Date: 20020613

Dockets: 2000-1446-EI,

2000-1448-CPP,

BETWEEN:

SHAW COMMUNICATIONS INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasonsfor Judgment

Mogan J.

[1]            These appeals were commenced under the provisions of the Employment Insurance Act (the "EI Act") and the Canada Pension Plan ("CPP"). The Minister of National Revenue made a ruling with respect to the status of certain individuals (the "Workers") as employees or independent contractors for the purposes of the EI Act and the CPP for the period January 1, 1998 to November 2, 1998. In that ruling, the Minister determined that the Workers were engaged under contracts of service with the Appellant and were, accordingly, employees of the Appellant. The Minister therefore concluded that the Workers were engaged in insurable employment under the EI Act and pensionable employment under the CPP.

[2]            The Appellant has appealed from that ruling by the Minister. The issue is whether the Workers are employees of the Appellant or independent contractors. In these reasons, I will frequently refer to the Appellant as "Shaw". One of the Workers, Patrick Plummer, gave notice on June 22, 2000 of his intention to be an intervenor in these appeals but thereafter did not participate in the proceedings.

[3]            Shaw is a public corporation resident in Canada carrying on the business of providing cable television programming and services, digital audio services, internet services and content (Shaw@Home) to households and businesses in various regions throughout Canada where it holds licenses to provide such services. Each license was granted by the Canadian Radio-Television and Telecommunications Commission ("CRTC"). There were two basic kinds of services provided by the Workers:

(a)            the installation of cable, Shaw@Home or digital cable services; and

(b)            the sale of cable, Shaw@Home or digital cable services.

Some Workers provided only sales services while other Workers provided both installations and sales services.

[4]            The period in question is January 1 to November 2, 1998. During that period, Shaw held an exclusive license from the CRTC to provide television cable services to a substantial territory north and east of Toronto including Richmond Hill, Markham and Scarborough. Shaw managed this territory from a large service centre and warehouse in Richmond Hill. Soon after the period in question, Shaw and Rogers Cable Communications ("Rogers") agreed to exchange certain territories with the consent of the CRTC. Shaw transferred to Rogers its territory north and east of Toronto in exchange for a territory of similar size in western Canada, closer to Shaw's main operation. All of the evidence in this case related to the Shaw territory north and east of Toronto as managed from the Richmond Hill service centre and warehouse during the period in question.

[5]            There were 13 witnesses who testified at the hearing of this appeal. The first nine were called by the Appellant and the remaining four were called by the Respondent. All of the witnesses described their connection with Shaw during the period in question. Most of the Appellant's witnesses were either senior employees of Shaw at the time of hearing (like Messrs. Morris and Fenwick) or persons who had a prior connection with Shaw during the period in question (like Messrs. Davey, Murphy, Samuel, Cavallo and Ms. Bacon) but later transferred their services to Rogers upon the exchange of territories. The Respondent's four witnesses had a connection with Shaw during the period in question but that connection was terminated and they had no connection with Shaw or Rogers at the time of hearing.

[6]            Richard Morris, Shaw's vice-president of operations, has been a continuous employee of Shaw or its predecessor since 1978. He explained how Shaw developed its present policy for installations. Prior to 1992, Shaw used third party cable contracting companies to provide installation services to customers. This got the installation done by piecework and it avoided the need to hire, supervise and provide benefits to employees. It also avoided the need to lease/purchase, maintain, insure and store a fleet of vehicles. Installation lends itself to piecework because of the predictability of the time required for each job. By 1992, Shaw concluded that the third party cable contracting companies were not providing an adequate level of service because only a small part of the fee which was paid to a particular company was passed on to the person who did the installation. As a result, the quality of the work was low and there was a high turnover of persons who did the installations.

[7]            In 1992, Shaw introduced an owner/operator installation program under which it contracted directly with the installers and eliminated the middleman. The owner/operator was paid piecework rates for installations based on industry norms which took into account the complexity of the job and the time required. The program was also intended to eliminate the need to supervise the installers. It became Shaw's policy to have each owner/operator sign a standard form of agreement defining the relationship between Shaw and the owner/operator. A binder containing 103 executed owner/operator agreements was entered as Exhibit A-2. All of the agreements appear to be the same.

[8]            Andrew Fullerton and Mario Cavallo are two cable installers who testified as witnesses for the Appellant. Each one signed an owner/operator agreement. Mr. Fullerton's agreement is at tab 42 in Exhibit A-2 and Mr. Cavallo's agreement is at tab 25. Each witness identified his respective owner/operator agreement and confirmed that the agreement described the terms under which he provided services to Shaw. The agreements in Exhibit A-2 are an important part of this case. Because each agreement is relatively short, I will set out in full Mr. Cavallo's agreement at tab 25 as representative of all 103 agreements.

SHAW CABLE SYSTEMS LTD.

OWNER OPERATOR AGREEMENT OF RESPONSIBILITES

(Continuous Time Period)

I, Mario Cavallo, am a sole proprietor pursuant to the laws of Ontario, and will provide my services as an Owner Operator to Shaw Cablesystems Ltd., along with other organizations if I so please, commencing on the 3rd day of November, 1997 and continuing indefinitely until the agreement concludes pursuant to the terms of paragraph eight below.

I, Mario Cavallo, will lease or own my own vehicle, have a valid drivers license and vehicle insurance which I will provide proof of to Shaw Cablesystems Ltd. on regular basis.

I Mario Cavallo, operate an independent business and own sufficient of my own tools of this trade, to provide services to Shaw Cablesystems Ltd.

1.              I understand that my status shall be that of an independent contractor/owner operator and nothing herein contained shall be so constructed as to constitute an employment relationship, partnership, joint venture or otherwise.

