Date:
20021021
Dockets:
2000-3667(EI)
2000-3668(CPP)
BETWEEN:
BETH
MCMORRAN O/A MCMORRAN & ASSOCIATES,
Appellant,
and
THE
MINISTER OF NATIONAL REVENUE,
Respondent.
and
PAULINE
BAKKEN,
Intervener,
AND
Dockets:
2000-3669(EI)
2000-3670(CPP)
PAULINE
BAKKEN,
Appellant,
and
THE
MINISTER OF NATIONAL REVENUE,
Respondent,
and
BETH
MCMORRAN O/A MCMORRAN & ASSOCIATES,
Intervener,
AND
Dockets:
2001-2465(CPP)
2001-2467(EI)
2001-2468(EI)
2001-2469(CPP)
BETH
MCMORRAN O/A MCMORRAN & ASSOCIATES,
and
THE
MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Porter,
D.J.T.C.C.
Introduction
[1] These eight appeals were heard on common
evidence by consent of the parties, at Edmonton, Alberta, on the 8th, 9th and
10th days of April, 2002.
[2] The Appellants have each appealed and each
intervened in the appeals of the other to this Court from the decisions of the
Minister of National Revenue (hereinafter called the “Minister”) confirming an
assessment dated September 13, 2000 made upon Beth McMorran
(hereinafter called “McMorran”), for contributions in the amount of $4,004.30
under the Canada Pension Plan (“CPP”) and $7,033.72 for
employment insurance premiums under the Employment Insurance Act (the “EI
Act”), plus penalty and interest with respect to workers listed in Schedule
“A” attached to these Reasons, for the period January 1, 1999 to December 31,
1999, including specifically with respect to Pauline Bakken for the period
January 1, 1999 to November 1, 1999. McMorran had previously appealed the
assessment to the Minister, who apart from some small variations, confirmed the
assessment by letter of March 27, 2001 giving the following reasons:
...These workers were engaged under contracts of
service and therefore were employees.
Notwithstanding the
above, the employment of these workers … would also be insurable and
pensionable under the Placement Agency Regulations as these workers were placed
in employment by you to perform services for and under the direction and
control of your clients, and they were paid by you for these services.
The decisions were said to be
issued pursuant to section 93 of the EI Act and section 27.2 of the CPP
and were based on paragraph 5(1)(a) of the EI Act, paragraph 6(g)
of the Employment Insurance Regulations, paragraphs 6(1)(a) and
12(1)(c) of the CPP and section 34 of the Canada Pension Plan
Regulations.
[3] The Appellants have also
appealed from the decisions of the Minister confirming an assessment dated
February 6, 2001 made upon McMorran, subject again to minor variations, for the
amount of $272.80 for CPP contributions and $562.97 for employment insurance
premiums, plus penalty and interest with respect to the workers set out in
Schedule “B” to these Reasons, for the period January 1, 2000 to September 30,
2000. Identical reasons were given by the Minister to those set out above.
[4] The material facts reveal
that during the periods in question, Bakken and the other workers (collectively
called the “Workers”) were engaged by McMorran to demonstrate food products in
Safeway and other food stores in the Edmonton area, with whom she had contracts
to put on such demonstrations. The first issue is a simple one to state,
namely, whether the Workers were engaged as employees under contracts of
service or independent contractors under contracts for services.
If the former, then they are clearly in pensionable and insurable employment.
The second issue, which only arises if they are found to be independent
contractors, is whether they fall within the ambit of the Placement Agency
Regulations under the EI Act and CPP. Each of the appeals
hinge one way or the other on these two issues. It can be fairly said that all
the Workers are in the same situation. There are no significant differences in
their respective working relationships with McMorran.
[5] I might add that in reaching
my decision in these matters, whilst I have done so squarely on the basis of
the evidence before me and my understanding of the law, I have given a great
deal of deference to the decision of Bell J. of this Court in the case of Sara
Consulting & Promotions v. Canada (Minister of National Revenue - M.N.R.),
[2001] T.C.J. No. 773. This case to all intents and purposes deals with
essentially the same situation as that before me. Indeed, many of the same
workers working for McMorran, worked also in the same Safeway Meat Program as
the workers in the Sara Consulting case. Whilst the decision in Sara
Consulting was not treated as a test case, the words of Bell J. could not
help but reverberate through the appeal before me.
... However, the
urge to continue to gnaw at the same bone is not unknown to the Respondent ...
[6] It has become clear to me
throughout this case that the Minister is indeed gnawing on the same bone in
this matter. Teskey J. in T.S.S. - Technical Service Solutions Inc. v.
Canada (Minister of National Revenue – M.N.R.), [2002]
T.C.J. No. 101 cited Sara Consulting with approval and it
would perhaps behove the Minister well, to now drop that bone and leave it
alone.
[7] Whilst I have had to form
my own view of the facts, I am mindful of the words of Bowie J. in the case of Lord
v. Canada (Minister of National Revenue – M.N.R.), [1999] T.C.J. No. 95 :
… I believe in the
comity of judges within the same court, and the comity of courts. Our system
of jurisprudence requires, so far as it is possible, that there be consistency
and predictability in judicial decision-making...
[8] Absent any appeal one
would hope that these types of matters are now laid to rest and other
appellants will not have to undergo the economic and social stress encountered
by McMorran. Counsel for the Minister, in her closing submissions, indicated
that whilst this is not a test case, the powers that be in the Canada Customs
and Revenue Agency, would be giving serious consideration to the result.
The
Law
Contracts
Of Service/For Services
[9] The manner in which the Court should go
about deciding whether any particular working arrangement is a contract of
service and thus an employer/employee relationship or a contract for
services and thus an independent contractor relationship, has long been
guided by the words of MacGuigan J. of the Federal Court of Appeal in the case
of Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025. The reasoning
in that case was amplified and explained further in cases emanating from that
Court, namely in the cases of Moose Jaw Kinsmen Flying Fins Inc. v. M.N.R.,
88 DTC 6099, Charbonneau v. Canada (Minister of National Revenue
- M.N.R.), [1996] F.C.J. No. 1337, and Vulcain Alarme Inc. v. The Minister of National Revenue (1999), 249 N.R. 1, all of which provided useful
guidance to a trial Court in deciding these matters.
[10] The Supreme court of
Canada has now revisited this issue in the case of 671122 Ontario Ltd. v.
Sagaz Industries Canada Inc. [2001] S.C.J. No. 61, 2001 SCC 59, 274 N.R.
