Citation: 2011 TCC 490
Date: 20111019
Dockets: 2011-16(EI)
2011-17(CPP)
BETWEEN:
CAVALIER LAND LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
MARK HOADLEY,
Intervenor.
REASONS FOR JUDGMENT
Rowe D.J.
[1]
The Appellant, Cavalier
Land Ltd. (“Cavalier”) appealed from two decisions – both dated October 5, 2010
- issued by the Minister of National Revenue (the “Minister”) pursuant to the Employment
Insurance Act (the “Act”) and the Canada Pension Plan (the
“Plan”) wherein the Minister decided the employment of Mark Hoadley
(“Hoadley”) from January 1, 2009 to October 14, 2009 was both insurable and pensionable
employment because he was providing his services pursuant to a contract of
service.
[2]
Counsel for the
Appellant, counsel for the Respondent and Hoadley agreed both appeals could be
heard together.
[3]
Steve Sinclair-Smith (“Sinclair-Smith”)
testified he is the Chief Operating Officer (COO) of Cavalier and all
vice-presidents report to him. Cavalier is owned by Divestco Ltd. (“Divestco”).
Within the corporate structure of Cavalier, the Land Department acts on behalf
of oil and gas companies to acquire the right to occupy land for the purpose of
exploration and development by negotiating for surface rights with the
landowners. It also deals with acquisition of Alberta
crown surface dispositions, negotiations and acquisition of freehold surface
rights, project mapping, freehold mineral leasing, liaison with regulatory
agencies, and related activities. Cavalier has a team of Land Agents (“Agents”)
located in various centres across Western Canada and retains individual Agents
by entering into a written contract, a practise in force during the relevant
period. Hoadley was the Agent in the Medicine Hat region
of south-eastern Alberta. Sinclair-Smith did not deal directly with
Hoadley but is familiar with the corporate policy and procedures for dealing
with the 12 to 15 Agents who provide services to Cavalier. In 2007, Cavalier
purchased Canadian Landmasters Resource Services Ltd. (“Landmasters”) and
brought it into the larger Cavalier corporate structure. According to
Sinclair-Smith, the industry standard is to retain independent contractors to
carry out the duties of Agent. Sinclair-Smith was referred to a Record of
Employment (“ROE”) – Exhibit A-1- dated February 6, 2008 stating that Landmasters
was acquired by Divestco on November 28, 2007 and that Hoadley’s final pay
period at Landmasters ended on November 30, 2007. Sinclair-Smith stated that
Hoadley and Cavalier entered in a written agreement – a copy of which was filed
as Exhibit A-2 – with a commencement date of January 1, 2008 and a termination
date of December 31, 2008, unless otherwise extended. Although the copy does
not contain the signature of a representative of Cavalier, there was no dispute
that this form of contract had been executed on behalf of Cavalier and by
Hoadley. The terms of said contract did not guarantee the amount of work
available – article 1.2 – because Cavalier required the services of Hoadley and
other Agents only in response to demand emanating from resource companies.
Pursuant to article 2.1, Sinclair-Smith stated it was apparent Hoadley would be
providing his services on the understanding that he was an independent
contractor and – as set forth in article 2.2 – that he could work for third
parties provided it did not interfere nor conflict with his obligations to
Cavalier. Pursuant to article 3.4, Hoadley was not eligible to participate in
any Cavalier benefit plans and was not entitled to sick leave, vacation pay
from Divestco nor any other form of holiday pay. He was responsible for the
payment of parking, transportation, expenses – including cell telephone, dues
and membership fees. Sinclair-Smith stated the practise followed by Agents was
to notify the Land Department if the Agent was taking an extended leave but
that was considered to be a matter of professional courtesy. If no notice was
given, another Agent was contacted to handle the particular matter. An amending
agreement – dated September 23, 2009 – Exhibit A-3 – was signed by Hoadley and
Peter Zyla (“Zyla") – on behalf of Divestco – whereby article 3.1 was
amended as of October 1, 2009 to reduce Hoadley’s remuneration – by 5% – to
$38.00 per hour. Article 3.2 was deleted and replaced with another clause which
reduced the number of Hoadley’s billable hours per week for “office time” to 25
hours. However, he could work a maximum of 40 hours per week when performing a
combination of field work and office duties, which remained fixed at a maximum
of 25 hours. Hoadley also had to provide an invoice at the end of every two
weeks showing the number of hours worked during the month and a description of
the work performed. Sinclair-Smith stated that by the end of September, 2009
there was a significant decline in revenue generated in the Medicine Hat region
and fewer files were being assigned to that office so the amending agreement was
needed to set limits on the hours billed by Hoadley. Sinclair-Smith was
referred to an e-mail – Exhibit A-4 – from Zyla to Hoadley which contained a
list of employees including Hoadley’s wife – Cherith Hoadley (“Cherith”) – who
worked in the Medicine Hat office. Hoadley is not included as an
employee subject to performance reviews but he was requested to complete the “supervisor
portion of the review” for Cherith. A bundle of invoices – Exhibit A-5 –
submitted by Hoadley to Cavalier pertained to the period from April 12, 2009 to
July 20, 2009 and were representative of the invoices and an attached table set
forth details of the particular file, hours worked, distance travelled, and
information pertaining to expenses.
