Citation: 2012 TCC 70
THE MINISTER OF NATIONAL REVENUE,
HER MAJESTY THE QUEEN,
REASONS FOR JUDGMENT
The five appeals herein
relate to assessments dated May 31, 2007, March 25, 2009 or
March 26, 2009, as the case may be, made by the Canada Revenue Agency
(CRA) for Canada Pension Plan (CPP) contributions, employment
insurance (EI) premiums and income tax source deductions under the Income
Tax Act (ITA) payable on behalf of Fritz Clarke (worker) for
the years 2006 and 2007. These assessments were made for the period at issue after
a ruling determining that the worker, while working for the appellant, was
employed in pensionable employment within the meaning of paragraph 6(1)(a)
of the CPP and insurable employment within the meaning of paragraph 5(1)(a)
of the Employment Insurance Act (EI Act) was confirmed by the CRA
on March 6, 2006.
The March 6, 2006 decision of the CRA was not itself appealed, hence
the issuance of the EI and CPP assessments dated May 31, 2007 and
March 26, 2009 for the years 2006 and 2007 and the issuance of the
income tax source deductions assessment dated March 25, 2009 for the 2007
taxation year. It is those assessments that are under appeal before me, not the
ruling, and this is why my decision will resolve the issue for the years 2006
and 2007 only.
The appellant is of the
view that the worker was not employed in insurable and pensionable employment
but rather was hired as an independent contractor working on his own account, and
that, as a consequence, no deductions at source had to be made.
The parties agreed on
(a) the appellant operated a small non-profit
charitable organization to provide support and aftercare to persons who had
been released from prison;
(b) the organization was funded by private donations,
grants, Correctional Services Canada and the government of Ontario;
(c) the appellant’s board of directors (BOD)
consisted of four or five volunteers;
(d) the worker’s duties were, among other things, to
manage the organization, recruit new volunteer team members, provide training
and support to the volunteers, and schedule and carry out fundraising events on
behalf of the appellant;
(e) the worker was a clergyman with experience working
(f) the organization’s founder, Bing Gallant, had
performed the services prior to the worker performing them;
(g) the worker was replaced by Dan Kelly, who had his
own corporation, Johnstone Training and Consultation Inc.;
(h) the worker had signing authority on the
appellant’s bank account, but two signatures were required on all cheques (the
evidence revealed, however, that in a few instances the worker was the sole
person to sign on behalf of the appellant, even when his own pay cheques were
(i) the appellant terminated the worker’s services on
August 31, 2008 (Exhibit R-2, Tab 3);
(j) the worker provided his own vehicle and was
responsible for its maintenance and repair;
(k) the worker was entitled to three weeks of paid
annual vacation leave (Transcript, p. 24), but this came into question further on
in the evidence (Transcript, pp. 151, 152);
(l) the worker was entitled to casual absence/sick leave
with pay credited to him at the rate of ¾ of a day each month;
(m) the appellant paid the worker mileage at the
rate of $0.42 per kilometre, which was based on the Ontario
(n) for a portion of the period under review, the
worker submitted invoices to the appellant; and
(o) the worker charged the appellant goods and services
tax (GST) on his services.
Mr. Charles Richard
Hudson, vice-president of the BOD, explained in court that the appellant is a
small charitable organization which trains volunteers to help people who are
released from prison. When one of the co-founders, Bing Gallant, died of
cancer, they engaged the worker to carry out the training of the volunteers. It
was always their intention to hire someone on a contractual basis as they were
not equipped to act as an employer (often being forced to work with no money,
with the help of volunteers). According to Mr. Hudson, this was always made
very clear to the worker before any contract was signed with him. Two chartered
accountants were consulted and they outlined a method to be followed in order for
the worker to be treated as a contractor, which MAP did follow. At first
(before the period at issue), the worker was working for the Pentecostal
Assemblies of Canada (PAC), and an agreement was apparently signed
between PAC and MAP for services to be provided by the worker; it was
understood that PAC could occasionally supply other pastors.
Mr. Hudson said
that the worker was a pastor, who knew better than the BOD members the work that
had to be done. He mentored offenders who were released from prison, found
coaches, encouraged the coaching teams, and sought donations or funding
opportunities. The worker was known by outsiders as the executive director and
director of MAP, but he was never a member of MAP’s BOD.
