Citation: 2011 TCC 570
Date: 20111222
Dockets: 2011-1986(EI)
2011-1988(CPP)
BETWEEN:
COPPER CREEK HOMES INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Rowe D.J.
[1]
The Appellant, Copper
Creek Homes Ltd. (“Copper Creek”) appealed from two decisions issued by the
Minister of National Revenue (the “Minister”) on May 5, 2011, pursuant to the Employment
Insurance Act (the “Act”) and the Canada Pension Plan (the “Plan”),
wherein the Minister decided Abraham Wiebe (“Wiebe”) was employed in both
insurable and pensionable employment with Copper Creek during the period from
January 1, 2010 to September 2, 2010, because he was engaged under a contract
of service.
[2]
Counsel for the Respondent
and Marvin Falk (“Falk”), agent for Copper Creek agreed both appeals could be
heard together.
[3]
Falk testified that he
is Secretary of – and a shareholder in – Copper Creek which was incorporated in
May, 2006. It builds homes either as a primary contractor or as a manager of
construction in which case it prepares a cost analysis and oversees the
subcontractors for which it charges a fee based on a percentage of the total
cost of the project. If Copper Creek is acting as the builder, it hires
sub-trades and proceeds to manage the project in the same manner as when
representing a client. As an example of the accounting method utilized by
Copper Creek, Falk filed a spreadsheet – Exhibit A-1 – dated October 29, 2010.
Although that date is beyond the end of the period relevant to the within
appeals, this method was in place earlier and the purpose was to track actual
costs at various points within the overall construction process and to compare
them to initial budgeted amounts. Falk stated Wiebe had worked as a carpenter
for Copper Creek in 2008 and was paid the hourly rate of $25 per hour which
remained in effect during the relevant period. Falk stated Wiebe was informed
that Copper Creek wanted him to provide his services as an independent
contractor and that Wiebe agreed. During the relevant period in 2010, Wiebe’s
duties varied, as required, and included cutting grass, inspecting houses,
cleaning houses, picking up materials and supplies, building forms for concrete
driveways, and correcting deficiencies on otherwise completed homes. Falk spoke
with Wiebe each day and specific duties were assigned and they also discussed
matters at the end of most working days. In the interim, Wiebe was not supervised
because he was an experienced and capable worker, familiar with the business
activities of Copper Creek. Usually, the workday consisted of 8 hours but
sometimes more time was required to complete certain tasks. Falk stated he
attended at various worksites to supervise the sub-trades. On occasion, when
there was a revision to an original plan, instead of bringing back the original
framing crew, Wiebe did the additional framing to accommodate that change.
Wiebe submitted his hours worked – by e-mail – to the Copper Creek bookkeeper
and was paid by cheque every two weeks. Wiebe owned his own hand tools and was
not reimbursed by Copper Creek for their use but larger tools and certain
equipment were rented by the corporation, when required. If Wiebe had to purchase
fuel to operate a generator or other equipment at a worksite, he was reimbursed
by Copper Creek. A receipt – Exhibit A-2 – is an example of the type of expense
incurred by Wiebe and submitted to Copper Creek along with his hours worked in
a pay period. Wiebe used his own vehicles – a ½ ton GMC pick-up or a Jeep
Cherokee – to travel from his residence to various job sites around the Lower
Mainland and was not reimbursed for the expense associated therewith nor was he
compensated for using his cell phone. Falk stated the amount of travel varied
depending on the work locations and estimated that Wiebe drove up to 200
kilometers some weeks in the course of his work and communicated – by cell
phone – with Falk and other persons involved in the various construction
projects. Falk acknowledged that Wiebe was required to perform the services
personally and stated they had not discussed any scenario whereby Wiebe would
hire a substitute or assistant to perform the work. Copper Creek did not
provide any benefits – usually associated with employment status – to Wiebe.
