Citation: 2011 TCC 81
Date: 20110209
Docket: 2010-2343(EI)
BETWEEN:
BRUCE A. THOMPSON,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Docket: 2010-2344(CPP)
BETWEEN:
BRUCE A. THOMPSON,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Lamarre J.
[1]
These are appeals from rulings by
the Minister of National Revenue (Minister) on April 15, 2010 and
April 16, 2010, determining that Neil Collins, Daniel Scott and James Richard
(collectively the “Workers”) were engaged in insurable and pensionable
employment within the meaning of the Employment Insurance Act (EI Act)
and the Canada Pension Plan (CPP) with V1 Labs Ltd.
(a corporation registered in Nova Scotia, Canada) for the period from June 2,
2008 to August 15, 2008,
and were employed by V1 Labs Inc. (a corporation registered in Delaware,
USA) under a contract of service within the meaning of the EI Act and the CPP
for the period from August 16, 2008 to March 6, 2009 (in the case of Neil
Collins) and from August 16, 2008 to March 16, 2009 (in the case of the
other two workers, Daniel Scott and James Richard). The appellant owned 22.34%
of the shares of V1 Labs Ltd. and 50% of the shares of V1 Labs Inc. and held
the position of chief operating officer with both corporations. The Minister
determined that, pursuant to subsection 10(1) of the Insurable Earnings and
Collection of Premiums Regulations (IECPR) and subsection 8.1(1) of Part
1 (Collection and Payment of Employees’ and Employers’ Contributions)
of the Canada Pension Plan Regulations (CPP Regs), the
appellant was the deemed employer of the workers when they were employed by V1
Labs Inc.
Statutory
provisions
Employment Insurance Act
Insurable Employment
Types of insurable employment
5. (1) Subject
to subsection (2), insurable employment is
(a)
employment in Canada by one or more employers, under any express or implied
contract of service or apprenticeship, written or oral, whether the earnings of
the employed person are received from the employer or some other person and
whether the earnings are calculated by time or by the piece, or partly by time
and partly by the piece, or otherwise;
Excluded employment
(2) Insurable
employment does not include
. . .
(e)
employment in Canada by an international organization;
Defining certain expressions
(7) The Commission
may, with the approval of the Governor in Council, make regulations defining,
for the purposes of this section, the expressions "casual nature",
"government", in relation to a government of a country other than
Canada or of a political subdivision of the other country, and
"international organization".
Employment Insurance Regulations
Interpretation
1. . . .
(2) For the
purposes of these Regulations and section 5 of the Act, "international
organization" means
(a) any
specialized agency of which Canada is a member that is brought into
relationship with the United Nations in accordance with article 63 of the Charter
of the United Nations; and
(b) any
international organization of which Canada is a member, the primary purpose of
which is the maintenance of international peace or the economic or social
well-being of a community of nations.
Insurable Earnings and Collection of Premiums Regulations
10. (1) Where,
in any case not coming within any other provision of these Regulations, an
insured person works
(a)
under the general control or direct supervision of, or is paid by, a
person other than the insured person’s actual employer, or
(b) with
the concurrence of a person other than the insured person’s actual employer, on
premises or property with respect to which that other person has any rights or
privileges under a licence, permit or agreement,
that other
person shall, for the purposes of maintaining records, calculating
the insurable earnings of the insured person and paying, deducting and
remitting the premiums payable on those insurable earnings under the Act and
these Regulations, be deemed to be the employer of the insured person
in addition to the actual employer.
[Emphasis
added.]
Canada Pension Plan
Definitions
2. (1) In this
Act,
"employer" means
a person liable to pay salary, wages or other remuneration for services
performed in employment, and in relation to an officer includes the person from
whom the officer receives his remuneration;
"employment" means the performance
of services under an express or implied contract of service or apprenticeship,
and includes the tenure of an office;
Pensionable employment
6. (1)
Pensionable employment is
(a)
employment in Canada that is not excepted employment;
Excepted employment
(2) Excepted
employment is
. . .
(j)
employment in Canada by the government of a country other than Canada or by an
international organization;
Canada Pension Plan Regulations
Interpretation
2. (2) For the purposes of the Act and these
Regulations,
. . .