2.              I understand that Shaw will not pay any contribution to the Canada Pension Plan, provincial health tax, unemployment insurance, federal or provincial withholding tax for me, nor provide any contributions to the company pension plan. I will not be covered under the companies short term disability plan. I understand I am solely responsible for remitting my federal and provincial income taxes on a regular basis to Revenue Canada.

3.              I understand I am responsible to purchase my own liability insurance for the amount not less than $1,000,000.00 and provide proof of purchase to Shaw Cablesystems Ltd. I am also responsible to purchase (if I desire) short term disability insurance for short term sick leave. Shaw Cablesystems Ltd. will pay the workers compensation monthly premium on my behalf and deduct these payments from my invoices monthly.

4.              I understand Shaw Cablesystems Ltd. will provide to me insurance for Personal and Dependent Life Insurance, Long Term Disability Insurance, Accidental Death & Dismemberment Insurance (AD & D) and Extended Medical & Dental Insurance. I will pay the premiums monthly for my Life and Dependent Life Insurance, and Long Term Disability Insurance. This amount will be deducted from my invoices. I understand I must complete the six month waiting period before insurance coverage will begin, except for Workers Compensation.

5.              When providing service to Shaw Cablesystems Ltd., I will ensure my vehicle is mechanically sound and fully painted on the exterior. I will maintain a professional appearance at all times and will always conduct myself in a professional courteous, and customer-friendly manner.

6.              If requested, I will effect repairs, at my cost, satisfactorily to Shaw's customers whenever damage is caused by myself.

7.              I will perform cable installation and sales work as detailed on my Rate Sheet using approved Shaw-supplied materials and in accordance with Shaw's technical specifications.

8.              If either myself or Shaw Cablesystems Ltd. wishes to terminate this agreement, we may do so upon providing the other with two weeks written notice. Shaw Cablesystems will pay me the amounts earned up to date of termination of the agreement less any amounts owing to Cablesystems Ltd. Notwithstanding the above, Shaw Cablesystems may terminate this agreement immediately upon paying me the equivalent remuneration for services in lieu of notice.

I have read and understand the preceding terms and conditions of the above "agreement of responsibilities". I understand my roles and responsibilities as an Owner Operator providing services to Shaw Cablesystems Ltd.

_"Mario Cavallo"____                       _November 3, 1997_

Owner Operator                                                     Date

_"Signature?"_______

Systems Manager

[9]            In accordance with the terms of the agreement set out above, Mr. Morris explained that each owner/operator was required to prove to Shaw's satisfaction that the owner/operator had a valid driver's license, motor vehicle insurance, liability insurance and a GST registration number. It is Shaw's policy to have each owner/operator sign an agreement (as in Exhibit A-2) before starting to provide any services to Shaw but, in cross-examination, a number of individuals were noted who executed their respective owner/operator agreement after they started to provide services to Shaw. Mr. Morris was not able to explain those particular departures from Shaw's policy. He did, however, explain that persons acknowledged to be Shaw employees received certain benefits which were not offered to owner/operators. The distinction in benefits may be summarized as follows:

                                acknowledged employee                                      owner/operator

                                vacation pay                                                                                          none

                                statutory holiday pay                                                           none

                                sick leave                                                                                                none

                                medical dental plan                                                               yes - same

                                short-term disability plan                                                     none

                                pension plan                                                                                          none

                                stock options                                                                         none

                                share purchase program                                                      none

[10]          An acknowledged employee is paid through the regular Shaw payroll but the owner/operator submits an invoice for the work performed and is paid through the accounts payable department. Shaw provides each owner/operator with almost all of the materials required for any installations because Shaw retains ownership of the materials and is required to maintain certain standards with respect to the quality of the materials installed in accordance with federal regulations. Exhibit A-1 is a federal publication entitled "Broadcasting Procedure" with the sub-title "Technical Standards and Procedures for Broadcasting, Receiving Undertakings (Cable Television)". In addition to the above reasons for providing materials, Shaw is able to obtain significant discounts on the cost of materials because of the volumes purchased.

[11]          David Fenwick is currently regional manager for Shaw in Victoria, B.C. but in 1998 he was head of the sales division for Shaw's operation at Richmond Hill. Mr. Fenwick described the two distinct sales groups (i) cable which sold cable television services; and (ii) Wave/Shaw@Home which sold high-speed internet access services. The internet service was first sold under the name "Wave" but the name was later changed to "Shaw@Home". I will refer to it as "Wave" because that was the word used by most of the witnesses. In addition to the two sales groups, each installer had a sales function in the sense that, if he was in a customer's home doing an installation which had been ordered by telephone, he was expected to mention other services provided by Shaw like specialty channels and Wave. If an installer sold an additional service, that installer was paid a commission as well as the piecework fee for the installation. Therefore, each owner/operator whose primary function was installations also had a sales function whereas an owner/operator whose primary function was selling cable might install only the product which that person actually sold; and an owner/operator who sold Wave would not install any service at all.

[12]          Mr. Fenwick stated that when a new owner/operator started in cable sales, that person would ordinarily receive three to five days of training by observing sales in the call centre, and by shadowing a service technician and owner/operator in cable sales. Under cross-examination, Mr. Fenwick also stated that an owner/operator in cable sales had access to "Shaw University", a four-day training program for new employees of Shaw, quite apart from any owner/operator. The objectives of the Shaw University Orientation Program as expressed in Exhibit R-1 are:

1.              Familiarize employees with the history, culture, and diversity of Shaw Communications.

2.              Provide an awareness and appreciation of the core skills and knowledge needed to provide customer service excellence.

