Employee or Consultant?

August 11, 2015

Links from this article: Read the article here.

Consulting agreements are often structured carefully to make it clear that the nature of the relationship is not an employment relationship, but a consulting relationship. What happens if the confidentiality agreement signed by the consultant contains inadvertent references to the ‘employee’ instead of the ‘consultant’? In other words, what are the consequences of the legal team’s failure to properly customize a key agreement? The result depends on your approach to contract interpretation.

This article summarizes Downey v. Ecore International Inc. where an engineer signed a consulting agreement (through his personal corporation) and a confidentiality agreement (which had not been sanitized properly and contained a reference to ‘employee’). The lower court interpreted the combination of documents as an employment agreement. On appeal, the court stated that the consulting agreement and the confidentiality agreement had to be read together as an integrated whole, in light of the intentions of the parties, and the factual matrix. Since the consultant was the ‘Key Person of the Consultant’, and since the corporation was the consultant purely for tax purposes, it was clear that the individual was intended to be (and actually was) in a consulting and not an employment relationship.

Read the article here.Take away:

  • Consulting agreements and confidentiality agreements entered into separately, but with respect to the same consulting relationship, should be reviewed to ensure consistency between the documents.
Consulting Agreement
Nature of Relationship
Human Resources