Although it was rare that Wiebe made a mistake, he was paid his regular hourly
rate to correct any error. Falk stated the hours worked by Wiebe were driven by
demand and during certain periods Copper Creek had 5 projects underway. Falk
filed – as Exhibit A-3 – respectively, a letter from Canada Revenue Agency (“CRA”)
– dated October 8, 2010 – addressed to Wiebe, a Goods and Services Tax,
Harmonized Sales Tax (GST/HST) Registration Notice and a Notice of Overdue
Return(s). The first paragraph of the October 8th letter informed
Wiebe that CRA had opened a Business Number and account on his behalf and the
Registration Notice stated that his registration for purposes of GST/HST was
effective as of November 1,
2008. Falk stated that in
May, 2010, Wiebe inquired about his work status as he was concerned about owing
income tax to CRA on monies earned from Copper Creek. Falk stated the company
was willing to commence making source deductions but the matter did not arise
again until September 2, 2010 - the last day of the working relationship – when
Wiebe’s services were no longer required due to a slowdown in the regional
residential construction industry. Falk stated Wiebe had never held out that he
was operating a business under a trade name. However, he understood that Wiebe
had done carpentry work for other people during 2010 and at other times since
2008. During the relevant period, Copper Creek did not have any workers on a
payroll as employees and persons such as finishing carpenters or workers
pouring concrete had been hired to provide specific services at an hourly rate.
Each of these workers did so personally and not via any business entity. Copper
Creek had paid the Workers’Compensation Board (“WCB”) premiums for Wiebe in
accordance with the standard practice that ensures every person working on a
site is covered. Falk stated Copper Creek checked the WCB website to ascertain
whether a worker/service provider had an account and if so, whether it was in good
standing. If an account was delinquent, Copper Creek would hold back – from
money owing to a subcontracting individual or business entity – an amount
sufficient to satisfy the outstanding balance and submit it directly to WCB.
[4]
In cross-examination by
counsel for the Respondent, Falk stated there was no written agreement between
Copper Creek and Wiebe and that their initial discussions concerned only the
hourly rate. Although Wiebe spoke – on two or three occasions – about being
placed on a regular payroll, that matter was not pursued by Wiebe subsequent to
being informed that the hourly rate would have to be reduced from $25 to about
$17 if Copper Creek was required to remit Employment Insurance (EI) premiums
and Canada Pension Plan (CPP) contributions and to remit income tax to CRA on a regular basis. Falk stated Wiebe did not agree
to this reduction and the matter was not pursued further. Falk confirmed that
work was assigned to Wiebe either during a meeting or by cell phone but they
saw each other almost every day. Wiebe sometimes started later than usual if
waiting for equipment to arrive on site. If Wiebe needed some time off, he
requested it in advance. Falk acknowledged that – once – he had to be away for
a certain period and informed Wiebe that his services were required during that
absence. Falk stated that although Wiebe had his own hand tools, some items
such as shovels or brooms were provided by Copper Creek when needed on a
specific project. Falk agreed that it was not practicable for Wiebe to hire an
assistant or substitute and if extra help was required, Copper Creek retained
the services of a qualified person. In 2008, Wiebe had worked with Falk on
certain projects undertaken by Weststone Auguston Homes (“Weststone”) and the
amount attributable to the work done by Wiebe – and paid for by Weststone
directly to Wiebe – was the subject of an invoice by Weststone to a numbered
company – 0774441 B.C. Ltd. – operated by Falk, for services provided between
October 9 and November 25, 2008. An invoice and others with attached time
sheets were filed as Exhibit R-1 and Wiebe is identified therein as an employee
only in those where Copper Creek was seeking payment from the client.
Sometimes, as a result of having been on the site of the home construction, the
owners hired Wiebe to perform some service but that was done personally and did
not involve Copper Creek.
[5]
The agent for the Appellant
closed its case.