3.              Introduce the various departments and divisions of Shaw Communications.

4.              Generate excitement about working at Shaw!

[13]          According to Mr. Fenwick, the cable sales owner/operators had no set hours, no day-to-day supervision, and no performance reviews. There was a sales co-ordinator (Juan Villa) who provided street maps; received completed work orders; and dealt with customer concerns. Most of the completed work orders of a cable sales owner/operator for a particular day would be turned in at the beginning of the following day. Shaw provided an area (referred to as the "sales pit") within the service centre where the cable sales owner/operators could make calls and use computers free of charge. The cable sales owner/operators agreed to take turns at "desk duty" under which, on any given day, one of them would remain in the sales pit to answer calls from customers. This was intended to assist in closing sales which were started in the field. The closing was usually routed back to the owner/operators who made the original contact.

[14]          Any sale effected by a cable sales owner/operator would be recorded in three ways. The owner/operator would record a sale on his work order which became the basis for his commission. Also, the owner/operator completed a daily sales form which was delivered to Juan Villa. And finally, there was a direct sales daily commission form which served as a backup to the work orders. Each cable sales owner/operator was assigned a territory which rotated approximately every six months.

[15]          Paul Davey currently works for Rogers but, in 1998, he was technical supervisor in charge of dispatch and maintenance for Shaw in Richmond Hill. He later headed up the outfitting of the cable system for the Wave service. He confirmed that, at the beginning of each day, the installers would go to Shaw's service centre in Richmond Hill to pick up work orders and usually turn in completed work orders for the prior day. An installer who needed any supplies would go to the Shaw warehouse to pick up the required supplies. An owner/operator installing the Wave service would receive a kit containing the necessary materials attached to each work order.

[16]          Shaw used an availability grid to schedule appointments based on a two-hour installation time and an average of five or six installations per day. Two Shaw employees were assigned to work with the owner/operator installers with respect to scheduling. One was assigned to cable installers and the other to Wave installers. Appointments could be scheduled for morning, afternoon or evening. The installers would inform Shaw as to what times they would be available and what times they preferred. Their respective appointments would be scheduled accordingly. Mr. Davey confirmed that there was a vacation request form which the owner/operators were asked to complete and submit to Shaw so that the scheduling grid could be adjusted for predictable absences. In some cases, two or more owner/operators might agree to cover each other's time off, but they were not obliged to do so.

[17]          Michelle Bacon started to work for Shaw in 1995 as a customer services representative, usually called a "CSR" within Shaw. As a CSR, she was an employee with full benefits. Shaw had about 25 CSRs on duty each business day during normal 9:00 to 5:00 hours. The principal duty of a CSR was to take phone calls: answering inquiries about cable services or the internet product, customer complaints, billing inquiries, and providing certain information for some of the owner/operator installers who were out in the field.

[18]          At the end of 1997, Ms. Bacon heard about the new Wave internet product which was going to be sold across the Richmond Hill marketing area. She had good knowledge of computers and was familiar with the product because she had been promoting it over the phone as a CSR. She spoke to the person at Shaw who was engaging the owner/operators to sell Wave and decided that she would give it a try. Ms. Bacon resigned as an employee of Shaw and signed an owner/operator agreement to sell Wave. See Tab 17 in Exhibit A-2.

[19]          When Ms. Bacon became an owner/operator, she had to get her own GST registration number. She was also required to purchase liability insurance. She gave up her salary and was paid only on a commission basis. She gave up her free Shaw cable and was no longer part of the stock option plan. She did, however, retain her dental and medical benefit plan.

[20]          Ms. Bacon started as an owner/operator selling Wave in January 1998. At that time she was one of a group of six or seven owner/operators whose only function was to sell Wave. There were four basic ways to make a sale: holding seminars, mall kiosk events, door-to-door, and referrals. When the product was new, seminars were an important sales method. She and the other owner/operators selling Wave would organize seminars at different locations like a neighbourhood school, a community centre or at the Shaw building in Richmond Hill. They would arrange among themselves as to who would work a seminar or similar event because they usually required a minimum of two or three persons to make the presentation, answer questions, sign up buyers and arrange for follow-up visits if necessary.

[21]          At the seminars, they pooled their efforts and sales and commissions because they did not want to compete with each other for a specific sale if it was part of an overall group event. If there was rent to be paid for a particular location (shopping mall, school hall, etc.), Shaw paid the rent and provided the computers and cable modems and flyers notifying the community of the seminar.

[22]          Apart from seminars, mall kiosk events, door-to-door sales and referrals, the owner/operators selling Wave would use the Shaw database referred to as CBS (cable based system). For security reasons, the CBS could be accessed only at the Shaw building in Richmond Hill. Using the CBS, an owner/operator could pull up a customer's account to see if the customer had Shaw cable services. This was a great timesaver because it permitted those selling Wave to work from a basic group who were already customers of Shaw for cable purposes and might be suitable candidates for Wave. Ms. Bacon stated that, on average, she would attend at the Shaw building in Richmond Hill four times each week although she was not required to be there at all.

[23]          Ms. Bacon was a success at selling Wave. As a CSR in 1997 she was earning an annual salary of about $30,000 but in 1998, in her first year as an owner/operator selling Wave, she earned about double that amount. She emphasized, however, that she worked long hours (evenings and weekend seminars, etc.) to achieve that level of commission income. Also, she had expenses which she had to pay herself like motor vehicle, cell phone, business cards and door hangers (a printed card which could be hung on a door knob with Ms. Bacon's name, phone number, cell number, a catchy phrase and the Shaw logo).

[24]          Ms. Bacon confirmed that there was little direct control over the way she performed her services as an owner/operator. Her performance was never evaluated. Her work was not inspected. She had no supervisor or manager. She could take a day off without seeking permission from anyone but she did have to be available for particular scheduled events like seminars. She did not report to any person. She chose the time of her vacations and received no vacation pay. She was required to submit an invoice in order to be paid and she developed the practice of invoicing every two weeks to minimize charge-backs for sales not actually installed.

