Citation: 2012 TCC 286
Date: 20120808
Dockets: 2011-3070(EI)
2011-3072(CPP)
BETWEEN:
KAJLA ZOLTAN - MAPLE ELECT.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Hogan J.
A. Introduction
[1]
By letter dated
December 13, 2010, the Appellant was notified by the Minister of National
Revenue (the “Minister”) that Yury Velichko (the “Worker”) was employed in
insurable employment for the purposes of the Employment Insurance Act
(the “EIA”) and in pensionable employment for the purposes of the Canada
Pension Plan (the “CPP”) while working for the Appellant during the
period from March 8, 2010 to September 29, 2010 (the “Period”).
[2]
The Appellant requested
a review of those determinations, which were confirmed. The Appellant alleges
that the Worker was an independent contractor providing subcontracting services
to the Appellant as a licensed electrician in the course of a business carried
on by the Worker for his own benefit.
B. Factual
Background
[3]
The Minister alleges
that in determining that the Worker was employed in insurable and pensionable
employment, he relied on the following assumptions of fact:
The
Appellant
(a) the Appellant operated an electrical installation and
electrical maintenance business (the “Business”);
(b) the Business operated under the trade name “Maple
Electric”;
(c) Kajla Zoltan controlled the day-to-day operations and
made the major decisions for the Business;
(d) the Appellant’s normal business hours were, 7:00 am to
4:00 pm, Monday to Friday;
(e) the Appellant advertised for the Worker’s position in a
local Russian newspaper;
(f) the Worker was part of a crew of workers that was
assigned to specific jobs that were contracted by the Appellant;
The Worker
(g)
the Worker was hired as an Electrician, for an
indefinite period of time, pursuant to a verbal agreement;
(h)
the Worker’s duties included the following:
(i)
installed electrical switches, outlets and light
fixtures;
(ii)
fastened metal boxes to walls and ceilings; and
(iii)
ran pipes and tubing inside walls or other
concealed areas and ran run wires or cables through them;
(i)
the Worker was certified as an
Electrician – in construction and maintenance;
(j)
the Worker had experience in performing
electrical installation work;
(k)
the Worker did not hold an Electrical Contractor
License issued by the Electrical Safety Authority, which is required to operate
an electrical contracting business in Ontario;
(l)
the Worker performed his duties at various job
locations in Windsor, Waterloo and Toronto;
(m)
the Worker provided his services exclusively to
the Appellant;
Control
(n)
the Worker normally worked the following
schedule:
(i)
Monday, 8:00 am to 6:00 pm;
(ii)
Tuesday to Thursday, 6:00 am to 6:00 pm; and
(iii)
Friday, 6:00 am to 1:30 pm;
(o)
the Appellant determined the Worker’s hours of
work;
(p)
for out of town jobs, the Worker would leave
with the Appellant’s crew on a Monday morning and return home on a Friday
afternoon;
(q)
the Appellant determined the Worker’s deadlines
and priorities;
(r)
the Worker’s hours of work were recorded on
timesheets by the Appellant’s Foreman;
(s)
the Worker was supervised by the construction
site Supervisor and the Appellant’s Foreman;
(t)
the Worker was required to report to the
Appellant;
(u)
the Appellant’s Foreman provided the Worker with
written or oral directions, such as:
(i)
the work that was to be completed each day and
in what priority;
(ii)
where he was to install boxes, pipes, etc.;
(iii)
what materials to use; and
(iv)
for more complicated jobs, what tools to use to
get the job done;
(v)
the Worker was required to obtain the
Appellant’s approval prior to taking certain actions, such as requesting time
off, medical appointment leave, changing his hours of work or changing the order
in which work was to be completed;
(w)
the Appellant terminated the Worker’s services;
Ownership
of Tools and Equipment
(x)
the Appellant provided the Worker with a hammer
drill and masonry bits, heavy hummer [sic] drill and bits,
conduit pipe benders, sawzall, chop saw, hacksaw blades, hydraulic and manual
knockout punch set and ladder (worth approximately $3,160), necessary for the
Worker to perform his duties, at no cost to the Worker;
(y)
the Appellant provided the Worker with the
materials required to complete the work, such as wires and receptacle switches;
(z)
the Worker provided his own hand tools, such as
an extension cord, screwdrivers, cordless drill and bits, pliers, hammer,
hacksaw, tape measure, snips and utility knife (worth approximately $479);
(aa)
the Appellant and Worker were responsible for
the maintenance and repairs of their own tools and equipment;
Subcontracting
Work and Hiring Assistants
(bb)
the Worker provided his services personally;
(cc)
the Worker did not hire helpers or replacements;
(dd)
the Appellant was responsible for hiring and
paying replacements or helpers;
