Citation: 2011 TCC 361
Date: 20110722
Docket: 2010-372(EI) and 2010-373(CPP)
BETWEEN:
POWERTREND ELECTRIC LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
JAMES D. EBERLE,
Intervenor.
REASONS FOR JUDGMENT
Paris J.
[1] The issue in these
appeals is whether the work performed by James Eberle for the Appellant between
May 1, 2007 and April 19, 2009 was performed as an employee under a contract of
service or as an independent contractor under a contract for services. The
Minister of National Revenue found that Mr. Eberle was an employee of the
Appellant and therefore in insurable employment under the Employment
Insurance Act
and in pensionable employment pursuant to the Canada Pension Plan.
[2] The Appellant is an
electrical contractor in Penticton, BC, operated by its sole shareholder, David Zobatar.
Mr. Zobatar represented the Appellant at the hearing and testified on its
behalf.
[3] In early 2006, the
Appellant entered into a contract with the Lang Ventures Inc. (“LVI”) to repair
computer lottery equipment in various retail establishments in the South Okanagan region of the province
on a call-out basis, and to install and remove lottery equipment from such
locations. The equipment belonged to the British Columbia Lottery Corporation
(“BCLC”). LVI was apparently responsible for the operation and maintenance of
BCLC equipment throughout the province.
[4] Under its contract
with LVI, the Appellant was required to have anyone who worked on the lottery
machines take a two-day training course in Kamloops, B.C. The contract also stipulated
that the Appellant be available to provide the repair service every day of the
year between 7:00 a.m. and 9:00 p.m., except Christmas Day. Repair jobs within
the immediate Penticton area were required to be completed within one hour from the time the call
out was made by the LVI dispatcher, and jobs outside Pentiction were required
to be completed within one and one-half hours.
[5] In order to carry out
this contract, the Appellant hired Mr. Eberle in March 2006. The
Appellant hired Mr. Eberle initially as an employee, and made the required
deductions from his pay for income tax, employment insurance premiums and
Canada Pension Plan contributions. The Appellant paid Mr. Eberle a fixed salary
of $2,000 per month for the repair work. For installations and removals he was
paid $12 per hour plus $.30 per kilometre for travel to and from the work
sites. Mr. Eberle was not paid for travel related to the repair work. Mr.
Eberle took the LVI training course along with Mr. Zobatar. Neither could
recall if the Appellant paid Mr. Eberle for the training.
[6] The Appellant required
Mr. Eberle to be on call every day of the year from 7:00 a.m. to 9:00 p.m. except
Christmas, and to take repair calls directly from the LVI dispatcher and
complete the calls within the applicable timeframes. Upon completion of the
calls, Mr. Eberle would report by phone to both LVI and the BCLC to indicate
what work had been performed. He was not required to report on the calls to the
Appellant and Mr. Zobatar said that often he and Mr. Eberle would not be in
touch for two or three weeks at a time.
[7] It seems that the
repair work consisted largely of replacing parts of the computer lottery
terminals, or the cables for the terminals, and reprogramming the terminals. If
any electrical work was required, Mr. Eberle would notify LVI and LVI would
arrange with the Appellant to send out an electrician.
[8] Mr. Eberle required
few tools to perform the repair work. He provided a few small hand tools, and the
Appellant provided a cordless drill, an electric cable tester and a drill bit. The
cable tester and drill bit were specialized equipment designed for use with the
lottery equipment, and were provided to the Appellant by LVI. Mr. Eberle was required
to use his own car to travel to the work locations. The Appellant provided Mr.
Eberle with a cell phone.
[9] Spare parts for the
repair work were stored in Mr. Zobatar’s basement in 2006 and 2007, and subsequently
in a storage shed owned by the Appellant. Mr. Eberle maintained the
inventory of spare parts, and contacted LVI if more were required. LVI also
monitored the inventory of spare parts through the phone reports made by Mr.
Eberle upon the completion of each call out, in which he indicated what parts
he had used to perform repairs.
[10] When LVI required
the Appellant to install or remove lottery equipment, it would contact Mr.
Zobatar, and he would get in touch with Mr. Eberle. In most instances, they
worked together since most of these jobs also required an electrician. Apparently,
this work made up a relatively smaller share of the overall work Mr. Eberle did
for the Appellant. Mr. Zobatar said that they did between 10 and 16 installations
per year, and about an equal number of removals. Mr. Eberle described this work
as “intermittent”. The installations and removals were a lower priority than
the repair calls, and there was some flexibility in when the work could be done.
Largely though, it was done according to the schedule set by LVI. Mr. Eberle
would report by phone to LVI on the work he did on these occasions.
[11] After the first year
Mr. Eberle worked for the Appellant, Mr. Zobatar reviewed the amount of work
Mr. Eberle was doing, which averaged one call per day for LVI, and Mr. Zobatar
decided that Mr. Eberle should provide his services to the Appellant as an
independent contractor rather than as an employee. Mr. Zobatar said he also
took into account the fact that he did not supervise or control Mr. Eberle’s
work when he decided to change Mr. Eberle’s status. Mr. Zobatar informed Mr.
Eberle of the change and told him that he would be required to invoice the
Appellant bi-monthly for his services. No other changes were made to Mr. Eberle’s
work relationship with the Appellant. Mr. Eberle said he accepted the change
in order to keep working.
