How to Terminate an Independent Contractor Agreement in Ontario
21Jun

How to Terminate an Independent Contractor Agreement in Ontario

In Ontario, terminating an independent contractor agreement isn’t always as simple as giving notice. Employers must address the legal classification of the contractor, the terms of the agreement, and the risk of dependent contractor claims or even wrongful dismissal lawsuits.

Why Independent Contractor Agreements Matter

Although independent contractors are not protected by the Employment Standards Act, 2000 (ESA), that doesn’t mean employers can terminate them without legal consequences.

A strong agreement can:

  • Define services, fees, timelines, and deliverables
  • Set out dispute resolution mechanisms
  • Clarify how and when termination can occur
  • Help demonstrate that the contractor is not misclassified as an employee

Poorly drafted or missing agreements expose employers to classification challenges, claims for notice or severance, and other disputes.

Key Clauses Every Ontario Contractor Agreement Should Include

Ensure your agreement includes:

  • Scope of Work: Clearly define responsibilities
  • Payment Terms: Include amounts, timing, and payment triggers
  • Term and Renewal: Is the contract fixed, ongoing, or project-based?
  • Termination Clause: Define the process and financial responsibilities
  • Dispute Resolution: Litigation, arbitration, or mediation procedures

How to Terminate a Contractor Agreement in Ontario

Termination must comply with the contract’s terms. Agreements can end:

  • For cause: Due to breach or failure to meet obligations
  • For convenience: At any time, if the contract allows

A vague or unenforceable clause may expose employers to legal claims for reasonable notice, damages, or dependent contractor entitlements.

Duty of Good Faith and Legal Risks

Even with a “terminate anytime” clause, employers must act in good faith. In Mohamed v. Information Systems Architects Inc., the Ontario Court of Appeal ruled that abrupt or bad-faith terminations can lead to liability—even if contractually permitted.

Are You Dealing with a Dependent Contractor?

If a contractor:

  • Works almost exclusively for your business
  • Relies on your income for their livelihood
  • Has a long-term, integrated relationship with your company

They may qualify as a dependent contractor, and courts may award reasonable notice of termination.
In Cormier v. St. Joseph Communications, a dependent contractor was awarded 21 months of pay.

Termination for Convenience Clauses: Best Practices

A “termination for convenience” clause allows you to end the relationship without cause. But to be enforceable:

  • It must be clearly worded
  • Consistent with other terms in the agreement
  • Explicit about payment obligations upon termination

Case in point: Atos IT Solutions v. Sapient Canada Inc., where vague language led to limitations on recoverable compensation.

How Achkar Law Helps Employers in Ontario

We support businesses with:

  • Drafting enforceable contractor agreements
  • Classification assessments (independent vs. dependent contractor)
  • Termination planning and execution
  • Defending classification or severance claims

Ready to terminate a contractor agreement legally and safely?

The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Achkar Law Professional Corporation and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Achkar Law Professional Corporation. ©