[6]
Abraham Wiebe testified
he is a construction worker and had worked for Copper Creek for nearly 3 years
performing those duties described earlier by Falk. He agreed there had been no
written contract and that their initial discussions concerned only the
applicable hourly rate of $25. During the relevant period when he had inquired
about being treated as an employee subject to the usual deductions, Falk
informed him that his hourly rate would have to be reduced to about $17.50 per
hour which was unacceptable. Wiebe agreed that he met with Falk nearly every
day to discuss work and that they communicated regularly by cell phone. He
requested time off – in advance – and was informed by Falk that he had to work
during a certain period when Falk was absent. Wiebe purchased certain small
items such as saw blades and did not seek reimbursement. He also paid all
expenses associated with operating his own vehicle when travelling to and from
work and between various work sites. Wiebe was referred to a bundle of sheets –
Exhibit R-2 – on which receipts had been photocopied. Wiebe stated Copper Creek
had reimbursed him for those purchases. Wiebe stated he understood that his
services were required to be performed personally and had not contemplated
hiring any helper. He kept track of his own time and printed out sheets –
Exhibit R-3 - which he sent to the Copper Creek office every two weeks. He was
paid by cheque and received a pay sheet – Exhibit R-4 – indicating the period
worked, the deduction of 4.4% attributable to his WCB premium – paid by Copper
Creek on his behalf – and the net amount payable. Wiebe stated that he did not
have time to work for others since Copper Creek occupied all of his time from
some point in 2008 until September 2, 2010. He was not entitled to any bonuses
nor was he penalized for having to undertake a repair due to his mistake. When
he worked for Weststone, he prepared time sheets and it paid him by cheque.
Falk had worked with Wiebe on some of the Weststone projects prior to 2010.
Wiebe stated he had not requested CRA to issue a
business number and that he had contacted that agency and the account opened on
his behalf has since been cancelled. Wiebe stated he had not operated a
business during the relevant period and did no work for others. As he had done
in 2008 and 2009, Wiebe filed his 2010 income tax return on the basis he had
earned business income and deducted expenses associated with the use of his own
vehicles. He estimated that the amount of those deductions may have been “a
couple of thousand dollars” for repair and fuel and parts. Wiebe’s tax preparer
also deducted the cost of some small tools he had purchased. Wiebe stated that
during his working career he had been an employee with source deductions taken
from his pay cheques, except for one situation prior to his relationship with
Copper Creek.
[7]
The agent for Copper
Creek did not cross-examine.
[8]
The Respondent closed
his case.
[9]
The agent for the Appellant
submitted that the evidence adduced in the within appeal had demonstrated that
from 2008 and throughout the relevant period, the working relationship was
based on Wiebe providing his services to Copper Creek as an independent
contractor. Although tasks were assigned, Wiebe was not under any direct
control or supervision. He used his own tools and incurred the expense of
operating his own vehicles for work. Further, Wiebe had borne the expense of
his cell phone and filed income tax returns on the basis he had generated
business income, against which he claimed expenses. The agent submitted that
the clear understanding between the parties at the beginning of their
relationship is sufficient to tip the balance in favour of finding that Wiebe
was not employed under a contract of service and that the decision of the
Minister was incorrect.
[10]
Counsel for the Respondent
submitted that Wiebe was provided with instructions by Falk on a daily basis
either in the morning or throughout the day by cell phone communications. Wiebe
was a reliable and trusted worker but requested time off and was instructed to
work during a period when Falk was going to be absent. The work Wiebe had
performed for Weststone was in 2008 and not relevant to the period under appeal
in 2010. Counsel submitted it was beyond dispute that Wiebe had to perform the
services personally and there was no opportunity to profit in the sense
required by the jurisprudence. Counsel submitted the decisions of the Minister
were correct and ought to be confirmed.
[11]
In several recent cases
including Wolf v. The Queen, 2002 DTC 6853, Royal Winnipeg Ballet v. M.N.R. (F.C.A.), 2006 FCA 87 (CanLII) (“Royal Winnipeg Ballet”),
Vida Wellness Corp. (c.o.b. Vida Wellness Spa) v. Canada (Minister of
National Revenue - M.N.R.), [2006] T.C.J. No. 570 and City Water International Inc. v. Canada, 2006 FCA 350 (CanLII) (“City
Water”), there was no issue in this regard due to the clearly-expressed
mutual intent of the parties that the person providing the services would be
doing so as an independent contractor and not as an employee. That is not the
case in the within appeals. There is no written agreement and the relevant
period is in 2010. Wiebe’s position is that he wanted to be treated as an
employee and although the matter had been discussed two or three times, it was
not pursued when it became apparent from speaking with Falk that Copper Creek
would reduce his hourly rate from $25 to $17 or $17.50 if source deductions
were taken from Wiebe’s cheques and remitted to CRA.