[25]          Brad Fraser was another owner/operator who sold the Wave high speed internet product. He worked in the same group with Michelle Bacon. He signed an owner/operator agreement (Tab 41 in Exhibit A-2). He confirmed that he had the same flexibility with respect to working hours and vacation time subject to scheduling at a seminar or similar event. Initially, he and Michelle Bacon would arrange for private companies to set up the kiosks and equipment for seminars and demonstrations, and Shaw would pay the companies directly. Later, Mr. Fraser took over the set-up task and charged Shaw a lower fee than the outside companies. He charged a fee of $100 based on $15 per hour. Ms. Bacon also testified that she performed certain non-selling services for Shaw and was paid at the rate of $15 per hour.

Analysis

[26]          Notwithstanding the evidence of the Appellant's witnesses with respect to the relative independence of owner/operators, I have concluded for the reasons set out below that all of the owner/operators were employees of Shaw. They were not independent contractors. I will later in these reasons consider the principles of law which apply to this case but, for the present, I will consider only the owner/operator agreements (Exhibit A-2) which are an important part of the Appellant's case. One of those agreements is set out in full in paragraph 8 above. Each agreement is between Shaw and a particular individual who is referred to as the "owner/operator". In paragraph 1, the owner/operator declares his status to be that of an independent contractor and he denies an employment relationship; but, in my view, most of the terms of the agreement are more consistent with an employment relationship than with the owner/operator being an independent contractor.

[27]          In paragraph 3, Shaw is required to pay the owner/operator's "workers compensation monthly premium" but Shaw is reimbursed by deducting the amounts paid from the owner/operator's invoices. Why would Shaw pay workers compensation premiums on behalf of a group of persons if those persons are truly independent contractors? Why would those persons not pay directly their own workers compensation premiums? Is workers compensation available to a sole proprietor or an independent contractor in Ontario having regard to the fact that all of the owner/operators were working in the Toronto area?

[28]          According to paragraph 4, Shaw provides "Personal and Dependent Life Insurance, Long Term Disability Insurance, Accidental Death & Dismemberment Insurance and Extended Medical & Dental Insurance" and Shaw is reimbursed from the owner/operator's invoices for the premiums paid for "Life and Dependent Life Insurance, and Long Term Disability Insurance" but Shaw is not reimbursed for extended medical and dental insurance. This provision is consistent with the evidence of Michelle Bacon who stated that she continued to have her medical and dental insurance paid for by Shaw after she resigned as an employee and began to work as an owner/operator. Why would Shaw provide medical and dental insurance for the owner/operators if they are truly independent contractors?

[29]          In paragraph 5, the owner/operator agrees that his vehicle will be mechanically sound and fully painted on the exterior; and that he will conduct himself in a courteous and customer-friendly manner. A truly independent contractor would not have to make those promises to any of his customers. He would make those promises to himself to make sure that he had at least some customers. It is apparent from paragraph 6, however, that the customers referred to in the owner/operator agreements are Shaw's customers and not the customers of any owner/operator. If Shaw is the only "customer" of the owner/operators as the only person by whom they are paid, is Shaw perhaps their employer?

[30]          In paragraph 7, the owner/operator agrees to perform cable installations in accordance with Shaw's technical specifications using "approved Shaw-supplied materials". This term of the agreement demonstrates control by Shaw of the manner in which the owner/operator works and the materials which the owner/operator uses. And in paragraph 8, the owner/operator agrees that Shaw may terminate the agreement "upon paying me the equivalent remuneration for service in lieu of notice". In employment law, a payment in lieu of notice is a common provision for instant termination without cause.

[31]          In the opening paragraph, the owner/operator states: "I am a sole proprietor pursuant to the laws of Ontario ...". The owner/operator does not identify the subject of his sole proprietorship. It could be an oil painting or a fancy car. The words in context imply that the owner/operator is the sole proprietor of a business because of what follows: " ... and will provide my services as an Owner Operator to Shaw ... along with other organizations if I so please ...". Michele Bacon signed one of these agreements (Exhibit A-2, Tab 17) but she was not the sole proprietor of any business when she signed on January 1, 1998 because she had just resigned as an employee of Shaw to become an owner/operator.

[32]          The closing paragraph of the owner/operator agreements is worth repeating:

I have read and understand the preceding terms and conditions of the above "agreement of responsibilities". I understand my roles and responsibilities as an Owner Operator providing services to Shaw Cablesystems Ltd.

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.

[33]          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/operator 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.

[34]          The owner/operator's declaration of status (to be an independent contractor) in paragraph 1 does not end the matter. There is an oft-quoted statement of Viscount Simon in I.R.C. v. Wesleyan and General Assurance Society, [1948] 1 All E.R. 555 at page 557:

                It may be well to repeat two propositions which are well established in the application of the law relating to income tax. First, the name given to a transaction by the parties concerned does not necessarily decide the nature of the transaction. To call a payment a loan if it is really an annuity does not assist the taxpayer, any more than to call an item a capital payment would prevent it from being regarded as an income payment if that is its true nature. The question always is what is the real character of the payment, not what the parties call it. ...

This statement by Viscount Simon was adopted by the Federal Court of Appeal in Estate of Roy Perini v. The Queen, 82 DTC 6080 when Le Dain J.A. stated at page 6082:

It is elementary, of course, that the name given by the parties to an amount payable pursuant to clause (v) of paragraph 1.3 of the agreement is not conclusive of its nature. See Commissioners of Inland Revenue v. Wesleyan & General Assurance Society 30 T.C. 11 at 16 and 25. ...