366. The issue in that case arose in the context of a vicarious
liability situation. However, the Court recognized that the same criteria
applied in many other situations, including employment legislation. Mr. Justice
Major speaking for the Court, approved the approach taken by MacGuigan J. in
the Wiebe Door case (above), where he had analyzed Canadian, English and American authorities,
and, in particular, referred to the four tests, for making such a determination
enunciated by Lord Wright in City of Montreal v. Montreal Locomotive
Works Ltd., [1974] 1 D.L.R. 161 at 169-70. MacGuigan J. concluded at page
5028 that:
Taken thus in context, Lord
Wright's fourfold test [control, ownership of tools, chance of profit, risk of
loss] is a general, indeed an overarching test, which involves "examining
the whole of the various elements which constitute the relationship between the
parties". In his own use of the test to determine the character of the
relationship in the Montreal Locomotive Works case itself, Lord Wright
combines and integrates the four tests in order to seek out the meaning of the
whole transaction.
At page 5029 he said:
... I interpret Lord Wright's test not as
the fourfold one it is often described as being but rather as a four-in-one
test, with emphasis always retained on what Lord Wright, supra, calls
"the combined force of the whole scheme of operations," even
while the usefulness of the four subordinate criteria is acknowledged.
(emphasis mine)
At page 5030 he had this to say:
What must always remain of the essence is
the search for the total relationship of the parties…
He also observed:
There is no escape
for the trial judge, when confronted with such a problem, from carefully
weighing all of the relevant factors…
[11] Mr. Justice MacGuigan also said this:
Perhaps the best synthesis found in the authorities is
that of Cooke J. in Market Investigations, Ltd. v. Minister of Social
Security, [1968] 3 All E.R. 732, 738-9;
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.
[12] In the case of Kinsmen Flying Fins Inc. case, above, the Federal Court of
Appeal said this:
... like MacGuigan J. we view the tests as
being useful subordinates in weighing all of the facts relating to the
operations of the Applicant. That is now the preferable and proper approach for
the very good reason that in a given case, and this may well be one of them,
one or more of the tests can have little or no applicability. To formulate a
decision then, the overall evidence must be considered taking into account
those of the tests which may be applicable and giving to all the evidence the
weight which the circumstances may dictate.
[13] The nature of the tests referred to by the
Federal Court of Appeal can be summarized as:
a) The degree or absence
of control exercised by the alleged employer;
b) Ownership of tools;
c)
Chance of profit;
d)
risk of loss;
In
addition, the Court must consider the question of the integration, if any, of
the alleged employee's work into the alleged employer's business.
[14] In the Sagaz decision (above) Major
J. said this:
… control is not the only factor to
consider in determining if a worker is an employee or an independent
contractor…
[15] He dealt with the inadequacy of the
‘control test’ by again approving the words of MacGuigan J. again in the Wiebe
Door case (above) as follows:
A principal inadequacy [with the control
test] is its apparent dependence on the exact terms in which the task in
question is contracted for: where the contract contains detailed specifications
and conditions, which would be the normal expectation in a contract with an
independent contractor, the control may even be greater than where it is to be
exercised by direction on the job, as would be the normal expectation in a
contract with a servant, but a literal application of the test might find the
actual control to be less. In addition, the test has broken down completely in
relation to highly skilled and professional workers, who possess skills far
beyond the ability of their employers to direct.
[16] He went on to say this:
In my opinion, there is no one conclusive
test which can be universally applied to determine whether a person is an
employee or an independent contractor. Lord Denning stated in Stevenson Jordan,
… ([1952] 1 The Times L.R. 101) that it may be impossible to give a precise
definition of the distinction (p. 111) and, similarly, Fleming observed that
“no single test seems to yield an invariably clear and acceptable answer to the
many variables of ever changing employment relations …” (p. 416). Further, I
agree with MacGuigan J.A. in Wiebe Door, at p. 563, citing Atiyah, … (Vicarious
Liability in the Law of Torts. London: Butterworths, 1967), at p. 38, that what
must always occur is a search for the total relationship of the parties:
[I]t is exceedingly doubtful whether the
search for a formula in the nature of a single test for identifying a contract
of service any longer serves a useful purpose…. The most that can profitably be
done is to examine all the possible factors which have been referred to in
these cases as bearing on the nature of the relationship between the parties
concerned. Clearly not all of these factors will be relevant in all cases, or
have the same weight in all cases. Equally clearly no magic formula can be
propounded for determining which factors should, in any given case, be treated
as the determining ones.
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.
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.
[17] I also find guidance in the words of Décary
J.A. in the Charbonneau case (above) when speaking for the Federal Court
of Appeal he said this:
The tests laid down
by this Court ... are not the ingredients of a magic formula. They are
guidelines which it will generally be useful to consider, but not to the point
of jeopardizing the ultimate objective of the exercise, which is to determine
the overall relationship between the parties. The issue is always, once it has
been determined that there is a genuine contract, whether there is a
relationship of subordination between the parties such that there is a contract
of employment ... or, whether there is ..., such a degree of autonomy that
there is a contract of enterprise or for services. ... In other words, we must
not pay so much attention to the trees that we lose sight of the forest. ...
The parts must give way to the whole. (emphasis mine)
[18] I also refer to the words of Létourneau J.A. in the
Vulcain Alarme case (above), where he said this:
… These tests derived
from case law are important, but it should be remembered that they cannot be
allowed to compromise the ultimate purpose of the exercise, to establish in
general the relationship between the parties. This exercise involves
determining whether a relationship of subordination exists between the parties
such that the Court must conclude that there was a contract of employment
within the meaning of art. 2085 of the Civil Code of Quebec, or whether
instead there was between them the degree of independence which characterises a
contract of enterprise or for services ...
[19] I am further mindful that as a result of
the recent decisions of the Federal Court of Appeal in Wolf v. Canada,
[2002] F.C.J. No. 375, and Precision Gutters Ltd. v. MNR, [2002] F.C. J.
No. 771, a considerable degree of latitude seems now to have been allowed to
creep into the jurisprudence enabling consultants to be engaged in a manner in
which they are not deemed to be employees as they might formerly been. I am
particularly mindful of the words of Mr. Justice Décary in that decision where
he said:
In our day and age,
when a worker decides to keep his freedom to come in and out of a contract
almost at will, when the hiring person wants to have no liability towards a
worker other than the price of work and when the terms of the contract and
its performance reflect those intentions, the contract should generally be
characterised as a contract for services. If specific factors have to be
identified, I would name lack of job security, disregard for employee-type
benefits, freedom of choice and mobility concerns. (my emphasis)
[20] Thus, it seems to this
Court that the pendulum has started to swing, so as to enable parties to govern
their affairs more easily in relation to consulting work and so that they may
more readily be able to categorize themselves, without interference by the
Courts or the Minister, as independent contractors rather than employees
working under contracts of service.
[21] In conclusion, there is no set formula. All these
factors bear consideration and as Major J. said in the Sagaz case
(above), the weight of each will depend upon the particular facts and
circumstances of the case. Many of the tests can be quite neutral and can apply
equally to both types of situation. In such case, serious consideration has to
be given to the intent of the parties; thus that is the task of the trial
Judge.
