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Citation: 2011 TCC 16
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Date: 20110211
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Docket: 2009-939(EI)
2009-940(CPP)
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BETWEEN:
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OLEKSANDR PICHUGIN,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent,
and
HIGH-TECH REALTY INC.,
Intervener.
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REASONS FOR JUDGMENT
(Edited from the transcript of Reasons for Judgment
delivered orally from the Bench on July 7, 2010 in Toronto, Ontario)
Weisman D.J.
[1] Over the course of two days
of hearings, the first one being January 25 and the second one being
today, I have entertained two appeals by the Appellant, Olexsandr Pichugin,
against determinations by the Minister of National Revenue that, while he was
engaged by the Intervener, High-Tech Realty Inc., from the 6th day of
September, 2007 to the 31st day of March, 2008, he was an independent
contractor carrying on business on his own behalf.
[2] The Appellant appeals both decisions on the
ground that, in his view, he was an employee and was therefore entitled to the
benefit of not only the Employment Insurance Act but the Canada Pension
Plan.
[3] This issue has been variously characterized
as "fundamental" in Wiebe Door Services v. Minister of National
Revenue (1986), 87 Dominion Tax Cases, 5025, in the Federal Court of
Appeal, also characterized as "central" in Sagaz Industries,
more accurately known as 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.,
[2001] S.C.C. 59, in the Supreme Court of Canada, and finally characterized as
"key" in the Federal Court of Appeal decision in the Royal
Winnipeg Ballet v. Minister of National Revenue, [2006] Federal Court
Judgments No. 339. However this issue is characterized, my role is to examine
the total relationship of the parties and the combined force of the whole
scheme of operations.
[4] To this end, the evidence in this matter is
to be subjected to the four-in-one test laid down as guidelines by Lord Wright
in Montreal City v. Montreal Locomotive Works, cited at [1947] 1
Dominion Law Reports 161, in the Privy Council, which guidelines were adopted
by Justice MacGuigan in Wiebe Door Services cited beforehand.
[5] It is trite law that the four guidelines are
the payer's right to control the worker, whether the worker or the payer owns
the tools required to fulfil the worker's function, and the worker's chance of
profit and risk of loss in his or her dealings with the payer, who in this case
is the Intervener.
[6] Dealing first with the criterion of control,
which criterion has been augmented by a concept imported into the common law
jurisdictions from the Civil Code of Quebec which is the concept of
subordination. The two have to be examined together to ascertain whether the
requisite degree of control is in evidence. To begin with, we are dealing with
the right to control rather than actual de facto control. That
distinction has been set out in a number of cases, one of which is Gallant
v. Minister of National Revenue, [1986] Federal Court Judgments, No. 330,
in the Federal Court of Appeal, and again in Hennick v. Minister of National
Revenue, [1995] Federal Court Judgments No. 294 in the Federal Court of
Appeal.
[7] I might say before I go any further that
this case was unusual in two ways. First, much was determined by the issue of
credibility between the witness for the Intervener and the Appellant himself. Second,
in my experience there is an unusual number of facts that I heard over the two
days of the hearing that pointed in both directions which somewhat complicated
matters.
[8] The evidence is clear that Mr. Oulahen could
direct what projects the Appellant was to work on, but he had no power to
direct how the work was to be done. To use other words than "how", I
am referring to the means or the manner in which the work was to be done.
[9] This is typical of cases where the worker has
expertise that is above and beyond the ability of the payer to supervise. In
this case we have the payee, the Appellant, being a paralegal and having legal
knowledge, which is the very reason that Mr. Oulahen retained him for his
primary project of changing the parking facility behind their offices from one
in which an independent company enforced parking regulations to one that is
self-regulated, but with the somewhat sensitive consideration that it had to be
done in such a way so as not to alienate the people who were parking there, who
primarily were clients of the Intervener.
[10] The reason I depart from the vernacular use
of the word "what" and replace it with the word "means" is
because the word "means" is the word used in the Civil Code of Quebec
in article 1099 which defines what a contractor is: "The contractor, or,
the provider of services is free to choose the means of performing the contract
and no relationship of subordination exists between the contractor, or the
provider of services, and the client in respect of such performance."
