F.G. Lister Transportation Inc. v. M.N.R., docket 96-119-CPP

Date: 19980623

Dockets: 96-2163-UI; 96-119-CPP

BETWEEN:

F.G. LISTER TRANSPORTATION INC.,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Rowe, D.J.T.C.C.

[1] The appellant, F.G. Lister Transportation Inc. (Lister) applied to the Minister of National Revenue (the "Minister") for a determination of the question whether long-haul truck drivers were employed in insurable employment while providing driving services to the appellant during the period October 1 to December 31, 1995 within the meaning of the Unemployment Insurance Act. In a letter dated August 9, 1996 the Minister informed the appellant it had been decided the workers listed in Appendix A - attached to and forming part of the notification letter - were employed under a contract of service and therefore are considered to have been employees of the appellant corporation. On August 9, 1996 the Minister also notified the appellant a decision had been made that the truck drivers had been engaged in pensionable employment with the appellant pursuant to the provisions of the Canada Pension Plan. The appellant appealed - 96-119(CPP) - from that decision and both Counsel agreed the appeal would be decided by following the result of the within appeal and the evidence heard would apply to both.

[2] The position of the appellant is that the long-haul truck drivers are members of a unique profession and, under the circumstances, were independent contractors.

[3] Ian MacLennan testified he has been employed by the appellant for 11 years and currently holds the position of Vice-President and Controller which permits him to be familiar with the day-to-day operations of the company. He described the appellant as a transport carrier involved in the business of shipping goods from one location to another. He explained there is a pool of truck drivers available to drive one of the appellant's trucks from one destination to another. A driver will be contacted by - or make contact with - the appellant in order to discuss whether that person is willing to accept a "trip" which is an assignment to drive a tractor/trailer with cargo to a particular place. MacLennan stated any driver has the right to refuse a particular trip but if he accepts then the pay is based on a certain amount per kilometre travelled together with certain payments specified by the appellant for extra work involved in "hook-ups" and/or the number of "drops". No instructions are given to the driver as to how the truck is to be driven or the particular route to be taken to the destination. While on the road, a driver was required to pay for food and lodging and for any fines or parking tickets resulting from operation of the truck. MacLennan advised drivers were free to drive for other transport companies and did not require any special training to work for the appellant. However, the drivers had to hold a valid licence - within a particular designated class - permitting them to operate the vehicles and equipment used by the appellant to transport goods. He indicated drivers were free to substitute another properly licensed driver with appropriate qualifications but needed the approval of the appellant to do so. Although the situation never arose, he thought it would have been possible for a driver, who had accepted an assignment, to collect the agreed rate per kilometre and then gain a profit by having hired another person - at a lower rate - to take the trip. He stated the rate paid per kilometre was 18 cents even though it had been stated as 29 cents during completion of a Questionnaire. In his view, the appellant and the drivers had always dealt with one another on the basis the drivers were independent contractors.

[4] In cross-examination, Ian MacLennan identified the Questionnaire - Exhibit R-1 - completed by him in his role as Controller of the appellant. He agreed a driver had to oversee loading and unloading of the truck being driven and was not paid extra for this duty. A driver was paid the sum of $8.50 per drop regardless of the amount of cargo to be unloaded during a stop at a particular site and was also compensated with a $7.50 fee for hook-up of a trailer. Since all these rates and the amount per kilometre were set by the appellant, he agreed the only way a driver could earn more money was to move the truck and cargo more quickly from one destination to another. MacLennan stated he could not recall any driver ever having hired a substitute driver. The drivers were required to complete an invoice/tripsheet which had been prepared by the appellant. All trucks were owned by the appellant and displayed the name: F.G. Lister Transportation Inc. The cost of all gas, oil and any repairs to the vehicles or equipment was borne by the appellant and drivers used a credit card issued by Lister to pay for these expenses. All liability insurance on the vehicles, equipment and cargo was carried by the appellant. On page 9 of the Questionnaire - Exhibit R-1 - at Question 13(a), an inquiry whether the worker could have worked for someone else during the time he/she was performing services for the payor, MacLennan wrote: Drivers tend to work only for the payor during the time they are performing services for the payor because of the nature of the work. He explained the appellant had been very busy and a lot of loads were available to the drivers comprising the pool of available haulers. He explained that truck drivers who operated locally were employees of the appellant's parent company and were paid an hourly rate and otherwise treated as employees subject to the usual deductions. The method of operation was that, by morning, Lister would be putting together loads and, at noon or shortly thereafter, a driver would be contacted and requested to deliver a load to a certain destination within a specified time. Lister hauled goods to points in Ontario, Quebec, New York, Illinois, and Pennsylvania and was properly registered, licensed and insured to operate in each of these jurisdictions. The appellant had been operating in the same manner since 1987 and always followed the same system of obtaining drivers to deliver loads. MacLennan explained the parent company carried on a produce business and Lister is a wholly-owned subsidiary of that corporation. All the Lister trailer units were refrigerated in order to carry produce.