The Federal Court of Appeal has adopted the same principle in employment insurance cases. In Standing v. M.M.R., [1992] F.C.J. 890, Stone J.A. stated:

... Regardless of what may have been the Tax Court's appreciation of the Wiebe Door test, what was crucial to it in the end was the parties own post facto characterization of the relationship as that of employer/employee. There is no foundation in the case law for the proposition that such a relationship may exist merely because the parties choose to describe it to be so regardless of the surrounding circumstances when weighed in the light of the Wiebe Door test. The Tax Court should have undertaken an analysis of the facts while having regard to that test ...

[35]          Since 1986, the decision of the Federal Court of Appeal in Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C.R. 553 has been a useful guide in determining the question whether a particular individual was an employee or an independent contractor. In 2001, the Supreme Court of Canada was required to consider the same question in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983. When writing the judgment for a unanimous Court in Sagaz, Major J. referred frequently and with approval to the decision in Wiebe Door and summarized the law as follows at page 1005:

47             Although there is no universal test to determine whether a person is an employee or an independent contractor, I agree with MacGuigan J.A. that a persuasive approach to the issue is that taken by Cooke J. in Market Investigations, supra. The central question is whether the person who has been engaged to perform the services is performing them as a person in business on his own account. In making this determination, the level of control the employer has over the worker's activities will always be a factor. However, other factors to consider include whether the worker provides his or her own equipment, whether the worker hires his or her own helpers, the degree of financial risk taken by the worker, the degree of responsibility for investment and management held by the worker, and the worker's opportunity for profit in the performance of his or her tasks.

48             It bears repeating that the above factors constitute a non-exhaustive list, and there is no set formula as to their application. The relative weight of each will depend on the particular facts and circumstances of the case.

[36]          The Supreme Court has made it clear that the central question is whether the worker is "in business on his own account". The significant factors to consider are (i) the level of control which the payor has over the worker's activities; (ii) who owns the worker's tools and equipment; (iii) can the worker hire helpers; (iv) the worker's opportunity for profit and risk of loss; and (v) the worker's degree of responsibility for investment and management. I have already stated in paragraphs 27 to 33 above why I think that the owner/operator agreements point to an employment status. Apart from the owner/operator agreements, I will review the five factors considered by the Supreme Court.

(i)             Control

[37]          Taylor Kennedy was the first witness called by the Respondent. He is currently a general contractor residing in Ontario but, in 1997 and early 1998, he was employed by Shaw at Richmond Hill as installation supervisor. He supervised the installation of both basic cable television and the Wave internet product. For a six-month period from September 1997 to March 1998, while Mr. Kennedy was digital coordinator for Shaw, one of the owner/operators took his place as installation supervisor. Mr. Kennedy's employment by Shaw ended in August 1998.

[38]          Mr. Kennedy's evidence is important because he described the extent to which Shaw controlled both the hours when the owner/operators worked as installers and the location where they performed their work. Exhibit R-12 is a form prepared and filled in by Mr. Kennedy, and it shows the work schedule for installers for the period April 6 to April 26, 1998. The first page of Exhibit R-12 has a list of 26 installers showing their designated hours of work each day (8:00 a.m. to 6:00 p.m. or 11:00 a.m. to 9:00 p.m.) from Monday, April 6 through to Sunday, April 12. The second page shows the same 26 installers in the same format but the man (Lodrick Bonardy) who is named last on page one is named first on page two and all the other names from page one have been moved down one space on page two. The same process is followed on page three where Lodrick Bonardy's name appears in the second space. Following this process, an installer like Trevor Sayers whose name appears at the top of page one would know his work schedule for 26 weeks or half a year. Mr. Kennedy explained his rotating system as follows:

A.             ... once Trevor gets down to the bottom of this list it will recircle and start at the top again, so you can actually take one page and visually see down the road six months where you are going to be.

Transcript page 643

[39]          Mr. Kennedy was asked to describe a day in the life of an installer and he answered:

A.             The work was routed, normally the night before, put into their bins, they had bins that they went to in the morning, collected the work, they wrote out a Route Sheet and photocopied that, took a copy of the Route Sheet to Call Centre, went out and performed their duties as an installer, collected any monies and filled out the Route Sheet according to the completion codes and that was photocopied in the morning and returned to Check In.

Q.             Can I stop you for a moment. We've heard in other evidence the word "Postings", is that the same as Check In?

A.             No, Check In are the two girls who would receive the work orders and posting the actual work order was the completion of the work order being the installation codes.

Q.             Were these two people who are taking the work order, just as a group, would they be referred to as the Check In people or Posting people, would those terms be used interchangeably?

A.             No, that responsibility was to the Check In girls.

Q.             Carry on, please. Oh, maybe I will ask why they gave their Route Sheets to the Check In people?

A.             It just showed that all the calls were completed, you mean the completed ones?

Q.             I'm sorry. Just backing up in the sequence of events. You said they would copy the Route Sheets and give them to the Check In -

A.             The girls in Check In.

Q.             Why were they doing that?

A.             Well, that allowed the girls in Check In to know who was on the road, who had what addresses and what areas in case a customer calls in and he cancels or they want to add something, they had the opportunity to contact that installer right there.

Q.             So after giving these sheets to the Check In people, then what would the installer do?

A.             They would either pick up material if it was required and go out and do the installs.

Q.             They are carrying out their work orders, would they have to have

contact with anyone at Shaw during the course of the day?

A.             Always with Check In.

                Q.             With Check In. How often would they do that?

A.             Well, initially they had to call in to complete or once they completed a job they had to call in, but the telephone traffic was too great so a decision was made that every second or third call, they could call in and clear the previous calls that they had.

Q.             What was the purpose of calling in, you said to clear the calls, what does that really mean?

A.             To show that maybe a customer was upgraded in service, that the work was done or there was an NBH. like if there was an NBH then they could notify the girls in Check In, the girls in Check In in turn would call the residence, confirmation that nobody was home, back to the installer and make a note on the door hanger at the time and move on.