The worker provided
guidance to the coaches on an ongoing basis, being their primary contact with
MAP. He was also responsible for matching them with the inmates to be mentored
(Transcript, pp. 84, 85). There was no supervision of any kind (Transcript, pp.
42 and 86). The BOD, however, set the course for the organization, within the limits
of the appellant’s “boundary documents” (Transcript, pp. 160, 161).
Mr. O’Gorman, the president and co-founder of MAP, testified that the
boundary documents were drawn up to help the coaches protect themselves in
dealing with the ex-offenders, to keep them safe (Transcript, p. 239). The BOD
was also trying to give guidance and help in relation to the organization’s
finances, and the worker, although not a board member, took part in decision making
with regard to what course of action to take (Transcript, p. 242).
MAP operated from a
borrowed one-room office, with some donated equipment, namely: cell phones, one
old computer, one filing cabinet, one table and two old chairs. The office’s
location was unpublished for safety reasons. The worker had access to that
The worker did most of
the work that needed to be done himself but could occasionally engage another
pastor from PAC. However, Mr. Hudson did not know whether the other pastor
would have been paid. In fact, the worker did engage pastors to provide
in-prison services and volunteers to speak at certain events. BOD members were
also called upon to speak. Mr. Hudson said that he doubted that they
received any payment for doing so (Transcript, pp. 43, 44), with the exception
of one case where the worker, on his own initiative, engaged a speaker who
charged MAP $7,500, much to the displeasure of the BOD (Transcript, p. 213,
214, and Exhibit R-2, Tab 5).
Although the contract
stipulated that the worker was to be paid for 40 hours or so of work per week,
the worker worked far more hours than that in a week without being paid anymore
(Transcript, p. 45). Sometimes, when there was no money available, the worker
worked without pay without complaining to the BOD (Transcript, p. 49). But in
the end, he was paid the full amount that he invoiced (Transcript, p. 133).
With respect to paying suppliers, many cheques were signed only by the worker, and
the BOD did not keep track of this. Mr. Hudson explained that the BOD
members were all volunteers and not readily available. He stated that from the
outset, “the board was set up as the policy setting board, not a hands-on daily
worked-on-by-volunteers kind of board” (Transcript, p. 50).
it was made clear that the first agreement entered into between MAP and the
worker directly was signed on October 15, 2004 for the period
commencing September 1, 2004 and ending August 31, 2005
(Exhibit R-2, Tab 1). Under that agreement, the worker was hired to manage MAP.
He was to be paid a fixed amount for a 42-hour work week, with no additional
pay for overtime. He was given 15 days of leave during the contract period and
paid sick days. Mr. Hudson’s testimony in this regard was that MAP did not
keep track of the worker’s days off (Transcript, p. 152). Pay cheques were to
be issued twice monthly on receipt of invoices from the worker. He was required
to have an automobile and to maintain office space off premises. Mileage was to
be paid by MAP.
In a second agreement,
entitled Service Contract, signed between MAP and the worker on
January 20, 2006, the worker agreed to invoice the organization on a
periodic basis at a fixed rate per day plus GST on a “net seven days” basis. It
was stipulated that the worker was responsible for maintaining his own office,
including paying premises costs and providing all computer and communications
equipment. The worker also had to provide his own automobile but was to be
reimbursed for his mileage (Exhibit R-2, Tab 2). Although the two contracts
were drafted differently, Mr. Hudson acknowledged that the worker’s role
did not change over the years (Transcript, p. 136) and it was understood that
he would be working under the same terms as before (Transcript, p. 232, 235,
During the period at
issue, part of MAP’s funding came from the Ontario Multifaith Council (Ontario government) and Correctional Services Canada. The worker, acting
on his own, took the initiative to execute contribution agreements (see as an
example Exhibit R-2, Tab 12, and see also Transcript, pp. 177, 178) and send
reports to those two organizations on behalf of MAP (Transcript, pp. 97, 98).
