a contractor will charge a certain amount for the completion of a task, then the contractor cannot sue for payment resulting from partially completing a task.

Quantum merit, the reasonable value of one’s services, also will not apply unless there is a contract that specifies that payment will be required for partial completion of the task.

Sumpter v Hedges [1898] 1 QB 673 stands as precedence for this rule. In this case, Mr. Sumpter (Sumpter) was a builder, who had entered into a contract with Mr. Hedges (Hedges) to build two houses and stables for £565. Sumpter completed work valued at £333 but did not have enough money to complete the task. Hedges finished the remainder of the task, using material that Sumpter had left behind. Sumpter had already been paid part of the £565, but sued for the outstanding amount. The Court of Appeal found that Sumpter was not owed the outstanding amount because he had abandoned the contract.

Hedges did not need to reimburse Sumpter for partially completing the task. Sumpter was entitled to compensation for the value of the materials that Hedges had used to complete the task. The Court of Appeal found that where there is a contract to do work for a lump sum, payment for the work cannot be recovered until the work is completed.

Furthermore, it was found that Sumpter was not entitled to recover for the work he did on a quantum merit. For quantum merit to exist there must be evidence of a new contract that specifies payment for the work previously completed. Quantum merit can also exist where there is evidence that the defendant had the option to take benefit of the work done. Had

Hedges been given the option of benefitting from partially completed buildings, then Sumpter may be entitled to quantum merit, however; as in the case of work done on buildings, the defendant is given not given an option to take benefit of the work done or not. As a result, Sumpter is not entitled to quantum merit. Duty of Good Faith

As a side note, it is also useful to include a duty of good faith as a provision within the contract, as this duty will obligate the party receiving the goods/services to honour an equitable or fairness obligation to provide payment for useful services received.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Wood v. Enbridge Gas Distribution Inc., 2011 ONSC

Discussion: This case deals primarily with the distinction between an employee and an independent contractor. Although the parties in this case intended to structure their relationship so that the applicant would be regarded as an independent contractor, the parties conduct indicated otherwise. The main difference between an employee and an independent contractor lies with the element of CONTROL that the employer has over the worker. Factors to consider when assessing whether a worker is an employee or an independent contractor include:

  • The level of control the employer has over the worker’s activities
  • Whether the worker provides his or her own equipment
  • Whether the worker hires his or her own helpers
  • The degree of financial risk taken by the worker
  • The degree of responsibility for investment and management held by the worker
  • The worker’s opportunity for profit in the performance of his or her tasks

Facts:

  • Applicant worked for the defendant as a pipe fitter.

    He was seriously injured while removing a decommissioned gas standpipe.

  • The applicant started an action for damages, alleging that he was working as an independent contractor for the employer at the time of the injury.
  • The respondents commenced a right to sue application under s. 31 of the Workplace Safety and Insurance Act (the Act), which authorizes the tribunal to determine whether, because of this Act the right to commence an action is taken. S. 27 and 28 of the Act prohibit a worker injured in the course of employment from suing his or her employer if he was injured while acting in the capacity of an employee or worker at the relevant time and is not an independent contractor
  • The tribunal allowed the application of the respondents and held that the applicant was not entitled to sue. The applicant seeks judicial review of this decision.

Issue:

  • Was the tribunal accurate in its conclusion that the applicant was an employee of the defendant and therefore not allowed to sue.

Rule:

  • The Workplace Safety and Insurance Appeals Tribunal is entitled to judicial deference on the reasonableness standard.