Q.             NBH means?

A.             Nobody Home.

Transcript pages 684-686

[40]          Exhibit R-12 and the oral testimony of Mr. Kennedy are strong evidence of the control which Shaw exercised over the installers with respect to hours worked and the locations where they worked (i.e. the homes of Shaw customers). That evidence is corroborated by the testimony of some witnesses for the Appellant who stated that the installers had to attend at the Shaw building each morning to pick up their work orders for that day and to turn in their completed work orders for the prior day. Paul Davey stated that there was a vacation request form which the owner/operators were asked to complete and submit to Shaw so that the scheduling grid could be adjusted for predictable absences.

[41]          Mr. Kennedy's testimony, quoted in paragraph 39 above, also demonstrates the extent to which the installers were required to report each day to the two women in the Shaw building who worked at "Check In". The name of the job "Check In" speaks for itself. Shaw controlled the installers.

[42]          Shaw also had significant control over the sales persons who did not install but only sold the Wave internet product. Michelle Bacon and Brad Fraser emphasized how much freedom they had in deciding when and where to work but there were real limitations on that freedom. They were required to be present on a rotation basis at seminars and demonstrations of the Wave product whether those seminars and demonstrations were arranged by sales persons like Ms. Bacon and Mr. Fraser or by Shaw. Also, the equipment for any seminar or demonstration was provided by Shaw; Shaw provided the flyers; and Shaw paid the rent for the location. If Ms. Bacon and Mr. Fraser were independent contractors, why did they not provide their own equipment at seminars and demonstrations? Why did they not provide the flyers and pay the rent for the locations of seminars and demonstrations?

[43]          When the persons selling Wave conducted a seminar in a community hall or demonstrated the product at a kiosk in a shopping mall, it was common for them to wear golf shirts with the Shaw logo to identify them as persons who could answer questions or make a sale. Although persons selling the Wave product were not required to attend at the Shaw building every day like the installers who had to pick up their work orders each morning, Ms. Bacon testified that she was at the Shaw building in Richmond Hill on average four times each week in order to have access to the Shaw database. For security reasons, the Shaw database could be accessed only at the Shaw building.

[44]          An individual who sells a single product (like Wave) provided by a single supplier (like Shaw) at a price determined by the supplier, and is compensated 100% by commission may appear to have significant freedom in choosing when and where to work. That freedom, however, is more apparent than real when the individual relies on the commission income to earn a living. Ms. Bacon and Mr. Fraser worked hard at selling Wave because it was their livelihood. They were not like the old style "Fuller Brush Man" picking up casual income by "moonlighting" on evenings and weekends. The need to earn a living is a powerful incentive for self-discipline and a strong work ethic. Ms. Bacon and Mr. Fraser are obviously enterprising persons but that does not mean that either one operated a personal business or was an independent contractor with respect to their sales of the Wave product. Although Ms. Bacon had a part-time job in a bar two evenings a week, during the ordinary working day she sold only Shaw's product (Wave) to Shaw's customers. The persons who sold the Wave product were very much under the control of Shaw.

[45]          Having regard to the factor of control, I find that Shaw had an overarching control over the installers and significant control over the non-installers who were selling as owner/operators. In my opinion, the factor of control points strongly in the direction of employment.

(ii)            Ownership of Tools and Equipment

[46]          The ownership of tools was not a condition of the owner/operator agreement but that agreement contained a recital which stated:

I, _________ , operate an independent business and own sufficient of my own tools for this trade to provides services to Shaw.

Having regard to the fact that the same agreement was signed by installers and persons selling cable TV or Wave, it is not clear what trade is referred to in the phrase "tools of this trade". I assume that the owner/operator agreement was first drafted for only installers when Shaw decided around 1992/1993 to eliminate third party cable contracting companies and engage the installers directly. Later, all persons installing or selling cable TV or Wave were required to sign the agreement to identify themselves as "independent contractors" but it appears that the basic agreement was not changed to reflect the different services which various individuals might provide.

[47]          The installers who testified were in agreement that they were required to own their own tools and a vehicle which was capable of carrying a ladder. Many skilled tradesmen like auto mechanics are required to own their own tools even if they are full-time employees in a service center. It is a policy which makes the individual responsible for retaining essential tools which may be expensive to replace. The ownership of a vehicle (probably a small truck or van) capable of carrying a ladder could be a significant financial burden for an installer.

[48]          There is no indication that the individuals engaged to sell cable TV or Wave were required to own any tools or equipment other than an automobile. In Brad Fraser's view, the best tools for a man engaged in sales were a dark suit and a deep voice. He had both of those. When demonstrating the Wave product, the equipment was supplied by Shaw. When selling cable TV, the homeowner provided the television set and Shaw provided the cable along the street with individual hookups to a subscriber's home. Tools were negligible in the sale of cable TV and Wave.

[49]          All persons engaged in sales could use the Shaw database, referred to as CBS (cable based system). For security reasons, CBS could be accessed only at the Shaw building in Richmond Hill but it was very useful to scan any neighborhood in the territory services by Shaw to determine who was a customer and, if so, whether the customer had only cable TV or also had Wave. For all persons engaged in sales, Shaw provided office space with phones, fax machines, computers and other equipment or supplies.

[50]          Considering the ownership of tools and equipment, I find an easy distinction between the installers and sellers. The installers must own the tools necessary for connecting a Shaw customer to cable TV or to Wave. For them, the factor of owning tools points in the direction of independent contractor and not employee. For the persons engaged in sales (cable TV or Wave), there are no significant tools. Shaw provides the cable and, for demonstrating Wave, Shaw provides the equipment. For those engaged in sales, the factor of owning tools points in the direction of employment and not independent contractor.