"international organization"
means
(a)
any specialized agency of which Canada is a member that is brought into
relationship with the United Nations in accordance with Article 63 of the
Charter of the United Nations, and
(b)
any international organization of which Canada is a member, the primary purpose
of which is the maintenance of international peace or the economic or social
well-being of a community of nations;
8.1 (1) Every
person by whom the remuneration of an employee for services performed in
pensionable employment is paid either wholly or in part is, for
the purpose of calculating the employee’s contributory salary and wages,
maintaining records and filing returns, and paying, deducting and remitting
the contributions payable thereon under the Act and these Regulations, deemed
to be an employer of that employee in addition to the actual employer of that
employee.
[Emphasis
added.]
Facts
[2]
It is not disputed that the
workers worked in insurable employment for V1 Labs Ltd. from April
2007 to May 30, 2008. The appellant testified to explain that V1 Labs Ltd.
was a corporation doing business in Halifax in the development of software. The workers were all
specialists in that field. They were first hired in 2006 as independent
contractors, but in April 2007 their status changed and they became employees,
a status to which benefits (such as health insurance, paid vacation and paid
sick days) were attached.
[3]
At the end of May 2008, V1 Labs Ltd.
found itself in a precarious financial situation and the appellant advised the
workers that they would be temporarily laid off. Each received on June 1,
2008, a Record of Employment stating that it was a temporary layoff and that
the date of recall was unknown (Exhibit R-1, Tabs 13, 24 and 31).
[4]
However, on June 2, 2008, all
three workers were called back to work. According to the appellant, they went
back voluntarily with the understanding that they were now working under
contractual agreements with V1 Labs Inc. and that they should have no
expectation of being paid until V1 Labs Ltd. was sold. The appellant
testified that each worker had shares in V1 Labs Ltd. as they had
been offered stock options on January 1, 2007, and they had accepted the
offer (Exhibit A-1, Documents 14, 15 and 16).
[5]
In fact, the workers continued working
from V1 Labs Ltd.’s premises in Halifax and were paid by cheques issued by V1 Labs Ltd.
on July 3, 2008 and August 18, 2008 (Exhibit A-1, Document 21).
According to the workers, these two payments covered their remuneration for the
work they had done up to those dates. The appellant admitted in
cross-examination that the amounts paid by V1 Labs Ltd. on those two dates
corresponded to the workers’ net pay for four pay periods (Transcript, pp. 54‑55).
He denied, however, that the workers could have assumed that V1 Labs Ltd. was
still withholding and remitting the proper deductions because they knew that
there was only a limited amount of funds available (Transcript, p. 55).
Nevertheless, it appears that those amounts were included in the T4s issued by
V1 Labs Ltd. to the workers for 2008 (an example of this is the T4
issued to Daniel Scott, which covered 16 biweekly pay periods with V1 Labs Ltd.,
to mid‑August 2008, as per Exhibit R-1, Tab 23, and as acknowledged
by the appellant at pages 74 and 75 of the Transcript). The appellant testified
that during the period from July to August 2008, V1 Labs Ltd. secured
a loan in an effort to try to maintain the ability to sell the business, and
some of those funds were given to the workers to cover their living expenses.
According to him, they did not perform any services for V1 Labs Ltd.
during that time.
[6]
From September to November 2008,
they allegedly worked for V1 Labs Inc. on a project for a US organization
(TV Anywhere) of which the appellant was apparently a shareholder.
According to him, the workers agreed to be paid their net salaries but, being
independent contractors, they could not assume that source deductions were
being made. He said in cross-examination that the workers accepted a pay cut
equal in amount to the deductions at source made when they were employees
(Transcript, pp. 55-56). At the same time, the appellant admitted that the
workers never invoiced V1 Labs Ltd. or V1 Labs Inc. for
their services, and that they kept the group health insurance provided by V1 Labs Ltd.