The issue of intent is muddled somewhat by the nature of a work association in
2008 when Falk – as an officer of a numbered company – was providing services
to Weststone on the same sites as Wiebe who billed directly – and was paid – by
Weststone. Copper Creek was not involved in those transactions. It is the
relevant period that must be analyzed in accordance with the jurisprudence.
[12]
The Supreme Court of Canada in 671122
Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983 – (“Sagaz”)
dealt with a case of vicarious liability and in the course of examining a
variety of relevant issues, the Court was also required to consider what
constitutes an independent contractor. The judgment of the Court was delivered
by Major, J. who reviewed the development of the jurisprudence in the context
of the significance of the difference between an employee and an independent
contractor as it affected the issue of vicarious liability. After referring to
the reasons of MacGuigan, J.A. in Wiebe Door Services Ltd. v. Canada
(Minister of National Revenue - M.N.R.), [1986] 3 F.C. 553 and the
reference therein to the organization test of Lord Denning - and to the
synthesis of Cooke, J. in Market Investigations, Ltd. v. Minister of Social
Security, [1968] 3 All E.R. 732 - Major, J. at paragraphs 47
and 48 of his judgment stated:
47 Although
there is no universal test to determine whether a person is an employee or an
independent contractor, I agree with MacGuigan J.A. that a persuasive approach
to the issue is that taken by Cooke J. in Market Investigations, supra. The
central question is whether the person who has been engaged to perform the
services is performing them as a person in business on his own account. In
making this determination, the level of control the employer has over the
worker's activities will always be a factor. However, other factors to consider
include whether the worker provides his or her own equipment, whether the
worker hires his or her own helpers, the degree of financial risk taken by the
worker, the degree of responsibility for investment and management held by the
worker, and the worker's opportunity for profit in the performance of his or
her tasks.
48 It
bears repeating that the above factors constitute a non-exhaustive list, and
there is no set formula as to their application. The relative weight of each
will depend on the particular facts and circumstances of the case.
[13]
I will examine the
facts in the within appeals in relation to the indicia set forth in the
judgment of Major, J. in Sagaz.
Level of control
[14]
Wiebe was an experienced, reliable
worker capable of performing various construction-related duties without
supervision. He was assigned work by Falk each morning and received
communications during the day when necessary if the work schedule had to be
modified. There was no evidence to suggest that Wiebe was free to come and go
as he pleased and any delay in starting work was caused by having to wait for
tools, supplies or rented equipment to be delivered to the work site. Wiebe
understood that he had to remain at work while Falk was absent for a specified
period even though he had requested time off. Wiebe did not consider that he
had the right to refuse any work assignments. The work performed by Wiebe was
directed by Falk and they met often at the end of the working day to discuss
events.
Provision of equipment and/or helpers
[15]
Wiebe used his own hand tools
which is normal within the construction industry. Some small items were also
provided by Copper Creek and it rented larger equipment when required by
specific projects. Wiebe was required to perform his services personally and if
he required assistance, Falk retained someone and Copper Creek paid for the
work.
Degree of financial risk
and responsibility for investment and management
[16]
The only expense incurred by Wiebe
was the cost of operating one or other of his motor vehicles during the
performance of his duties but that would not put him into a deficit position
since he was earning $25 per hour and working full-time and – sometimes – extra hours throughout the
relevant period. He did not have any investment in any equipment beyond the
older-model vehicles and his hand tools. He used his personal cell phone for work
when required. Wiebe was not required to carry out any management function when
performing his duties as Falk handled all matters pertaining to supplying
workers or equipment and supplies to a site. Wiebe picked up certain items and
delivered them to various work sites in the course of his assigned duties.
