Consumer Concepts Corp. v. M.N.R., docket 1999-2406-EI

Date: 19991214

Docket: 1999-2406-EI; 1999-2408-CPP

BETWEEN:

CONSUMER CONCEPTS CORPORATION,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

Reasons for Judgment

Cain, D.J.T.C.C.

[1] These are appeals by Consumer Concepts Corporation, hereinafter called the “Appellant”, from a ruling of the Minister of National Revenue, hereinafter called the “Respondent” made after a request from the Appellant for the determination of the question of whether or not Chantal Gelinas, hereinafter called “Worker”, was employed in insurable and pensionable employment while engaged by the Appellant for the period May 23, 1997 to April 9, 1998 within the meaning of the Employment Insurance Act, hereinafter referred to as the “Act” and the Canada Pension Plan respectively.

[2] At the outset the parties agreed to combine the appeals, to proceed with the appeal relating to employment insurance and then apply the evidence led in that appeal to the appeal relating to the Canada Pension.

[3] From the evidence adduced the Court makes the following finding of facts.

[4] The Appellant carries on the business of displaying manufacturer’s products in retail settings. The Appellant enters into contracts for the provision of that service with the manufacturer at an agreed price and then engages personnel to effect the actual display.

[5] The Appellant operates throughout Canada and in the various regions of the country employs area managers whose function it is to engage persons to display products, with the knowledge and consent of the Appellant, to negotiate hourly working rates and to arrange with retail establishments the time of display, the location within the store and when the display is completed to receive and approve the invoice presented by the displayer.

[6] The manufacturer, before engaging the Appellant, determines where the product should be displayed and makes the initial arrangement with the retail store or chain as the case may be. The manufacturer provides sample product, identifies the retail establishment where the product is to be displayed and the time and duration of such display. In turn the area manager liaises with the store manager at each location to work out the specific details.

[7] The Appellant receives from the manufacturer and through the area manager provides the displayer with written instructions. These give background information on the product being displayed, the objectives of the display, step by step instructions on how to set up and maintain the display, suggested scripts and instructions as they relate to presentation, deportment and dress.

[8] When displaying liquor in a government outlet, the displayer is required to purchase the product from the outlet and food stuff from a local store or bakery for which he or she is reimbursed by the Appellant.

[9] The displayer is required in some cases to provide a table on which the product is displayed and also some form of decorative basket or flower arrangement as a centre piece.

[10] When the display is completed the displayer files with the area manager an invoice on a pre-printed form of the Appellant for the agreed hours at the agreed rate together with any out of pocket expenses which is sent to the Appellant who pays the displayer by cheque.

[11] A displayer once engaged, if she or he was satisfactory, would be called by the area manager or the Appellant from time to time to display other products. He or she could refuse to work. But such refusal would not necessarily eliminate her from future consideration and he or she could also work for competitors of the Appellant. While displayers once engaged could select someone else to complete the employment, the area manager was usually involved in the change and the replacement would have to be a person who was considered suitable.

[12] During the period in question, the Appellant engaged the Worker to display such products in several retail settings.

[13] The area manager in question negotiated an hourly rate, the Worker performed basically the services hereinabove described, submitted her invoices and was paid by cheque. Evidence of her employment was introduced as Exhibits A-1, A-2, A-3 and A-4. Included in some of the Exhibits were comments by store managers and in some cases the store manager signed the invoice. In some cases the approval of the area manager was evidenced by his signature.

Submissions

[14] The Appellant submitted that the Worker was an independent contractor engaged under a contract for services and not under a contract of service for the following reasons:

- That the Worker could refuse at any time to work a requested engagement and was free to work for competitors of the Appellant.

- That during the performance of her service the Worker was not under supervision and was entitled to change her hours of work after consultation with the store manager and without consultation with the Appellant or the area manager.

- The Worker could engage substitutes to perform after she had engaged to perform the service herself.

- The real question for the Court to decide is whose business is the Worker carrying on, her own or that of the Appellant’s and refers the Court to Wiebe Door Services Ltd. v. M.N.R. 87 DTC 5025, Moose Jaw Flying Fins Inc. v. Minister of National Revenue, 88 DTC 6099 and Drummond v. Canada (Minister of National Revenue - M.N.R.) [1998] T.C.J. No. 309, DRS 98-11450, Court File Nos. 96-862(UI), 96-35(CPP), 96-918(UI) and 96-38(CPP)).

