Citation: 2012 TCC 150
Date: 20120508
Dockets: 2011-124(EI),
2011-113(EI),
2011-106(EI),
2011-107(EI),
2011-99(EI),
2011-125(CPP),
2011-105(CPP),
2011-79(CPP),
2011-80(CPP),
2011-98(CPP)
BETWEEN:
A&T TIRE & WHEEL LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Hogan J.
[1]
These are appeals from
determinations by the Minister of National Revenue (the “Minister”) that Edgar
Ganopolsky, Vladimir Mozhar, Hassan Sahly, Jason Smeskal and Michael Young (the
“workers”), were employees, rather than independent contractors, of A&T Tire
& Wheel Ltd. (the “Appellant”) during the period from
January 1, 2007 to August 1, 2009.
[2]
The Appellant requested
a review of the determinations, which were confirmed. The Appellant argues that
the five workers were independent contractors providing services to the
Appellant in the course of businesses carried on by them for their own benefit.
[3]
The Appellant called Michael Young
and Vladimir Mozhar, (two of the workers concerned in these appeals), Anna Mozhar
(the daughter of Mr. Mozhar), and Mathew Foster, Dennis Le Course and
Kyle Izzard (former workers of the Appellant), as witnesses to give evidence of
the workers’ intention to enter into independent contractor relationships with the
Appellant.
[4]
The Respondent called Hassan Sahly
and Jason Smeskal as witnesses to show that those workers did not intend
to become independent contractors and to establish that the workers’ actual
dealings with the Appellant are not consistent with a finding of independent
contractor status.
I. Factual Background
[5]
The Appellant operates
a small tire sales, installation and service business. Dan Smith is the
sole shareholder of the Appellant.
[6]
These appeals concern
five individuals, namely Michael Young, the shop manager; Vladimir Mozhar, who
sorts and stores tires; Edgar Ganopolsky, who works on the shop floor and
performs general duties such as installing and removing tires; and Jason
Smeskal and Hassan Sahly, who no longer work for the Appellant, but whose responsibilities
were similar to Mr. Ganopolsky’s.
[7]
Of the individuals
about whom evidence was presented at trial, Mr. Young was the only person who
had relevant work experience before starting to work for the Appellant. Mr. Mozhar,
Mr. Sahly and Mr. Smeskal received on‑the‑job training
from Mr. Young and the other workers at the shop. Mr. Sahly and
Mr. Smeskal were respectively 20 and 19 years of age when they started
working for the Appellant. Mr. Mozhar, who spoke to the Court through a
translator, was a lawyer in Russia prior to immigrating to Canada and had never worked in a tire shop before being
hired by the Appellant. Mr. Ganopolsky was not available to testify at
trial and no evidence was presented regarding his level of experience when he was
first hired.
[8]
The evidence shows that
the workers were initially all hired pursuant to verbal agreements. After the
Canada Revenue Agency (the “CRA”) began its audit that culminated in the
determinations at issue in these appeals, Vladimir Mozhar, Jason Smeskal
and Michael Young were asked to sign written agreements prepared by the
Appellant describing their status as that of independent contractors.
[9]
Mr. Smeskal never
signed the contract. He was the only individual concerned in the present appeals
who tried to negotiate the terms of the contract. He gave Michael Young, on the
morning of April 27, 2009, when he arrived at work, a letter addressed to Dan
Smith requesting a provision whereby A&T would provide him with the Workplace
Safety and Insurance Board coverage and adequate liability insurance. He
received at 5:50 p.m. on the same day, a termination letter accompanied
with two invoices to clients suggesting “sloppy work” as the reason for his
termination. Mr. Smeskal believes that he was let go because he attempted
to negotiate the terms of the agreement presented to him.
[10]
Mr. Young testified
that he was hired by Mr. Smith to manage the Appellant’s business. In his
words: “I look after my own business, but in place, my duties involve making
sure the shop runs smoothly but also putting new tires on and calling people
back. There are many different things that I do there, but if I decide not to
come in one day, the shop may not be open”.
[11]
Mr. Young
testified that he agreed to work for the Appellant as an independent contractor
because Mr. Smith offered him the opportunity to run a business while
benefiting from a share of its profits.
[12]
Mr. Young alleged
that he interviewed Mr. Smeskal, Mr. Ganopolsky and Mr. Sahly
when they applied to work for the Appellant. According to the witness, he made
it clear to each of these workers that they would perform their duties as
independent contractors and not employees.