Although he was not specifically authorized to do these things, the BOD was
most probably aware that he was doing them and did not disapprove (Transcript,
p. 178). Further, Mr. Fritz Clarke testified that Correctional
Services Canada and the Ontario Multifaith Council would not let him maintain
his own office because of the confidential information provided to MAP regarding
inmates. Mr. Hudson testified that he had never heard of that and that any
file on an offender was kept in the parole office (Transcript, pp. 144, 145).
Mr. Hudson said that the worker did not have the authority to do so, the
worker also performed administrative services on his own, without necessarily
informing the BOD. Most of the time, this went unnoticed, but sometimes the
worker was reprimanded by the BOD. Such was the case, for example, when the
worker advised the CRA that MAP had withheld money at source from his
remuneration, which, according to Mr. Hudson, it had not done. Another
example is that of the worker signing cheques (including his own pay cheques)
on behalf of MAP without asking a BOD member to co-sign (Transcript, pp. 105 to
113). Mr. Hudson acknowledged, however, that the worker was the one who
did most of the work for MAP and that he was giving MAP full value for the money
he was being paid (Transcript, pp. 121, 122).
The remuneration paid
to the worker constituted the major expense in the budget (Transcript, pp. 102,
103, 105, and see MAP’s budget for 2004, 2005 and 2006 under the item
“salaries” in Exhibit R-2, Tab 12, Appendix B, and MAP’s profit and loss
Statement for 2007 under the item “employees”, Exhibit R-2, Tab 7, last page).
When the worker’s
contract was terminated in August 2008, MAP gave him a severance package.
Mr. Hudson testified that they did not feel legally obligated to do so,
but they thought that it would be fair (Transcript, p. 154).
O’Gorman, one of the co-founders of MAP also testified. He explained that the
BOD, of which he is the president, is made up of three to five people, all
working elsewhere, but giving of their time to that charitable organization. None
of them were in a position to actually run it and they could only provide
advice and guidance. When Bing Gallant, the pastor who was the other co‑founder,
died, the BOD decided to hire someone to run the operation full-time. They
interviewed a number of people and Reverend Fritz Clarke was hired because of
his background and his good-heartedness. The BOD had absolutely no control over
his day-to-day activities (Transcript, p. 204). The BOD held meetings from time
to time that were attended by Mr. Clarke. Those meetings were centred mostly
on how to find funding and volunteers and how to advance the cause of MAP. In
signing the contract with the worker MAP never intended to become an employer.
The contract was conceived in order for MAP to be able to pay him. Afterwards,
they found out that Mr. Clarke made a lot of misguided financial decisions
as a result of which MAP lost money instead of raising funds. As an example, he
paid his own remuneration out of cash advances from his own Visa credit card in
anticipation of funding coming in. All of a sudden, he revealed the existence
of a $20,000 debt, and he had not previously advised anyone of the situation
(Transcript, pp. 225, 226, 227). In fact, the BOD did not exercise any
supervision and bad decisions were made that resulted in a huge deficit. BOD
members met regularly with the worker, not to have him account for what was being
done, but rather to encourage him, to give him support. But Mr. O’Gorman
said that had he known that the funding had dried up, they probably would have
terminated the worker’s contract earlier (Transcript, pp. 262, 263).
Mr. Robert Gibbons
Birch, another member of the BOD, also testified. He said that the worker was
hired as a consultant and the BOD gave him guidelines within which to work. On
a couple of occasions Mr. Birch raised with the BOD the issue of whether
the worker should be treated as an employee, but the others members of the BOD were
opposed. He confirmed that there was no day-to-day guidance given to the worker
(Transcript, pp. 289 to 292). He recognized that Fritz Clarke was the coaches’
contact at MAP (Transcript, p. 295) and the point man for raising donations
(Transcript, p. 296), but maintained that, whatever title Mr. Clarke used,
he was always acting for MAP as a consultant (Transcript, p. 297). He had
an all-encompassing role, dealing with prisoners, organizing teams of coaches, and
reporting back to the BOD on how he presented MAP to outside agencies and on
the work done. Mr. Birch agreed that Mr. Clarke was running the MAP
organization (including overseeing the paperwork and any administrative work),
but he also stated, without really knowing whether it was so, that
Mr. Clarke may also have worked as a Pentecostal minister at the same time
(Transcript, pp. 298 to 304). Mr. Birch admitted as well that Mr. Clarke
received guidelines from the BOD within which he was to work (Transcript, pp.
