Citation: 2012 TCC 218
Date: 20120622
Dockets: 2011-2337(EI)
2011-2340(CPP)
BETWEEN:
BRENDA NIGHTINGALE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
and
HTV SYSTEMS LTD,
Intervenor.
REASONS FOR JUDGMENT
Favreau J.
[1]
The Appellant is appealing
the Minister of National Revenue’s decision regarding the insurability under
the Employment Insurance Act, S.C. 1996, c. 23, as modified (the
"EIA"), and pensionability under the Canada Pension Plan,
R.S.C., 1985, c. C‑8, as modified (the "CPP"), of
her employment with HTV Systems Ltd. (the "Payer") for the period
from January 1, 2010 to October 8, 2010 (the "period").
[2]
Shortly after the
termination of her job with the Payer, the Appellant submitted to the Revenue
Canada Agency ("CRA") a request for a ruling (Form CPT1) on the
status of her employment with the Payer.
[3]
By letters dated
December 16, 2010, the Appellant and the Payer were notified that it had
been determined, based on the information provided and the analysis of the
ruling officer, that the Appellant was, during the period, an employee of the
Payer and that her employment was insurable under paragraph 5(1)(a)
of the EIA and pensionable under paragraph 6(1)(a) of the CPP.
[4]
The Payer disagreed
with the ruling decision and filed an appeal with the Chief of Appeals, on
January 10, 2011.
[5]
By letters dated
April 8, 2011, the Appellant and the Payer were notified that the decision
was reversed and it had been determined that the Appellant was not employed in
an insurable employment under the EIA nor in a pensionable employment
under the CPP, because she was not employed under a contract of service
within the meaning of paragraph 5(1)(a) of the EIA and
paragraph 6(1)(a) of the CPP during the period.
[6]
In determining that the
Appellant was not employed in insurable employment nor in pensionable
employment by the Payer during the period, the Minister of National Revenue made
the following assumptions of fact, described in paragraph 14 of the Reply
to the Notice of Appeal, filed in respect of each appeal:
Payer
(a)
the Payer operated a business of selling,
installing and servicing televisions and related equipment to healthcare
facilities, along with renting television services to patients in healthcare
facilities throughout Canada
(the "Business"); (admitted)
(b)
Greg Riedstra controlled the day-to-day
operations and made the major decisions for the Business; (admitted)
(c)
the Payer's normal business hours were 8:00 am
to 5:00 pm, Monday to Friday; (admitted)
The Appellant
(d)
the Appellant was hired as a Bookkeeper, for an
indefinite period of time, pursuant to a verbal agreement; (admitted)
(e)
the Appellant performed the following duties:
(i)
prepared government remittances for three
provinces;
(ii)
prepared payroll and daily banking;
(iii)
paid all bills; and
(iv)
shipping and receiving; (admitted)
(f)
the Appellant performed her duties at the
Payer's business location and occasionally from her home; (denied)
(g)
the Appellant had prior experience and training
in accounting along with the various accounting systems and she also had
experience in Office Management; (admitted)
(h)
the Appellant was not required to provide her
services exclusively to the Payer; (admitted)
(i)
the Appellant worked for the Payer since July
2006; (admitted)
(j)
the Payer replaced the Appellant with another
worker, who was a full-time employee who earned $20.00 per hour and worked
regular hours; (ignored)
(k)
during the period 2006 to 2007, the Appellant
worked for the Payer as an employee and received T4 slips; (admitted)
Control
(l)
the Appellant normally worked Monday to Friday
and occasionally on Saturday; (admitted)
(m)
the Appellant determined her own hours of work,
which were flexible, depending on workload and deadlines; (admitted)
(n)
the Appellant was free to work as many hours or
as little hours as she wanted; (denied)
(o)
the Appellant recorded her hours for invoicing
purposes; (denied as written)
(p)
Greg Riedstra supervised the Appellant, but only
to the extent of requesting status updates and ensuring that financial reports
and books were current; (denied)
(q)
the Appellant was not required to report to the Payer,
except to provide updates; (denied)
(r)
the Payer provided the Appellant with
instructions on job responsibilities and procedures; (admitted)
(s)
the Appellant was required to obtain approval