Chance of Profit and Risk of Loss
(ee)
the Worker was initially paid $14.00 per hour,
which increased to $14.50 after a couple of months;
(ff)
the Appellant determined the rate of pay;
(gg)
the Appellant determined the bi-weekly timing of
payments to the Worker;
(hh)
the Appellant determined the method of payment
to the Worker which was payment by cheque;
(ii)
the Worker was paid in his personal name;
(jj)
the Worker did not receive bonuses, benefits,
vacation pay or paid leave;
(kk)
the Worker was paid his hourly rate for travel
time to and from out of town work locations;
(ll)
the Worker was paid a $20.00 per diem allowance
when working out of town;
(mm)
the Worker was reimbursed for fuel, meals and
accommodation expenses;
(nn)
the Worker invoiced the Appellant;
(oo)
the Worker was covered under the Appellant’s
Worker’s Safety and Insurance Board plan;
(pp)
the Appellant was ultimately responsible for
resolving customer complaints which resulted from the Worker’s performance;
(qq)
the construction site Supervisor and/or the
Appellant’s Foreman determined if work needed to be redone;
(rr)
the Appellant provided the guarantee on work
performed by the Worker;
Intention
(ss)
the Worker did not manage his own staff;
(tt)
the Worker did not advertise his services;
(uu)
the Worker did not have a business bank account;
(vv)
the Worker registered for a GST number with the
Canada Revenue Agency after he started working for the Appellant; and
Other
Relevant Information
(ww)
the Worker reported his income as “Other
Employment Income” and did not claim any expenses on his personal income tax
return for the 2010 taxation year.
[4]
The assumptions set out
in paragraphs (r), (s), (t), (u), (x), (y) and (qq) are inaccurate.
[5]
The evidence shows that
the Appellant was awarded a subcontract to install electrical fittings and
cables in a new wing of the Windsor Hospital that was under construction during
the relevant period. This subcontract was awarded by the general electrical
contractor for the project, J.M.R. Electric (“JMR”).
[6]
The Appellant hired the
Worker to work on that project. In all, the Appellant hired four subcontractors
for the project. The Appellant did not work on the project site himself as he
preferred to work in the general Toronto metropolitan area so that he could
return home at night. The Respondent does not dispute this fact.
[7]
Below is the Worker’s
résumé provided in response to the Appellant’s advertisement for an electrician:
. . .
Dear
Sir
I
am writing in response to your advertisement for construction electrician. I
was talking with you about this vacancy over phone on Monday February 22, 2010
at 11.50 AM, and am sending
my
resume for your review.
. . .
Objective
To obtain a position as a Construction Electrician.
Summary of Qualifications
a.
A Licensed Electrician (309A Red Seal) with more
than two years of Canadian commercial and residential experience. Adept in
performing electrical installations, maintenance and repairs in plant
facilities, knowledgeable in all areas of the national electrical code and
excel in analyzing and solving problems with various electrical controls and
systems
b.
G Driver Licence with clean abstract and own
vehicle
c.
Own tools and safety equipment
Professional Skills
d. Electrical Service Panels
e. Switches & Circuit Breakers
f. Lighting fixtures, electrical control and distribution equipment
g. Generator & Transformers
h. Wire fishing
i.
Knob and Tube removing
j.
Trouble-shooting
k. Blueprints & Schematics
l.
Wiring Diagrams
m. Testing Instruments
n. Electrical Code
o. Safety & QA
Work Experience
Construction
Electrician
contractor
ANDREI PARFENOV, Canada, Toronto (2008-2010)
IOB Electric ltd, Canada, Toronto (2008)
Performed
electrical-related wiring and installation for commercial and residential
construction projects, including new construction,
retrofits,
remodels and plant expansions. Key Results:
·
Served as an electrician on more than 30
construction projects.
·
Earned a reputation for expertise in complex
troubleshooting and problem resolution
·
Gained extensive experience in analyzing and
following manuals, schematic diagrams, blueprints and other specifications
·
Mastered the use of measuring/testing
instruments such as ammeters, ohmmeters, voltmeters and testing lamps
·
Consistently commended for team-player mind-set,
“doing it right the first time” and working with minimal supervision under tight
deadlines
Education
-
Ability Learning Network – EP for Trades Workers
& Apprentices (2010)
-
Construction & Maintenance Electrician’s
License – 309A Red Seal (2008)
-
High School Diploma (1991)
I
am confident that my education coupled with my extensive experience can be an
asset to your company. Please feel free to contact me, either by email: . . .
or by leaving a massage [sic] on . . . . I look forward to
speaking to you soon.