(Transcript, pp. 61-62). The appellant also admitted that the structure in
place did not change after June 2, 2008: Neil Collins was still
acting as supervisor for V1 Labs Ltd. or V1 Labs Inc.,
assigning duties to the other workers, while Collins himself reported to the
company (Transcript, p. 62). With respect to vacation, the workers submitted
requests to their supervisors (evidence of that was filed regarding Neil Collins,
who sent one request to the appellant directly in July 2008, as per Exhibit R-1,
Tab 14, and a second request, on October 6, 2008, to Michael Earle,
who was the president and chief executive officer (CEO) of
V1 Labs Inc., as per Exhibit R-1, Tab 15). The appellant said
that the workers were permitted to hire someone else to help them perform their
duties, but acknowledged that it never happened (Transcript, pp. 64-65).
The workers all testified that they could not hire anyone (Transcript, pp. 96,
106, 132, 140, 153 and 154). The appellant also testified that the workers
would share in the proceeds of sale of the business, pursuant to a verbal
agreement (Transcript, p. 68). This was also denied by the workers.
Although they were offered stock options in 2007, they never exercised the
options and never acquired shares (Transcript, pp. 107, 140, 141, 160, 161
and 170)
[7]
The appellant testified that in
November 2008 the workers started working under a Product License Agreement
signed between an American corporation by the name of NeoNova Network Services
Inc. (NNS) and V1 Labs Inc. (Exhibit R-1, Tab 2).
That agreement, referred to by the appellant, was signed on November 12,
2008. Exhibit A to that agreement provided, among other things, that NNS
would pay V1 Labs Inc. an amount of $75,000 USD in software fees, and
operating fees of $1,500 USD to reimburse V1 Labs Inc. for
operating expenses. The appellant testified that these operating expenses were
rental, heating and electricity costs for the premises previously occupied by
V1 Labs Ltd. in Halifax. The agreement also provided that V1 Labs Inc.
would provide the services of Neil Collins, who would be paid directly by V1 Labs Inc.
NNS agreed to pay the latter a fee of $7,000 CAD for those services which were
to be provided for a period of 30 days following delivery of the source code
for the V1 Labs Inc. products. After that period, NNS had the
authorization of V1 Labs Inc. to "contract for services".
It was made clear in that agreement (paragraph 16 m) that V1 Labs Inc.
was acting as an independent contractor and that its personnel would not be
considered employees or agents of NNS. In connection with the Product License
Agreement, NNS asked the workers to sign an Independent Contractor Agreement,
and in an addendum thereto, V1 Labs Inc., agreed that the worker
would remain its employee. That agreement, dated November 17, 2008, was
never signed (Exhibit R-1, Tab 9). In fact, NNS contracted for the
services of the workers through V1 Labs Inc. for the period from
November 16, 2008 to March 13, 2009. For those services total fees in
the amount of $79,585.50 were paid by NNS (Exhibit A-1, Document 18).
This amount was based on invoices sent to NNS from V1 Labs Inc. for the workers
labor services provided by the workers (Exhibit R-1, Tab 5) and on
the rates set by contract, and took into account any workdays missed due to
vacation or other things (Exhibit A-1, Document 19).
[8]
The appellant testified that the
workers were paid regularly, on a biweekly basis, from the moment the Product
License Agreement was signed with NNS. NNS would pay V1 Labs Inc., which in
turn put the money in the personal bank account of the appellant, who then paid
the workers, either by cheque or in cash. Apparently, it was done this manner
because that was the easiest way, as V1 Labs Inc. did not have a bank
account in Canada and V1 Labs Ltd.’s bank account had been
frozen by the Canada Revenue Agency (CRA). The appellant said that he agreed
to act as a conduit and transfer the money to the workers on the express
understanding that they were being treated as independent contractors and that
no withholdings were required.
[9]
With respect to the assignment of
work, the appellant said that the workers reported directly to Mike Earle of V1 Labs Inc.
and that, during the project with NNS, they were solely under the direction of
Jason MacInnis, Vice‑president, Technology Operations, with NNS. It was the
appellant’s understanding that requests for vacation were addressed to either
Mike Earle or Jason MacInnis, and that the workers were not paid for
any time not worked (Transcript, pp. 29-30).