Placement Agencies
[22] It is to be noted that the wording in the
two statutory schemes (EI Act and CPP), is somewhat different. One
is therefore not necessarily inclusive of the other, although there is a
certain commonality. The Regulations in question read as follows:
6. Employment in any of the
following employments, unless it is excluded from insurable employment by any
provision of these Regulations, is included in insurable employment:
…
(g) employment of a person who is
placed in that employment by a placement or employment agency to perform
services for and under the direction and control of a client of the agency,
where that person is remunerated by the agency for the performance of those
services.
Section 34 Canada Pension Plan
Regulations
34(1) Where any individual is placed by a
placement or employment agency in employment with or for performance of
services for a client of the agency and the terms or conditions on which the
employment or services are performed and the remuneration thereof is paid
constitute a contract of service or are analogous to a contract of service, the
employment or performance of services is included in pensionable employment and
the agency or the client, whichever pays the remuneration to the individual,
shall, for the purposes of maintaining records and filing returns and paying,
deducting and remitting contributions payable by and in respect of the
individual under the Act and these Regulations, be deemed to be the employer of
the individual.
(2) For the purposes of subsection (1),
“placement or employment agency” includes any person or organization that is
engaged in the business of placing individuals in employment or for performance
of services or of securing employment for individuals for a fee, reward or
other remuneration.”
[23] It is to be noticed that “placement agency”
or “employment agency” is defined to include certain situations in the CPP
Regulations. That definition is not all inclusive. There is no definition
of the term in the EI Regulations.
[24] Bonner, T.C.J. in the case of Computer
Action Inc. v. M.N.R, [1990] T.C.J. No. 101, said that the term should
be given its ordinary meaning and read in context:
... an organization engaged in matching
requests for work with requests for workers.
[25] Teskey, T. C. J. in the case of Rod
Turpin Consulting Ltd. (c. o. b. Tundra Site Services) v. Canada
(Minister of National Revenue - M.N.R), [1997] T.C.J. No. 1052, said this:
The Appellant argues that it is not a
placement agency, but to look at it as a general contractor. This I cannot
accept. General contractors usually by the terms of their contracts with
clients, are responsible to the client to construct the project contracted to
be constructed in a good and workmanlike manner. Herein, the only
responsibility the Appellant had to Cominco was to provide qualified workers as
specified by Cominco.
The Appellant was acting as a placement
agency in respect of this worker. The Appellant was asked to provide a
journeyman electrician, which it did. It paid the electrician and charged the
wages to Cominco, together with a fee for services.
[26] In the case of Dyck v. Canada (Minister
of National Revenue-M.N.R.) and Bigknife Oilfield Operating Ltd., [1999]
T.C.J. No. 852, 1 held as follows:
The position of the Minister is that
Bigknife acted in this situation as a placement or employment agency. The El
Regulation in question was changed in 1997 and thus, previous case law is not
particularly helpful. However, the logic of Teskey, J. in Rod Turpin
Consulting Ltd. [...] seems as relevant today as it was then. Bigknife was
not a general contractor. It was only responsible to supply qualified
personnel. There was no individual fees for the different people who were
engaged, but no doubt, that was all built into the overall contract. It places
Dyck, to the extent that he needed it in providing his services under the
direction and control of Fletcher. They had the right to control his work. In
my view, El Regulation 6(g) and CPP Regulation 34 do each apply in this
situation.
[27] I am of the view that there is a
fundamental principle to be grasped in these cases which really should simplify
the question for the parties. I dealt with this in the case of Dataco
Utility Services Ltd. v. Canada (Minister of National Revenue – M.N.R.,
[2001] T.C.J. No. 372, the reasoning in which I now adopt. It seems to me that
the intention or the “pith and substance” of the Regulations is to bring
into the basket of the two social schemes set up by Parliament, those workers
(whether they are employees under a contract of service or independent
contractors under contracts for services), who simply contract with entity A
for a fee or other recompense, to be found or placed in work (employment) with
or under the direction and control of a third entity B. Thus, these workers do
not contract with entity A to do any work for entity A as part of the latter’s
business. Further, entity A does not contract with entity B to do any work for
entity B other than to provide them with personnel for which they collect a fee
or other remuneration.
[28] That situation seems to me, to be
absolutely and mutually exclusive of any arrangement whereby a worker is
engaged to perform services for entity A in the course of the latter's
business, or where entity A has a contract with entity B to perform services
for entity B. In such a situation, entity A is not providing or placing
personnel, but carrying out its contractual obligation to provide those
services to entity B.
[29] Thus, the first question to be asked is
whether the worker is performing services for entity A as part of the business
of the latter, albeit part of that business may be a contract for entity A to
provide a service for entity B, or whether entity A is simply acquiring
personnel as its very business with no contract to undertake anything further
than to pass the worker on to entity B to undertake whatever the business of entity
B might be. The simple question to ask is whether entity A is under any
obligation to provide a service to entity B other than simply the provision of
personnel. Is entity A obligated to perform a service in some way other than
simply making personnel available? If the answer is yes, it clearly has
business of its own as does any general contractor on a building site and the
worker is not covered by the Regulations under either statute. If
however, the answer is no, that is, it is not obligated to carry out any
service other than to provide personnel, then clearly the worker in such a
situation is covered by the Regulations under both statutes.
[30] The question as I see it is not so much
about who is the ultimate recipient of the work or services provided, as this
will cover every single possible subcontract situation, but rather who is under
obligation to provide the service. If the entity alleged to be the placement
agency is under an obligation to provide a service over and above the provision
of personnel, it is not placing people, but rather performing that service and
the situation is not covered by the Regulations.
[31] I refer to the Federal Court of Appeal case
of Vulcain Alarme Inc. v. The Minister of National Revenue, (1999)
249 N.R. 1 for an analogy, where the same principle is clearly set out in
relation to whether a subcontractor becomes an employee in certain situations.
Létourneau J.A. said this:
... A contractor who, for example, works on
site on a subcontract does not serve his customers but those of the payer, that
is the general contractor who has retained his services. The fact that Mr.
Blouin had to report to the plaintiff's premises once a month to get his
service sheets and so to learn the list of customers requiring service, and
consequently the places where his services would be provided, does not make him
an employee. A contractor performing work for a business has to know the places
where services are required and their frequency just as an employee does under
a contract of employment. Priority in performance of the work required of a
worker is not the apanage of a contract of employment. Contractors or
subcontractors are also often approached by various influential customers who
force them to set priorities in providing their services or to comply with the
customers' requirements.
[32] The simple facts that subcontractors
contracting with entity A are required to comply with the requirements of
entity B does not per se place those persons under the direction and control of
entity B any more than it makes entity B a customer of those persons.