Although a rare occurrence, even when required to correct an error, Copper
Creek paid him the regular hourly rate. The lack of job security within the
construction industry during the fall 2010 was attributable to the economy in
the Lower Mainland rather than the status of their working relationship.
Opportunity
for profit in the performance of tasks
[17]
Wiebe was paid an hourly rate of
$25. There was no provision to receive a bonus or overtime pay. He did not
participate in any profit-sharing mechanism.
[18]
The agent for the Appellant relied
on the decision in the case of Panache Fine Cabinetry Ltd. v. The Minister
of National Revenue, 2008 TCC 513 wherein Justice Webb held that a cabinet
maker – Mancini – was an independent contractor based on the mutual intention
of the parties in accordance with the decision of Royal Winnipeg Ballet,
supra. Justice Webb found that the worker could set his own hours of work
and was able to work for other clients and had done so and could perform work
for the payor at his own home but did so mostly at the payor’s premises. He was
retained to build cabinets according to the specifications dictated by the
payor’s clients. The issue of tools in that case was not a helpful factor in
the analysis and Mancini understood he could not hire other workers, although
the payor’s position was contrary. Mancini did not incur any financial risk and
earned a set amount per hour but could work for other clients.
[19]
The facts in the within appeals
are similar to those in the case of Stephen Twilley v. The Minister of
National Revenue (“Twilley”), 2009 TCC 524 that I heard in 2009. In that
case the worker agreed to provide his services at the flat rate of $25 per
hour. The payor – Twilley – was charging his customers a flat rate based on a
certain amount per square foot.
[20]
In Twilley, counsel
for the appellant relied on my decision in the case of Beaver Home
Improvements Ltd. v. Canada (Minister of National Revenue – M.N.R.), [2003] T.C.J. No. 56 (“Beaver Home”). In that
case, I found the worker to have been an independent contractor when
undertaking roofing work for which he was paid by Beaver. There are some
significant differences in the facts between that case and those in the within
appeals. First, the only attendance at the job site by anyone from Beaver was a
salesperson/estimator for the purpose of ensuring the work conformed with the
demands of the customer. Second, 90% of the time, the jobs were ordinary and
could be performed by using the personal hand tools and other equipment owned
by the worker. If specialized equipment was required, it was provided by
Beaver. The worker – O’Flynn – used his own vehicle to travel to and from work
and also transported his fellow workers as a matter of convenience. Beaver
provided O’Flynn’s helpers with tools and equipment.
[21]
In the Beaver Home case,
there was not a significant amount of financial risk and O’Flynn received
payment from Beaver whether or not the homeowner paid the invoice and the
helpers were paid directly by Beaver. However, there was an opportunity for
profit because of a particular revenue-sharing arrangement whereby O’Flynn
could gain a profit from work performed by another worker. He also had the
right to accept or decline a job and could negotiate for an additional payment
if the project turned out to be more difficult than anticipated. In Beaver
Home, I found O’Flynn had the ability to increase his own income by
operating in an efficient manner and by exercising supervision over other
workers to ensure efficiency. At paragraph 27 of that decision, I commented as
follows:
27 That leaves
the central question to be decided. Was O'Flynn providing services to Beaver as
a person in business on his own account or was he performing them in his
capacity as an employee? In this case, there is no doubt that he had -
initially - been an employee of Beaver and, thereafter, both parties had agreed
the nature of the working relationship should be transformed into one involving
two entities each carrying on a specific activity within the context of an
overall industry. One must remember that Beaver also had its own employees who
were installers, apart from the trainees working on O'Flynn's crew. In fact,
about 40% of roofing and siding installations were undertaken by Beaver
employees rather than by offering those jobs to the pool of roofers. Beaver
also undertook new home construction, renovation, deck, patio, sun-room
construction, and installation of siding. All work except for roofing and/or siding
installations was performed by workers having the undisputed status of
employees. That range of supply of material and services constituted the Beaver
business, while the business of O'Flynn was to perform the installation of
specified material in a satisfactory manner and, by doing so, becoming entitled
to collect an agreed-upon amount from which he had to account to his
co-venturer - Aspinall - for 40% of the revenue attributable to the overall
work performed. In a sense, O'Flynn, Aspinall and Beaver were co-venturers on
each job since Beaver incurred the expense of paying the wages for the two
helpers and provided them with tools and equipment. In accordance with that
working arrangement, O'Flynn and Aspinall were then able to divide the balance
of the remuneration attributable to a job without having to share it with other
workers/partners who would probably require more remuneration for their
services than that paid by Beaver to the helpers as mere trainees.
