Date: 19981016
Docket: 97-1196-UI
BETWEEN:
RITA RANDA,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Porter, D.J.T.C.C.
[1] This appeal was heard at Edmonton, Alberta, on June 16,
1998. The Appellant appeals the decision of the Minister of
National Revenue (the "Minister") dated May 12, 1997
that the employment with her of one Loretta Lo Chung (“the
Worker”) for the period March 1 to April 24, 1996, was
insurable employment under the Unemployment Insurance Act
(hereinafter referred to as the "Act"). The
reason given for the decision was that:
"...Loretta Lo Chung was employed under a contract of
service, and therefore she was your employee."
[2] The established facts reveal that the Worker carried out
child care duties for the Appellant between the dates in
question. The case revolves around some seven weeks during which
the Worker cared for the one year old child of the Appellant at
the latter’s home. The issue before the Court is whether in
doing so, the Worker was employed under a contract of service or
a contract for services. If she was engaged to work under a
contract of service, such would constitute insurable employment
under section 3 of the Act. If on the other hand she was
engaged by way of a contract for services, that would not be
insurable employment and she would not be entitled to claim
unemployment insurance benefits and the Appellant would not be
required to pay premiums.
The Law
[3] The manner in which the Court should go about deciding
whether any particular working arrangement is a contract
of service and thus an employer/employee
relationship or a contract for services and thus an
independent contractor relationship, has been clearly laid out by
the Federal Court of Appeal in Wiebe Door Services Ltd. v.
M.N.R., 87 DTC 5025. The test to be applied has been further
explained by that Court in Moose Jaw Kinsmen Flying Fins Inc.
v. M.N.R., 88 DTC 6099. There are, following these cases,
numerous decisions of this Court, some of which have been cited
by counsel, which demonstrate how these appellate guidelines have
been applied. In the Moose Jaw Kinsmen Flying Fins Inc.
case, above, the Federal Court of Appeal said this:
"[Analysis]
The definitive authority on this issue in the context of the
Act, is the decision of this Court in Wiebe Door Services Ltd. v.
The Minister of National Revenue, 87 DTC 5025. MacGuigan J.
speaking on behalf of the Court, analyzed Canadian, English and
American authorities, and, in particular, referred to the four
tests for making such a determination enunciated by Lord Wright
in City of Montreal v. Montreal Locomotive Works Ltd.,
[1974] 1 D.L.R. 161 at 169-70. He concluded at page 5028
that:
Taken thus in context, Lord Wright's fourfold test
[control, ownership of tools, chance of profit, risk of loss] is
a general, indeed an overarching test, which involves
"examining the whole of the various elements which
constitute the relationship between the parties". In his own
use of the test to determine the character of the relationship in
the Montreal Locomotive Works case itself, Lord Wright combines
and integrates the four tests in order to seek out the meaning of
the whole transaction.
At page 5029 he said:
...I interpret Lord Wright's test not as the fourfold one
it is often described as being but rather as a
four-in-one test with emphasis always retained on
what Lord Wright, supra, calls "the combined force of
the whole scheme of operations," even while the usefulness
of the four subordinate criteria is
acknowledged.
At page 5030 he had this to say:
What must always remain of the essence is the search for the
total relationship of the parties.
He also observed "there is no escape for the trial judge,
when confronted with such a problem, from carefully weighing all
the facts."
...like MacGuigan J. we view the tests as being useful
subordinates in weighing all of the facts relating to the
operations of the Applicant. That is now the preferable and
proper approach for the very good reason that in a given case,
and this may well be one of them, one or more of the tests can
have little or no applicability. To formulate a decision then,
the overall evidence must be considered taking into account those
of the tests which may be applicable and giving to all the
evidence the weight which the circumstances may
dictate."
[4] The nature of the tests referred to by the Court can be
summarized as follows:
a) The degree or absence of control exercised by the alleged
employer;
b) Ownership of tools;
c) Chance of profit and risk of loss;
d) Integration of the alleged employee's work into the
alleged employer's business.