[4]
In cross-examination by
counsel for the Respondent, Sinclair-Smith stated the Head Office of Divestco
was in Calgary. The company provided software data
services to companies exploring for oil and gas and provided Agents who dealt
with acquisition of necessary rights pertaining to entry on lands. Divestco has
240 employees and 30 persons who provide services as independent contractors.
Cavalier has 28 employees and 15 people who are retained as independent
contractors. During the relevant period, Zyla was the Cavalier Vice-President
who dealt directly with Agents, including Hoadley. There were 3 Senior
Coordinators, Ryan Dallyn, (“Dallyn”) John Lanaras (“Lanaras”) and Terry
Henkleman (“Henkleman”) who had been a Coordinator at Landmasters and was one
of the owners. Cavalier retained the former office in Medicine Hat. Sinclair-Smith stated he never met Hoadley during the relevant period
and was not aware of the day-to-day activities of Cavalier. He was aware that
the ROE – Exhibit A-1 – had been issued by Landmasters on February 6, 2008. He
understood that Hoadley had been an Agent at Landmasters prior to its
acquisition by Cavalier. It was standard practise at Cavalier to offer a
contract to Agents in the form of Exhibit A-2. Prior to the acquisition,
Landmasters had been a competitor of Cavalier. Sinclair-Smith acknowledged that
in the chart contained within the e-mail – Exhibit A-4 – Hoadley is named within
the category of someone “Who Coordinates” and “Who Does Reviews.” Lanaras, a
Senior Coordinator – is listed as John L. under the heading, “Who Else in
Review.” Sinclair-Smith acknowledged it was not normal for an independent
contractor to perform a review of an employee. Sinclair-Smith was referred to a
document entitled Divestco Employee Directory and to the entry therein on the
last page where Hoadley was listed and his function described as: Medicine Hat
Coordinator and whose supervisor was Lanaras. Hoadley’s e-mail address is shown
as at: “divestco.com”. Sinclair-Smith stated Hoadley represented Cavalier when
dealing with landowners.
[5]
In re-direct
examination, Sinclair-Smith stated he did not know who had compiled the
employee list – Exhibit R-1 – but assumed it was someone working in the
Information Technology Department who probably did not know the status of
certain individuals named therein as its main purpose was to list people who
were involved in the overall business of Cavalier. The Medicine Hat office acquired from Landmasters was closed to save expenses and the
only people working from that office were Hoadley and his wife – Cherith – who
was an employee of Divestco/Cavalier.
[6]
In cross-examination by
Hoadley – as Intervenor – Sinclair-Smith stated he was not aware that Cavalier
had acquired an office in Carlyle, Saskatchewan. His understanding of
corporate policy was that Agents administered their own files but did not
participate in the daily administration of an office. Cavalier accepted – in
good faith – that the hours billed by Hoadley were accurate and the recorded
time thereon was billed to the appropriate file, wherever possible.
Sinclair-Smith was not aware of specific details of invoices within Exhibit
A-5. He did not agree that Hoadley – or any other Agent – had an obligation to
advise a supervisor or other person at Cavalier of an intended absence. The
practise was that the Senior Coordinator would contact an Agent from another
area to perform the necessary duties. He understood that – at some point – the
Agent in Edmonton had become an employee and that she had
performed certain administrative office duties as well as those undertaken by
an Agent. Sinclair-Smith stated he understood it was normal for an Agent to
deal with a representative of an oil and gas company directly in the course of
negotiations with a landowner.
[7]
The case for the Appellant
was closed.
[8]
Mark Hoadley was called
to the stand by counsel for the Respondent. Previously, Hoadley was employed by
Landmasters as a Coordinator and Agent in the Medicine Hat office. Landmasters also had offices in three other locations –
Carlyle, Edmonton and Calgary.
He began working – in 2001 – for the corporation which was owned by his parents
and Henkleman. Initially, he worked in the office performing administrative
duties until he obtained his Agent’s licence in 2006 after which his duties
expanded and became more varied. When his father died, the decision was made by
the remaining shareholders to sell the company. Prior to his father’s death,
Hoadley had managed the Medicine
Hat office and his wife –
Cherith – also worked in that office. While employed by Landmasters, he was
remunerated for overtime work at 1.5 times his regular pay. He recorded the
time devoted to work performed as an Agent apart from the role he assumed to
administer the office. Hoadley stated that when Landmasters was acquired by
Divestco/Cavalier, he understood all Landmasters’ staff would be retained. The
transition was immediate and there was no delay in receiving payment for his
work. The transaction took place on November 28, 2007 and there was no
subsequent change in his duties. Hoadley stated he fulfilled three separate
roles. First, as Agent he was responsible for duties associated with
negotiating rights to land, which services were billed to a particular file.