[15] The Respondent submitted that the Worker was engaged under a contract of service and none of the particulars of her employment as set out in the Appellant’s submission would qualify her as an independent contractor and refers the Court to Instore Focus Inc. v. Canada (Minister of National Revenue - M.N.R. [1986] T.C.J. No. 107 DRS 95-05616, Action No. 84-470(UI) a decision of Labelle, D.J.T.C.

Decision

[16] Wiebe (supra) confirmed that, while not exhaustive, the four tests most commonly referred to, to determine whether a contract is one of service or for the provision of services are (a) the degree or absence of control, exercised by the alleged employer; (b) ownership of the tools; (c) chance of profit or risk of loss; and (d) integration of the alleged employee’s work into the alleged employer’s business. The following is an analysis of the evidence as it relates to those tests.

Control

[17] In this case, while the Worker was alone in the retail establishment, she was controlled in the sense that the area manager supervised her work from time to time and she worked in accordance with instructions received from the Appellant and/or the manufacturer or distributor of the particular product being displayed.

[18] The Worker was employed to work a set number of hours over a set period of time, which times were established by the area manager in consultation with the store manager of the retail outlet where the goods were being displayed.

Ownership of Tools

[19] The Worker was in some cases required as a term of her employment to provide a table on which the product would be displayed and also some decorative arrangement to enhance the display. The food or item to be displayed was provided by the manufacturer and any additional items that might be required for the display was purchased by the Worker and she in turn was reimbursed by the Appellant.

Chance of Profit or Risk of Loss

[20] The remuneration of the Worker was fixed at the time of her engagement and that remuneration could not be increased by her performance on the job and could only be decreased if she failed to do the display within the terms of her employment.

The Integration Test

[21] The Appellant was in the business of displaying products for manufacturers or distributors. The work performed by the Worker was an integral part of the Appellant’s business.

[22] In Weibe (supra) it was decided that a Court cannot deal with each of the above tests in isolation but rather as a four-in-one test with emphasis always retained on the combined force of the whole scheme of operations even while the usefulness of the four subordinate criteria is acknowledged. The Court suggested that the best synthesis of this principle is found in the words of Cooke J. in Market Investigations, Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732 at 738-9 where he said:

"The observations of Lord Wright, of Denning L.J., and of the judges of the Supreme Court in the U.S.A. suggest that the fundamental test to be applied is this: "Is the person who has engaged himself to perform these services performing them as a person in business on his own account?" If the answer to that question is "yes", then the contract is a contract for services. If the answer is "no" then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors, which may be of importance, are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk be taken, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task. The application of the general test may be easier in a case where the person who engages himself to perform the services does so in the course of an already established business of his own; but this factor is not decisive, and a person who engages himself to perform services for another may well be an independent contractor even though he has not entered into the contract in the course of an existing business carried on by him."

[23] The Court in Weibe (supra) stated that there is no escape for the trial judge, when confronted with such a determination, from weighing all of the relevant factors as outlined by Cooke J.

[24] In Instore Focus Inc. (supra) the facts are similar to the facts in this case. There is some difference in what the Payor and the Worker were required to supply but these differences were minuscule and not relevant. The engagement of the Worker, the training, the organization of the display, the right to refuse to work if the Worker had been employed before, the right of the Worker to arrange for a replacement if unavailable to complete the engagement personally and the method of reporting and receiving remuneration were the same.

[25] At page 21 of the above judgment the learned Judge said:

“It has been proven that Instore Focus Inc. was incorporated for the purpose of promoting the sale of food products. Mr. Salt would contact food producers such as Kellogg, Colgate, Heinz, General Food and others to offer the promotion services of his company. He would then contact food stores, mostly important chain stores such as Steinberg, A & P, Dominion, Woolco and others to have their consent to his promotion project, which would be beneficial to them. But this business extends from sea to sea so surveys are made all over and 40 to 45 districts were formed with a supervisors [sic] appointed. Then the instructions received from the furnishers of products are given from the head office of Instore to the district supervisors with the proper pamphlets and prepared pep talks. The supervisors then contact demonstrators who after meetings are ready to go to a store designated by the supervisor to make their demonstration with material purchased from the stores paid at retail price by Instore, with a kit of tables, umbrellas and aprons with Instore’s name again furnished by Instore, and sometimes with some material that belong to them but for the use of which they are compensated.

I consider this a perfect chain starting from the head office of Instore way down to the customer who will buy a bottle of Heinz catsup or some other food product. Without that chain there would be no promotion business for Instore. Supervisors and demonstrators are links of that chain. They are integral parts of their employer’s business. They are paid by Instore on a number of stores as supervisors and on an hourly basis as demonstrators.

