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Citation: 2011 TCC 300
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Date: 20110614
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Dockets: 2010-2412(EI)
2010-2413(CPP)
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BETWEEN:
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177398 CANADA LTD.,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
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REASONS FOR JUDGMENT
(Edited from the transcript of Reasons for Judgment
delivered orally from the Bench on May 13, 2011 in Vancouver, British Columbia)
Campbell J.
[1] Let the record show that I am
delivering oral reasons in the matter of two appeals which I heard yesterday. The
Appellant is a numbered company, 177398 Canada Limited.
[2] The Appellant corporation provides general
residential plumbing services. It operates under the name of Advantage Plumbing
and Drainage, and for the purposes of my oral reasons, I will refer to the Appellant
by its operating name, Advantage Plumbing, instead of the numbered corporate
name. The Appellant is appealing two rulings of the Minister which determined
that the worker, Bruce Larry Harder, was employed in insurable and pensionable
employment during the period December 1, 2007, through to December the 31st,
2008, pursuant to Section 5(1)(a) of the Employment Insurance Act and
Section 6(1)(a) of the Canada Pension Plan, respectively.
[3] The issue is whether the worker, Mr. Harder,
was employed by the Appellant during this period as an employee or an
independent contractor.
[4] On the Appellant's behalf, I heard
evidence from its president and CEO, Fred Van Hunenstijn. The Respondent relied
on the evidence of the worker and another plumber, Brian Rossiter, who had also
worked for Advantage Plumbing between late 2003 and May, 2010. According to the
evidence of the president and CEO of Advantage Plumbing, the company employed
both employees and independent contractors during the period under appeal. The
company has about 25 workers in total. The employees, as opposed to the
independent contractors, were generally less skilled, more junior, and were
given smaller jobs of up to one day's duration.
[5] According to the president and CEO's
evidence, Mr. Harder was employed in 2002 as an independent contractor because
of his considerable knowledge, skill and experience. A contract was executed
and the parties' work relationship operated pursuant to this contract for five
years.
[6] In August 2007, the parties executed another
agreement which referenced the first agreement of 2002. The intent was to amend
the terms of that agreement. This second agreement stated again the parties'
intention that the worker be an independent contractor and not an employee of
the Appellant. The compensation to the worker was listed at paragraph 3.1 as
equivalent to 45 percent of the gross aggregate price for the plumbing
services, less the cost of the parts and materials provided by the Appellant,
together with the cost, if any, of the rental by the worker of specialty tools
and equipment possessed by the Appellant.
[7] In December of 2007, there were
changes implemented to these work arrangements. According to the Appellant's
evidence, although Mr. Harder was an excellent plumber, his personal
issues and challenges impacted upon his work. Those problems, according to the Appellant,
were numerous, and included the worker disappearing for several days, not
meeting with customers at scheduled times, and not invoicing on some jobs. Consequently,
to address these issues and particularly the accounting problems, the work
relationship changed in several key areas. The worker became a technical field
supervisor for the Appellant, based on a daily rate of up to a maximum of $350.
This rate was inclusive of the use of the Appellant's truck, heavy tools and
equipment such as excavators and Bobcat. Previously, the tools had been rented
when the Appellant required their use on a job. The worker always supplied his
own hand tools valued at approximately several thousand dollars, which were the
tools normally used in the plumbing trade.
[8] As the Appellant's technical field
supervisor, the worker was primarily a trouble-shooter, and I quote the
description by the Appellant: "A trouble-shooter on jobs that went
sideways." The worker's responsibility was to get that job back on track
or to finish the job. As a senior plumber, he was also used to provide his
expertise in some training of plumbing technicians. On average, he worked three
to four days per week.
[9] The Appellant provided Mr. Harder with both a
cell phone and a pager, and communicated with him via these tools respecting
jobs where he was requested to go.