[12] Mr. Zobatar also
said that Mr. Eberle could hire someone to replace him to do the work, as long
as that worker had received the required training from LVI and had no criminal
record. However, Mr. Zobatar was the only person to replace Mr. Eberle. He did
so on two occasions when Mr. Eberle was acting in a play. Mr. Eberle said that
he never considered the possibility of hiring someone to replace him.
[13] Mr. Eberle was never
registered to collect GST because his earnings from the Appellant were below
the $30,000 per year small supplier threshold.
[14] The Appellant
maintains that it correctly classified Mr. Eberle as an independent contractor
because his work was controlled by LVI and not by the Appellant. It says that Mr.
Eberle could also hire a replacement worker, and was required to provide more
equipment for the work than the Appellant was, since he has to supply his own vehicle.
The Appellant said, as well, that it was likely that Mr. Eberle’s status with
the Appellant from the outset was that of an independent contractor and that
the Appellant had mistakenly believed that he was an employee for the first
year.
Analysis
[15] According to the
Supreme Court of Canada, in 671122 Ontario Ltd. v. Sagaz Industries Inc., the central
question to be decided in a case of this kind is “whether the person who has
been engaged to perform the services is performing them as a person in business
on his own account”. The Court went on to say:
47 … 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.
[16] I will start first by reviewing
the level of control the Appellant had over Mr. Eberle’s activities. While Mr.
Zobatar suggested that the Appellant exercised little control over Mr. Eberle,
I disagree with this characterization of their relationship. I find that Mr.
Eberle was directly controlled by LVI in the performance of his duties and that
this control arose out of Mr. Eberle’s contract with the Appellant. In effect,
the Appellant delegated its right of control to LVI, and LVI exercised that
control continuously. It was a requirement of Mr. Eberle’s contract with
the Appellant that he be available on call for LVI and that he report back to
LVI on each call. In requiring Mr. Eberle to be available 14 hours a day, 364 days
a year for repair calls, and to complete the calls within a specified time frame
and to provide detailed reports of his work, the Appellant exercised close
control over his work. It is also apparent that the Appellant had first call on
Mr. Eberle’s time. Once a service call came in from LVI, Mr. Eberle was
required to drop whatever he was doing and attend to the call. He was permitted
to work elsewhere but had to fit such work around his work for the Appellant. The
critical factor, in my view, is that Mr. Eberle was not permitted to refuse any
of the repair calls from the LVI dispatcher. This is also a form of control
over the Appellant, and one that is inconsistent with the existence of an
independent contractor relationship. It is true that Mr. Eberle could have refused
the installation/removal work, because Mr. Zobatar could have done it himself,
if necessary, but these jobs only made up a small portion of the work done by
Mr. Eberle for the Appellant. Overall, the control test weights heavily in favour
of a finding that Mr. Eberle was an employee of the Appellant during the period
in issue.
[17] With respect to the tools and
equipment used by Mr. Eberle in his work, the major items appear to be Mr.
Eberle’s vehicle and a cell phone provided to him by the Appellant. This factor
points towards the work being performed under a contract for services.
[18] There was no evidence that Mr.
Eberle was exposed to any financial risk or that he had any real opportunity
for profit in his relationship with the Appellant. His rate of pay was fixed.
He received a flat monthly rate for repair calls and an hourly rate for installations
and removals. I do not accept the Appellant’s suggestion that by carrying out
the repair work more effectively, Mr. Eberle could reduce future repair
calls for that equipment and thereby increase his “profit”. There was no
evidence that Mr. Eberle had any control over how frequently the
equipment would require attention or that he could in any way minimize the
number of service calls from LVI. This test supports the view that Mr. Eberle was
an employee of the Appellant.
[19] While Mr. Zobatar maintained
that Mr. Eberle could have hired someone to help him perform the work, this
would have required that person to be trained by LVI. Mr. Eberle did not
consider hiring anyone to assist him because he himself wanted that work. While
Mr. Zobatar replaced Mr. Eberle on two occasions over a three-year period, the
evidence did not show whether Mr. Eberle’s pay was reduced proportionately.
This factor, in my view, is inconclusive as to whether Mr. Eberle was an
employee or an independent contractor.
[20] The final factor that should be
considered is the intention of the parties concerning the nature of the work
relationship. Despite Mr. Zobatar’s assertion that Mr. Eberle agreed to be
classified as an independent contractor after the first year, I am satisfied
that he only did so in order to keep his job These circumstances are not
reflective of a true mutual intention concerning Mr. Eberle’s status, and for
this reason, this factor does not assist in establishing whether Mr. Eberle was
an employee or an independent contractor.
[21] Overall, given the control the
Appellant exercised over Mr. Eberle, and his lack of any opportunity for profit
or risk of loss in his work, I conclude that for the period in issue Mr. Eberle
was not performing the services as a person in business on his own account but
as an employee of the Appellant. The only contravening factor, the requirement
that Mr. Eberle provide his own vehicle, is not alone sufficient to show that
he was in business on his own account, especially in light of the fact that the
Appellant supplied him with a cell phone and some minor tools necessary to perform
his duties.
[22] For these reasons, the appeals
are dismissed.
Signed at Vancouver, British Columbia, this 22nd day of July, 2011.
“Brent Paris”
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