There is supervision of the supervisors by the head office who tells them what to say, what to do and how to do it and in turn the demonstrators are told also by the supervisors what to say, what to do and how to do their work.

There is no risk of loss or profits as the supervisors are paid according to the number of stores under their supervision, not even on a commission basis, and the demonstrators are paid on an hourly basis whatever the amount of merchandise they sell.

It is true that the work is not on a steady basis and may be interrupted between demonstrations of a product and a demonstration of another one. But this is not casual excepted employment. There may be several contracts of service.

For instance a bricklayer may work three weeks for one contractor under a contract of service and his employment will be insurable. Then he may work another three weeks for a competitor of his first employer on another contract of service and he will be again insured. The same situation may happen here. In between two contracts of service with Instore, a demonstrator may have worked for a competitor, this does not change the nature of her employment.”

[26] In my view the above excerpt tracks the evidence in this case with minor and insignificant variations.

[27] Counsel for the Appellant submitted that the decision in Instore (supra) preceded the decision in Weibe (supra) and that the learned Judge approached the question of organization and integration from the persona of the employer and not from the persona of the employee. He particularly noted the comments of the author of the judgment, the late Mr. Justice McGuigan:

“Of course, the organization test of Lord Denning and others produces entirely acceptable results when properly applied, that is, when the question of organization or integration is approached from the persona of the “employee” and not from that of the “employer”, because it is always too easy from the superior perspective of the larger enterprise to assume that every contributing cause is so arranged purely for the convenience of the larger entity. We must keep in mind that it was with respect to the business of the employee that Lord Wright addressed the question “Whose business is it?”

[28] Counsel for the Appellant referred to Drummond (supra) and particularly paragraph 38 et sequitur. The learned trial Judge, Cuddihy D.J.T.C.C. summarizes the evidence that he ultimately accepts in paragraph 50. For the purposes of comparison it is necessary to quote from portions of the learned Judge’s reasons at some length. Starting at paragraph 38 he said:

“The evidence demonstrated the existence of a genuine contract and the issue is whether there is a relationship of subordination between the parties such that there is a contract of employment or whether there is not rather such a degree of autonomy that there is a contract for services.

The evidence at the hearing as to the initial agreement of the parties and the conduct of their affairs as a result are extremely important. It is also important to analyze the mutual dependency of the parties as a consequence of the contract between them in order to determine what the real intrinsic relationship was.

The Payor’s business is importing, distributing fine fragrances and related products. The Payor’s line of products is sold only to major department stores. The Payor does not operate retail stores of its own. The Payor is not a retailer and does not sell products to off the street customers.

The contract (Exhibit A-1) makes no mention of the Payor. It is only by the evidence that it is known that Michele Brunet was the Territory Manager for the Payor. It would appear, then, that the Territory Manager was the person that actually decided when and how many contract demonstrators would be needed and what fee would be allowed. This activity of the Territory Manager could possibly vary from one to another. The Territory Manager appeared to act on her own with the implicit consent of the Payor. Nothing in the evidence showed that she was authorized by the Payor to hire a person as an employee. The contract therefore was the principal document used to secure the services of the contract demonstrator and it must be accepted that if the contract was not signed as accepted, no work was provided and no fees payable. Therefore in analyzing the evidence, this basic contract was the foundation upon which rested the intentions of the parties and thus determined what the intrinsic relationship was between the Payor and the Worker through the activity of the Territory Manager.

In analyzing the evidence of the Worker and the questionnaire submitted to the Respondent (Exhibit R-5), the Worker was engaged on a contract basis, for an undetermined amount of hours, for no determined number of days. She was paid according to the number of hours she decided to work. If she worked more hours she was paid more, if she worked less hours or did not go to work she was not paid. She worked at the stores she chose. It is accepted that she worked at stores where Calvin Klein products were being sold but she could work for other competitors. This was not excluded in the contract. The services of the Worker would be carried out personally by the contract demonstrator. The Worker would not have hired someone else to perform her services but nothing in the contract (Exhibit A-1) or the evidence at the hearing could prevent the Worker form hiring another person to assist her while she was working at a particular store on a given day. ... The Worker was made aware either by the Territory Manager or the stores of the periods of promotion of Calvin Klein products but the decision as to what store, what hours and how she would perform her duties was the decision of the Worker. It did not appear that the Workers [sic] comings and goings were coordinated with the operations of the Payor. It is accepted that the contract demonstrator’s work was done for the stores who owned the products and indirectly for the Payor, the supplier. This work was not integrated to the Payor’s daily or weekly business but was only incidental to it. It was not part of the actual importing or distribution per se, of the products to the stores. The work had to do with the periodic promotional activity in selected stores at peak periods of the year. Although the stores sold those products on a day-to-day basis, the contract demonstrators services were not required on that basis. According to the evidence, the requirement of contract demonstrators was temporary and variable. The hours worked and invoiced to the Payor could vary from few to many hours. ...