[13]
Mr. Sahly had a
different recollection of his discussion with Mr. Young. According to that
witness, he was hired as a general labourer because he had little work
experience, being a recent high school graduate. Mr. Sahly testified that
he was not informed that he would be an independent contractor. The witness
added that because he received his instructions from Mr. Young, he
believed he was an employee of the Appellant while he worked there.
[14]
Mr. Smeskal’s
recollection of his discussions with Mr. Young was similar to that of
Mr. Sahly. He recalled that he was told that he was hired as an
independent contractor more than one year after he had started to work for the
Appellant. He did not recall this matter being discussed when he was first
hired by the Appellant.
[15]
Mr. Mozhar
testified that he agreed to work as an independent contractor when he was first
hired by the Appellant.
[16]
With the exception of
Michael Young, all of the workers were paid an hourly wage for their
services, for a normal working week of 8:00 a.m. to 6:00 p.m. Monday
to Friday and 8:00 a.m. to 1:00 p.m. on Saturday. They were paid an additional
hourly amount if they worked overtime. Mr. Young was generally paid
$850.00 per week. He was entitled to a bonus of 20% of the Appellant’s profits,
determined quarterly.
[17]
The evidence shows that
the workers were allowed to take one or two weeks of vacation with pay. They
were not paid for sick days.
II. Analysis
[18]
The Appellant argues
that it has presented sufficient evidence for the Court to conclude that the
workers intended to be treated as independent contractors while working for the
Appellant. According to the Appellant, the evidence presented by the Respondent
is insufficient to justify disregarding the parties’ choice in this regard.
[19]
I do not agree with the
Respondent’s assertion that the evidence shows that Jason Smeskal, Edgar Ganopolsky
and Hassan Sahly agreed to be treated as independent contractors when they were
engaged by the Appellant. First, the evidence shows that these workers did not
sign written agreements with the Appellant at the time they were hired. While
Mr. Young testified that they verbally agreed to be treated as independent
contractors, Mr. Sahly testified that this point was not discussed when he
was hired. He believed he was hired as a general labourer.
[20]
Mr. Smeskal was
asked to sign a written agreement declaring himself to be an independent
contractor after the Canada Revenue Agency (“CRA”) began the audit that
resulted in the determinations now under appeal. Mr. Smeskal attempted to
negotiate the terms of the written agreement presented to him for signature. In
a letter addressed to Dan Smith dated April 27, 2009, he makes
the following suggested changes to the provision entitled “Supplies and
Equipment”:
I also agree with point 3; however, the following
addition should be included:
3. Supplies and Equipment: (Original statement).
PLUS: A&T will train the contractor on all
equipment to be used in the shop. A&T ensures that all tools and fixed
machinery are in good working order and condition and are properly maintained.
In case of work-related injuries or accidents, A&T will cover the
contractor under WSIB. In addition, A&T will provide adequate liability
insurance for the contractor related to moving clients’ vehicles.
[21]
“WSIB” is the
abbreviation for the Workplace Safety and Insurance Board established in Ontario to administer the no-fault workplace insurance
program funded by employers to provide, inter alia, compensation and
medical rehabilitation to workers injured in the workplace. Independent
contractors or self-employed persons are not automatically covered under this
program for injuries that they suffer in the workplace.
[22]
Mr. Smeskal also
sought to be covered, under the Appellant’s insurance policy, for damage caused
by him to customers’ vehicles. These requests are illustrative of
Mr. Smeskal’s reluctance to accept the Appellant’s unilateral
characterization of their relationship. The parties did not sign a written
agreement as Mr. Smeskal was terminated by the Appellant on the same day
that he delivered his letter to Dan Smith requesting changes to the draft
of the proposed contract he had received from the Appellant. I accept
Mr. Smeskal’s testimony that his request to negotiate the terms of the
contract prepared by the Appellant played a role in his termination rather than
it being attributable to the causes alleged by Mr. Young during his
testimony.
[23]
In any event, the case
law has established that the parties’ declaration of their intention to enter into
an independent contracting relationship is not in and of itself determinative
of the issue. In TBT Personnel Services v. Canada, 2011 FCA 256,
Sharlow J.A., writing the unanimous decision of the Court, cautions that
the factors outlined in Wiebe Door Services Ltd. v. M.N.R.,
[1986] 3 F.C. 553 (FCA), must nonetheless be applied to
determine whether the facts are indeed consistent with the parties’ description
of their relationship. 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.]