An affidavit signed by
JoAnne Christie, another member of the BOD, was filed as Exhibit A-7. She was
out of town at the time of the hearing and could not be cross-examined.
Essentially, what she says in her affidavit is the same as what was stated by
the other members of the BOD in court, and she explains why they all considered
Mr. Clarke as a contractor rather than an employee. She mentions that the
BOD had monthly meetings to discuss administrative details and give guidance
and establish priorities when necessary. She also alluded to weekly meetings
between Mr. Clarke and two BOD members, the purpose of the meetings being
to support Mr. Clarke and his work, but they were not meant as direct
supervision and scrutiny of his work.
Elizabeth Buchan, an employee of the CRA, explained that the appellant was assessed
on March 25, 2009 for failure to remit source deductions following receipt
of a T4 slip issued for Mr. Clarke on August 14, 2008 (as per
the payroll account filed as Exhibit R-3, at pages 5 and 6 of 17, and the notice
of assessment filed as Exhibit R-1, Tab 3C). It also appears from the payroll
account that arrears payments were made on behalf of the appellant from
July 2005 to June 2008 (Exhibit R-3). The letter sent by the CRA to
Mr. Clarke on April 19, 2006 (Exhibit A-8) stated that the CRA
noted that Mr. Clarke had reported self-employment business earnings for
the years 2002, 2003 and 2004. Attached to that letter was a summary of the income
and deductions that the CRA had on record and the summary showed an amount owing
of $182.96 for those years. Ms. Buchan explained that, after a review of
Mr. Clarke’s file, the CRA determined that he was an employee for the
years 2006 and 2007. It is my understanding that that decision, which is at
issue before this court, did not have any impact on previous years.
Finally, I heard the
testimony of Reverend Fritz Clarke.
He studied theology and ethics in university and, before joining MAP, had had experience
working with individuals with addiction problems. He testified that he saw
himself as a contractor when he was first hired, but his role subsequently
changed. He said that, when he signed the second contract in January 2006
(Exhibit R-2, Tab 2), he was questioning the nature of his status with MAP. There
was an ongoing dialogue with the BOD until he received from the CRA, one month
after signing the second contract, the ruling that determined that he was
indeed an employee. He did register for the purposes of the GST and did remit
GST because, until the ruling, he had to abide by his contract. His
responsibilities were not spelled out in his contract, but it was his
understanding that the functions he performed (i.e., training and recruiting
volunteers, selecting individuals for mentorships, administrative duties—including
paying bills, answering emails, raising funds, bringing forward proposals for
approval by the BOD (examples of contribution agreements signed are found in Exhibit
R-2, Tabs 12, 13 and 14) — and filing reports to donors) were all required of
him. He had been working full-time for MAP up until the beginning of January 2008,
at which time he started to work part-time only until he was laid off. He
stated that prior to 2008 he was the only one there full-time to conduct day‑to‑day
operations, but there was always someone helping him out. He followed
guidelines set by the BOD for training the volunteers and he discussed things with
the members of the BOD. He carried on his work mainly at MAP’s office, as it
was not appropriate for him to work from home. Board meetings were held at
least ten times a year and Mr. Clarke attended all of them.
Mr. Clarke’s first
contract required him to work 42 hours per week but he worked more than that.
Hours were irrelevant to him and the BOD members did not control his schedule.
The second contract did not change anything. He did not ask for any time off. For
the first contract, he invoiced MAP by dividing the total remuneration provided
for in the contract by the number of weeks in the year, and under the second
contract, he invoiced a certain amount per day. His expenses for attending
meetings at Correctional Services Canada or with the Ontario Multifaith Council
were reimbursed by those two organizations directly.
For an eight-month
period, MAP was out of funds and Mr. Clarke advanced money using his own
credit card. He did that as a goodwill gesture in the belief that the funding
would come in and that he would be paid back. In the end, MAP reimbursed him in
full. He also signed his own pay cheques when no one else was available to co-sign,
but all cheques were recorded and accessible to members of the BOD.