  • Contractual arrangements can be used to supplement viva voce evidence, provided that the written word corresponds with the manner in which the parties actually conduct themselves. In these cases, the law is concerned with what people actually do and not what they agreed to do. More importantly, the law will not blindly accept the classification label the parties have placed on their relationship (Joey’s Delivery Service v. New Brunswick (Workplace Health, Safety and Compensation Commission)

Analysis:

  • Although the parties intended to structure their relationship so that the applicant would be regarded as an independent contractor, the parties’ conduct indicates otherwise. The Tribunal noted that the respondent continued to pay a salary to the applicant when he was off work and after he returned to work on modified duties; the applicant’s earnings were reported to the Workplace Safety and Insurance Board; the respondent exercised a high degree of control over the applicant’s work; the applicant did not hire his own helpers; the applicant had marginal financial risk; the applicant had no meaningful opportunity for profit. The Tribunal’s decision fell within the range of possible and acceptable outcomes that were defensible with regard to the facts and the law. It was not unreasonable.

Conclusion:

  • Application dismissed.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

What you don't know can hurt you! Subscribe to stay informed.

Sign up now and receive an email when we publish new content.

We will never give away, trade or sell your email address. You can unsubscribe at any time.

Read more...

Contractors need to specify payments for incomplete tasks

When drafting a work related contract, ensure that payment due for the completion of the task, as well as payment due for partial completion of the task is included and specify the degree of completion for each respective payment amount.

Generally, in a lump sum contract, there is no right to partial payment if the task specified within the contract is not completed. If a contract indicates that a contractor will charge a certain amount for the completion of a task, then the contractor cannot sue for payment resulting from partially completing a task. Quantum merit, the reasonable value of one’s services, also will not apply unless there is a contract that specifies that payment will be required for partial completion of the task.

Sumpter v Hedges [1898] 1 QB 673 stands as precedence for this rule.

In this case, Mr. Sumpter (“Sumpter”) was a builder, who had entered into a contract with Mr. Hedges (“Hedges”) to build two houses and stables for £565. Sumpter completed work valued at £333 but did not have enough money to complete the task. Hedges finished the remainder of the task, using material that Sumpter had left behind. Sumpter had already been paid part of the £565, but sued for the outstanding amount.

The Court of Appeal found that Sumpter was not owed the outstanding amount because he had abandoned the contract. Hedges did not need to reimburse Sumpter for partially completing the task. Sumpter was entitled to compensation for the value of the materials that Hedges had used to complete the task. The Court of Appeal found that where there is a contract to do work for a lump sum, payment for the work cannot be recovered until the work is completed.

Furthermore, it was found that Sumpter was not entitled to recover for the work he did on a quantum merit.

For quantum merit to exist there must be evidence of a new contract that specifies payment for the work previously completed. Quantum merit can also exist where there is evidence that the defendant had the option to take benefit of the work done. Had Hedges been given the option of benefitting from partially completed buildings, then Sumpter may be entitled to quantum merit, however; as in the case of work done on buildings, the defendant is given not given an option to take benefit of the work done or not. As a result, Sumpter is not entitled to quantum merit.

Duty of Good Faith

As a side note, it is also useful to include a duty of good faith as a provision within the contract, as this duty will obligate the party receiving the goods/services to honour an “equitable” or “fairness” obligation to provide payment for useful services received.

 

–  –  –

This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

What you don't know can hurt you! Subscribe to stay informed.

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Read more...

Confidentiality: Duties of Your Independent Contractors

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Read the article here.

The article discusses a recent case out of Massachusetts which held that, as a matter of law, in the absence of a confidentiality agreement (or a formal confidentiality policy), an independent contractor was free to disclose a company’s trade secrets, including customer names, pricing information, business processes and work flow patterns, information about business relationships with other companies, and accounting records. While this may be covered at common law in employment relationships, that duty of confidentiality may not extend to contractors. The article provides a strong reminder that drafters of independent contractor agreements may want to include provisions to protect the property of the company.

All too often, independent contractor provisions fail to address critical topics (e.g., confidentiality and intellectual property ownership issues).

Read the article here.

 

Take away:

Where a degree of a duty of confidentiality applies to an employee, the same may not apply to independent contractors. It would be prudent for an employer to ensure that all confidentiality terms are listed in the governing document of their relationship.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

What you don't know can hurt you! Subscribe to stay informed.

Sign up now and receive an email when we publish new content.

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Read more...

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