[24]
In assessing the
relevance of contracts signed by the individuals involved in TBT Personnel
Services, Sharlow J.A. added:
35. Such intention clauses are relevant but not conclusive. The Wiebe
Door factors must also be considered to determine whether the contractual
intention suggested by the intention clauses is consistent with the remaining
contractual terms and the manner in which the contractual relationship operated
in fact.
[25]
The Wiebe Door
factors must be applied to determine whether the workers’ declared intentions,
if any, conform to the true nature of their relationship with the employer. Applying
these tests, does the evidence show that a particular worker is performing his
services in the course of a business conducted for his benefit?
III. Application of the Wiebe Door
factors
A. Control
[26]
The Minister assumed in
the replies to the notices of appeal that Mr. Young supervised the other
workers in his capacity as the Appellant’s shop manager. His duties included a
supervisory function. Mr. Young denies this, but he has failed to convince
me that such was not the case.
[27]
Mr. Sahly was
hired as a general labourer. He had no relevant work experience when he began
working for the Appellant. He testified that Mr. Young told him what to do
and supervised the performance of the duties that he was given. Mr. Smeskal’s
situation was similar to that of Mr. Sahly. He also started as a general
labourer. When he came to work he was assigned tasks by Mr. Young. It is
hard to imagine how unskilled workers would know what to do and how to do it if
no one explained their duties to them and showed them what was expected of
them.
[28]
Mr. Smeskal
alleges that Mr. Young and personnel appointed by Mr. Young trained
him on the equipment used to install and remove tires from rims and on the
equipment used to balance wheels. I cannot envisage it having been otherwise,
as Mr. Smeskal had no prior experience performing these tasks. Mr. Young
denied that he supervised the other workers but admitted that the business might
be closed if he decided to take a day off. This is an admission that the
Appellant’s workers could not be trusted to perform their duties on their own
without the benefit of Mr. Young’s supervision.
[29]
Mr. Young
acknowledged that it was he who dealt with the clients. The clients would line
up in the morning and be served on a first-come, first-served basis. If they
were unhappy with the service they received, they would complain to Mr. Young,
who would ensure that the work was redone in accordance with the client’s wishes.
In this context, it is hard to imagine how the shop could function smoothly if
Mr. Young did not exercise oversight over the workers.
[30]
Mr. Mozhar was likewise
an unskilled labourer when he was hired by the Appellant to work in its used
tire division. He did not speak English and his daughter acted as a translator
when he was hired. In these circumstances it appears highly unlikely that he
could have performed his duties without proper training and supervision. I do
not doubt that he learned his tasks quickly, which allowed him to enjoy greater
autonomy in the exercise of his duties. However, the case law has established
that it is not the actual exercise of control that matters. What is important
is the employer’s ability to exercise control.
[31]
Very little evidence
was presented on the working conditions of Mr. Ganopolsky. I assume that,
as asserted by the Minister, his situation was analogous to that of the other
four unskilled workers. The Appellant did not prove otherwise and it had the
burden of doing so.
[32]
Mr. Young denied
that he was subject to the direction and control of Mr. Smith, the sole
shareholder of the Appellant. Mr. Sahly and Mr. Smeskal claimed the
contrary. They testified that they had observed Mr. Young seeking
direction from Mr. Smith. Mr. Smeskal’s testimony is corroborated by
the circumstances surrounding the termination of his services. According to that
witness, Mr. Young told him that the decision to fire him was made by
Mr. Smith. Mr. Young did not have the authority to ignore
Mr. Smith’s wishes in this regard. The termination letter was signed by
Mr. Smith. This suggests to me that Mr. Smith was instrumental in the
decision and that Mr. Young was tasked with breaking the unpleasant news
to Mr. Smeskal.
[33]
Mr. Smith wanted
his workers to be independent contractors and Mr. Young was charged with convincing
the workers to accept this status. Mr. Smith wanted written contracts to be
executed by the workers following the CRA audit, and Mr. Young endeavoured
to cause this to be done. Mr. Smeskal attempted to negotiate the written
agreement presented to him by the Appellant, and Mr. Young told him he was
fired after discussing the matter with Mr. Smith. Mr. Young testified
that he forwarded mail to Mr. Smith, as he did when he received letters
from the CRA concerning the matters in dispute here. In my opinion, the fact
that he did not report to Mr. Smith on a daily basis does not detract from
the fact that ultimate control over the Appellant’s business resided with
Mr. Smith. Mr. Young was required to comply with Mr. Smith’s business
philosophy. This aspect of the test thus points to the existence of an
employer/employee relationship.