[11] I listened, of course, with great interest
to just what Mr. Oulahen could direct and what he could not and, as I have
said, he could not control the means; he could only control what the Appellant
was doing.
[12] I have misspoken. I have not replaced the
word "what" with "means." It is the word "how"
that is replaced by the word "means." In common law we talk about
what to do and how to do it, but where the Civil Code comes in we talk about
the means.
[13] As examples of what I am referring to, we
have the main project that was entrusted to Mr. Pichugin, and that was this
parking lot encompassing some 20 to 30 spaces on Avondale Road in North York, Toronto.
That involved him negotiating or learning from the municipality what
regulations were extant with reference to signage. He was also involved with
the Avondale Cafe project. He wound up issuing parking tickets once he took the
course and obtained the authority to do so. He was in charge of document
management for some of the residents or tenancies that the Intervener possessed.
In his words, he "was in charge of supervision of documents with reference
to the tenants".
[14] His main project, the parking lot, required
legal expertise, which I have said was beyond the ability of the Intervener to
supervise.
[15] In Wolf, which has been included in
the Book of Authorities of the Intervener at tab 6, they refer to this type of "employment"
-- and I use that term generically rather than technically-- as non-standard. In
other words, the distinction, according to Wolf, between standard and
non-standard employment is that in standard employment the supervisor knows the
job as well as, if not better than, the worker and is in an excellent position
to tell the worker not only what to do but how to do it. In non-standard
employment (-- in Wolf we had a very highly specialized aeronautical
engineer whose expertise was far beyond that of anyone in the employ of the
payer to supervise --) it suffices that the control only extend so far as
telling the worker what to do, and he could still be classified as an employee.
In that particular case, however, he wound up being found to be an independent
contractor. Wolf is the case that set out this distinction.
[16] Accordingly, we are dealing here with Mr. Pichugin who
was in non-standard employment, and it was sufficient only that Mr. Oulahen be
able to direct and have the right to direct what he should do, as I find he did
so that facet of the control factor points towards the Appellant being an
employee.
[17] When I said the evidence goes both ways,
there are other pieces of evidence that I heard that do point in another
direction. For instance,
Mr. Pichugin had no set hours. He did not require permission from the
Intervener to work for his one client that he was doing paralegal work for
during lunch hours, on his days off, and even during his normal working hours, although
he did give notice when he was required to be away during working hours, and he
would endeavour to make other arrangements with Mr. Oulahen.
[18] In my view, there is a big difference
between requiring permission and giving notice of what you intend to do. The
former indicates subordination, but the latter does not.
[19] Then I get to the evidence with reference
to Mr. Pichugin issuing parking tickets. His evidence was that he gave out
parking tickets about six times a day every one-and-a-half hours, and the
question arises: Was this a requirement? Is this something that a paralegal
would normally do?
[20] When it came to taking the parking enforcement course in the first
place, Mr. Pichugin says it was not something that he wanted to do. It was
interesting that Mr. Oulahen and Mr. Pichugin wanted to distance themselves
from parking enforcement, but in Mr. Pichugin's case, while he says he didn't
want to do it, others in the office, some four or five, were taking the course,
so rather than creating waves, he went along with it.
[21] As counsel for the Intervener has pointed
out, that does not explain why his wife and his son also took the course, which
raises some question as to Mr. Pichugin's credibility. On closer inspection of
the evidence, I don't find that he was required to issue parking tickets. It is
something that he just did.
[22] Another facet of an employee is that an
employee has to perform his services personally. It is very clear law that the
right or the freedom to do a job either by one's own hands or by another's is
inconsistent with a contract of service.
[23] We find that in Ready-Mixed Concrete
(South East) Limited v. Minister of Pensions and National Insurance, [1968]
1 All E.R. 433, Queen's Bench Division. I paid close attention to the evidence of
Mr. Oulahen that Mr. Pichugin hired his son and possibly his wife to help him
with his duties. I concluded that the evidence did not support that assumption
on the part of the Minister and the submissions by counsel on behalf of the Intervener
.