[10] According to the Appellant, the worker could
refuse to take a job. However, this was contrary to the evidence of the worker,
who stated that he did not feel he could refuse work if called upon, and that
if he could not attend, he would be required to inform the Appellant's office
through the dispatcher. The Appellant paid Workers' Compensation premiums on
the worker's behalf, provided liability insurance for the worker and provided a
medical and dental plan for him. The Appellant stated that the worker, as an
independent contractor during the period, could opt in or out of the medical
and dental plan, but employees could not. The worker's evidence was that the
plan was offered to him and he accepted, but he did not view it as an option of
opting in or out of the plan.
[11] The truck which the Appellant
supplied to the worker during the period under appeal was described by the Appellant
as a marketing tool because the vehicle contained the Appellant's corporate
name. The Appellant also paid expenses relating to the fuel costs, insurance,
repair and maintenance concerning the truck. The vehicle also contained a GPS system
which the Appellant explained was used as a method of monitoring the
whereabouts of the worker, or as the president and CEO put it, and I quote,
"We reconstructed where he'd been” in order to determine if he'd been to a
particular job site. The worker viewed the purpose of the GPS system as a
means for the Appellant to know the location of the vehicle and to monitor his
hours of work.
[12] The worker carried a supply of the Appellant's
business cards, which contained the Appellant's name and logo together with the
name and title of the worker. The worker testified that when he attended a job
site, he identified himself as being from and representing Advantage Plumbing. For
payment respecting a job, he emailed the Appellant or phoned in his hours of work.
He testified that he could not take other work because he was on call each day
for the Appellant. He was never registered for GST and never charged GST to the
Appellant.
[13] If he did require assistants or helpers on a
job, he could not hire those individuals himself, but instead contacted the Appellant's
office, and it was the Appellant that would arrange additional helpers if
required. If damage occurred on a job site, it was the Appellant's
responsibility to rectify the problems.
[14] The third witness, Brian Rossiter,
confirmed the worker's testimony respecting the use of the Appellant's business
cards with customers, and the availability of the medical and dental plan to
workers without the opt-in/opt-out option that the Appellant testified to. He
also corroborated the worker's evidence that he was not free to turn down work
when it was offered. He also testified that he never prepared his own invoices.
He stated that every job had been priced by the Appellant and that, when he
completed the work, the customer signed off and this was submitted to the Appellant.
Eventually, according to a similar commission formula that the worker had in
place prior to changed arrangements, Mr. Rossiter received a cheque for
payment.
[15] I am going to turn now to the law
in this area. Both the Appellant and Respondent counsel agree that the
appropriate test concerning these appeals is laid down in the Supreme Court of
Canada decision in Sagaz Industries, more accurately known as 671122
Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] S.C.C. 59. Although this decision did not
involve Employment Insurance, but involved the issue of vicarious liability, it
did adopt the four-in-one test laid out in Wiebe Door Services v. Minister of
National Revenue (1986), 87 D.T.C. 5025 (F.C.A.).
[16] At paragraphs 46 to 48 of that decision,
Justice Major stated that there did not exist one conclusive test to determine
if an individual was an employee or an independent contractor but, rather, an
examination must be conducted of all of the factors bearing on the total nature
of the parties' relationship. Depending on the facts of each case, some of
those factors will have more relevance than others, and some may in fact be of
neutral weight. Although there is no magical formula available in deciding such
an issue, the factors outlined in Wiebe Door provide a useful, although
not an exhaustive list. As per Justice Major, the central question to be asked
is, and I quote:
"…whether the person who has
been engaged to perform the services is performing them as a person in business
on his own account."
[17] To answer this question, Justice Major relied
on the factors in Wiebe Door, those being control, tools, chance of
profit, and risk of loss. Added to the Wiebe Door factors is a consideration
of the intention of the parties as to the nature of their work relationship (per
the decision in Royal Winnipeg Ballet v. Minister of National
Revenue, [2006] F.C.J. No.
339). However, as that decision clearly emphasizes, the
parties' labelling of their relationship will not necessarily be determinative.
