COURT FILE NO.: CV-20-2340-00
DATE: June 27, 2022
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
NEIL GOBERDHAN
Plaintiff (Respondent on Motion)
Joel McCoy for the Respondent
- and –
KNIGHTS OF COLUMBUS
Defendant (Applicant on Motion)
Ryan Campbell for the Applicant
HEARD: March 9, 2022
RULING ON MOTION
D.E HARRIS J.
[1] The defendant Knights of Columbus (the “Knights”) is a fraternal benefits society and a Fortune 1000 company with annual revenues in the billions. Its pamphlet filed on this application states at the outset,
We are an organization of dedicated individuals—1.6 million members strong, and growing. An organization that, since 1882, has embodied the selflessness of man as it has helped overcome the problems of the world. Poverty. Ignorance. Apathy. Things which imperil not only a single individual, but the whole of humanity. We are men of faith, comprising over 12,000 Knights of Columbus councils at home and overseas. Guided not only by our belief in God and the Catholic Church, but by our belief in each other, and in ourselves. We are the Knights of Columbus. Believing that a man is defined by his actions as a follower of God, and as a leader in his community. Believing that a man is more than simply a man, when he bears the title of “Knight.”
G U A M G U A T E M A L A , P A N A M A , C U B A , T H E V I R G I N I S L A N D S , T H E B A H A M A S , A N D S A I P A N
[2] The Knights offers insurance products to its members. The plaintiff Neil Goberdhan was a “field agent” appointed through the Knights to sell insurance.
[3] After 8 years working as a field agent, the Knights terminated the plaintiff on May 23, 2019. The plaintiff filed a statement of claim for wrongful dismissal on June 30, 2020.
[4] In this motion, the defendant argues that the plaintiff is required by contract to undergo mandatory arbitration and requests that, as a consequence, this action be stayed following the requirements of Section 7(1) of the Ontario Arbitration Act, 1991, S.O. 1991, c. 17 (the “Arbitration Act, 1991”). With some exceptions, Section 7 requires an action be stayed if an arbitration agreement exists between the parties.
[5] There were three contracts entered into between the Knights and the plaintiff: the initial contract dated April 17. 2001 was followed by a contract dated October 5, 2018. In this latter contract, a mandatory arbitration clause was inserted. A third contract dated April 5, 2019--substantially the same for our purposes as the October 5, 2018 contract--was entered into prior to the plaintiff’s termination a month later.
[6] The plaintiff’s response to this motion brought to stay the action is that there was no consideration for entering into the second and third contracts and that, as a result, it is null and void. The arbitration agreement is ineffective and the action ought not to be stayed.
THE RELATIONSHIP BETWEEN THE KNIGHTS AND MR. GOBERDHAN
[7] The Knights appoint general agents who are provided with a specified territory to conduct their insurance business. General agents then appoint field agents, who solicit and procure Knights’ insurance applications from members within their territory.
[8] The plaintiff was first selected as a field agent by Raymond Richer, a general agent appointed by the Knights, in 2011. Mr. Richer operated an independent agency, the Richer Agency.
[9] The contract stipulated that the plaintiff “devote his full time and entire attention and energy to the services required under” the agreement. He was paid by commission and was compensated for expenses. The plaintiff could only sell Knights’ insurance and could only sell it to Knights’ members. Advertising had to be authorized by the Knights and they paid for it. The contract asserts that the field agent is an independent contractor and cites a number of field agent responsibilities in support of this proclaimed legal status.
[10] In the second and third contracts, Mr. Goberdhan’s specified territory was revised. These two latter contracts state that non-binding mediation is to be paid by the Order unless the claim is frivolous. If mediation fails, then binding arbitration is required. In addition, while the previous contract was silent on the question, his severance and termination pay were now limited to one week for each year employed up to a maximum of 8 weeks. The plaintiff has attested, and there could not be any dispute about it, that he had no choice but to sign the contract if he expected to continue to work for the Knights.
WAS THE PLAINTIFF AN INDEPENDENT CONTRACTOR?
[11] There can be little question but that the plaintiff was an employee of the defendant despite the pains taken to state otherwise in the contracts. The leading case of 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59, [2001] 2 S.C.R. 983 at 47 boils down the question of how to determine whether a person is an employee or an independent contractor. The ultimate question is: Whose business is it? The non-exhaustive factors to determine the nature of the relationship were digested by the Ontario Court of Appeal in Braiden v. La-Z-Boy Canada Limited, 2008 ONCA 464, at para. 33,
- Whether or not the agent was limited exclusively to the service of the principal;
- Whether or not the agent is subject to the control of the principal, not only as to the product sold, but also as to when, where and how it is sold;
- Whether or not the agent has an investment or interest in what are characterized as the “tools” relating to his service;
- Whether or not the agent has undertaken any risk in the business sense or, alternatively, has any expectation of profit associated with the delivery of his service as distinct from a fixed commission;
- Whether or not the activity of the agent is part of the business organization of the principal for which he works. In other words, whose business is it?