. . .
[8]
The Appellant testified
that the Worker and the other three subcontractors assigned to the Windsor project received their instructions from two foremen employed by JMR. The Worker
was not subject to his direction and control. The Worker and the three other
subcontractors were skilled licensed electricians requiring little supervision.
However, they did have to get instructions from the JMR foremen as to which
tasks they should complete first. This was done for scheduling reasons in order
to avoid unnecessary delays. For example, the metal conduits and wiring and
electrical boxes must be installed prior to the drywall installation. Fixtures
are installed afterwards. According to the Appellant, this occurs on every worksite.
In the case of residential construction, the general contractor often controls
the work flow for all of the tradespeople working on the site. On larger
commercial projects, the general electrical contractor often controls the work
flow for the electrical subcontractors.
[9]
The Appellant also
explained that all electrical work in the province of Ontario is subject to
certification by the Electrical Safety Authority (the “ESA”). The ESA had
inspectors present on a full-time basis at the Windsor project. If the
electrical work did not meet the ESA’s certification standards, it had to be
redone.
[10]
The Worker testified
that for the Windsor project he used his own tools and heavy equipment supplied
by JMR. He acknowledged that the Appellant did not provide him with tools or
equipment to work on that project.
[11]
The Worker was hired by
the Appellant on March 8, 2010 and worked on the Windsor project until August
4, 2010. While the Appellant was in Europe visiting his family for the first
time in 10 years, the Worker quit without giving the Appellant any notice of
his intention to do so. According to the Worker, he left because his family
resided in the Greater Toronto Area (GTA) and he was unhappy being away from
them all week. Shortly afterwards, the Worker contacted the CRA to enquire
about his tax filing and remittance obligations and the possibility of
receiving employment insurance benefits.
[12]
When the Appellant
returned to Canada from his European family vacation, he contacted the Worker
to settle the amounts owed to him. The Worker was required to submit substantiated
invoices for the amount owed to him and invoices for the period from May 9,
2010 to August 4, 2010. The Worker had been paid for that period on the basis
of the time records kept by JMR.
[13]
Shortly after the
Worker received payment of the sum owed to him by the Appellant, he agreed to
recommence working for the Appellant. According to the Appellant, the Worker
was interested in working on job sites in the GTA. The Appellant had a
subcontract for electrical work on a hotel project in Markham and the Worker
agreed to work on that project. The Appellant himself did not work on the Markham project and there is no evidence to show that he employed a foreman to supervise
the work there.
[14]
According to the
testimony of the Appellant and the Worker, the Worker worked on the Markham project alongside other electricians hired by the Appellant. The Worker worked on that
project from around August 21, 2010 until September 29, 2010, the date he was
fired. The Worker claims he was fired because the Appellant discovered he had
contacted the CRA to ask questions concerning his status as an employee as
opposed to an independent contractor.
[15]
The Appellant claims he
fired the Worker because he was involved in personal conflicts with other
workers on the worksite and because he smeared the Appellant’s reputation by
making comments which he viewed as disparaging, such as “slave driver” and
“capitalist”.
C. Analysis
(1) Intention
[16]
The Appellant submits
that he has presented evidence that shows that the Worker agreed to work on the
Appellant’s project as an independent contractor. According to the Appellant,
the evidence presented by the Respondent is insufficient to justify ignoring
the parties’ agreement to enter into a subcontracting arrangement.
[17]
I agree with the
Appellant’s submission that the worker agreed to enter into an independent contractor
relationship. The Worker applied for a GST/HST number shortly after he began
working with the Appellant. His major business activity was described as:
. . .
a
self‑employed electrician who do[es] electrical work for electrical
company
. . .
[18]
The registration was
effective March 8, 2010, the first day of the Worker’s presence on the Windsor hospital project. The Worker’s curriculum vitae,
which the Appellant relied on when he hired the Worker, emphasizes that the
worker was:
. . .
·
consistently commended for team-player mind set,
doing it right the first time; and working with minimal supervision under tight
deadlines.
. . .
[19]
The Appellant’s
interview notes
indicate that the Worker agreed to work as a subcontractor. The form shows that
the Worker was to supply his own hand tools and that he owned a vehicle, which
could also be used to transport equipment to the worksite. The testimonial
evidence of both parties confirms these facts.