If, after a review of all of the facts in evidence relating to the Wiebe
Door factors, the contractual terms do not support the label attached, then
the parties' intention must be assigned little weight. The decision in Wolf
v The Queen, 2002 D.T.C. 6853 (F.C.A.) supports this statement. Justice
Décary, in Wolf, stated at paragraph 119, and I quote:
"… When a contract is genuinely entered into as a
contract for services and is performed as such, the common intention of the
parties is clear and that should be the end of the search. …"
He went on to state, at paragraph 122, and I quote:
"… [T]his is a case where the
characterization which the parties have placed on their relationship ought to
be given great weight. I acknowledge that the manner in which parties choose to
describe their relationship is not usually determinative particularly where the
applicable legal tests point in the other direction. But in a close case … where
the relevant factors point in both directions with equal force, the parties'
contractual intent, and in particular their mutual understanding of the
relationship cannot be disregarded."
[18] With this background of the law, I want to
turn now to an application of these legal principles to the facts in the
present appeal.
[19] In this appeal, the parties clearly do not
share a common intention or mutual understanding of the nature of their
relationship. They have attached different labels, despite any supposed
agreement. The Appellant testified that the worker was initially employed as an
independent contractor and remained so throughout the period of employment with
Advantage Plumbing, as supported by the documentary evidence and his oral
testimony. He contended that the worker remained an independent contractor in
December, 2007, despite the changes in the work relationship.
[20] The worker testified that he considered himself to be an employee during
the period under appeal after those changes were initiated. Although returns
for the worker may have been helpful, those have not been filed since 2002.
[21] I do not accept the Appellant's position that
this Court cannot ignore the written agreement evidencing the parties'
intention. It must be ignored where clearly the facts do not support a common
intention. In addition, it appears that the Appellant is relying to some extent
on the December 2002 agreement and, particularly, the August 2007 agreement, which
were subsequently and substantially altered.
[22] Reliance in submissions was placed on the fact
that the 2007 agreement of August was for a five-year term and had never
been terminated, that the parties simply modified it, as per paragraph 1.2. Although
the 2007 agreement was not formally terminated in December, 2007, the parties
embarked on a complete re-make of their working relationship and in so doing
repudiated the 2007 agreement. The method of remuneration was altered, the
worker's duties were changed, the provision for rental of the Appellant's
equipment changed, methods were utilized to track his locations and financial
interaction with the customers was reduced substantially. All of these terms
are substantial in respect to the working relationship.
[23] I do not accept the Appellant's submission
that paragraph 1.2 committed the parties to consensually modify all of
those terms. Paragraph 1.2 allows the parties to modify the services the worker
was providing, but the changes implemented went far beyond the wording and
intention of paragraph 1.2.
[24] Although the Respondent did not directly
address this argument, I believe the parties entered into a new working
relationship different from that described in either of the former agreements. However,
the evidence does not support that both parties had a common intention
concerning this new relationship. Even if I am incorrect in this conclusion,
and the 2007 agreement remained in effect, subject to the modifications,
there is nevertheless still no common intention between the parties concerning
their relationship even if that 2007 agreement is still to govern. Intention
must be sufficiently clear to be determinative, and it must be supported
independently by the factors and the evidence in the case. This is not the
situation here, and consequently I turn to an analysis of the Wiebe Door
factors.
[25] The first is control. The important
distinction here in this factor is not in the “actual control” that was
exercised over the worker, but the Appellant's “right to control” the worker. As
stated in Livreur Plus Inc. v Minister of National Revenue, [2004]
F.C.J. No. 267 (F.C.A.) at paragraph 19, and I quote:
"… Monitoring the result must not be confused
with controlling the worker."
Even where an
independent contractor is hired, there is an expectation that the work product
will be in accordance with specific requirements and conditions. However, in an
independent contractor situation, there is no right to control the logistics of
the independent contractor in attaining his specific work product.