[5] I also take note of the further words of MacGuigan J., in
the Wiebe case, above, where he approved the approach
taken in the English courts:
"Perhaps the best synthesis found in the authorities is
that of Cooke J. in Market Investigations, Ltd. v. Minister of
Social Security, [1968] 3 All E.R. 732, 738-9:
The observations of Lord Wright, of Denning L.J., and of
the judges of the Supreme Court in the U.S.A. suggest that the
fundamental test to be applied is this: "Is the person who
has engaged himself to perform these services performing them as
a person in business on his own account?" If the answer to
that question is "yes", then the contract is a contract
for services. If the answer is "no" then the contract
is a contract of service. No exhaustive list has been compiled
and perhaps no exhaustive list can be compiled of considerations
which are relevant in determining that question, nor can strict
rules be laid down as to the relative weight which the various
considerations should carry in particular cases. The most that
can be said is that control will no doubt always have to be
considered, although it can no longer be regarded as the sole
determining factor; and that factors, which may be of importance,
are such matters as whether the man performing the services
provides his own equipment, whether he hires his own helpers,
what degree of financial risk be taken, what degree of
responsibility for investment and management he has, and whether
and how far he has an opportunity of profiting from sound
management in the performance of his task. The application of the
general test may be easier in a case where the person who engages
himself to perform the services does so in the course of an
already established business of his own; but this factor is not
decisive, and a person who engages himself to perform services
for another may well be an independent contractor even though he
has not entered into the contract in the course of an existing
business carried on by him."
[6] Counsel for the Minister has also put before me two
cases, from this Court which relate to the provision of child
care services, namely Johnson v M.N.R, March 9, 1998,
Docket # 97-517 (UI) a decision of Beaubier, T.C.J. and Mohr
v M.N.R., November 27, 1997, Docket # 97-481(UI) a decision
of Mogan, T.C.J. In each of these cases the worker was held to
be in insurable employment. I noted that in the first of these
cases the services extended over a period of seventeen months
and in the second over a period of nearly three years.
[7] These then are the legal guidelines that I should bear in
mind in deciding this issue.
[8] The assumptions of fact upon which the Minister relied
are set out in the Reply to the Notice of Appeal as
follows:
"(a) the Worker was hired as a child care worker for
the Appellant's one year old child, (the
"Child");
(b) the work was performed at the Appellant's
residence;
(c) the Worker worked from about 7:00 a.m. to 5:30 p.m.,
Monday through Friday;
(d) the Worker's hours were determined by the
Appellant;
(e) the Worker had to perform the services personally and
could not hire someone to replace herself;
(f) if the Worker wanted time off, she was required to
notify the Appellant who would arrange for a replacement
Worker;
(g) the Appellant provided instructions to the Worker on
caring for the Child;
(h) the Worker was not in business for herself;
(i) the Worker was not required to incur any expenses in the
performance of her duties;
(j) the Worker was paid $400.00 per month by the
Appellant;
(k) the Appellant was employed full time and is not in
business for herself;
(l) the employment of the Worker was not casual
employment."
[9] The Appellant, mother of the child the subject of the
care services, gave evidence on her own behalf. Basically it
could be said that she agreed for the most part with the
assumptions of fact with some exceptions. However she amplified
and explained them, so that the full situation could be laid
out and understood. Specifically she agreed with items (a) to
(d), (g) and (i), subject to explanation, (j) and (l). She
disputed items (e), (f), (h) and (k). Her dispute was
principally with the assertion that the Worker could not use a
replacement and that the Worker was not in business for
herself.
[10] I should say at this juncture, that I share the
sentiment of Mogan T.C.J. expressed in the Mohr case
(above), when he said:-
“... I might say however that I cannot imagine that
when the legislation was originally introduced in the late
1940s or revised as it has been from time to time, that up
until recently anyone would have thought of the casual work of
a childcare person in the home as being insurable employment,
giving rise to rights to unemployment insurance. We live in a
society where laws and regulations are becoming overly
intrusive in the lives of citizens. This is an area where one
person who wants to expand her skills inquires about some form
of assistance and triggers a whole series of ramifications,
which suddenly put Shelley and the Appellant not only into an
employer/employee relationship, but into one which gives rise
to the need to withhold and remit unemployment insurance
premiums and Canada Pension Plan contributions. It is an
indication that we are an over-regulated society, but Judges do
not make laws. They only interpret them and apply them to
certain fact situations : what I am obliged to do in this
case.”