(iii)           Hiring a Helper

[51]          There is conflicting evidence as to whether an owner/operator could have hired a helper but apparently none of them ever did. Shaw got rid of third party cable contracting companies back in 1992/1993 because Shaw concluded that the actual installer was not adequately paid and the level of service was poor. It was that situation which prompted Shaw to engage the installers directly through an owner/operator agreement. Consequently, I find it difficult to believe that Shaw would accept the idea that any installer cold hire a helper who himself (i.e. the helper) was not a signatory to an owner/operator agreement. Also, there is no way that a helper could be integrated into the installer's work schedule (Exhibit R-12) unless that helper was under the control of Shaw.

[52]          Considering the owner/operators who sold basic cable TV or Wave or both, they know that selling is an intensely personal endeavour. There is a certain natural ability for selling and an inclination to dress for the role. Brad Fraser referred to a deep voice and a dark suit! The compensation was 100% commission and was conditional upon the actual installation after the order was signed. Therefore, it was important for the sales person to know about the installation procedure with respect to any promise given for an installation date. If the installer did not show up at the promised time, the customer would call the sales person who would then "go into the system" and book a new installation date. The person making the sale would have to be familiar with the installation procedure and the installer time-table at Shaw. A sales "helper" who had not become part of the Shaw organization by signing an owner/operator agreement would not be able to attend at the Shaw building in Richmond Hill; would not know the installation procedures; and would not be able to make a firm installation commitment on behalf of Shaw.

[53]          The sales persons who testified all described how frequently they went to the Shaw building at Richmond Hill. They were familiar with the Shaw database and they used the five or six cubicles which had been assigned to them to share for purposes of retrieving information. No person could be an effective vendor of the Shaw products unless that person had signed an owner/operator agreement and become part of the Shaw organization. For all practical purposes, I find that an owner/operator could not hire a helper. This factor points toward employment.

(iv)           Opportunity for Profit/Risk of Loss

[54]          It is important to remember the difference between profit and revenue. Profit is a net result when revenues exceed expenses. Similarly, loss is a net result when expenses exceed revenues. The opportunity to make a profit from the sound management of a business is different from the opportunity to earn more revenue by efficient piece-work or by longer hours at a flat rate.

[55]          A responsible installer who becomes very efficient will be able to perform more installations in a given 8-hour period. Because he is paid on a piece-work basis, he will earn more revenue. Also, if he works longer than an 8-hour day, he will earn more revenue. These opportunities for an installer to earn more revenue have nothing to do with the successful operation of a business. It is a fact that the installers were required to incur certain expenses in order to earn their revenue. They had to pay the operating expenses of a vehicle which could carry their tools and a ladder. They had to pay for any tools which were lost or stolen. They had to purchase liability insurance. These expenses were incidental to the terms of the owner/operator agreement but it is reasonable to infer that the piece-work rates established by Shaw for the remuneration of the installers took into account these required expenses. In other words, the piece-work rates (which Mr. Morris said were based on industry norms) must have held out to any prospective installer at least the prospect of earning a reasonable income.

[56]          The owner/operators who were engaged to sell basic cable TV or Wave were not required to own tools but they did have to own a motor vehicle and pay its operating expenses. Again, I infer that the rates of commission established by Shaw for the remuneration of the sellers took into account their required expenses, and held out at least the prospect of earning a reasonable income.

[57]          I note in passing that section 8 of the Income Tax Act contemplates the deduction of certain expenses incidental to earning income from employment. In particular, paragraphs 8(1)(f), (h) and (h.1) permit the deduction of travel expenses where the employee was ordinarily required to carry on the duties of employment away from the employer's place of business. Also, paragraph 8(1)(j) permits the deduction of interest on money borrowed to purchase a motor vehicle, and permits the deduction of capital cost allowance (i.e. depreciation) with respect to a motor vehicle where the employee is entitled to a deduction under paragraph 8(1)(f), (h) or (h.1). The incurring of certain expenses by a person incidental to his/her employment does not, by itself, change that person's status from employee to independent contractor.

[58]          An owner/operator did in theory have a risk of loss if the expenses related to his/her duties under the owner/operator agreement exceeded his/her revenues. If, as I have inferred, and there is no evidence to the contrary, the piece-work rates for installers and the commission rates for sellers took into account the reasonable expenses of those activities, an individual working as an installer or seller would have to be truly incompetent in order to suffer a loss. In my view, the opportunity for profit and risk of loss factor must be seen and applied in the context of each person having a reasonable level of competence. There were many individuals who signed the owner/operator agreements (there are 103 agreements in Exhibit A-2), and the owner/operators who testified as witnesses for the Appellant appeared to be content with their financial arrangement. They did not indicate that there was any material risk of loss.

[59]          The owner/operators were not on the Shaw payroll. They submitted invoices every two weeks and charged GST to Shaw. They were paid by the "accounts payable department" at Shaw. There is evidence that many owner/operators reported their income (from Shaw) for income tax purposes as "business income" using a Revenue Canada form which disclosed revenues and expenses. On that form, they would deduct the expenses which are permitted under section 8 (and perhaps some other sections) of the Income Tax Act. In my view, the manner in which an owner/operator claimed certain revenue from Shaw every two weeks, and the manner in which Shaw paid the owner/operator every two weeks are not significant facts when compared with all of the other surrounding circumstances. Indeed, the regularity of being paid every two weeks by Shaw is a further indication of employment.

[60]          The Appellant argued that there were two obligations which could expose the installers to a risk of loss. First, the installer was responsible for the quality of his work. If there was a defective installation of cable TV or Wave, the installer who performed the work was obligated to go back to the customer's house and repair his former work with no additional compensation. And second, the installer was responsible for any damage caused to a customer's house or property in the course of an installation. That is why each installer was obliged to purchase liability insurance.