[22]
As for the purported agreement at
the outset that Wiebe provide his services to Copper Creek as an independent
contractor, although there was no coercion, that status was offered by Falk on
a “take-it-or-leave-it” basis at the negotiated hourly rate and the working
relationship – in 2008 – commenced on that basis. Wiebe was providing his
services to others – including Weststone – at that time but had not registered
with GST nor had he considered that he was carrying on his own business. The
manner of filing his income tax returns for the years 2008 and 2009 was
dictated by the absence of a T4 slip from Copper Creek and in 2010 his return
was prepared – again – by his tax preparer on the basis the money earned was
business income. The manner of filing is not determinative nor is the arbitrary
issuance of a GST/HST number to Wiebe, which was probably based on the filing
of his income tax returns wherein he reported business income and claimed
appropriate deductions.
[23]
The central question posed in Sagaz,
supra, is:
… whether the
person who has been engaged to perform the services is performing them as a
person in business on his own account.
[24]
The evidence in the within appeals
does not indicate Wiebe was carrying on business on his own account during the
relevant period. The business registration was thrust upon him by the Minister
and it has been cancelled. Wiebe did not work for others during the period at
issue and did not advertise his services nor did he consider that he had any
status other than as an employee who should have been on the Copper Creek
payroll. The overall evidence strongly favours a finding that Wiebe was
employed by Copper Creek pursuant to a contract of service. Their conduct was
consistent with that status even though Wiebe’s earlier working relationship
with Copper Creek – and the numbered company – may have been sufficiently
different to have justified the decision of the Minister to issue Wiebe a
business account number. Those circumstances are not before me except by way of
background to explain the origins of the relationship between Wiebe and Falk
and Wiebe and Copper Creek. Whether a clear expression of mutual intent would
have saved the day for the Appellant is doubtful in any event but it was not a
reliable factor in the within appeals. There was no true meeting of the minds
on this point and early in 2010, Wiebe sought to have his status characterized
as an employee. It was apparent that Falks’ statement that Wiebe’s hourly rate
would have to be reduced from $25 to $17 or $17.50 if he were to be treated as
an employee and subject to source deductions, was a negotiating ploy on his
part that put an end to Wiebe’s inquiries on that point. The difference of $7
or $7.50 per hour amounted to 30% which was disproportionate to the percentage
of earnings required to be paid by the employer when making remittances
pursuant to the Act and the Plan which – to a certain maximum not
relevant here – are based on 2.42% and 4.95% or earnings, respectively.
As an employer, Copper Creek would have been responsible for paying the 4.4%
WCB premium so the total percentage payable by Copper Creek would have been
11.77%. Based on the hourly rate of $25, that would have reduced Wiebe’s pay by
$2.94.
[25]
In the case of Standing v. Canada
(Minister of National Revenue – M.N.R.)(F.C.A.), [1992] F.C.J. No. 890 Stone, J.A. stated:
... There is
no foundation in the case law for the proposition that such a relationship may
exist merely because the parties choose to describe it to be so regardless of
the surrounding circumstances when weighed in the light of the Wiebe Door test.
...
[26]
The Appellant has not discharged
the burden of demonstrating that the decisions issued by the Minister were
incorrect. Therefore, they are confirmed and both appeals are dismissed.
Signed
at Sidney, British Columbia this 22nd day of December 2011.
“D.W. Rowe”
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