[26] In this appeal, commencing in December, 2007,
the Appellant employed several methods to gain control over a worker whose
expertise it wanted to retain, while limiting the personal issues which
impacted his work. The Appellant installed a GPS system in the truck which the
worker used at the job sites so that his hours and location could be tracked
and monitored on a daily basis. The Appellant also limited the financial
interaction which the worker could have with customers. The Appellant stated
that this was in line with the attempt to limit the worker's ability to issue
invoices.
[27] The worker had no input in respect to the job
or which workers were at any particular site. He was primarily called upon to
trouble-shoot or resolve a problem that had arisen during a job. According to
the worker, he was restricted in his duties at each site. As he stated, he
would have to contact the Appellant's office and obtain its consent if, for
example, a customer's bill was to be reduced because of a problem that had
arisen.
[28] I conclude that the control factor is
supportive of the worker being an employee and not an independent contractor. He
was in a subservient position. He was on call each day. He was told where to go.
His hours and location throughout the day were monitored. Although the worker
did not require supervision in the completion of his actual on-the-job duties,
the evidence supports that the Appellant retained the right to control that
worker.
[29] The next factor is tools. Again, this factor
supports the worker being an employee. The worker supplied the normal hand
tools used by plumbers whether they were employees or contractors for the Appellant.
Those tools were worth several thousand dollars. The Appellant supplied any
necessary materials and also any of the larger items, such as an excavator. The
2002 and 2007 agreements called for the worker to pay for the rental of
the Appellant's tools and equipment. These were supplied without charge,
according to the later December 2007 arrangement, however. In addition, the Appellant
supplied the cell phone and the pager to the worker, together with the truck,
and paid for all fuel and other expenses related to this vehicle. It is also
telling that the worker possessed and handed out the Appellant's business cards
to the customers. This is contrary to what independent contractors would be
doing in promoting their own business. Mr. Rossiter also corroborated the
evidence of the worker in this regard, and stated that he introduced himself to
a customer by handing them the Appellant's business card.
[30] Finally, the worker testified that he was
supposed to wear the Appellant's uniform, being a shirt and hat, but that he
seldom abided by this dress code. Mr. Rossiter stated he always wore the
uniform.
[31] The next factors -- and I'm going to deal with
them together -- the two factors are chance of profit and risk of loss. The
December 2007 arrangement witnessed a major remuneration change. Prior to
December 2007, the Appellant was paid a percentage commission basis on
work completed so that the quicker he could complete assigned work, his
potential for profit increased. However, in December 2007, he was paid a
maximum daily rate of $350. The worker testified that he was on call and had to
be available to the Appellant, and could not take on work for other persons. This
also greatly impacted upon any opportunity he may have had for profit earning. At
the end of the day, no matter how many jobs he could trouble-shoot, he was
limited to a maximum of $350 daily.
[32] The December 2007 arrangement also limited any
potential he previously had for losses as it limited his responsibility for any
of the expenses. All expenses were now those of the Appellant. In addition, the
worker was not permitted to hire helpers and, if they were required, the Appellant
retained the right to provide them.
[33] As with most employee/employer relationships,
the Appellant provided liability insurance, paid Workers' Compensation
premiums, and provided a medical and dental plan. The evidence of Mr. Rossiter
corroborates the worker's evidence that they were not given an opportunity to
opt in or out of this plan.
[34] Lastly, if damages occurred at the work
site, it was again the Appellant that incurred the cost of rectifying those
problems.
[35] In reviewing all of the evidence as it relates
to a proper characterization of the total relationship of the parties, I
conclude in answering the pertinent question posed by Justice Major in Sagaz
that the worker was performing these services during the period on behalf
of the Appellant, and not as a person conducting business on his own account. The
customers, at the end of the day, were customers of the Appellant and not the
worker, and it was the business of the Appellant. Even if I set aside all of
the Wiebe Door factors and the intention factor, and applied only common
sense here, the worker had all of the trappings of an employee and not an
independent contractor.
[36] Accordingly, for these reasons, the appeals
are dismissed without costs.
Signed at Ottawa, Canada, this 14th day of June 2011.
“Diane Campbell”
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