The BOD members kept
informed about what was taking place, asked him whether he needed assistance
and gave him advice. But Mr. Clarke acknowledged that it was the donors,
mostly, whose approval was required and who tended to say what was expected
In his personal tax
returns, Mr. Clarke reported his income as a contractor until the CRA
ruling was issued. He then took it upon himself to pay the CRA source
deductions for employment insurance, CPP and income tax on his remuneration. In
his testimony, he said that he did not pay more than a few thousands dollars in
this fashion. He also issued his own record of employment when he was laid off.
Mr. Clarke said that he approached the BOD a few times regarding his
employment status, but the issue remained unresolved. He never did receive a
formal response from the BOD.
The issue before me is
whether the worker, Reverend Fritz Clarke, held employment with MAP or was an
independent contractor for the period from January 2006 to
December 2007. If he was an employee, the appellant was required to remit
to the Receiver General employment insurance premiums pursuant to sections 67
and 82 of the EI Act, CPP contributions pursuant to sections 8 and 21 of the
CPP and income tax source deductions pursuant to section 153 of the ITA.
In 671122 Ontario
Ltd. v. Sagaz Industries Canada Inc.,  S.C.J. No. 61 (QL), 2001 SCC
59, the Supreme Court of Canada stated the principles applicable to the
determination of a person’s status as follows at paragraphs 46, 47 and 48:
46 In my opinion, there is no one
conclusive test which can be universally applied to determine whether a person
is an employee or an independent contractor. Lord Denning stated in Stevenson
Jordan, supra, that it may be impossible to give a precise definition of
the distinction (p. 111) and, similarly, Fleming observed that "no single
test seems to yield an invariably clear and acceptable answer to the many
variables of ever changing employment relations . . ." (p. 416).
Further, I agree with MacGuigan J.A. in Wiebe Door, at p. 563, citing
Atiyah, supra, at p. 38, that what must always occur is a search for the
total relationship of the parties:
[I]t is exceedingly doubtful whether the search for a formula in the
nature of a single test for identifying a contract of service any longer serves
a useful purpose. . . . The most that can profitably be done is
to examine all the possible factors which have been referred to in these cases
as bearing on the nature of the relationship between the parties concerned.
Clearly not all of these factors will be relevant in all cases, or have the
same weight in all cases. Equally clearly no magic formula can be propounded
for determining which factors should, in any given case, be treated as the
47 Although there is no universal test
to determine whether a person is an employee or an independent contractor, I
agree with MacGuigan J.A. that a persuasive approach to the issue is that taken
by Cooke J. in Market Investigations, supra. The central question
is whether the person who has been engaged to perform the services is
performing them as a person in business on his own account. In making this
determination, the level of control the employer has over the worker's
activities will always be a factor. However, other factors to consider include
whether the worker provides his or her own equipment, whether the worker hires
his or her own helpers, the degree of financial risk taken by the worker, the
degree of responsibility for investment and management held by the worker, and
the worker's opportunity for profit in the performance of his or her tasks.
48 It bears repeating that the above
factors constitute a non-exhaustive list, and there is no set formula as to
their application. The relative weight of each will depend on the particular
facts and circumstances of the case.
Further, in Royal
Winnipeg Ballet v. M.N.R.,  F.C.J. No. 339 (QL), 2006 FCA 87, the
majority of the Federal Court of Appeal stated as well that the terms of the
written contract between parties are to be given weight if they properly
reflect the relationship between them. That being so, the evidence of the
parties’ understanding of their contract must always be examined, keeping in
mind, though, that the parties’ declaration as to the legal nature of their
contract is not necessarily determinative. Thus the intention of the parties is
also a factor to consider in the determination of the legal nature of the
relationship between the parties. Sharlow J.A. stated the following at
paragraphs 59 through 62:
59 It seems to me from Montreal
Locomotive that in determining the legal nature of a contract, it is a
search for the common intention of the parties that is the object of the
exercise. The same idea is expressed as follows in the reasons of Décary J.A.
in Wolf, at paragraph 117:
I say, with great respect, that the courts, in their propensity to
create artificial legal categories, have sometimes overlooked the very factor
which is the essence of a contractual relationship, i.e. the intention of the
60 Décary J.A. was not saying that the
legal nature of a particular relationship is always what the parties say it is.