[34]
I note that my findings
on the respective roles of Mr. Smith and Mr. Young are consistent
with the findings of Deputy Judge Weisman who, in A & T Tire & Wheel
Limited v. The Minister of National Revenue, 2009 TCC 640, held
that Justin Bunn, a worker employed by the Appellant from mid‑2006 to
September 2008, was an employee of the Appellant. In that case, Deputy Judge Weisman
placed importance on Mr. Smith’s admission that he had hired Mr. Young
to manage the business in a manner consistent with his business philosophy.
Mr. Smith testified that Mr. Young was tasked, inter alia,
with ensuring that the workers adhered to Mr. Smith’s stringent safety
standards for removing and installing wheels and tires. Mr. Smith was not
called as a witness by the Appellant in these appeals. Given his position as
the sole shareholder of the company, Mr. Smith was in the best position to
give material information on the facts, including the intention of the
Appellant regarding the nature of its relationship with the workers and the
reasons behind Jason Smeskal’s dismissal. A negative inference may be drawn
from the fact that he was not called as a witness. The evidence as a whole
shows that Mr. Smith’s role in the business was more important than that
described by Mr. Young.
Ownership of Tools
[35]
Mr. Smeskal and
Mr. Sahly provided their own work boots. The Appellant provided the
uniform, tools, equipment and premises used to install and remove wheels and
tires. No specific evidence was led by the Appellant with respect to the tools
or equipment used by Mr. Ganopolsky and Mr. Mozhar. I assume that
their situation was analogous to that of Mr. Smeskal and Mr. Sahly.
In the case of those workers, this test points to the existence of an
employer/employee relationship.
[36]
Mr. Young testified
that he owned some of the tools that he used to perform his duties. However, he
did acknowledge that all of the tools necessary to the discharge of his duties
were made available by the Appellant. The value of the tools and equipment
provided by the Appellant far exceeded the value of the tools belonging to
Mr. Young. At very best, this aspect of the test is not conclusive in the
case of Mr. Young.
Chance of Profit/Risk of Loss
[37]
With respect to four of
the five workers, the evidence shows they were all paid an hourly wage for
their services. Nobody earned more than $11.00 per hour, save Mr. Young.
Mr. Young benefited from a profit-sharing arrangement, but this incentive
arrangement is not inconsistent with a finding that he was an employee of the
Appellant. All of the workers were granted paid time off for vacation. The
amount paid to them was labelled as “VP” in the Appellant’s accounting ledgers.
VP is an abbreviation for “vacation pay”.
[38]
The workers were not charged
for the use of the Appellant’s property. Mr. Young suggested in his
testimony that the workers would be charged if they damaged more than one tire
or wheel annually. The evidence shows, however, that none of the workers were
held financially liable for any damage despite the fact that Mr. Smeskal
testified that he had damaged at least two rims in the same year.
[39]
The Appellant maintains
that the workers could have hired workers to assist them in their duties. However,
none of the workers made enough money to make this a practical option.
[40]
The workers performed
all of their services on the Appellant’s premises. The Appellant controlled the
maximum number of hours that they could work. The shop would be open during
regular working hours, or for scheduled overtime, only if Mr. Young was
present.
[41]
The Appellant alleged
that the workers had the opportunity to make a profit by working more hours. In
the case of Mr. Smeskal, he asked for a raise that was eventually granted.
Some evidence was adduced to show that the workers were able to use the shop premises
to service vehicles belonging to friends and family, for which they could be
directly compensated in kind or with a “case of beer”. This is insufficient to
provide a real opportunity for profit. Working overtime and requesting a pay
raise are consistent with an employer-employee relationship. Using shop
facilities to provide services to friends and family is akin to using an
employee discount for friends and relatives.
[42]
In light of the
evidence and the application of the Wiebe Door tests, I conclude that
the workers were employees of the Appellant throughout the period under review.
Therefore, the Minister’s determinations are confirmed.
Signed at Ottawa,
Canada, this 8th day of May 2012.
“Robert J. Hogan”
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