from the Payer on what bills to pay and who to invoice; (admitted)
Ownership of Tools and Equipment
(t)
the Payer provided the tools, equipment and
supplies such as computer, printer, fax, photocopier, calculator, postage,
accounting software and desk necessary for the Appellant to perform her duties,
at no cost to the Appellant; (admitted)
(u)
when the Appellant worked from home, she used
her own tools and equipment; (denied)
(v)
the Appellant and Payer were responsible for the
maintenance and repairs of their own tools and equipment; (denied)
Subcontracting Work and Hiring Assistants
(w)
the Appellant provided her services personally; (admitted)
(x)
the Appellant did not hire helpers, substitutes
or replacements; (admitted because not allowed to hire someone else)
Chance of Profit and Risk of Loss
(y)
the Appellant was paid $35.00 per hour; (admitted
for 2010)
(z)
the Appellant determined her own rate of pay; (denied)
(aa)
during the period 2006 to 2007, the Appellant
was paid $18.50 per hour; (admitted but she also received a cheque of $424
on a bi-weekly basis)
(bb)
the Appellant was paid on a regular weekly
basis; (admitted from 2008)
(cc)
the Appellant was paid by cheque; (admitted)
(dd)
cheques were made out in the Appellant's
personal name; (admitted)
(ee)
the Appellant was required to submit invoices in
order to be paid; (denied)
(ff)
the Payer did not put a cap on the number of
hours the Appellant could bill for in a week; (admitted)
(gg)
the Appellant did not receive bonuses, benefits,
vacation pay or paid leave; (admitted from 2008)
(hh)
the Payer was ultimately responsible for
resolving customer complaints; (admitted)
(ii)
the Appellant provided the guarantee on the work
she performed; (denied as written)
(jj)
the Appellant incurred expenses in the
performance of her work for her home office tools, equipment and travel
expenses; (denied)
Intention
(kk)
the Appellant included Goods and Services Tax on
invoices submitted to the Payer; (denied as written)
(ll)
the Appellant reported her income from the Payer
as "Business income" and she claimed expenses against this income on
her personal income tax return for the 2009 taxation year; (the first part
of sentence is admitted; the second part is denied)
(mm)
the Appellant registered a business number with
the Canada Revenue Agency; (admitted for the Equine Services business in
February 2005)
(nn)
the Appellant had other clients; (admitted)
(oo)
the Appellant maintained books and records for
her own business; and (admitted)
(pp)
the Appellant advertised her business by word of
mouth. (admitted for the Equine Services business).
[7]
Paragraph 14(f) of
the Reply to the Notice of Appeal was denied by the Appellant because she did
not work for the Payer from her home. She testified that she never took work
home as nothing could be done from her computer at home. She did not have
access to the Payer's computer from home.
[8]
Paragraph 14(n) of
the Reply to the Notice of Appeal was denied by the Appellant because she was
not free to work as many hours or as few hours as she wanted. She worked on a
full-time basis for the Payer and her work had to be done well and on time. The
expectation of the Payer was that the Appellant would be present at the office
everyday from 9 a.m. to 5 p.m. There was no fixed number of hours she had to do
and her schedule was flexible depending on the workload and the deadlines.
[9]
Paragraph 14(o) of
the Reply to the Notice of Appeal was denied by the Appellant because she
recorded her hours in a timecard to determine her pay and not for invoicing
purposes. At the hearing, she testified that she did not charge her hours to
the Payer via invoices.
[10]
Paragraphs 14(p) and (q)
of the Reply to the Notice of Appeal were denied by the Appellant because she
was required to report to Mr. Greg Riedstra on a daily basis either in person
at the office or by phone and/or email if he was away from office. The
Appellant was required to obtain Mr. Greg Riedstra's approval for certain tasks,
such as, which bills to pay or not to pay and whom to invoice.
[11]
Paragraphs 14(u),
(v) and (jj) of the Reply to the Notice of Appeal were denied by the Appellant
because she never used her own tools and equipment when working for the Payer
and she never incurred maintenance and repair expenses of her own tools and
equipment when working for the Payer.