He was referring particularly to Articles 1425 and 1426 of the Civil Code of
Quebec, which state principles of the law of contract that are also present
in the common law. One principle is that in interpreting a contract, what is
sought is the common intention of the parties rather than the adherence to
the literal meaning of the words. Another principle is that in interpreting
a contract, the circumstances in which it was formed, the interpretation which
has already been given to it by the parties or which it may have received, and
usage, are all taken into account. The inescapable conclusion is that the
evidence of the parties' understanding of their contract must always be
examined and given appropriate weight.
61 I emphasize, again, that this does
not mean that the parties' declaration as to the legal character of their
contract is determinative. Nor does it mean that the parties' statements as to
what they intended to do must result in a finding that their intention has been
realized. To paraphrase Desjardins J.A. (from paragraph 71 of the lead judgment
in Wolf), if it is established that the terms of the contract,
considered in the appropriate factual context, do not reflect the legal
relationship that the parties profess to have intended, then their stated
intention will be disregarded.
62 It is common for a dispute to arise
as to whether the contractual intention professed by one party is shared by the
other. Particularly in appeals under the Canada Pension Plan and the
Employment Insurance Act, the parties may present conflicting evidence as
to what they intended their legal relationship to be. Such a dispute typically
arises when an individual is engaged to provide services and signs a form of
agreement presented by an employer, in which she is stated to be an independent
contractor. The employer may have included that clause in the agreement in
order to avoid creating an employment relationship. The individual may later
assert that she was an employee. She may testify that she felt coerced into
signifying her consent to the written form of the contract because of financial
need or other circumstances. Or, she may testify that she believed, despite
signing a contract containing such language, that she would be treated like
others who were clearly employees. Although the court in such a case may
conclude, based on the Wiebe Door factors, that the individual is an
employee, that does not mean that the intention of the parties is irrelevant.
Indeed, their common intention as to most of the terms of their contract is
probably not in dispute. It means only that a stipulation in a contract as to
the legal nature of the relationship created by the contract cannot be
Therefore, the central
question here is whether the person who was engaged to perform the services, namely,
Reverend Clarke, performed them as a person in business on his own account. In
making this determination, I have to consider, if applicable, the level of
control MAP had over the worker’s activities, whether he provided his own
equipment, whether he hired his own helpers, the degree of financial risk taken
by the worker, the degree of responsibility that he had for investment and
management, and the worker’s opportunity for profit. The common intention of
the parties will help in determining the worker’s status, if that common
intention is uncontested by them.
In the present case, it
is not crystal clear what the worker’s intention was when he signed the second
contract in January 2006. Mr. Clarke testified that he abided by the
terms of that contract in invoicing MAP and charging GST. However, at the same
time, he had conversations with people from the CRA and was awaiting their
decision. He also testified that he approached the BOD on the matter of re-evaluating
his status, but the issue remained unresolved. On the other hand,
Mr. Hudson and Mr. O’Gorman (as well as Ms. JoAnne Christie in her affidavit
filed as Exhibit A-7) were clearly of the opinion that MAP was not in a
position to be an employer and that the intention was always to hire someone on
a contract basis to do the work done by Mr. Clarke. Mr. Birch was
less clear on that but accepted the other BOD members’ decision to treat
Mr. Clarke as a consultant and not an employee.
In this context, and
taking into account that the evidence of the parties’ understanding of their
contract must be examined and given appropriate weight, I find that the
stated intention of each party is not conclusive in resolving the issue.
I will therefore analyze
the other factors set out in the case law in order to determine the nature of
the relationship between MAP and Mr. Clarke.
As stated by Hershfield
J. of this Court in W.B. Pletch Company Limited v. The Queen, 2005 TCC
400, at paragraph 9, in applying the control test, we are “faced with the
frequently encountered problem of determining whether the independence in the
performance of a role of a worker is attributable to the freedom that derives
from the nature of the relationship, from the party in a position to control
choosing not to exercise control or whether it is attributable to the nature of
the tasks assigned and the worker’s particular skills to perform such tasks
Here, it is obvious
that Mr. Clarke was hired for his skills in dealing with ex-offenders leaving
prison and for his abilities and his acquaintances as a chaplain, which were
useful in seeking donations. It is also obvious from the evidence that the BOD
members, all working elsewhere and all volunteers sharing the same goal of
helping people through the charitable organization, relied almost completely on
Mr. Clarke to run MAP’s activities with almost no supervision.