[20]
Although he may have
agreed to be treated as an independent contractor, the Worker insists that he
did not understand the ramifications of his agreement with Appellant. His
letter to the CRA justifying his claim for employment insurance makes reference
to inconsistencies with his designation as an independent contractor, as
follows:
Dear
Sir or Madam
Cover
Letter to Questionnaire for a Worker – 110690707002
1. Please pay attention to attached copies of pay checks and
invoices (copies are in calendar order). Bringing here all these details, I
would like to show that Zoltan Kajla did not use my invoices as information
source to determine the compensation he should have paid for my work.
a) a word “accommodation” was used in invoices
instead of a word “allowance” (I did not pay for hotel. Zoltan Kajla did)
b) the pay check March 8-13 2010 does not include
GST, because I did not have the GST number at that time
c) Total paid money amount in the pay checks March
15 – May 8 2010 and total money amount in the invoices do not much. Also, a
quantity of work hours in the pay check March 28-Apr 10 does not much with the
invoice for the same time period.
d) after May 9 I understood that Zoltan Kajla did
not pay attention to my invoices and I ceased to write out them. Zoltan Kajla
continued to send me pay checks without any invoices from me
e) the invoices May 10 – Aug 7 2010 were backdated on
Aug 24 2010 because Zoltan Kajla refused to pay me money for the last two work
weeks until I send him invoices for the past few months. As you can see in the
corrected invoices (June 21-Aug 7) which he sent me back it is clearly visible
that I was not aware how much money an hour he actually paid me
2. My work hours were recorded by the supervisor of the
construction site and were sent directly to Zoltan Kajla.
3. I have attached the certificated translation of the
advertising announcement of employment which Zoltan Kajla places in newspaper.
There is no any word in this announcement that he is looking for independent
contractors. On the contrary, the announcement says about hiring construction
electrician or beginner electrician. When they get a job in the Maple Electric
Ltd they mysteriously turn into “independent contractors”. I used exactly the
same advertising to find the job in Maple Electric Ltd.
4. “As of January 1, 2007 no person shall operate an
Electrical Contracting Business in Ontario without first obtaining an
Electrical Contractor Licence issues by ECRA/ESA.” - this information I took
from official Internet site of Electrical Safety Authority. I insist that I
worked for Maple Electric Ltd as an employee electrician with license
309 A which did not allow me to work as an independent contractor and was
supervised by the foreman of the construction site who controlled my work and
checked whether all my work was done properly. Zoltan Kajla insists that
electricians who worked and are working now in his company are subcontractors.
As I guess, it is very serious offence to subcontract electricians to perform
the work as independent contractors without necessary qualification (master
electrician license), liability insurance (there will not any responsibility
for their work) and electrical contractor license. Such a situation threats the
people that already resident units where electrical system was made by so-called
contractors or are going to do this.
5. Also, please pay attention that Zoltan Kajla paid for me
to Workplace Safety an[d] Insurance Board. He might have been afraid of
judicial claims in case of injury of the workers and therefore big charges, and
tried to decline all his responsibility paying to Workplace Safety an[d]
Insurance Board as for the usual employees. But for the Revenue Agency he
presented the same workers as independent contractors, thus it was not
necessary for him to pay for them to CPP/EI. Of course, all these conclusions
are based only on my guesses. I believe that in the Canada Revenue Agency work
professionals who can find out the truth.
[21]
Although the Worker had
recently immigrated to Canada, I do not accept his claim that he did not
understand the difference between independent contractor status and employee
status. Rather, I believe that the Worker asked the CRA for clarification of
his status after he stopped working for the Appellant on August 4, 2010. He did
so because he was without work and in need of employment insurance benefits.
The evidence suggests that he did not pursue this initial enquiry because he
was rehired by the Appellant three weeks later and received full payment of the
amounts owed to him. Not surprisingly, when the Appellant terminated his
relationship with the Worker on September 29, 2010, the Worker reactivated his
file with the CRA. This culminated in the Worker receiving employment insurance
benefits following the Minister’s determination that he had held insurable
employment.
[22]
The facts alleged in
the Worker’s letter are nonetheless relevant for the second step of the
analysis, namely, whether the application of the factors outlined in Wiebe
Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553 (FCA), shows that the
facts are consistent with the parties’ characterization of their relationship.
In TBT Personnel Services Inc. v. Canada, 2011 FCA 256,
Sharlow J.A. stated the following:
9.
In Wolf v. Canada, 2002 FCA 96, [2002]
4 F.C. 396 (C.A.), and Royal Winnipeg Ballet v. Canada
(Minister of National Revenue – M.N.R.), 2006 FCA 87,
[2007] 1 F.C.R. 35, this Court added that where there is evidence
that the parties had a common intention as to the legal relationship
between them, it is necessary to consider that evidence, but it is
also necessary to consider the Wiebe Door factors to determine whether
the facts are consistent with the parties’ expressed intention.