[10]
Ms. Gail Leblanc, an accountant,
testified for the appellant. It was she who issued the Records of Employment to
the workers. She confirmed that the workers were laid off by V1 Labs Ltd.
because there would be no future revenue coming in. She also confirmed that the
workers returned to the office right after being laid off, because they were
shareholders and it was in their interest to work in view of potential future
income. She said that up until June 2008 she claimed scientific research and
experimental development rebates from the CRA for V1 Labs Ltd., but
did not do so after that because the workers were no longer employees. Had she
been able to make such a claim for such rebates, she said, it would have been
advantageous for the company because it could have thereby recovered 35% of the
wages paid to the workers. In re-examination, she acknowledged that V1 Labs
Inc., being a US company, would not have been entitled to those
rebates even if the workers had been treated as employees (Transcript, p. 88).
[11]
Neil Collins testified. He
was first hired to write test documentation with respect to software. He then
became vice-president responsible for product development and started managing
the other employees. He said that prior to becoming an employee he used his own
laptop for his work. After he became an employee in April of 2007, he used only
equipment provided by V1 Labs Ltd. and never paid any of the
company’s operating expenses. In addition, source deductions were withheld from
his biweekly pay. He also had three weeks of paid vacation, was entitled to
paid sick days and could join the company’s health plan. His work was
supervised by Mike Earle and the appellant, from both of whom he received
directives. He worked from Monday to Friday, from 9 a.m. to 5 p.m.
[12]
He said that after receiving his
Record of Employment he was called back to work by the appellant, and neither
the location nor anything else had changed (Transcript, p. 113). Although
there were periods when he was not paid, he was nevertheless compensated for all
his time at the same rate of remuneration after deductions as before. His
understanding was that the EI and CPP deductions were still being made by the
employer. His vacation was still paid and he had to make requests for any
vacation he took. Sick days also continued to be paid. As he never received any
pay stubs from "V1 Labs", it was only when he received his T4
for 2008, which showed only 60% of his full earnings (Exhibit R-1, Tab 12),
that he realized something was wrong. He immediately contacted the appellant
(Exhibit R-1, Tab 16), who told him that he would look into it. The
appellant ultimately advised him that the missing remuneration on the T4 had to
be considered remuneration for services provided as contractor. As he was
responsible for paying his tax on that remuneration, Mr. Collins e‑mailed
the appellant asking to be paid the amount of tax owing (Exhibit R-1, Tab 18).
He testified that this e‑mail was not intended to show that he was accepting
independent contractor status (Transcript, p. 105). He raised the
problem with the CRA when he filed his tax return for 2008 (Exhibit R-1,
Tab 20); in preparing that return, he estimated his total employment
income and the total deductions at source that should have been made for the
year 2008 given that the T4 did not reflect the full amounts. As evidence that
he never intended to become an independent contractor, he indicated that he
refused to sign the independent contractor agreement with NNS, one of the
reasons being that he wanted to remain an employee of "V1 Labs"
(Transcript, pp. 109‑110).
[13]
In cross-examination, when
confronted with evidence of amounts paid on four occasions by V1 Labs Ltd.,
or by the appellant directly, in July, August, September and November 2008
(Exhibit A-1, document 21), he acknowledged that the four amounts
shown there did not correspond to his full net salary, but stated that "[t]hat
can’t be correct". He maintained that he "always got paid what was
owing to [him] of [his] standard bi-weekly payments. So however they paid it,
pay it in cash from an account paid from a personal cheque. [He] always got
paid the right amounts" (Transcript, p. 116).
[14]
In fact, he stated that he even
got a pay raise that year. With respect to the stock options, when the
appellant showed Mr. Collins a capitalization table (Exhibit R-1, Tab 1)
for V1 Labs Ltd., which showed that 210,000 shares were committed to
him, he did not understand and said that it was news to him. The appellant was
of the view that Mr. Collins did not have to exercise his option in accordance
with the agreement, that the shares automatically vested in him, and further, that
Mr. Collins would have profited from the proceeds of the sale of the
company. On scrutinizing this capitalization table, it can be seen that it does
not say that shares were issued to Mr. Collins. The figures given are for
"options to be allocated/committed" and, in Mr. Collins’ case,
shares were committed but not issued. Further, it is clear from Schedule A to
the Notice of Grant of Stock Options and Option Agreement (Exhibit A-1,
Document 14), that the exercise of the option had to be in writing, and
there is no evidence of such exercise having taken place.