[33] I note in the Wolf case (above) that statutory
deductions were made for Canada Pension Plan and employment insurance purposes
and that although Kirk‑Mayer was clearly held to be a placement agency,
the decision was rendered on the basis of tax liability of the Appellant worker
and no reference was made to the Regulations as to how the work was to
be categorized for employment insurance and Canada Pension Plan purposes
separate and apart from any question of liability for tax under the Income
Tax Act. In other words, the arrangements for statutory deductions which
were made under the EI Act and the CPP do not appear to have been
set aside by the Federal Court of Appeal in that decision.
[34] Thus, in summary in my view, it matters not whether
the situation is one of a contract of service or for
services. If the worker is placed by the placement agency under the control of
the client or is carrying out work, the terms and conditions of which are
analogous to a contract of service for the client, albeit that
the arrangement may be held to be a contract for services, such
work is in my view still covered by these Regulations so as to bring
within the social schemes established by these Acts, that work as both
insurable and pensionable employment. If, however, entity A contracts with
entity B to provide a service (other than simply providing personnel) and then
sub-contracts with a worker to provide all or any of that service, for which
entity A is responsible, then the worker does fall within the ambit of the Regulations.
The Facts
[35] In arriving at his various decisions, the Minister was
said in the respective Replies to the Notices of Appeal to have relied upon the
following facts (taken from file No. 2001-2468(EI), the appeal of McMorran), to
which I have added in parenthesis my understanding from the evidence of the
Appellants as to whether they agreed or disagreed. Those assumptions of fact
are:
13(a) The Appellant is in
the business of providing people for product demonstrations. (Agreed)
(b) The Appellant
obtained contracts of product manufacturers (hereinafter “the Client”) to
demonstrate their products in stores. (Agreed)
(c) The Client
established the place, date and time of the demonstration. (Agreed to the
extent that it contracted for that date, time and place with McMorran)
(d) The Workers were
hired as product demonstrators and their duties included setting up the display
table at the store, portioning out the product to be sampled, offering samples,
advising customers of the product, and distributing coupons. (Agreed)
(e) The Workers
performed their services at various store locations. (Agreed)
(f) The Client was in
contact with the stores and arranged for the work location. (Agreed; in the
Safeway Program the client owned these stores)
(g) The client
determined the time required to demonstrate each product. (Agreed; it set
the outside hours, the worker came and went very much as she chose within that
time frame)
(h) The Appellant
obtained and assigned the work. (Agreed)
(i) The Workers did
not control their own hours and days. (Disputed)
(j) The Workers were
required to keep track of their hours and submit a product demonstration report
to the Appellant. (Agreed in part; the workers submitted a product
demonstration report to the Appellant on which it was confirmed that the
demonstration had taken place between certain hours, which were the hours
contracted for by McMorran with the client and by McMorran with the worker.)
(k) The Workers earned
a set hourly wage. (Agreed)
(l) The Workers
received an additional hourly amount if they provided their own appliances. (Agreed)
(m) The Appellant set
the Workers’ wage. (Disputed; it was a matter of negotiation between McMorran
and the worker in each case.)
(n) The Workers were
paid weekly by cheque. (Agreed and disputed. The workers were paid sometime
after they submitted their respective reports.)
(o) The Workers did
not invoice the Appellant. (Agreed)
(p) The Workers never
replaced themselves or hired helpers. (Agreed; however, the evidence
revealed that they had the right to do so had they chosen to.)
(q) The appellant was
answerable to the Client. (Agreed)
(r) The Client
provided product information sheets to the Workers. (Agreed)
(s) The store manager
may review the Workers’ work. (Disputed)
(t) The Appellant
and/or the Client may also review the Workers’ work. (Agreed)
(u) The Workers were
required to conform to a store dress code. (Agreed partly; in some situations
there was a dress code such as in the Safeway Meat Program. In other
situations, McMorran requested in the demonstrator instructions that the
workers wear a tailored white blouse and black slacks, and black shoes, but not
runners.)
(v) The Workers did
not provide the work location. (Agreed)
(w) The Client provided
the product. (Agreed)
(x) The Workers
provided their own tools such as bowls, pitchers, utensils, plates, can opener,
cutting board, dish cloths, cleaning materials, and demo table. (Agreed)
(y) At times the
Workers provided their own appliance, such as a toaster oven, for which they
were paid extra. (Agreed)
(z) At times the
Client would arrange for a special demo table or a microwave oven. (Agreed)
(aa) The Workers did not
have a risk of loss. (Disputed)
(bb) The Workers did not
have a chance of profit. (Disputed)
(cc) The Workers did not
charge the Appellant GST. (Agreed; they did not make enough money to have to
have a GST number.)
(dd) The Appellant
placed the Workers in employment to perform services for the Appellant’s
clients. (Disputed)
(ee) The Workers were
under the direction and control of the Appellant’s clients. (Disputed)
(ff) The Appellant
remunerated the Workers. (Agreed)
(gg) Wages paid by the
Appellant to the Workers, for the period [the subject of these appeals] are
detailed on the Schedules attached to and forming part of the Replies to
the Notices of Appeal. (Agreed on the basis that it was remuneration and not
wages.)
[36] There was an additional assumption of fact in the
appeal of Pauline Bakken, namely:
11(e) The Appellant has
worked for the payor since 1985. (Agreed)
[37] Evidence was given by McMorran on her own behalf. I
have no hesitation whatsoever in saying that I found her to be a totally honest
and credible witness. She is quite obviously a person of integrity. Some of
the Workers also testified and again, whilst some of them were a little
confused about the interpretation to be put upon their respective situations,
all were honest and credible witnesses.
[38] To the greatest extent, the viva voce evidence
was consistent with the assumptions of fact made by the Minister. There were a
few with which McMorran disagreed. She was able to expand on them considerably,
as were the other witnesses, but in essence there is little dispute between the
parties over the facts, as opposed to the conclusions to be drawn from those
facts.
[39] I am particularly grateful to both counsel, each of
whom summarized the facts in their final submissions in a concise and admirable
fashion, the Appellant’s counsel in his written brief and counsel for the
Minister in her cogent verbal summary.
[40] McMorran in her evidence explained that she had been
the sole proprietor of this business for the last 22 years. It is not a large
business, but I gather that it had been steady over the years. When she
received this assessment for the year 1999, it represented 20% of her income
for that year; thus it has been of serious concern to her.
[41] She explained that in her business, she negotiated
contracts to put on demonstrations of samples of food in various food stores
throughout Edmonton. She negotiated these contracts sometimes with the food
companies themselves, or their brokers, sometimes with the stores directly such
as the Safeway Meat Program, and sometimes with other demonstration agencies,
such as Sara Consulting & Promotions Inc. Indeed 50% of her business in
1999 came as a result of working jointly with Sara Consulting in the Safeway
Meat Program, the subject of the Sara Consulting case decided by Bell J.
(above).