[5] Counsel for the appellant submitted the evidence disclosed the drivers had arranged themselves in such a fashion that each was free to accept or refuse a particular trip and could arrange a schedule so as to maximize the time allotted for a delivery, thereby making extra time available during a certain period which would permit another haul to be completed and extra money to be earned as a result. He pointed out the issue of chance of profit or risk of loss was not dependent on whether the drivers actually earned profit on a trip by hiring substitute drivers at a lower rate per kilometre but whether a driver could have done so and the evidence of the appellant's controller was that this was possible.

[6] Counsel for the respondent submitted the various indicia of employment as set forth in the jurisprudence indicated, overall, that the Minister's decision was correct and the drivers were in insurable employment with the appellant during the relevant period.

[7] In Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025, the Federal Court of Appeal approved subjecting the evidence to the following tests, with the admonition that the tests be regarded as a four-in-one test with emphasis on the combined force of the whole scheme of operations. The tests are:

1. The Control Test

2. Ownership of Tools

3. Chance of Profit or Risk of Loss

4. The Integration Test

[8] While the evidence was the drivers were free to accept or refuse any particular trip and were not supervised in the performance of their duties, they were also required to perform their services in accordance with company policy and within timeframes specified by the appellant. The fact a person - with the consent of the employer - is able to exercise some flexibility in terms of coming in to work - common in the hospitality and food/beverage business - does not make that individual an independent contractor.

[9] All the tools and equipment in the form of trucks, trailers, accessories, transport licences, registrations and insurance coverage were owned by the appellant. The drivers were properly licensed to operate the vehicles and equipment.

[10] The drivers had no real chance of profit or risk of loss. They were paid at specified rates established by the appellant without any negotiation and all long-haul drivers were paid on the same basis. All costs of running the tractor/trailer unit down the road to the appointed designation were borne by the appellant and the driver could not suffer any loss except for the risk of paying a fine or penalty arising out of the manner in which the unit was operated but that would be a personal liability imposed by statute or by-law. The opportunity to accept more trips within a particular timeframe - in effect, working harder - is not an indicia of chance of profit in the sense required by the jurisprudence.

[11] As for the integration test, in the case of David T. McDonald Co. Ltd. v. M.N.R., 92 DTC 1917, Mogan, T.C.C.J. was considering whether an individual was an employee of a corporation or if his relationship was that of an independent contractor. At page 1922, the Honourable Judge Mogan stated:

"In Wiebe Door, MacGuigan, J. cited with approval at page 5030 the Market Investigations case in which the question is asked: "Is the person who has engaged himself to perform these services performing them as a person in business on his own account?" To answer that question, one must consider whether the person has the capacity to engage in the particular business on his own account. If he has experience, knowledge and goodwill in the business, it is easier to conclude that he has the capacity to engage in the business on his own account and that he is not simply an incorporated employee. This is particularly true when the person has no prior employment connection with the party who benefits from his services. But if he has no experience, knowledge or goodwill in the business and offers only personal skills not related to the business, it is more difficult to conclude that he has the capacity to engage in the business on his own account; and it would probably be more reasonable to regard him as an employee of the party who benefits from his services."

[12] It is clear the business was that of the appellant, a transportation company which was a wholly-owned subsidiary of a parent-corporation engaged in the business of selling and distributing produce. While the appellant had local drivers who functioned on the basis of being employees, the long-haul drivers were treated differently without any apparent reason to have done so other than the method by which their services were engaged - a trip-by-trip basis - and the system of payment per kilometre rather than on an hourly basis. The local drivers probably could have undertaken the long-hauls but they may not have held the proper licenses or qualifications to operate the larger units in various jurisdictions. In that sense, the appellant had made a distinction between the two types of drivers and, as a result, the long-haul drivers named in the decision issued by the Minister were persons who were providing a service integral to the appellant. There is no evidence, at all, that any driver - or the appellant - ever acted in a manner consistent with a driver being in business as an independent contractor.

[13] I now find myself in the position of being required to point out the differences in the facts in the within appeal and those in two other decisions issued by me in which I held the drivers were independent contractors. In the case of Lee (c.o.b. D & A Transport) v. M.N.R. [1995] T.C.J. No. 426 I held the driver of a long-haul transport truck to have been an independent contractor. In that case, the driver had registered his business for purposes of the Goods and Services Tax, maintained a business bank account and had filed income tax returns on the basis of being self-employed. In Lee, the appellant had earlier been an employee of the payor and had agreed to alter the working relationship and there was clear evidence he could have hired another driver to work for him on long-hauls thereby generating a profit. As well, in Lee, it came down to choosing between two versions of circumstances surrounding a working relationship and the choice did not favour the worker. I also held the tools of the trade were the personal skills of the driver as a qualified person capable of hauling a loaded trailer over long distances. That finding was in the context of the driver operating a business under the trade name, Rick's Driving Services, having a bank account under that name and otherwise doing business with third parties on that basis. Income tax returns had been filed on the basis the worker was a self-employed person.