[24] Assumption 17(r) says that the Appellant
could hire helpers at his own expense. The evidence is very clear that Mr.
Oulahen financed this hiring of helpers. When I say "financed", he
gave the money to Mr. Pichugin and quoting from Mr. Oulahen, "I paid you
cash to pay your son $20 per hour or whatever." The evidence also came
out that the son -- I don't know about the wife, but I think the son was not
only issuing parking tickets, but he was cleaning up garbage, and that clearly
was not part of a paralegal's jurisdiction.
[25] I do, however, find that Mr. Pichugin was
required to perform his services personally, which indicates that he was an
employee.
[26] There was argument by counsel for the Intervener
that Mr. Pichugin had the right to refuse work. It gets back to his ability not
to ask permission to leave during business hours, but simply give notice.
[27] I must draw to everyone's attention that
there is a distinction between refusing a working relationship or refusing an
assignment or a possibility of employment, and refusing to perform a task once
employment has been accepted. Counsel quite often confuse these two. It is
clear law that, if one has the right to refuse a working relationship, he is
clearly an independent contractor.
[28] There are many cases that support that
proposition, such as A & T Tire & Wheel Limited v. Minister of
National Revenue, a case of my own in 2009, and many other cases: Ambulance
St-Jean v. M.N.R., [2004] F.C.J. 1680; Livreur Plus Inc. v. M.N.R.,
[2004] F.C.J. No. 267; Precision Gutters v. M.N.R., [2002] F.C.J. No.
779. There are others, but that is enough.
[29] There are also cases in which the worker refuses
to perform a task within a working relationship, and that is quite a different
thing. The primary case in that regard is one that I have already cited, and
that is Hennick. Where one refuses to perform a task, the Court has to
look at the reasons. Sometimes they are reasonable, such as unloading a truck that
is full of contamination. This has nothing to do with whether the person is an
employee or an independent contractor. On the other hand, the worker may simply
be insubordinate. An insubordinate worker, however, can still be in a
subordinate relationship with his or her payer.
[30] Getting back to Mr. Pichugin, I find that
he did not have any right to refuse a working relationship. He accepted the
working relationship. At the most, it can be said that, when those few
occasions occurred when there was a conflict, he might refuse an assignment,
but that does not make him an independent contractor.
[31] Moreover, there is the fact that his hours
were not recorded, and he could work fast or slow as long as the project was
done. That is inconsistent with subordination.
[32] Then there is an assumption that he had to
report weekly or bi-monthly to Mr. Oulahen. There are exhibits of his report on
the parking lot project which was done, I believe, in late March 2008. The
question is: Is that reporting an indicia of control or is it simply letting
Mr. Oulahen know the progress that he was making, in which case it is not so
much a matter of reporting but a matter of letting Mr. Oulahen monitor the
result, which you are permitted to do with an independent contractor.
[33] We get to the famous case of Charbonneau
v. M.N.R., which articulated that monitoring the result must not be
confused with supervising the worker. That is cited in [1996] Federal Court Judgments
No. 1337 in the Federal Court of Appeal. I did not take that assumption as
having been established, and I find that Mr. Pichugin was not really reporting
on a regular basis to the Intervener or Mr. Oulahen. It was more a matter of
Mr. Oulahen monitoring the quality of the work done.
[34] There is jurisprudence that says that
independent contractors are not free of all control. It stands to reason that,
if one is operating any sort of an establishment -- let's take the example of a
real estate office where all the realtors are independent contractors working
on commission, you can't let chaos reign. You can't have them come and go
whenever they want. Someone has to be there in case clients come in. Mr.
Oulahen well knows that.
[35] A certain amount of control of an
independent contractor is reasonable and permissible without turning that
person into an employee. Poulin v. Canada, [2003] F.C.J. No. 141
(F.C.A.) at paragraph 16.
[36] Here we have Mr. Oulahen telling Mr.
Pichugin that on
Mr. Pichugin's invoices he cannot have the Intervener's address, the same as
his. He is not to see clients in the office. As far as I am concerned, those
are reasonable controls not inconsistent with Mr. Pichugin still being an
independent contractor.