[42] In percentage terms, 25% of her time was spent doing
these negotiations, which included, finding good products to sample and good
locations at which to do the sampling. She would obtain all the information
about the product that the customers were likely to request. She then spent the
other 75% of her time arranging for Workers to carry out the actual
demonstrations of the products at their respective locations which she had
booked.
[43] In this latter respect, she engaged the Workers, the
subjects of this case. She had a large list of people available to do the work
for her, most of whom she had found by word of mouth. About 100 people did
work for her over the 2-year period. She did not advertise for them. She worked
out of her home office. When she booked the Workers, she gave them the name of
the product and the store location. Most of them were experienced and knew what
to do without any instruction. They would attend at the appropriate store at the
arranged time. The store, generally speaking, knew ahead of time that a
demonstration had been arranged. The Workers would contact the manager of the
appropriate department, who would then make available the product in question.
They took inventory at the beginning and end of each demonstration so the store
knew how much product was used and was able to charge for it accordingly. The
store, of course, had an interest in seeing the product promoted, so it would
increase sales, as did the food producer. Thus, the manager and the Worker
would liaise as to the best location for the demonstration to take place. I
gleaned from all the evidence that this was not so much a matter of control,
but good common sense cooperation; working together so as to be the most
effective.
[44] When Workers were first engaged by McMorran, she met
with them, went over the demonstration process with them, and had them sign a
form of contract which varied somewhat from time to time, but in 1999 set out
the following basic items (Exhibit A-1):
1. That as a
self-employed person I offer my services as required.
2. That I will be
paid by the hour and I am responsible for keeping records for Income Tax and
Canada Pension.
3. That I will not
receive any staff benefits.
4. That I am not
eligible for Unemployment Insurance, as a self-employed worker.
5. That McMorran
& Associates Demonstration Agency is not registered with Workers’
Compensation.
6. That McMorran &
Associates Demonstration Agency
- will
schedule the locations of work
- will
provide required information
- will
pay for work completed.
7. That I will
provide completed forms, signed by a person in charge, at the location of the
work, and return these forms as requested. I will carry a demo kit with
required supplies: notepad, pen, tape, scissors, plus the cooking requirements
for each demo.
8. That I may be
required to pick up and deliver required materials or supplies.
9. That I am or will
become certified in the Food Safety Handling Course.
10. That I am required to
observe the McMorran and Associates Demonstration Agency Rules of Conduct and
Dress Code.
[45] When signing this contract, she said that the Workers
could ask any questions about it that they wanted and all of them signed it
either whilst they were at her office, or took it home and returned it to her
later. I gleaned from the evidence that no undue pressure was applied to the
Workers in this respect. McMorran is clearly not that type of person. However,
she made it clear that was the manner in which she wished to engage their
services. Clearly, it was her intention to set up contracts for services with
independent contractors.
[46] McMorran also provided the Workers with a list
entitled “Demonstrator Instructions” (Exhibit A-2) which basically set out what
was expected of them during the course of the demonstration. I see this is
nothing more than setting out what they were required to do in order to meet
her contractual obligations to the client, along with some standard
information, which would no doubt be of assistance to new demonstrators. They
were like a set of blueprints, in my view, given to a sub‑contractor by a
general contractor on a building site.
[47] Whilst contracts of a standard nature, such as this,
have been condemned sometimes in this Court as being a sham, Mogan J. in Shaw
Communications Inc. v. Canada (Minister of National Revenue - M.N.R.),
[2000] T.C.J. No. 314, said this:
The tone of those words discloses the heavy hand of a
large corporation which required a group of individuals to sign a standard form
of document (drafted by the corporation) before they were permitted to provide
services to and be paid by the corporation. The terms of the agreement were not
negotiated between Shaw and any prospective owner/operator. Each prospective
owner/operator was asked to sign the document as a fait accompli. There was no
equality of bargaining between Shaw and a prospective owner/operator.
The declaration of status in the owner/operator
agreements is self‑serving to Shaw, the drafter of the document, but the
declared status of “independent contractor” is not supported by much evidence.
Most of the evidence points in the direction of employment. In my opinion, the
owner/operators agreements in Exhibit A-2 are collectively a camouflage or façade
intended to make a group of persons appear to be independent contractors when
those persons were really employees of Shaw. Those agreements offer more harm
than help to Shaw’s appeal herein.
It is clear in this case that this was not the same
situation; it was simply the basis upon which McMorran was prepared to engage
her Workers.
[48] From the evidence of the
Workers in the case before me, it is clear that they understood and accepted
the terms offered to them. This is not a big corporation situation and there
was no imbalance in the bargaining opportunity between the parties. One Worker
was uncertain as to her situation and another felt that she was an employee. I
will deal with their evidence later in these Reasons. However, I am satisfied
that there was no undue pressure put on the Workers. Quite simply, terms of
engagement were offered to the Workers and on the whole, they were perfectly
content to provide their services in this manner. Whilst I understood most of
them to be somewhat unsophisticated in the field of business arrangements, I am
satisfied that each had a clear understanding of how they were being engaged,
as self-employed persons, to which they were agreeable.
[49] Very little, if anything,
was required in the way of training. A food safety handling certificate,
involving a short course in food handling, was required by the local Board of
Health. The Workers appeared to have completed this course at their own
expense.
[50] Once a Worker was assigned
to a demonstration, she was very much left to her own resources. How she did
her presentation, subject to any particular ways the store wished to adopt, was
very much up to her. She brought all her own small utensils, such as a frying
pan, toaster oven, spoons and spatulas, towels, can opener, plastic gloves,
cutting boards, plates, dishes, soaps, pens and pencils, all of an approximate
value of $300.00. McMorran did not pay for these items. Any larger equipment
provided by McMorran would be invoiced directly to the client or provided by
the client, such as heating ovens or larger electric frying pans. The Workers
would arrange their own breaks at the store and whilst basically they were
expected to be at a store all day to do the demonstration, they very much came
and went as they chose. They could also change the hours of the demonstration
if they saw fit and would simply advise the manager of the department in the
store accordingly. The store manager or the department manager would check in
on them to make sure everything was going correctly, but I did not view this as
supervision, but rather a liaison with the Worker. Similarly, McMorran might
come to a store from time to time just to check in with a demonstrator. Again,
I did not perceive this as an element of control, but rather a liaison visit
with the Worker.
[51] McMorran was of the view
that a Worker could replace herself; I felt her evidence in this respect was
somewhat tenuous as the Worker would have had to find another Worker from
McMorran’s list and McMorran would pay the new Worker, herself. The Workers
were not really free to hire their own Workers or sub-contract out the work in
the true sense of that word.
[52] The Workers were clearly
free to take on or refuse any demonstrations as they saw fit. They were free to
make this choice and thus were in charge of their schedule. They were also free
to work for other agencies at the same time as working for McMorran, and in
fact, some did so.