At the same time, MAP
signed contribution agreements with the Ontario Multifaith Council and
Correctional Services Canada. Examples of such agreements were tendered (Exhibit
R-2, Tabs 11, 12, 13, 14). It is my understanding that MAP had to report to
those two government services on how the funding was being spent, and that ultimately,
MAP was responsible and accountable with respect to demonstrating good
management practices in the allocation of those funds to the subsidized programs
for the reintegration of offenders into the community. The same can be said of
other donors, like Telus and the Community Foundation of Ottawa, as evidenced
by the letters of donation filed as Exhibit R-2, Tab 8.
Mr. Clarke was the
key person acting for MAP in that respect, and although enjoying a lot of
freedom of action, he ultimately reported regularly to the BOD, which held
meetings once a month. In the end, it was MAP that was responsible for the day‑to‑day
decisions taken by Mr. Clarke on how the contribution monies were spent.
Indeed, MAP committed itself to reporting to the contributing organizations in
order to demonstrate its use of good management practices in its financial
planning with respect to the contribution monies.
In fact, MAP’s
president testified that on at least two occasions he reprimanded
Mr. Clarke for his mismanagement of MAP funds (the payment of $7,500 to a
guest speaker and Mr. Clarke’s advances to himself totalling $20,000, for
his remuneration). Mr. O’Gorman testified that had he known that MAP was
out of funds he would have terminated Mr. Clarke’s contract before August
In my view, this shows
that, although Mr. Clarke was treated like a de facto board member with
regard to many of the decisions to be taken, the BOD still oversaw and kept an
eye on Mr. Clarke’s work. However, while this type of control could be likened
to that which exists between a board and a senior officer (as discussed by
Hershfield J. in Pletch, supra), the respondent conceded that the
control test is difficult to apply in the case of managers because, generally,
they are given a considerable amount of autonomy. Indeed, one must keep in mind
that monitoring the result is not to be confused with controlling the worker
(see Charbonneau v. Canada (M.N.R.),  F.C.J. No. 1337 (QL) at par.
I therefore conclude
that this is a case in which the control factor is not conclusive one way or
the other and that the other factors must be looked at.
Ownership of tools
Mr. Clarke made
substantial use of an office and computer provided by MAP, but he also used his
own car to visit prisons and prospective donors and to attend conferences (although
under the terms of the contract he was entitled to reimbursement of vehicle
expenses on a mileage basis). Although he was required by his contract to
maintain his own office, it appears that he was not allowed to work there due
to confidentiality requirements imposed by the Ontario Multifaith Council and
by Correctional Services Canada. Counsel for the respondent conceded in his
argument that this factor should be taken as being neutral and I agree.
Chance of profit and risk of loss
Under the first
contract Mr. Clarke was compensated on the basis of a fixed salary that
was divided by the number of weeks in the year. Under the second contract, he
was paid according to the number of days he worked. He was not paid for
overtime. Mr. Clarke invoiced MAP and charged GST, as he was required to do
by the contracts. Nevertheless, Mr. Clarke’s remuneration was fixed and
was not dependent on hours worked, nor was there any realistic way in which he
could have made a profit through sound management in the performance of his
Mr. Clarke was working on a full-time basis for MAP, and he did so with such
dedication that he had no time to carry on any other business activities.
It would also appear
that costs (including mileage on his vehicle) associated with attending work-related
training sessions and seminars were paid by Correctional Services Canada, the Ontario
Multifaith Council and MAP. The worker was also apparently entitled to casual absence/sick
leave. Further, although not legally required to do so, MAP gave him severance
pay when the contract was terminated.
With respect to the
risk of loss factor, Mr. Clarke advanced to himself his own remuneration
when MAP was out of funds. However, he did so on his own initiative, without
telling the BOD, which expressed disapproval of that practice when informed of
the situation. Ultimately, MAP did reimburse him for the advances.
I am therefore of the
view that Mr. Clarke genuinely had no chance of profit or risk of loss.
This factor favours the existence of an employer-employee relationship.