[61]          Having regard to the first obligation, a responsible technician who had the initiative and enterprise to become an owner/operator would know that he was responsible for the quality of his work and, with at least average competence, would perform his installations in a way which did not require repair. Concerning the second obligation, a person ordinarily carries liability insurance in order to be protected from loss. And more significantly, a customer whose house or other property was damaged by the negligence of an installer would sue both Shaw and the installer. As we know from paragraph 6 of the owner/operator agreement, the customer is Shaw's customer and not the owner/operator's customer. The owner/operator arrives at the customer's house only because the customer has made a prior appointment with Shaw. The obligation in the owner/operator agreement for the liability insurance is primarily to protect Shaw and, as stated above, the insurance itself is intended to protect a person from loss.

[62]          Compensating the installers by piece-work and the sellers by commission gave them a real incentive to maximize their revenues in accordance with their abilities. Neither the installers nor the sellers were required to establish an independent place of business away from their homes. They had no fixed overhead and no need to advertise. The installers performed services only for Shaw's customers and every new order obtained by a seller became a Shaw customer. Without any fixed overhead or any need to advertise, the installers and sellers had no risk of loss.

[63]          The owner/operators had a real opportunity to maximize their revenues without any need to compute a profit or loss. The factor concerning opportunity for profit and risk of loss points in the direction of employment.

(v)            Responsibility for Investment and Management

[64]          An independent contractor would ordinarily invest capital in his/her business and have a business to manage. In this case, the owner/operators had no customers or clients because all of their services were performed for Shaw's customers. Accordingly, they had no need to advertise. They were not in the yellow pages of the phone book or in the want ad columns of local newspapers. They had no place of business where a customer might attend to seek them out. They had no helpers or employees, permanent or temporary. Not one of the owner/operators had a business to manage. All they had to do was organize their individual time and effort so as to maximize their personal revenue from Shaw.

[65]          The only capital which the owner/operators required was the ownership (or lease) of a motor vehicle and, for installers, the ownership of tools. This was not a significant outlay of capital which required weekly or monthly management.

[66]          The Appellant made much of the fact that each owner/operator was obligated to obtain a GST registration number; was paid only in response to invoices submitted to Shaw; and was expected to invoice the appropriate amount of GST. I stated in paragraph 33 above that the owner/operator agreements are collectively a camouflage or façade to make employees appear to be independent contractors. The requirement to submit invoices and charge GST is simply part of the façade. There is no reason why the owner/operators could not be on the payroll and paid in accordance with the work orders completed (for installers) and the sales effected (for sellers).

[67]          The owner/operators had no business to manage and virtually no capital to invest. The factor of responsible investment and management points in the direction of employment.

Conclusion

[68]          According to the Supreme Court of Canada in Sagaz (above), the central question is whether the worker is "in business on his own account". Upon reviewing the five significant factors to consider when attempting to answer that question, I have reached the following conclusion:

(i)             control - indicates employment;

(ii)            ownership of tools and equipment -

indicates independent contractor for installers

but employment for sellers;

(iii)           hiring a helper - indicates employment;

(iv)           opportunity for profit/risk of loss -

indicates employment;

(v)            responsibility for investment and management -

indicates employment.

Although the ownership of tools as a stand-alone test would indicate the status of "independent contractor" for installers, the other four factors (and particularly "control") leave no doubt that the installers are employees. I have no hesitation in concluding that not one of the owner/operators was in business on his/her own account.

[69]          After the hearing of these appeals, my colleague Judge Teskey issued his decision allowing the appeal in TSS-Technical Service Solutions Inc. v. M.N.R., (Tax Court of Canada, file number 2000-3366(EI), February 26, 2002). Although TSS-Technical Service Solutions Inc. is in a business somewhat similar to that of Shaw, I do not find anything in Judge Teskey's decision which causes me to change the result herein. The appeals are dismissed.

Signed at Ottawa, Canada, this 13th day of June, 2002.

"M.A. Mogan"

J.T.C.C.

COURT FILE NO.:                                                 2000-1446(EI) and 2000-1448(CPP)

STYLE OF CAUSE:                                               Shaw Communications Inc. and

                                                                                                the Minister of National Revenue

PLACE OF HEARING:                                         Calgary, Alberta

DATE OF HEARING:                                           September 24, 25, 26, 27 & 28, 2001

REASONS FOR JUDGMENT BY:      The Honourable Judge M.A. Mogan

DATE OF JUDGMENT:                                       June 13, 2002

APPEARANCES:

Counsel for the Appellant: Gregory Gartner, James C. Yaskowich

                                                                                and Howard Levitt

Counsel for the Respondent:              Julia S. Parker and Mark Heseltine

COUNSEL OF RECORD:

For the Appellant:                

Name:                                Brian A. Felesky, Q.C.

Firm:                  Felesky Flynn

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                Ottawa, Canada

2000-1446(EI)

2000-1448(CPP)

BETWEEN:

SHAW COMMUNICATIONS INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Appeals heard on September 24, 25, 26, 27 and 28, 2001, at Calgary, Alberta, by

the Honourable Judge M.A. Mogan

Appearances

Counsel for the Appellant:          Gregory Gartner, James C. Yaskowich

                                                and Howard Levitt

Counsel for the Respondent:      Julia S. Parker and Mark Heseltine

JUDGMENT

          The appeal pursuant to subsection 103(1) of the Employment Insurance Act is dismissed and the decision of the Minister of National Revenue on the appeal made to him under section 92 of that Act is confirmed.

The appeal pursuant to section 28 of the Canada Pension Plan is dismissed; and the determination of the Minister of National Revenue on the application made to him under section 27.1 of the Plan is confirmed.

Signed at Ottawa, Canada, this 13th day of June, 2002.

"M.A. Mogan"

J.T.C.C.