[Emphasis added.]
(2) Application of the Wiebe Door Factors
[23]
The Wiebe Door
factors must be applied to determine whether the parties’ agreement on the
nature of their relationship conforms to the true nature of their relationship in
light of the evidentiary findings of the Court. Applying these tests, does the
evidence show that the Worker performed his services in the course of a
business conducted for his own benefit?
(3) Control
[24]
The Minister assumed in
his reply to the Notice of Appeal that the Appellant employed a foreman who
supervised the Worker in the execution of his duties. As noted above, this
factual assumption is wrong. The foremen on the Windsor Hospital project were
employed by JMR. Can their actions be imputed to the Appellant? In my opinion,
the answer is yes, in much the same way that the control exercised by clients is
imputed to a personnel agency that supplied them with temporary workers.
[25]
The case law establishes
that there is an important distinction to be made between control over the
worker and control over the end product. For example, a consumer can hire a
general contractor to build a family home. That consumer would be well advised
to inspect the work to point out deficiencies so that they can be corrected
before delivery of the house. This does not make the contractor the consumer’s
employee. In addition, the general contractor will hire tradespeople as
subcontractors. For example, the general contractor can hire a self-employed
electrician to complete the electrical work. In that case, the general
contractor will control the work schedule in order to coordinate the work of the
various tradespeople working on the site.
[26]
The parties presented
contradictory evidence on the level of control exercised by JMR. The Appellant
claims that the general contractor’s foremen were responsible for controlling
work flow and ensuring that the work of all the electrical subcontractors
complied with the standards of the ESA. Certification of the work was performed
by inspectors who were present on the worksite on a daily basis.
[27]
The Respondent alleges
that the JMR foremen provided direct control over, and supervision of, the
manner in which the Worker performed his tasks.
[28]
On balance, I find the
Appellant’s evidence to be more credible. The JMR foremen did not supervise and
control the Worker’s activities for or on behalf of the Appellant.
[29]
With respect to the Markham worksite, there is no evidence to suggest that the Worker was subject to the
Appellant’s direction and control. The Appellant was not present at the
worksite and he did not employ a foreman or team leader. The control criterion
points to an independent contractor relationship.
(4) Ownership of Tools
[30]
The evidence shows that
the Worker owned his own hand tools and a vehicle used to travel to and from
the worksite. The evidence also shows that the Appellant did not provide the
Worker with equipment or material on the Windsor worksite. JMR did, but not the
Appellant. The Appellant admitted that on the Markham worksite he provided the
Worker with some equipment. There is no evidence as to the relative value of that
equipment. At best, this factor is neutral in the characterization of the
parties’ relationship.
(5) Chance of Profit/Risk of Loss
[31]
The evidence shows that
the Worker was paid an hourly wage for his services, was reimbursed his
gasoline and hotel accommodation costs and received a $20 per diem meal
allowance while working on the Windsor project. He was initially paid
$14 per hour and his wage was increased to $18 per hour over the
relevant period. Apparently, no per diem and gasoline allowance was paid to the
Worker when he worked on the Markham Hotel project. The Appellant also paid a
premium to the Workplace Safety and Insurance Board to cover the Worker under
that organization’s plan. The Appellant acknowledged that he would also pay
one-half of normal work hours for statutory holidays.
[32]
The form of
remuneration, at first blush, points to an employer‑employee
relationship. That being said, it is not totally inconsistent with the manner
in which self-employed electricians bill their clients for services. Many electricians
bill at an hourly rate for their services and are reimbursed the cost of
materials. Not all contracts are based on a fixed price.
[33]
The Worker did not
negotiate with JMR directly. He worked for the electrical contractor. On
balance, this factor points to an employer-employee relationship.
D. Conclusion
[34]
The parties agreed to
an independent contractor relationship at the outset of their relationship. Their
intention should be respected unless the application of the Wiebe Door
factors shows that the facts are inconsistent with that intention. The control
factor points to an independent contractor relationship. The chance of
profit/risk of loss criterion is more indicative of an employee-employer
relationship. I place greater weight on intention and on the control factor.
Apparently, the Worker did not succeed in establishing himself in business. He
tried and failed. This, however, is not a sufficient reason for the Court to
ignore the parties’ intention when the Wiebe Door factors support the
parties’ characterization of their relationship.
[35]
For the reasons
outlined earlier, I conclude that the Worker was not employed in insurable and
pensionable employment within the meaning of the EIA and the CPP
at any time during the period from March 8, 2010 to September 29, 2010.
Signed at Ottawa, Canada, this 8th day of August
2012.
“Robert J. Hogan”
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