The Supreme Court of Canada
stated the following in Sagaz, supra, at paragraph 47:
The central question is whether the person who has been engaged to
perform the services is performing them as a person in business on his own
Here, the appellant
stated that the concept of business is difficult to apply to a charitable
organization. This may be true, except that people who happen to work for a
charitable organization are entitled to the same rights as anyone working for a
for-profit organization. If the charity makes it clear from the beginning that it
cannot afford to pay anyone, then people wishing to give of their time may very
well agree to work for it as volunteers.
From the moment a
charity agrees to remunerate a person working for the organization and signs a
contract with that person, the legal rules applicable to other workers apply
equally to that worker.
As Hershfield J. said in
Art City in St. James (Town) v. Minister of National Revenue, 2006 TCC
507 at paragraph 41, non-profit organizations cannot seek to abuse workers by
claiming that a lack of funds to pay benefits, and a worker’s acceptance of
that, is a basis to avoid categorizing the workers as employees.
Here, the appellant
received funding from, among other sources, government organizations. The funding
agreements filed in evidence stipulated that MAP was responsible for any and
all deductions, including CPP, EI and income tax, required to be made from
employees’ income and for any and all payments to employees. The budget
appended to one of those agreements showed salaries as the major expense, and
it was admitted in evidence that Mr. Clarke’s remuneration was included in
Mr. Clarke’s work an integral part of MAP’s operations? It seems obvious
that MAP was a body corporate capable of obtaining funding from various sources
for the purpose of carrying out its mandate to actively encourage former prison
inmates to become reintegrated into the community and assist them in that. It is
quite clear that without such funding the services of the worker would not have
been required. Moreover, Mr. Clarke acted and represented himself as MAP’s
director on his business cards, in letters sent on behalf of MAP, in pamphlets and
in annual reports, and the BOD tolerated this practice.
The business, or the
mandate, was clearly MAP’s, as is attested by the contribution agreements
entered into between MAP on the one hand and Correctional Services Canada, or
the Ontario Multifaith Council, or any other donor on the other hand. As stated
earlier, it was MAP, and not Mr. Clarke, who ultimately was responsible,
and accountable to the donors, with regard to how the funds were spent by him.
The services of the worker were integral to MAP’s core function rather than
being merely ancillary to its operations (see Long-Term Inmates Now in the
Community v. Minister of National Revenue, 2002 CarswellNat 1028, at
paragraph 22; the situation in that case shows great similarity with the facts of
the present case; see also Pluri Vox Media Corp. v. R., 2011 TCC 237; 2011
CarswellNat 1344, at paragraph 19).
Furthermore, and in
accordance with the observations of Hershfield J. in Pletch, supra,
at paragraph 12(a), the fact that the worker maintained on a full-time basis an
enduring long-term relationship with MAP is not a factor that is consistent
with his being an independent contractor carrying on business on his own
account, particularly in circumstances where there is no evidence that the
worker was engaged in similar activities with other clients.
I therefore conclude
that the integration test favours employee status.
I am of the opinion
that, in the whole context of this case, there are enough factors (particularly
the integration test, which is, here, a very significant aspect of the
relationship) that militate in favour of a finding that there was an employment
I therefore conclude that
the Minister did not err in determining that the worker was providing services
pursuant to a contract of service and thus held insurable and pensionable
Before making its
submissions in this case, the appellant stated that the CRA had already been
paid what it was owed, and that, in the event that I determined that the
worker’s remuneration was insurable and pensionable, which I have found to be
the case, the CRA would be getting paid twice.
submitted the CRA’s records showing what was credited to MAP’s account as
having been remitted, and Ms. Buchan testified that the assessments at issue were
based on those numbers. I agree with the respondent that the appellant has
submitted no evidence to show that these calculations are wrong or to establish
an amount of source deductions actually remitted to the government that differs
from that shown in the statement of account filed in evidence.
For all these reasons,
I conclude that Reverend Fritz Clarke, the worker, was an employee of the
appellant, and not an independent contractor working on his own account, during
the period at issue.
appeals are dismissed and the assessments issued for the 2006 and 2007 taxation
years, which are the object of the present appeals, are confirmed.
Signed at Ottawa, Canada,
this 2nd day of March 2012.