[53] Confirmation that the
demonstration had actually taken place was obtained by having the store
personnel complete the demonstration report. There also had to be an accounting
between McMorran and the store relative to the amount of product used in the
demonstration and the Worker would carry a blank cheque from McMorran to pay
for this.
[54] McMorran did not require
the Workers to wear a specific uniform as was the situation in the Sara
Consulting case. Sometimes a store would ask for consistency, such as black
pants and white blouse, a bow tie, etc. It was of note that in the joint
Safeway Meat Program carried out in conjunction with Sara Consulting, all the
demonstrators including those engaged by McMorran, wore aprons bearing the Sara
Consulting name. All stores required the demonstrators to wear name tags so
that they could be identified. That was part of the contract with McMorran.
McMorran also made the request in the Demonstrator Instructions that they wear
white blouses and black pants together with black shoes. I did not see this as
an element of control, but rather part of the general professional demeanour
required by the clients with whom McMorran was contracting.
[55] Also of note was the
evidence of McMorran, that if she was not happy with the performance of a
demonstrator, she would simply not rebook that Worker. It was not a question of
firing a Worker, but simply not rebooking him/her. Thus, there was no security
of employment enjoyed by the Workers.
[56] It was clear from the
evidence as a whole that the Workers were paid on a regular basis two weeks
after they had completed their demonstrations. No deductions for taxes,
employment insurance premiums or CPP contributions were made as per the
contract with the Workers. Also, no GST was paid as none of the Workers were
earning more than $30,000.00 per annum. There was no vacation pay and no other
benefits were made available to the Workers. There were no fringe benefits or
social events put on for the Workers. They were simply paid the agreed amount
for the demonstrations which they put on.
[57] Whether or not the Workers
used their motor vehicles to get themselves to the demonstration locations was
very much up to them. A motor vehicle, however, was not a requisite for the
work.
[58] The rate of pay was by the
hour. The Workers negotiated this with McMorran. The more experienced Workers
received more. The range appeared to be between $7.50 and $9.00 per hour. I
noticed in particular that the Workers did negotiate the amount with McMorran,
which varied depending upon their experience and how they were able to negotiate.
[59] McMorran carried liability
insurance. The Workers did not carry their own separate insurance. I took from
the evidence that if they had been employed and working under contracts of
service, they would have been covered by her insurance policy for any vicarious
liability (as would she), but not if they were independent contractors.
[60] McMorran stated that
although in 1999 one-half of her business was involved in the Canada Safeway
Meat Program in conjunction with Sara Consulting, in the ensuing year 2000, she
dropped that programme as being too onerous, and worked entirely independently
again.
[61] Evidence was given by Ann
Lee, one of the Workers. She clearly considered herself to be a sub–contractor
and was quite at ease with that situation. She had worked at Safeway for 25
years as a cashier, so she knew what both full-time and part-time employment
was about. She viewed her relationship with McMorran differently. She also
worked for Sara Consulting doing the same thing. She explained how sometimes
she dressed up products she was demonstrating in her own way, to make them more
appealing to customers. She took on work or declined it as it suited her. She
had no feeling that anyone was evaluating her work or dictating to her how she
should do it. She simply collected her assignments from McMorran and went about
doing her work in her own way. She reported to no one. She owned her own table
as well as her own utensils. She was paid $9.00 per hour for her services. She
said there was no written contract, but the witness clearly understood the
arrangement into which she had entered into McMorran.
[62] Pauline Bakken gave
evidence. She also considered herself to be a sub-contractor and not an
employee. She had worked in the food demonstration industry for 30 years and
was clearly very experienced. She had contracted previously with the Northern
Alberta Diary Pool, and fully understood the difference between being an
employee and an independent contractor. She also had no written agreement with
McMorran. She felt she had a great deal of discretion in how she presented any
particular product. She described a typical demonstration procedure very much
as it had been described by McMorran. In 1999, she worked for a number of
different agencies including Elections Canada and a marketing agency. She felt
she was free to work for a competitor to McMorran at any time. She was free to
accept offered assignments or not as she saw fit. If she did not like the
location or the time, she would refuse an assignment. She felt no one dictated
to her how she prepared her demonstration. She would change manufacturer’s
recommendations if they did not seem worthwhile to her. She was not evaluated
in any way by the store. She did wear a “McMorran Associates” name tag. She was
paid $9.00 per hour. She said McMorran had offered her $8.00 per hour, which
she had declined, as well as $8.50 per hour before settling on $9.00 per hour.
Thus, clearly she was able to negotiate her remuneration with McMorran.
[63] Monica Dijker gave evidence.
She was called on behalf of the Minister. She had also been engaged to do
demonstrations by McMorran in 1999. She had never worked as a demonstrator
previously, thus McMorran had explained what was involved at their preliminary
meeting. She signed an agreement. She said that she read it but did not know
what it was. She recalls the words “self‑employed”, but considered she
had been hired as an employee at the end of the interview. She kept track of
her hours. If she used her own major appliances, she charged McMorran for their
use. She felt she did not negotiate with McMorran over the amount of
remuneration, but was simply told it would be $8.00 per hour. She never turned
down work. She went wherever McMorran assigned her. She never arranged for somebody
to stand in for her if she could not be at an assignment, but would simply
phone McMorran who would find somebody to replace her. She said she only found
out later that it was open to her to arrange for somebody to stand in for her.
In the Safeway Program, she would report to the meat manager upon arrival, who
would tell her where to set up her demonstration and plug in her appliances.
[64] This witness also worked
for Sara Consulting and in fact took the food handling course whilst working
for the latter agency.
[65] She carried no insurance of
her own. She wore a Sara Consulting apron and a McMorran name tag whilst
working in the Safeway Meat Program.
[66] She felt that she could be
“let go” if she did not do a demonstration properly and in summary, felt that
she was an employee throughout. She had been self-employed in a previous
situation and felt she understood the difference.
[67] Delorraine Kowalski also
gave evidence. She also worked for McMorran doing demonstrations. She signed a
contract. She understood that “sub‑contracting” meant that she was in
business for herself. She felt that demonstrators simply followed McMorran’s
directions, particularly in regard to following the meat manager’s directions
at the store. She paid for her own food handling course. She was paid every 2
weeks. She was paid $8.00 per hour. McMorran apparently offered her $7.00 per
hour, and she, the witness, said $8.00 per hour, upon which amount they
eventually settled. Again, this was evidence of the negotiations that took
place between them. She felt she could not replace herself but would have to
call McMorran to find another replacement. She was not reimbursed for driving
to locations. She felt she could be fired. She would not have given any notice
if she had decided to quit. She considered she was both an employee and a
sub-contractor. As she said, “it was very iffy” and “you were both”. She did
work for other people over the same period of time. She felt she was put on
contract for 6 hours at a time.