[37] This brings me to the two weeks’ vacation pay
and Mr. Pichugin being paid for Christmas and New Year's. I do not find this
means that he was an employee, using as authority the aforementioned case of Wolf
where the highly specialized aeronautical engineer was given various benefits,
and the Federal Court of Appeal did not say that his receipt of these various
benefits turned him into an employee.
[38] I accept Mr. Oulahen's position that the
office was closed and, therefore, Mr. Pichugin could not gain access to it and
could not earn any income and, in fairness, his pay went on. That is similar to
the situation, although not identical, to that in Wolf where payments
were made to
Mr. Wolf as an inducement not to take his skills elsewhere. That sort of
payment did not turn him into an employee. He got overtime pay and he was paid
for statutory holidays, which is why I am comparing the two cases.
[39] Finally, with reference to the right to
control, I reject the suggestion that I have heard many times that, once
someone is an independent contractor, that person is always an independent
contractor. In other words, by virtue of the admitted fact that Mr. Pichugin is
an independent contractor as a paralegal, that means he must be an independent
contractor with reference to his working relationship with the Intervener.
[40] It is clear that one can be an employee by
day and be an independent contractor by night. It is called moonlighting. In
this case, the difference is that Mr. Pichugin was daylighting, if I can coin a
phrase. Sometimes it was during working hours that he was carrying on business
as an independent contractor paralegal. The issue is: Did that somehow make him
an independent contractor for all purposes? I don't accept that proposition. He
could still be an employee of the Intervener and an independent paralegal at
the same time.
[41] On balance, I think I have established that
the control indicia go back and forth in both directions, but there comes a
time when one has to see where the scales tip on balance. In my view, the
essential elements that I have heard are that Mr. Pichugin had the freedom to
come and go as he chose; that he was not required to seek permission in that
coming and going, that it was a matter of him giving notice which, to me,
indicates a lack of subordination.
[42] There was some suggestion that, because a
lot of his invoices talked about interest at 4.5 per cent on overdue accounts
and because there was a disclaimer on his report on the parking project, those
were both indicia of being an independent contractor, but the only invoice that
I could see that had the threat of interest was the last one, on March 24, 2008.
Similarly, the disclaimer only shows up on the report which was called
"Parking Project Review and Analysis", which also was right towards
the end of the working relationship.
[43] Those two did not alter my conclusion that the control issue indicated
that he was an independent contractor. Again, it was the lack of subordination
that tipped the scale in that direction.
[44] I can be considerably more brief on the
other indicia. The ownership of tools, in my view, is neutral. That is because
the tools that were provided to the Appellant by the Intervener were not
exclusive. He had the shared use of an office and the shared use of a computer
and the shared use of Internet services. Conversely, the tools that were not
brought to the job but were used for the job by Mr. Pichugin were also not
exclusive. He had a home office; he had a laptop computer and Internet
facilities, but they were not for the exclusive use of the Intervener. They
were also for use in his business as a paralegal. I found the tools factor
neutral and not conclusive one way or the other.
[45] In terms of chance or profit and risk of
loss, I can be equally succinct. It is very clear that the amount of $550 under
which Mr. Pichugin worked right from the beginning to the end was negotiated. It
started off at
$500 offered by Mr. Oulahen, while $750 was the figure that Mr. Pichugin
required, and it was sawed off at $550. The $750 was possible, depending on
just how he performed on the parking lot project.
[46] Then we have the Federal Court of Appeal decision
in Precision Gutters, above, at paragraph 27, saying that the ability to
negotiate the terms of a contract is ipso facto a chance of profit and a
risk of loss, and I am bound by that.
[47] I also find that Mr. Pichugin had no risk
of financial loss, because all his expenditures were reimbursed by the Intervener.
I have to find that the profit and loss factor points to his being an
independent contractor.
[48] There was some suggestion, I believe by
counsel for the Intervener, that this was his parking lot business. I want it
to be very clear, because it is important, that at no time was Mr. Pichugin in
the parking lot business. For one to be in business, one has to be working to
build up his own business, not somebody else's: Woodland Insurance Ltd. v.