[15]
Daniel Scott and James Richard
also testified. Their testimony was in line with that of Neil Collins. They
reported to Neil Collins and their remuneration was somewhat lower than his.
They both thought that from June 2, 2008 they were still working for V1 Labs Ltd.,
regardless of the source of the work. They did not see any changes after June 2,
2008, apart from the fact that they were not paid regularly during some
periods, a circumstance which they attributed to V1 Labs Ltd.’s
financial difficulties. But they confirmed that, in the end, they received
their entire net pay, and even had a raise before the end of 2008. It was their
understanding that deductions were being made at source by their employer. They
never considered themselves as independent contractors. They also said that
they never exercised their options to acquire shares of V1 Labs Ltd., the
major reason being that they had to pay to acquire those shares and did not
have the money to do so.
Analysis
[16]
The appellant first raised the
point that the decisions made by the Minister were contradictory in that the
Minister appeared to have changed horses in mid‑stream. With respect, I
do not find this to be so. I do not have any difficulty understanding the
rulings made by the Minister on April 15, 2010 and April 16, 2010. In
the letter dated April 16, 2010 sent to V1 Labs Ltd. (Exhibit A-1,
Document 10), it was determined that for the period from January 1,
2008 to August 15, 2008, the workers Neil Collins and Daniel Scott were
employed by V1 Labs Ltd., but for the period from August 16,
2008 onward, those workers were not employed by V1 Labs Ltd. In the
letter dated April 15, 2010, sent to V1 Labs Inc. (Exhibit A‑1,
Document 11), it was determined that for the period from August 16,
2008 to March 6, 2009 (in the case of Neil Collins) and to March 16,
2009 (in the case of Daniel Scott), they were "engaged" under a
contract of service (meaning employed) by V1 Labs Inc., and Bruce
Thompson, the appellant, was deemed to be the employer responsible for
deducting, remitting and reporting the applicable contributions and premiums.
In the case of the worker James Richard, the court file shows that a letter was
sent to Bruce Thompson on April 15, 2010. The letter stated that that
worker was "engaged" under a contract of service with V1 Labs Ltd.
from June 2, 2008 to August 15, 2008, and with V1 Labs Inc.
from August 16, 2008 to March 16, 2009, and that Bruce Thompson, the
appellant, was deemed to be the employer responsible for deducting, remitting
and reporting the applicable contributions and premiums for the latter period.
A separate letter was sent to V1 Labs Ltd. on April 15, 2010,
stating that James Richard was employed by V1 Labs Ltd. for the first
period but not for the second.
[17]
In due course, the appellant
personally filed an appeal before this court against all of the aforementioned decisions.
Therefore, this court has now to determine whether the workers were employees
of V1 Labs Ltd. for the period from June 2, 2008 to August 15,
2008 and of V1 Labs Inc. for the subsequent period, and if so,
whether the appellant is the deemed employer for that subsequent period for the
purposes of the deductions at source under the EI Act and the CPP.
[18]
First of all, it would appear that
all the remuneration received by the workers from V1 Labs Ltd. up
until August 15, 2008 was already considered as employment income and
included in the T4s issued by V1 Labs Ltd.
[19]
In any event, the workers all
testified that they came back to work on June 2, 2008 at the request of
the appellant. They all denied that they held shares in V1 Labs Ltd.
They all said that V1 Labs Ltd. paid them their usual net
remuneration until August 15, 2008. This was even admitted by the
appellant (Transcript, pp. 54-55 and p. 69). The workers all said
that the situation was exactly the same both before and after their Records of
Employment were issued. They were working at the same place with equipment
supplied by V1 Labs Ltd. and, in the case of James Richard and Daniel
Scott, received their directives from Neil Collins; as for Mr. Collins, he
received his instructions from the appellant at least until August 2008.
[20]
It is my understanding, from the appellant’s
testimony, that things started to really change in September 2008. For two
months, he said, the workers worked for V1 Labs Inc. and did not receive their
full net salary. The appellant said that the workers did not report to him.