[12]
Paragraph 14(z) of
the Reply to the Notice of Appeal was denied by the Appellant because when she
was hired as an employee, the Payer agreed to pay her at the rate of $18.50 an
hour and to pay for her transportation expenses from home by cheque in the
amount of $424 on a bi‑weekly basis. In January 2008, when the
Appellant's employment status changed to an independent contractor, the Payer
agreed to pay the Appellant at the rate of $30 an hour but without reimbursement
of her transportation expenses.
[13]
Paragraph 14 (ee) of
the Reply to the Notice of Appeal was denied by the Appellant as she maintained
that she was not required to submit invoices in order to be paid.
[14]
Paragraph 14(ii) of the
Reply to the Notice of Appeal was denied by the Appellant because she never
provided any specific guarantee on the work she performed.
[15]
Paragraph 14(ll) of the
Reply to the Notice of Appeal was denied as written because the Appellant did
not claim, on her personal income tax return for the 2009 taxation year, expenses
against the income from the Payer.
[16]
The Appellant testified
at the hearing. She explained that she accepted a part-time job with the Payer
in July 2006 and that, a few weeks later, she became a full-time employee of
the Payer. From July 2006 to January 2008, the Appellant was on the Payer's
payroll and received T4 slips.
[17]
On January 2008, the
Appellant asked for a raise in salary which was not accepted by the Payer
unless her employment status changed from an employee to an independent
contractor. She said that she was forced to accept the change in her employment
status to keep her job with the Payer. No written contract was entered into
between them and she stated that the employee/employer relationship that
existed in 2006 and 2007 did not change in 2008 nor after. She continued to do
her work in the same manner as before, under Mr. Greg Riedstra's direction and
control.
[18]
The Appellant admitted
that she had a flexible schedule and that the number of hours she worked was
also flexible but she pointed out that she had to work more hours than normal
business hours at the Payer's office to meet the deadlines of the Payer. In 4½ years
with the Payer, she was not allowed to take a vacation.
[19]
Mr. Riedstra assigned
her tasks on a daily basis with the deadlines by which they were to be
completed. At the office, the Appellant was required to report daily in person
to Mr. Riedstra. If he was away from the office, it would be done by
telephone and/or e-mail. Furthermore, the Appellant was required to obtain
approval for certain tasks, such as, which bills to pay or not to pay and whom
to invoice.
[20]
The Appellant also
indicated that she never brought work to be done at home because she could not access
the Payer's computers from home.
[21]
The Appellant was not
precluded from working for other clients without approval from the Payer. Over
the years that she worked for the Payer, she did have some small bookkeeping
clients and clients of her Equine Services business to whom she rendered
services on evenings and weekends.
[22]
As with all other
employees of the Payer, the Appellant submitted weekly timecards for payroll
purposes. Shortly after the change of the Appellant's employment status, she
started to invoice the Payer for the services she rendered. Three invoices
dated February 15, 2008, February 29, 2008 and October 19, 2010 were filed
by the Respondent as Exhibit R-1. The Goods and Services Tax (GST) was charged
on the first two invoices and the Harmonized Sales Tax (HST) was charged on the
last invoice. In her testimony, the Appellant explained that she was asked to
stop making invoices to the Payer or to the other six corporations owned by
members of Mr. Riedstra's family for which she also had to do the work under
Mr. Riedstra's direction. The Appellant stated that no other invoices were sent
to the Payer except for the invoice dated October 19, 2010 for her last week of
work which was prepared after her dismissal.
[23]
The Appellant was paid
by the Payer by weekly cheques. In order to produce the cheques, the Payer's
computer automatically produced purchase orders showing the date, the purchase
number, a description of the goods or services rendered, the name of the
supplier, the amount charged, the GST and provincial sales tax payable and the
GST and provincial sales tax registration numbers. The cheques produced by the
computer referred to the date and number of the purchase order, the invoice
number which was in fact the date of the purchase order and the amount paid including
GST but no provincial sales tax.
[24]
The Appellant explained
that her GST and provincial sales tax numbers were obtained in 2005 in respect
of her Equine Services business. The Appellant also confirmed that she declared
her income from the Payer as business income in her 2009 tax return and that
she reported and remitted the GST collected in 2008 and 2009. For 2010, she had
not reported nor remitted the GST collected because she was waiting for the
ruling concerning the status of her employment.
