Ruling clarifies worker's shareholding status cannot override substance of employment relationship
A Canadian co-founder who helped build a British fire safety company from the ground up was wrongly classified as an independent contractor — and Ontario courts have the right to hear his wrongful dismissal case — the Court of Appeal for Ontario ruled this week.
In Pringle v. Zenova Group PLC, released July 29, a three-judge panel overturned a lower court decision that had permanently stayed Shawn Pringle's wrongful dismissal action, finding that the motion judge made a legal error by conflating Pringle's role as a shareholder with his role as a worker providing services.
The decision has implications for how Ontario courts will assess the employment status of workers who are also investors or founders in the businesses that engage them.
Pringle was one of three co-founders who, beginning in 2018, built Zenova, a company focused on flame-resistant paints and fire safety products. For the first three years, he and the other founders worked without pay. By 2021, as the company prepared to go public on a British exchange, the board decided it needed to demonstrate a formal management team — and offered Pringle a position as director of product development at 80,000 per year.
Given a choice between an employment contract and a consultancy arrangement, Pringle chose the latter for tax reasons. The resulting agreement — titled "Product Development Consultant Contract...
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