M.N.R., [2005] T.C.J. No. 276 (T.C.C.). This was clearly the Intervener's
parking lot.
[49] Insofar as the possibility of there being
other parking lots and other projects if he did well, this was in the distant
future. It is just too vague and speculative to constitute a chance of profit.
[50] Finally, with reference to chance of profit
and risk of loss, the relationship ended because, as I understand it, Mr.
Pichugin presented without warning an invoice for $750, which inadvertently was
paid by
Mr. Oulahen. When he noticed the error, he went right back to the
$550. That could have concluded in two ways. Number one, there could have been
further negotiation between Mr. Oulahen and Mr. Pichugin, or the relationship
could have terminated. The latter is what happened. It is just reinforcing the
fact that negotiation was not only actually accomplished but was possible. As I
say, that buttressed the conclusion that this man was an independent contractor
during the period under review.
[51] To summarize, the control-subordination
factor indicates that
Mr. Pichugin was an independent contractor. The tools factor is neutral. The
chance of profit and risk of loss factor indicates that he is an independent
contractor. We have three out of the four Wiebe Door factors pointing in
the direction of Mr. Pichugin being an independent contractor, which means that
it is really not necessary for the Court to go into the issue of intent.
[52] I want to be very clear as to what my role
is when it comes to intent. In the Royal Winnipeg Ballet case that I
have already cited, Madam Justice Desjardins at paragraph 81 accepts Justice Sharlow's
analysis in paragraph 64, saying:
… -- what the Tax Court Judge should have
done was to take note of the uncontradicted evidence of the parties' common
understanding that the dancers should be independent contractors and then
consider, based on the Wiebe Door factors, whether that intention was
fulfilled.
[53] While it is not absolutely necessary to go
into it because, even if there had been intention otherwise, the Wiebe Door
factors are quite conclusive, there was enough argument addressed to this issue
that, in fairness, I will comment upon it.
[54] That brings me to the handwritten letter,
Exhibit I-3, dated August 29, 2007, which Mr. Oulahen testified he personally
handed to Mr. Pichugin, which Mr. Pichugin denies. Having watched the witnesses
under oath and assessed their demeanour and their consistency, I find that I
prefer the evidence of Mr. Oulahen. I find that there was such a letter, that
it was brought to Mr. Pichugin's attention, that he worked under its terms and
conditions until March 2008 when he unilaterally increased his wage to $750. That,
in my view, is evidence of a mutual intent that Mr. Pichugin be an independent
contractor.
[55] Having said that, it was almost as if Mr.
Pichugin had read Wolf, which I have cited, when he said, "I am not
a risk-taker. I have four students at home and I want security and
stability." Those words could have been read right out of Wolf. When
they talk about what sort of person is an independent contractor and what sort
of person is not, they use language that is almost identical to that spoken.
[56] In paragraph 118:
We are dealing here with a type of worker
who chooses to offer his services as an independent contractor rather than as
an employee and with a type of enterprise that chooses to hire independent
contractors rather than employees. The worker deliberately sacrifices security
for freedom (the pay was much better, the job security was not there, there
were no benefits involved as an employee receives, such as medical benefits, pension,
things of that nature...
[57] Then it says at paragraph 120:
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.
[58] In paragraph 94 of Wolf it says:
Non-standard employment --
(I earlier said that that phrase emanated from Wolf),
-- such as the one of the appellant, which
emphasizes higher profit coupled with higher risk, mobility and independence,
indicate, in my view, that the appellant correctly claimed the status of
contractor or the provider of services under article 2098 of the Civil Code of
Québec.
[59] I earlier said that the Federal Court of
Appeal in Wolf, even though that worker got benefits as an employee
would, he was still found to be an independent contractor. That is to be found in
paragraph 91:
The indicia of overtime pay, vacation pay
and holidays are neutral in my view. The completion bonus, --
(Which I have already adverted to)
-- the absence of health insurance and
pension plan, and the whole risk factor, including the lack of any protection
under provincial labour legislation, favour the status of independent
contractor.