[11] The Appellant explained the facts in her own way. She
is and was a provincial government employee, working in
Edmonton and living in Sherwood Park about twenty to thirty
kilometers apart. In January 1996 her daughter was one year old
and needed caring for whilst the Appellant went to work. She
advertised in the local paper looking, she said, for home where
she might leave her child, that is in the home of another
person. She interviewed a number of people including
Ms. Chung, who agreed to take the child and care for her
in her own apartment in Edmonton. The arrangement was made on
the basis that the Worker was operating her own day care home
and would obviously be entitled to take in other children.
Clearly the agreed sum of $400.00 per month is consistent with
that arrangement as opposed to full-time employment. It works
out to little more than $2.00 per hour.
[12] After the initial arrangement had been set up, the
Worker called the Appellant to say that she was having some
difficulty in her apartment and suggested the she look after
the child in the Appellant’s home. There is some conflict
in the evidence here but having listened carefully to the
parties I find that the evidence of the Appellant is more
credible than that of the Worker. The Appellant says that the
Worker indicated that the arrangement at the Appellant's
house would be short term while she, Ms Chung looked for some
accommodation in Sherwood Park where she would then carry out
her duties. I accept the Appellant's evidence on these
points.
[13] In fact what happened, was that things got so bad for
the Worker at her apartment that she moved into the home of the
Appellant, again for a short term until she could find and set
up in her own place in Sherwood Park. The agreement was that
the sum of $200.00 would be taken off the $400.00 for services,
as payment for the board and lodging.
[14] The initial arrangements contemplated by the parties,
according to the Appellant, and again I believe her on this
point also, was that if the Worker is not available at any time
she had a friend in Sherwood Park, who would stand in for her.
This was acceptable to the Appellant, and thus the services did
not have to be performed personally.
[15] In the end, seven weeks after she started, Ms. Chung
left to take up other work and so the original arrangement that
she bargained for was never implemented, that is setting up a
day care home in her own residence.
[16] The difficulty the Appellant has in dealing with this
situation is that the original bargain was clearly made on the
basis that Ms. Chung was in business for herself. Subsequently
when she could not follow through with this, it was still her
intention to do so. The actions of the Appellant were to assist
her through a short-term difficulty, with a view to the
original arrangement still being implemented. In fact, it never
was because the Worker left.
[17] The worker then applied for unemployment insurance
benefits in the following November. She apparently needed the
time during which she had provided these services, in order to
qualify for benefits and the wheels were then set in motion for
an investigation leading to the Appellant being interviewed
almost one year later. The Appellant was visibly upset and
stressed by this whole affair.
[18] I cannot conceive that the situation at hand could
properly be categorized as insurable employment. It was an
extremely short period of service. The services were originally
contracted for on the basis of an independent contractor
running her own home daycare. As a result of difficulties
experienced by the Worker, the Appellant reached a temporary
arrangement with the Worker in order to help her get
established in her business. Out of the goodness of her heart
she also provided some accommodation. The fees paid were
clearly consistent with the Worker taking on a number of
children in her own home as opposed to an employment situation.
The Appellant did not ever contemplate having an employee. Had
the situation continued as it evolved, for any length of time,
maybe some different considerations would have applied.
However, it endured for only seven weeks. I am not suggesting
that a period of service of only seven weeks might not in
general terms be categorized as employment, but rather that
this arrangement, which was originally set up in a particular
way and through force of circumstances materialized a little
differently on a temporary basis, cannot be so defined.
[19] It was not contemplated by the parties that it be an
employer/employee relationship or that there be any measure of
control over the Worker. It was contemplated that the Worker
would be setting up her own facilities to use. It was
contemplated that the Worker would be making her own profit and
risking her own losses in the setting up of the home daycare.
Certainly what transpired was not a question of integration
into any business of the Appellant.
[20] In the result I am not of the view that this short-term
arrangement can be categorized as a contract of service. It was
a stepping stone to the establishment of and independent
business and thus more in the nature of a contract for services
than a contract of service.
[21] The appeal is allowed and the decision of the Minister
is vacated.
Signed at Calgary, Alberta, this 16th day of October 1998.
"Michael H. Porter"
D.J.T.C.C.
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