[25]
The Appellant also
confirmed that the Payer provided the tools, equipment and supplies necessary
for the Appellant to perform her duties at no cost to her, that she never used
her own tools in performing her duties for the Payer and that she never
incurred expenses in respect of her own tools and equipment for that purpose.
[26]
The Appellant did not
have the ability to subcontract work or to hire assistants to help her and, in
fact, she did not hire helpers, substitutes or replacements.
[27]
Finally, the Appellant
confirmed that she did not bear any financial risk, that she had no risk of
loss and no chance of profit, except by working more hours to the extent they
were justified, that she made no financial investment and did not maintain a
business presence.
[28]
The Appellant's
testimony was corroborated by the testimony of Ms. Erika Agnew, a part-time
administrative assistant with the Payer from November 2008 to November 2009.
Ms. Agnew's testimony was particularly relevant in that she confirmed the
following facts:
(a) the Appellant worked
full-time hours at the office, Monday to Friday, usually from 8:30 a.m. to
often after 5:30 p.m.;
(b) the Appellant filled
timecards;
(c) the Appellant never
worked for the Payer from home since the accounting system could only be accessed
through the computers at the Payer's office. The Appellant had to come to the
office if she wanted to work on the week-ends;
(d) the Appellant could
not be easily replaced because her replacement would need a thorough knowledge
of the computer program used by the Payer which is not a widely known program
as it is archaic and no longer used by most firms;
(e) Ms. Agnew was hired by
Mr. Riedstra specifically to help the Appellant. She was not hired by the
Appellant. The Appellant referred her to Mr. Riedstra who did the
interview alone. Mr. Riedstra was also the one who made the hiring decision and
offered her the job. The Appellant was not involved in the hiring of her own
helper.
[29]
Despite her friendship
with the Appellant, the testimony of Ms. Agnew should be relied upon because
she was a credible witness and had personal knowledge of the working conditions
of the Appellant from November 2008 to November 2009.
[30]
Mr. Greg Riedstra also
testified at the hearing and explained that he did not control the working
hours of the Appellant. What mattered to him was that the work be done
adequately and on time. He referred to the fact that the Appellant unilaterally
increased her own remuneration from $30 to $35 per hour. He could not remember
exactly when that happened, whether it was July 2009 or July 2010. Mr. Riedstra
became confused and mentioned that it was one week after his father passed
away. He never accepted this pay increase. He further explained that the
Appellant was dismissed because she refused to execute a task, that is, to call
a client (a hospital) in order to collect an outstanding account. He described
the dismissal as a disciplinary action.
Analysis
[31]
Paragraph 5(1)(a)
of the EIA defines insurable employment as follows:
5.(1) Types of insurable employment — Subject to subsection (2), insurable employment is
(a) employment in Canada by one or more employers, under any
express or implied contract of service or apprenticeship, written or oral,
whether the earnings of the employed person are received from the employer or
some other person and whether the earnings are calculated by time or by the
piece, or partly by time and partly be the piece, or otherwise;
[32]
Paragraph 6(1)(a)
of the CPP defines pensionable employment as an employment in Canada that is not excepted employment.
[33]
Each case dealing with the
status of a worker as an employee versus an independent contractor must be
determined on its own facts. Court decisions indicated that, in making this
determination, the level of control the payer has over the worker's activities
is an important factor. Other factors are also relevant, such as, the ownership
of tools and equipment, the chance of profit and the risk of loss, the
integration in the payer's organization and the intention of the parties.
Level of Control
[34]
The Appellant was hired
as a bookkeeper for an indefinite period of time pursuant to a verbal
agreement. From July 2006 to the end of 2007, the Appellant worked for the
Payer as an employee and received T4 slips. In January 2008, the financial
arrangement between the Appellant and the Payer was changed. Her remuneration
was increased from $18.50 to $30 per hour and her transportation expenses from
home ceased to be reimbursed. The Appellant's employment status was supposedly
changed to an independent contractor despite the fact that the Appellant's job
remained the same.