Neil Collins received his directives directly from Mike Earle at V1 Labs Inc.,
and the other two workers reported to Neil Collins. The appellant was only
facilitating the payments to the workers by agreeing to have the funds for
paying the operating expenses for V1 Labs Inc., including the workers’
net pay, transit through his bank account. He said that he did so on the
express condition that the workers would be treated as independent contractors
and that he would not have to be responsible for any deductions and remittances
to the government. As evidence of that, he relied on the Product License
Agreement between NNS and V1 Labs Inc. in which it is clearly
stipulated that the latter was to carry out the agreement as an independent
contractor (Exhibit R-1, Tab 2, paragraph 16 m). That agreement
was entered into in November 2008.
[21]
On the other hand, the workers all
stated that they never saw any differences. For them, the work was coming from
“V1 Labs”. They knew that V1 Labs Ltd. was experiencing
financial difficulties and this explained why, for a time, they were not being paid
regularly. But they all said that they were paid their full net pay for the
whole period and that they even got a pay raise at the end of 2008. It was only
when they received in 2009 their T4s for the year 2008 that they noticed that something
was wrong. They all said that they thought that “V1 Labs” was their
employer and that they thought that the deductions at source were being made.
[22]
This is a black or white case. If
I accept the appellant’s version, the workers agreed to take the financial risk
of working for a reduced salary, even running the risk of not being paid at
all. They did not seek to work elsewhere, being devoted to "V1 Labs",
and having accepted stock options in 2007, they had a chance of profiting from
the proceeds of the sale of V1 Labs Ltd. They worked voluntarily on
that basis, with a clear understanding that they had lost their employee
status.
[23]
Unfortunately for the appellant,
his version does not appear to me to be realistic. The evidence did not reveal
that the workers had any shares in V1 Labs Ltd. Although Gail Leblanc and
the appellant maintained that the workers owned shares, the fact that they were
granted stock options in the course of their employment does not automatically make
them shareholders, as contended by the appellant. The stock option agreement
specifically stated that the acquiring of shares had to be done in writing, and
the workers would have had to pay money to acquire shares, which they did not.
The capitalization table in Exhibit R‑1, Tab 1, does not show that
the workers owned issued shares. So, the appellant’s assertion that the workers
returned voluntarily, drawn by the chance of profiting from the proceeds of the
sale of V1 Labs Ltd., is simply unbelievable. As for the risk of not being
paid for work performed or of having to take a reduction in salary, neither
actually occurred according to the workers’ testimony. They were all under the
impression that they continued under the same benefits plan with their employer.
They were aware of their employer’s financial difficulties, but were told by
the appellant that V1 Labs Ltd. was securing a loan in order to be
able to pay them. Apart from that, nothing had changed. When the work started
coming from V1 Labs Inc., on projects either for TV Anywhere or for
NNS, the workers received their remuneration directly from the appellant. However,
they did not make any distinctions in that regard. In their words, they were
working for "V1 Labs".
[24]
In 671122 Ontario Ltd. v. Sagaz
Industries Canada Inc., [2001] 2 S.C.R. 983, Major J. said at paragraphs 46
and 47:
46 In my
opinion, there is no one conclusive test which can be universally applied to
determine whether a person is an employee or an independent contractor. Lord
Denning stated in Stevenson Jordan, supra, that it may be
impossible to give a precise definition of the distinction (p. 111) and,
similarly, Fleming observed that "no single test seems to yield an
invariably clear and acceptable answer to the many variables of ever changing
employment relations . . . " (p. 416). Further, I agree
with MacGuigan J.A. in Wiebe Door, at p. 563, citing Atiyah, supra,
at p. 38, that what must always occur is a search for the total relationship of
the parties:
[I]t
is exceedingly doubtful whether the search for a formula in the nature of a
single test for identifying a contract of service any longer serves a useful
purpose. . . . The most that can profitably be done is to
examine all the possible factors which have been referred to in these cases as
bearing on the nature of the relationship between the parties concerned.
Clearly not all of these factors will be relevant in all cases, or have the
same weight in all cases. Equally clearly no magic formula can be propounded
for determining which factors should, in any given case, be treated as the
determining ones.
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.
[25]
Taking into account those factors,
I believe that the workers kept their employment status with V1 Labs Ltd.
until August 15, 2008, and thereafter were employed by V1 Labs Inc.