[68] Clearly, the witness was
somewhat ambivalent and confused about her true situation.
[69] Kevin Kennedy, one of the
meat managers in the Canada Safeway Meat Program, also gave evidence. His main
concern, it seemed, was to ensure that the demonstrators were not considered to
be employees of Safeway. He made it perfectly clear that he was not supervising
the demonstrators. If he was not happy with what was going on, he would contact
Sara Consulting, who in turn would contact McMorran if it concerned one of her
Workers. He agreed he would sign the demonstration report confirming that the
demonstration had taken place. He would add any positive comments he had. He
said Safeway had a dress code in effect for its employees and they set
guidelines for others working in the store to follow as a dress code. He wanted
every demonstrator in his store “to look professional”. Overall, his evidence
indicated little or no control being exercised over the demonstrators. There
was liaison and an expectation to behave and look professional in a manner that
befitted the store.
[70] Those are the salient facts
that I draw from the evidence. Whilst I understood the confusion in the mind of
Delorraine Kowalski and understood that Monica Dijker considered that she was
an employee, generally speaking I was impressed by the evidence of Pauline
Bakken and Ann Lee, the long-time Workers who appeared to have a very clear
understanding, both of the nature of their work and the conditions under which
they were being engaged. They were much more decisive in their manner and I
prefer to accept their evidence where it differs from the others as to the
manner in which these demonstrations were arranged and conducted.
Application
of the Factors to the Evidence
[71] Although perhaps the necessity
of reviewing the four-in-one test referred to in the Wiebe Door decision
(above) has now been somewhat diminished by the decision of the Supreme Court
of Canada in the Sagaz case (above) it is still in my mind, a useful
exercise to go through. The Federal Court of Appeal considered as much in both
the Wolf decision (above) and the Precision Gutters decision
(above). There are obviously difficulties with each one of the aspects of this
test, but they are still of assistance to a trial Judge to a greater or lesser
extent, depending upon the circumstances.
[72] It must still be clearly
understood that even where the parties choose to put a title to their
relationship, if the true nature and substance of the arrangement does not
accord with that title, it is the substance to which the Court must have
regard. That legal principle has not changed (see Shell Canada Ltd. v.
Canada, [1999] S.C.J. No. 30). Having said that, it is also fair to say
that where the parties genuinely choose a particular method of setting up their
working arrangement, it is not for the Minister or this Court to disregard that
choice. Due deference must be given to the method chosen by the parties and if
on the evidence as a whole there is no substantial reason to derogate from the
title chosen by the parties, then it should be left untouched. The Wolf
and Precision Gutters cases very much substantiate that proposition.
[73] In this case McMorran
clearly specified to the Workers that she was intending to set up an
independent contractor relationship with each of them. I accept her evidence
and that of Ann Lee and Delorraine Kowalski to that effect. Such formed part of
the initial discussion with each Worker, before they were engaged and was also
set out in the written contracts with those with whom written contracts were in
fact signed. It is true that Monica Dijker still considered herself to be an
employee as did Delorraine Kowalski. Delorraine Kowalski was confused on this
point, but the other Workers were clear about the terms of their engagement as
independent contractors and I prefer to accept their evidence on this point.
[74] Thus, absent some reason to
derogate from that choice of arrangement, such as finding that it, in essence,
was a sham or in substance did not amount to a contract for services, a great
deal of deference has to be given to it. Such, if it was not clear before, is
now abundantly clear from the reasons given in the Wolf and Precision
Gutters decisions.
[75] Control: As this
aspect of the test has been traditionally applied, it has been consistently
pointed out that it is not the actual control so much as the right to control
that is important for the Court to consider. The more professional and
competent a person is or the more experience they have in their field, the less
likely there is to be any actual control, which creates difficulty in applying
this test. Indeed as Major J. pointed out in the Sagaz case (above),
there may be less control exercised in the case of a competent professional
employee than in the case of an independent contractor. Nonetheless, it is
another factor to be weighed in the balance.
[76] In this case I find there
was little or no control exercised in fact over the Workers by McMorran. She
entered into contracts with stores or producers to demonstrate their products
on certain days at certain times at certain places. Those were not matters of
control. That is the very essence of the work she contracted to perform. Her
passing on to her Workers the request of her principals and the specifications
of her contracts with them, was not an element of control being exercised over
the Workers. It was the very essence of the work itself. Over and above that, I
find from the evidence that they were very much free to go about their
demonstrations as they saw fit, and indeed, they brought a certain amount of
individuality to their work.
[77] Similarly, liaising with
the store managers or department managers at the stores as to where exactly to
set up in the premises was not a matter of control. I am satisfied that
although those managers were required sometimes to sign off on a report sheet
that in fact the demonstrations in question had taken place, they did not
exercise control over how the Workers went about their work. They simply
dropped by out of courtesy, sometimes to see how things were going. Similarly
with respect to dress codes, such as they were, these, again, were a matter of
a requirement which went along with the main contract, to do a demonstration in
a store in a professional manner.
[78] I notice that the Workers
changed the recipes, sometimes changed their hours and very much came and went
as they chose. The matter of the food handling course, in my view, was a red
herring. Any professional has to have his license to carry out his occupation.
This was a Board of Health requirement.
[79] Similarly, I am perfectly
satisfied from the evidence that neither the store nor the food producer (the
clients) exercised any control over the Workers. The evidence of Kevin
Kennedy, the Safeway meat manager, was very much to the contrary. It was
perfectly clear from what he said that he wanted to stay as far away from any
element of control, that could possibly make him or Safeway responsible for
anything that went wrong with any demonstration.
[80] I also find that McMorran
did not reserve the right to control to herself. Whilst she also would drop in
from time to time to make sure all was going well, she expected the Worker to
be doing her professional best and was not about to interfere. She might not
have re-engaged a Worker if she did not like what she saw, but there was not
the slightest indication that she would interfere with the day-to-day work
being done by the Worker. Again, the evidence was quite to the contrary.
[81] I am satisfied that there
was little, if any, element of control reserved to or exercised by either
McMorran or the clients over the Workers. This factor clearly points, in my
view, to an independent contractor status as opposed to an employee situation.
[82] Tools and Equipment:
The Workers, generally speaking, had all their own operational tools. Larger
items such as ovens were provided either by the client directly, e.g. Safeway,
or by McMorran who then charged her client for their use. Whilst the value of
the tools owned by the Workers may not have been great, $300.00 approximately,
such were not at all inconsistent with the situation prevailing in the Precision
Gutters case (above) where Sexton J.A. said:
I do not feel that because such tools can be used in other
occupations, this means they are not important to the installers in this case.
Because these are common tools it can always be said they are not peculiar to
one business or another. Nevertheless, those tools require the expenditure of
money on the part of the installers and are essential to the proper carrying
out of the work of the installer.”