[60] In paragraph 87:
In consideration for a higher pay, the
appellant, in the case at bar, took all the risks of the activities he was
engaging in.
[61] Notwithstanding that Mr. Pichugin has
characterized himself as not a risk-taker, which resonates with the language
spoken in Wolf, I find that three of the four Wiebe Door factors
all point in the same direction, that he was an independent contractor, that
the letter, Exhibit R-3, buttresses that conclusion, as does the fact that he
worked under it without complaint for the seven and a half months that he was
engaged by the Intervener. As aforesaid, he had the ability to negotiate his
rate of remuneration and was not in a relationship of subordination with the
Intervener.
[62] It remains that we go over the assumptions
set out in paragraph 17 in the Reply to the Appellant's Notice of Appeal,
because it is trite law that the burden is upon the Appellant to rebut or
demolish those assumptions. Those that are not rebutted, as counsel for the
Minister said, are to be taken as true.
[63] There was no issue with 17(a), (b) or (c).
[64] For (d) there was a caveat. They talk about
the management of parking lots. I have already said that there was only one
parking lot. Also in (d), when they list the Appellant's duties, it can be
argued that they left out the issuance of parking tickets. Although I have said
there was no evidence that he was required to do that, he did it every hour and
a half.
[65] (e) is not disputed, nor is (f) or (g).
[66] In (h), "the Appellant was not
supervised by the payer". That is true. Any reporting that was done, as I
have already said, was more by way of monitoring the result rather than
controlling the worker.
[67] In (i), "the payer provided the
Appellant with directions", but only to the extent of what work had to be
done for each assignment. That indicates that the man was an employee because
this is non-standard employment and directing what work is to be done is enough.
You don't have to dictate the means or the manner. That is something that is
specifically set out in the Civil Code of Quebec. It goes to the issue of
subordination, and I have already found that there was not sufficient
subordination to indicate that this man was an employee.
[68] (j) is not contested, nor is (k).
[69] (l) says that the Appellant worked eight
hours a day Monday to Friday. The evidence was that he had no set times, and
his hours were flexible as long as the project was completed.
[70] The same goes for (m).
[71] I have already discussed (n) and (o) in my
reasons with reference to the ownership of tools. I find that, because they
were both shared, the tools factor is neutral.
[72] (p) is established, and (q) is established.
[73] (r) was demolished: "the Appellant
could hire helpers at his own expense".
[74] (s) stands, as does (t), (u), (v), (w) and
(x).
[75] (y) has been established, that he
unilaterally increased his pay to
$750 a month.
[76] (z) I have discussed at length. The payer
did not provide the Appellant with any health benefits, life insurance benefits
or paid vacation. I find that that has been established because what Mr.
Pichugin was provided with, was ongoing income instead of vacations because the
offices were closed and, therefore, he could not earn any income. Even if it
could be construed as vacation pay, in the case of Wolf the man got
vacation pay and was still held to be an independent contractor.
[77] The Appellant has succeeded in demolishing,
at most, three of the assumptions set out in the Minister's Reply. According to
Jencan Ltd., even though he has demolished some of the assumptions, if
the remaining assumptions are sufficient to support the Minister's determination,
then they stand. Jencan, by the way, is Jencan Ltd. v. M.N.R.,
[1997] Federal Court Judgments No. 876 in the Federal Court of Appeal.
[78] During these two days of hearings I have
investigated all the facts with the parties and the witnesses called on behalf
of the Appellant and the Intervener to testify under oath for the first time,
and I have found no new facts or nothing to indicate that the facts inferred or
relied upon by the Minister were unreal or incorrectly assessed or
misunderstood. I find that during the period under review, in his working
relationship with the Intervener, Mr. Pichugin was an independent contractor on
his own account. The Minister's conclusions are, therefore, objectively
reasonable.
[79] Therefore, in the result, the Minister's
determinations will be confirmed, and the two appeals are dismissed.
Signed at Toronto, Ontario, this 11th day of February 2011.
“N. Weisman”
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