They always received instructions for their work from their immediate supervisor
whether their employer was V1 Labs Ltd. or V1 Labs Inc.; they continued
to work the same hours and did so at V1 Labs’ premises in Halifax; they
did not provide their own equipment; they did not hire anyone to help them with
their work; they did not have any responsibility for investment or with respect
to management of the company. None of this was really challenged by the appellant.
Further, I am satisfied that they did not expect to have any opportunity for
profit.
[26]
They did, however, incur a risk in
that their salaries could be put on a hold while the employer was trying to
secure funds to pay them and keep the business afloat. Further, there was a
dispute as to whether the workers received their full net salary from mid‑August
2008 to the beginning of December 2008. All the workers said they did. Neil
Collins was firm on that point. The appellant said that there is a discrepancy
in that regard, as shown by the cheques issued by him for that period. My
recollection is that the appellant admitted that he sometimes paid the workers
in cash (Transcript, p. 25, and see the appellant’s bank statements
showing significant cash withdrawals, in Exhibit R‑1, Tab 6). The
existence of this point of controversy, in my view, does nothing to change the
workers’ status into that of independent contractors. In the first place, I am
more inclined to believe the workers. In the second place, not all the factors
have the same weight, taking into account the circumstances surrounding the
relationship between the parties concerned.
[27]
The common intention of the
parties may also be considered as determining the existence of a contractual
relationship. However, in a case like this one, where the parties present
conflicting evidence as to what they intended their legal relationship to be,
intent cannot be a factor to be considered (see Lang v. MNR, 2007 TCC
547, at par. 33).
[28]
All in all, analyzing the factors
referred to in Sagaz (supra), and balancing the evidence
presented before me, I conclude that the contractual relationship between the
parties points more to employee status than to independent contractor status.
[29]
With respect to the employment
with V1 Labs Inc., it is clear from subsection 10(1) of the
IECPR and subsection 8.1(1) of the CPP Regs that the appellant is the
deemed employer of the workers for the purpose of deducting and remitting the
contributions and premiums. As a matter of fact, the appellant admitted that he
paid the workers through his own bank account to facilitate payment. This alone
is sufficient for the appellant to be liable under the above provisions, even
though the source of the funds was the actual employer, V1 Labs Inc.
As stated by the Federal Court of Appeal in Canada v. Insurance Corp.
of British Columbia, [2002] FCA 104, at paragraph 8:
8 The purpose
of the Regulations and the statute which authorizes them is in part to
facilitate collection of employment insurance premiums, an activity which is
essential to the scheme as it now exists. The Act clearly authorizes the kind
of provision which has been adopted by the Governor in Council in section 10 of
the Regulations. In examining section 10 one sees that it is to apply inter
alia where an employed insured person is being "paid by a person other
than [his or her] actual employer". In such case that "other
person" must maintain records of employment and calculate, deduct, and
remit the appropriate premiums. The proposition is simple enough and its
purpose clear: premiums are to be deducted at the source where salary or wages
are calculated and administered, and where checks or pay-packets are issued.
The term "paid" ought to be interpreted in context, and it is not
necessary to examine technical sources in order to attribute to it a meaning that
would defeat the clear purpose of the section. It would be equally possible, if
one were to dwell on abstract legal concepts, to hold that a person can be an
"actual employer" only if that person is paying the
"employee" from his or her own resources and not at the expense of
another. But that would also defeat the purpose of the section by precluding
its application to any situation where a third party was actually providing and
administering the wages or salary.
[30]
Finally, the appellant
raised a last‑minute argument that the employment for an American company
was excepted employment pursuant to paragraph 5(2)(e) of the EI Act
and paragraph 6(2)(j) of the CPP because it was for an
international organization. This argument cannot stand. The term "international
organization" is defined in subsection 1(2) of the Employment Insurance
Regulations and in subsection 2(1) of the CPP Regs, and
V1 Labs Inc. is definitely not an international organization as so
defined.
[31]
For all these reasons, the appeals
are dismissed.
Signed at Montreal, Quebec, this 9th day of February 2011.
"Lucie Lamarre"
Email this Content