And
It has been held that if the worker owns the tools of the
trade which it is reasonable for him to own, this test will point to the
conclusion that the individual is an independent contractor even though the
alleged employer provides special tools for the particular business. See Bradford
v. M.N.R. 88 D.T.C. 1661; Campbell v. M.N.R. 87 D.T.C. 47; Big
Pond Publishing v. M.N.R., [1998] T.C.J. No. 935.
[83] The tools owned by the Workers were essential to the
demonstrations which they carried out. This factor points again to an
independent contractor status rather than that of an employee under a contract of
service.
[84] Chance of Profit – Risk of Loss: I deal with these two factors under the same heading.
Generally, if there is a chance of profit there is a risk of loss also in an
entrepreneurial situation. To some extent the only chance of profit in this
case arose with the amount of work that the Workers took on. The more they
worked, the more they made, which has been traditionally held not to be true
profit in the sense of this word. In the Precision Gutters case (above),
Sexton J.A. again said:
In my view, this ignores certain important aspects of the
relationship between the installer and Precision. In particular each installer
used his own judgment to decide when to work and whether to accept or decline
any particular job. He was of course free to take jobs with other gutter
manufacturers. The contract price, although it was not negotiated on all
occasions, was nevertheless negotiated 20%-30% of the time. In my view, the
ability to negotiate the terms of a contract entails a chance of profit and
risk of loss in the same way that allowing an individual the right to accept or
decline to take a job entails a change of profit and risk of loss. The
installers were not given any set time for performance of the contract and
hence efficient performance might well lead to more profits. An installer
could choose to work alone or employ others to help him. Obviously, the more
work he could do on his own the more profits he could make. The installer
was responsible for defects in work done and had to return to repair the
defects at his own expense. There was no guarantee of work from day to day, no
guaranteed minimum pay and no fringe benefits. All of these things have led
other courts to conclude that an independent contractor relationship exists. See Société de Projets ETPA Inc. v. Minister of National
Revenue, 93 D.T.C. 510. I am therefore of the view that the Tax
Court Judge erred in holding that chance of profit and risk of loss criteria
favours characterization of the installers as employees.” (emphasis mine)
[85] Looked at from this point of view there was an entrepreneurial
aspect to the work of these demonstrators. They could accept or decline work.
They negotiated or renegotiated their hourly rate from time to time.
Theoretically, they could work alone or hire others to do the work for them,
although this never in fact seems to have happened. Nonetheless the potential
was there and along with it, the chance of profit or the risk of loss.
[86] The use of their own tools, and the cost thereof if
not used prudently all weigh in here as did the opportunity the Workers had to
do work for others in other agencies if their work was perceived to be being
done well.
[87] All in all, I am well satisfied that there was an
entrepreneurial element to these services performed by these Workers. On a
business scale, that element may have been nearer the lower end of the ladder,
but nonetheless it existed, in a way in which it could not exist in a regular
employment situation. This aspect of the test points quite clearly, in my view,
to an independent contractor status.
[88] Integration:
This again has been found by the Courts to be a difficult test to apply. The
question frequently asked is “whose business is it?” Clearly, that has to be
asked from the point of view of the worker not the payor, as from the latter’s
point of view he is always in business. The context in which the question must
be asked is whether there are one or two businesses. In other words, is the
person who has engaged himself or herself to perform these services, performing
them as a person in business on his or her own account. If the answer to that
question is yes, then the contract is a contract for services. If
the answer is no, then it is a contract of service.
[89] In my view, the very fact that there was an
entrepreneurial aspect to the work performed by the demonstrators, tends to
reveal that they were in business on their own account. They had no job
security and no ongoing commitment to either being engaged by McMorran or
provide services to her. Each demonstration was a contract standing alone that
either side was free to pick up or leave as they chose. The Workers could and
did accept engagements for other agencies, all during the same period of time,
that they provided services to McMorran. In my view, this test clearly points
to independent contractors working under contracts for services.
[90] When I view all of these factors, when I look at the
whole forest as well as the individual trees, and when I bear in mind the
decision of Bell J. in the Sara Consulting case (above), I feel overwhelmingly
compelled to the view that these Workers were independent contractors in
business on their own account. The words of Bell J. ring loud and clear when he
made reference to the Minister continuing to gnaw on the same bone. It is most
unfortunate that the Appellant McMorran, in this case, a hardworking lady of
the utmost integrity, working in a relatively small business, has been put to
such expense and stress in her need to present these appeals. I have of even
date dealt with another decision of the Minister in a similar situation in
Regina, Saskatchewan, (Joan Pearce o/a J.P. Class Promotions v. M.N.R.
2000-3246 (EI) and 2000‑3252(CPP)), where the Minister has again forced
an Appellant to go to appeal in the face of the Sara Consulting
decision. If I had jurisdiction to award costs against the Minister in such
situation, I would have no hesitation in doing so. Unfortunately, that
jurisdiction does not exist. The time has perhaps come for the Minister to say
“enough is enough” and halt the necessity for these appeals. If nothing else,
the pendulum seems to have swung somewhat in the Sagaz, Wolf and Precision
Gutters cases (above) and the Minister, and those advising and representing
him, need to go back to the drawing (not gnawing) board to review how these
types of business arrangements are now being made in the new age of commerce at
the dawn of this century. The economic need for businesses to streamline their
working arrangements is becoming evermore apparent and thus the Court is seeing
more and more consultant and independent contractor types of arrangements. If
the Minister is of the view that these should fall within the ambit of the EI
Act or CPP, he can seek to change the Regulations or the
Statutes themselves. That is a political decision. However, to continue to put
round pegs into the square holes of the existing legislation, in the face of
the existing Court decisions, is becoming unacceptable.
Placement Agency
Considerations
[91] In my view, the arguments of the Minister on this
point have no merit whatsoever. They totally ignore the true intent of the Regulations
to deal with placement agencies per se. In the situation at hand, McMorran
is clearly not simply placing people into employment under the direct control
of her clients, she is contracting with those clients to provide a
demonstration service for their products. She is required to put on those
demonstrations and be responsible for them, do the accounting with respect to
them and invoice the clients accordingly for her services. She is clearly
providing a service. Furthermore, the Workers were clearly not placed
under the control of her clients. Whilst, with the greatest of respect, I part
company from Bell J., that independent contractors cannot be covered by the Regulations
in question, the word “employment” being used in this context of work generally
(see R. v. Scheer Ltd., [1974] S.C.R. 1046), it is clear that in
this case the Workers were independent contractors and were not placed under
the direct control of the clients in any situation analogous to a contract of
service with the clients. In my view, these Regulations simply do not
apply.
Conclusion
[92] In the result, the appeals are allowed, the decisions
and the assessments are vacated.
Signed at Calgary, Alberta, this 21st day of
October 2002.
D.J.T.C.C.
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