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In 2000, Brian Head, through his company, Head Holdings Limited, entered into a franchise agreement with Radio Shack Ltd. (now known as The Source), to
In 2000, Brian Head, through his company, Head Holdings Limited, entered into a franchise agreement with Radio Shack Ltd. (now known as The Source), to operate the Oakville store. In essence, the agreement called for Head Holdings Limited and Radio Shack Ltd. to split the store profits 50/50 and use that money to each pay certain specified expenses related to the store's operation. Head was responsible for staffing the store, purchasing and sales, and keeping the store open and operational. They signed a written agreement which stated that either one could terminate the arrangement on one month's written notice to the other party. Head understood from verbal discussions that Radio Shack would not terminate without cause (e.g., a dishonest act or a serious breach of the agreement). Head regularly worked a 55 to 60-hour week at the store, and during Christmas time he worked about 80 hours a week. The store was quite profitable and brought in sales of close to $1,000,000.00 per annum. In 2005, Head won Radio Shack's Manager of the Month Award in recognition of outstanding achievement the previous year. The independence of the manager of a franchise store was strongly limited by the terms of the franchise agreement. The store had to have a certain appearance and stock certain merchandise. It had to remain open during specified hours. In 2005, Radio Shack had a change in policy towards franchised stores. They found that they were less profitable than company owned stores where they merely paid the store manager a straight salary. In January 2006, Head received a letter from Radio Shack terminating the franchise agreement effective one month later as per the clause in the original contract. Head sued Radio Shack for a year's profits, claiming he was an employee and was entitled to pay in lieu of reasonable notice. Questions: 1. Was Head an employee of Radio Shack or an independent contractor? 2. Identify three legal tests that you used in coming to your conclusion in question # 1 and discuss how the tests would apply in the case by referencing each of them on the facts. In other words, using test # 1 which way does the test lean on the facts and why
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