[12] Protestation that the relationship was that of independent contractor, like in the contracts in this case, is not definitive. The question is one of operation of law.
[13] In this instance, all factors align with this being an employment relationship. 1. The plaintiff could only work for the defendant; 2. The product sold had to be the one provided by the defendant and had to be sold to a member of the defendant’s organization; 3. The plaintiff was required upon termination to return all property of the Order to the Order or the general agent; 4. The plaintiff was paid by commission and had neither expectation of profit or risk of loss; and 5. The activity of the plaintiff was solely for the benefit of the defendant.
[14] In the end, it was the defendant’s business. The plaintiff was an employee of the Knights, not an independent contractor.
WAS THERE FRESH CONSIDERATION FOR THE SECOND AND THIRD CONTRACTS?
[15] A valid contract requires consideration. In the employment context, this necessity has become a means to enable the judiciary to protect employees from unconscionable or unfair employment practices. As Justice Juriansz said in Hobbs v. TDI Canada Ltd. (2004), 2004 CanLII 44783 (ON CA), 246 D.L.R. (4th) 43 (C.A.):
[42] The requirement of consideration to support an amended agreement is especially important in the employment context where, generally, there is inequality of bargaining power between employees and employers. Some employees may enjoy a measure of bargaining power when negotiating the terms of prospective employment, but once they have been hired and are dependent on the remuneration of the new job, they become more vulnerable. The law recognizes this vulnerability…
[16] Also see Braiden, at paras. 55-60; Holland v. Hostopia.com Inc., 2015 ONCA 762 at paras. 51-55; Francis v. Canadian Imperial Bank of Commerce (1994), 1994 CanLII 1578 (ON CA), 21 O.R. (3d) 75 (C.A.). Benefits cannot flow only to the employer: “[I[n return for the new promise, something must flow to the employee.” Techform Products v. Wolda (2001), 2001 CanLII 8604 (ON CA), 56 O.R. (3d) 1 (C.A.) at para. 24, leave to appeal refused [2002] 3 S.C.R. xii.
[17] The Applicant argued that there was in fact consideration in the two subsequent contracts. First, it was argued that new requirement for mediation and mandatory arbitration constituted consideration.
[18] I do not agree. The contracts require binding arbitration. This constitutes an arbitration agreement which under Section 7(1) of the Arbitration Act, 1991 precludes action in court. In addition, in bold uppercase letters, the contracts provides that both parties agree to waive the right to a jury trial and right to participate as a member in a class action.
[19] Removal of the right to sue is clearly not a benefit to the plaintiff. Furthermore, “[T]rial by jury is a fundamental right": McDonald-Wright (Litigation Guardian of) v. O'Herlihy, 2007 ONCA 89, 220 O.A.C. 110 (Ont. C.A.), at para. 13, per Gillese J.A. Giving up the fundamental right to a jury trial, to participate in a class action is a curtailment of an individual’s rights. These are detriments and cannot be construed otherwise.
[20] The next argument is that the first contract states that it is to be governed by the laws of Connecticut while the two subsequent contracts are to be governed by the laws of Ontario. This is argued to be consideration. Without knowing the pertinent differences between the laws in the two jurisdictions, this cannot be shown to be a benefit to the plaintiff.
[21] There was also allusion in argument to the latter contracts changing who could sell insurance contracts but I see nothing in this that could be viewed as consideration.
[22] For these reasons, I disagree that there was consideration for the new contracts. The new agreements in October 2018 and April 2019 in every material respect diminish the plaintiff’s contractual rights while giving him nothing in return. This exemplifies the unfair bargaining relationship between employer and employee alluded to in the cases.
[23] Counsel for the Knights argues that the law under Section 7(1) of the Arbitration Act, 1991 is that a stay should be imposed when it is arguable that the dispute falls within the terms of an arbitration agreement: Haas v. Gunasekaram, 2016 ONCA 744 (Ont. C.A.) at para. 15-16. The present case is arguably within the arbitration requirement and therefore should be stayed.
[24] However, this concerns with the interpretation of an arbitration agreement, not its very existence. Section 7(2) of the Act provides in part,
7(2) Exceptions
However, the court may refuse to stay the proceeding in any of the following cases:
- The arbitration agreement is invalid.
[25] As the contract fails for lack of consideration, so too does the arbitration term in the contact. The arbitration agreement is invalid under Section 7(2) of the Act.
[26] The action will not be stayed and should continue. The defendant’s motion is dismissed.
[27] Both parties filed costs submissions. The plaintiff should have his costs having successfully resisted the motion. Furthermore, as discussed, the equities are strongly in his favour. Substantial indemnity is appropriate. The costs will be $12,002.63 all inclusive to be paid within 30 days.
D.E HARRIS J.
Released: June 27, 2022
COURT FILE NO.: CV-20-2340-00
DATE: June 27, 2022
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
NEIL GOBERDHAN PLAINTIFF (RESPONDENT ON MOTION)
- and –
KNIGHTS OF COLUMBUS DEFENDANT (APPLICANT ON MOTION)
RULING ON MOTION
D.E HARRIS J.
Released: June 27, 2022