[35]
The testimonies of the
Appellant and of Ms. Erika Agnew revealed that Mr. Greg Riedstra did in
fact exercise a high degree of control over the Appellant and over the manner
in which the Appellant performed her job. Mr. Riedstra assigned tasks to the
Appellant on a daily basis with deadlines for completion of the work. The
Appellant was required to report daily to Mr. Riedstra even when he was away
from the office. The Appellant was required to obtain approval for certain
tasks, such as, which bills to pay or not to pay and whom to invoice.
[36]
The Appellant worked
exclusively at the Payer's office. The Appellant had a flexible schedule
without a pre-determined number of working hours but Mr. Riedstra's
expectation was that the Appellant be present at the office every day and by a
certain time.
[37]
The Appellant was not
precluded from working for other clients without approval from the Payer but,
in fact, the Appellant could only provide services to them in the evenings and
on week-ends. In the 4½ years with the Payer, the Appellant was not allowed to
take a vacation because of deadlines that had to be met. In these
circumstances, I do not see how the Appellant could work for other clients on
her regular working days with the Payer.
[38]
The level of control
exercised by the Payer resulted also from the fact that the Payer took
disciplinary action in dismissing the Appellant because she had refused to
execute a task, being the collection of an account payable from a hospital.
[39]
Generally considered,
this factor pointed more to an employer/employee relationship than to an
independent contractor relationship.
Ownership of Tools and Equipment
[40]
The Appellant never
used her own tools and equipment when performing her job for the Payer. The
evidence was to the effect that the Appellant could only have access to the
Payer's computer from the Payer's office.
[41]
This factor clearly
pointed more to an employee/employer relationship.
Subcontracting Work or Hiring Assistants
[42]
The Appellant did not
have the ability to subcontract work or to hire assistants to help her and, in
fact, she did not hire helpers, substitutes or replacements. This was clearly
demonstrated by the hiring of Ms. Erika Agnew by Mr. Riedstra to specifically help
the Appellant. Mr. Riedstra placed an advertisement for help in the Georgetown independent newspaper and he did all the interviews
personally without the presence of the Appellant. Mr. Riedstra made his hiring
decision and offered her the job.
[43]
This factor is again
indicative of a contract of service and not of a contract for service.
Chance of Profit and Risk of Loss
[44]
The Appellant was paid
on an hourly basis with no maximum number of hours. There was an opportunity
for the Appellant to realize a profit considering the fact that the Payer had
no control over the number of hours the Appellant could bill for. It should be
mentioned here that paragraph 5(1)(a) of the EIA recognizes as
insurable employment an employment under a contract of service where the
earnings are calculated by the piece or partly by the hour and partly by the
piece.
[45]
On the other hand, the
Appellant did not bear any financial risk and did not have any risk of loss
except for the fact that she had no benefits, no vacation pay and her mileage
expenses were not reimbursed.
[46]
Considered as a whole,
this factor appears to me to be neutral.
Integration
[47]
Very little has been
said during the hearing about the integration of the Appellant's work into the
Payer's business. The Appellant argued in her pleadings that the integration factor
shall be considered from the point of view of the worker and not from the point
of view of the employer. In any event, my appreciation of the Appellant's
services is that they were rendered as an integral part of the Payer's
business.
Intention
[48]
In this instance, the
Payer and the Appellant did not have a common intention regarding their working
relationship. The Payer intended the Appellant to be self-employed while the
Appellant intended to be an employee of the Payer.
[49]
The Appellant went off
payroll in 2008, she started invoicing the Payer for her services but was asked
to stop submitting such invoices. Instead, she then prepared purchase orders.
The Appellant reported her income from the Payer as business income in 2009 and
she charged GST from 2008 to 2010. The Appellant alleged that she was forced to
accept the conditions imposed by the Payer in 2008 in order to keep her job and
to get a pay increase to $30 per hour.
[50]
Considering the fact
that the intent of the parties is not shared by both parties, this factor cannot
be considered as being conclusive, in and by itself.
Conclusion
[51]
For the reasons
referred to above, these appeals are allowed and the Minister of National
Revenue's decisions regarding the insurability and the pensionability of the
Appellant's employment with HTV Systems Ltd. for the period from January 1,
2010 to October 8, 2010 are vacated.
Signed at Ottawa, Canada, this 22nd day of June 2012.
"Réal Favreau"
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