The Worker when offered assignments could accept or refuse them. ...

The Worker did not have an existing business of her own. The Worker was free to choose the means of performing her work and no relationship of subordination existed between her and the Payor in respect of such performance. ... The demonstrator sales report (Exhibit R-2) was meant to show the hours worked. Any employee of a store could initial the hours and this was a requirement to be paid. ...”

[29] The following is a comparison of the evidence in Drummond (supra) with the evidence in the case at bar. In this comparison the contract demonstrator in Drummond will be referred to as the “Worker” since she was referred to by that appellation in the judgment notwithstanding that the Court was ultimately determined that she was an independent contractor.

[30] In Drummond (supra) the Worker entered into a contract directly with the manufacturer through the Territory Manager. While employed directly by the manufacturer, she was not an integral part of the manufacturer’s operation because the manufacturer did not sell retail and did not operate stores. The Worker’s comings and goings were not coordinated with the Payor’s operations. The learned trial Judge made that finding. In the case at bar the Worker entered into a contract with the Appellant whose function was to display manufacturer’s products and the Worker engaged to perform that task was an integral part of the Appellant’s business which was the display of manufacturer’s products.

[31] In the case at bar, the Worker was engaged to do a specific display at a specific time, for a specific duration, at a specific rate, in accordance with the contract entered into by the Appellant with the manufacturer. When the specific display was finished and the Worker remunerated, the contract was at an end. The Worker would enter into a new contract when engaged again by the Appellant. In Drummond (supra) the contract between the Worker was open ended, continued in full force and effect notwithstanding the number of engagements worked and could be performed at the whim of the Worker. She was not hired to work a specific number of hours or days. She was notified from time to time when certain promotions were offered by the manufacturer but she could pick the retail establishment where she wanted to work, the hours she wanted to work and how she would perform her duties. No relationship of subordination existed between her and the Payor in respect to her performance. She could perform the contract either by herself or a hired replacement if she so desired. Her invoice for payment merely had to be verified by any employee in the retail establishment where she conducted her promotion of the manufacturer’s product. She could work for competitors.

[32] If the Worker in Drummond (supra) did not promote the Payor’s product, she was not paid nor was any one hired in her place. If the Worker in the case at bar did not appear and display the product in accordance with her contract, she also was not paid but the Appellant through the area manager would engage someone else to conduct the display under a separate contract.

[33] It is clear that in both cases:

(a) the work done by both Workers was done for the retail establishment that sold the products of the respective Payors and for the Payors themselves.

(b) the Workers could refuse to enter into a contract and could work for competitors notwithstanding that they were engaged in a contract relationship with their respective Payors.

[34] Counsel for the Appellant alluded to the finding of the trial Judge in Drummond (supra) that the Territory Manager was not authorized to engage anyone as an employee. He submitted that there was no evidence that the area manager in the case at bar was so authorized. However, irrespective of what either manager would have called such an engagement, it is always a question of law whether a contract is one of service or for services and is not governed by what the parties may call it.

[35] Considering the above comparison, and applying the test in Weibe (supra), I am not satisfied that the Appellant has demonstrated that the Worker, Chantal Gelinas, showed a sufficient degree of autonomy to describe her work as a contract for services. She was supervised or at least the Appellant had the power to exercise control over her. With the exception of a table and centre piece she was provided with all the tools she needed to complete her task. There was no chance for her to make a profit over and above the agreed hourly wage and she could not suffer a loss, and finally her work was in fact the business of the Appellant and therefore an integral part of the Appellant’s business. The combined force of the whole scheme of operations placed her in the employer-employee relationship.

[36] The Appellant has failed to lead evidence to dispel or “demolish” the main assumptions of the Respondent on the balance of probabilities.

[37] I am satisfied that the answer to the question as to “Whose business is it?” must be that it is the business of the Appellant and that the contract entered into between Chantal Gelinas and the Appellant was a contract of service.

[38] The Appellant’s appeals are therefore dismissed.

Signed at Rothesay, New Brunswick, this 14th day of December 1999.

“Murray F. Cain”

D.J.T.C.C.