[14] In another decision of mine, Metro Towing Ltd. v. M.N.R. [1991] T.C.J. No. 717, I found a tow-truck driver to have been an independent contractor. In that case, while there was a high degree of control over the worker, he had leased the vehicle and all of the equipment needed to carry out his task and bore all of the costs, including insurance, relating thereto. That driver also had a substantial risk of loss arising from the operation of that vehicle in the event he was not able to generate sufficient gross revenues which fluctuated on a monthly basis, as did, to a lesser extent, his costs of operation. In that case, like Lee, supra, the worker had earlier been on the regular payroll and had decided to enter into a new arrangement whereby he was the lessor of a truck and certain equipment and would be entitled to receive 30% of gross towing revenue arising from jobs which were dispatched by Metro Towing Ltd. The evidence in the Metro Towing Ltd. appeal disclosed that other tow-truck drivers operated through a limited company or a partnership arrangement.

[15] In the case of Summit Gourmet Foods Inc. v. M.N.R. 97-470(UI), a decision of The Honourable Judge Mogan, T.C.C., dated November 24, 1997, Judge Mogan considered the status of a person - Freeman Walters, the intervenor - who drove a truck for the appellant, a corporation carrying on business as a supplier to pizza restaurants. Judge Mogan held the driver to have been an employee engaged in insurable employment and, at page 5 and following, stated:

"On control, I regard that test as marginally favouring employment and not independent contractor even though counsel for the Appellant stressed that Freeman was not told the way to do his work. I accept that. On the other hand, he was assigned trips; he could arrange the order of delivery and the date but they had to be delivered within a week, and he had to call in to the Appellant’s office each morning. This was brought out in Freeman’s testimony. He said: “Every person operating a truck has to report in, and I specifically did. I had to call in every morning to say where I was going so that they would know where I would be that day, and whether there were additional orders that had come in from customers which I might have to fill out of the extra product I was carrying”. There was an opportunity for the Appellant to call evidence in reply to contradict that bald statement by Freeman but it failed to do so. On a common sense basis, I believe the statement.

Eric described a freezer truck which Freeman used costing between $70,000 and $80,000. When a company sends a person out in its truck of that value, it wants to know not only where the truck is day-by-day but also, when there are established customers to be serviced, it wants to know in a timely manner whether the customers are being serviced because they are the lifeline of a business. I cannot believe that a person in Freeman’s position would not be required to report in daily on where he went and what he had serviced and whether there were fresh orders.

The fact that Freeman could arrange the order in which he would service these customers, or that he could arrange the time when he started on a trip does give him some freedom from control but, on balance, I would say that although he was not under the hand of the Appellant, they knew on a daily basis where he was, what he was doing and what customers he had serviced. Therefore, on the test of control, I find that there is more of an indication of the type of control one finds in employment than the simple direction which is given to an independent contractor.

With regard to the test of ownership of tools, it is very strongly in favour of employment and not an independent contractor. The only relevant tools for this kind of work were the truck and the dolly, both of which were owned by the Appellant. Counsel for the Appellant brought to my attention a similar case in Saskatchewan, where Mr. Justice Kyle of the Court of Queen’s Bench said:

...To draw a parallel between the ownership of tools in the case of a tradesman and the hotel and equipment therein in a case such as this appears to be stretching the logic of the Montreal Locomotive case beyond reason.

I would agree with that statement. I think that an $80,000 truck was never in the minds of those learned Judges half a century ago who laid down these early tests and talked about ownership of tools. In my view, they were talking about tradesmen’s tools like a carpenter’s hammer and saw. The fact is, however, that in a more sophisticated society, this truck was the only vehicle through which the service was performed. The driver’s licence that was held by Freeman was a pre-qualification to his engagement with the Appellant; and he could not be engaged if he did not have a driver’s licence. I do not regard his driver’s licence as a tool. I look at the only thing that Freeman used to perform the services and it was a very expensive and sophisticated piece of equipment. Therefore, the test of ownership of tools favours employment.

On the chance of profit and risk of loss, I find that also favours employment because there was virtually no risk of loss. There was a chance of compensation because all Freeman had to do was complete the round trip and he would receive the amount that had been settled between himself and the Appellant in Exhibit A-1. Compensation in this context is not profit. Counsel for the Appellant argued that it was possible for Freeman to incur a loss because, on the surplus product that he carried, he could say: “I will buy some of that and resell it for profit on my own”. If he had committed to that kind of arrangement, he could buy the product at the point of departure on the trip; let us say 10 cases of completed pizza, and take a chance on selling them either on this trip, and make money by the trading in pizza product. That opportunity may have been available to him, but I draw the inference that the extra product was not there just for the trading and commercial activities of the driver. It was also there as backup product for the needs of established customers who might, in the course of the trip, decide that they needed more than the order destined for them at the time of departure of the truck."

[16] There was a paucity of evidence in the within appeal as to the working relationship between the drivers and the appellant compared to the other decisions referred to herein. Each case turns on its own facts and in this instance, since the contrary has not been proven in accordance with the burden required, I am satisfied the decision of the Minister is correct and it is hereby confirmed. As a result, the appeal is dismissed as is the appeal 96-119(CPP).

Signed at Toronto, Ontario, this 23rd day of June 1998.

"D.W. Rowe"

D.J.T.C.C.