Second, as a Coordinator, he dealt with staff and coordinated the activities of
other Agents, when required. As a Coordinator, he dealt directly with the
representative of the resource company and coordinated the activities of other
Agents, when required. Third, he functioned as Manager of the Medicine Hat office which was open from 8:30 a.m. to 5:00 p.m. and
reported to Dallyn or Lanaras. Hoadley stated, “there is a definite crossover
in roles.” Landmasters had its own client base before being acquired by
Cavalier. With respect to the agreement – Exhibit A-2 – Hoadley stated he
understood it related to his role as Agent only and had anticipated a separate
agreement would be forthcoming with respect to his other roles and associated
duties. Hoadley stated he did not think he could have worked for other
companies because it would have constituted a conflict and also because when he
was not away working as an Agent, he was in the office all day. Hoadley stated
he signed the agreement – Exhibit A-2 – because he wanted to be included in
Workers Compensation Board coverage, particularly when out in the field
performing duties as an Agent. Hoadley acknowledged that he signed the amending
agreement – Exhibit A-3 – on September 11, 2009, but informed Zyla that he
would be filing an income tax return on the basis he was an employee and had
requested a decision on his working status from Canada Revenue Agency (“CRA”)
and that the amending agreement would be “null and void” upon receiving a
Ruling from Canada Revenue Agency that he was an employee. On October 16, 2009,
a Rulings Officer notified Cavalier and Hoadley that Hoadley was engaged in
both insurable and pensionable employment with Cavalier during the period from
January 1, 2009 to October 14, 2009. Hoadley stated that prior to signing the
amending agreement – Exhibit A-3 – he had refused to sign an earlier version
which had fixed the guaranteed hours of work per week at zero. As a
consequence, the next version contained a guarantee to a maximum of 25 hours
per week for office work and a total of 40 hours for a combination of those
duties and those performed as Agent. Hoadley stated he reported to Zyla, Dallyn
or Lanaras – the Senior Coordinator – when another Agent was required to handle
a file in the Medicine Hat region. Files could originate in Calgary, Edmonton or Medicine
Hat and personality conflicts
arose – occasionally – which required an Agent from another office to take over
conduct of a file. Dallyn and Lanaras assigned work originating in the Edmonton
and Calgary offices. However, work was also obtained
directly through the office in Medicine
Hat as Hoadley’s father had
been in the land agent business for 30 years. Hoadley utilized the Cavalier
data base to process the required work. It was necessary to communicate with
other Agents to distribute work among members of that group. Hoadley submitted
invoices to Cavalier and was paid every two weeks. Until April, 2009, he was
paid for statutory holidays but was informed by Zyla that he could no longer
receive payment for those days unless he had actually worked. Hoadley stated he
needed to hold a licence in Saskatchewan to perform duties there as an Agent as the
authorizing legislation differs from that of Alberta.
He was supplied with business cards by Cavalier and a photocopy of one was
filed – as Exhibit R-2 – on a sheet also containing handwritten notes by
Hoadley. The card stated Cavalier was “A Divestco Company” and Hoadley was
identified as “Office Manager/Land Agent, Medicine Hat & Carlyle Offices.” Hoadley
used his own car and cell phone and was reimbursed by Cavalier. The contract
with the provider was in the name of Landmasters so Hoadley paid the monthly
bill directly and billed Cavalier when submitting his invoices. At some point,
a new telephone contract was signed by Cavalier. All expenses associated with
the operation of the Medicine
Hat office were paid by
Cavalier. When that space was occupied by Landmasters, it comprised 5 offices
and a reception area to accommodate a total of 7 employees. During the relevant
period, the rental was on a month-to-month basis and all arrangements pertaining
thereto were between the landlord and a representative of Cavalier.
[9]
In cross-examination by
counsel for the Appellant, Hoadley was requested to explain the difference in
format between the invoices contained in Exhibit A-5 and those filed as Exhibit
A-6. Hoadley stated the first page of the invoice in Exhibit A-5 – like those
in Exhibit A-6 – was a form produced internally by Cavalier and sent to Hoadley
for his use. He prepared the second page which was a chart or table setting
forth particulars of specific work performed on particular days and included
additional details and comments, as required. Another group of invoices – filed
as Exhibit A-7 – were used in the course of a hearing before a tribunal.
Hoadley stated that when Landmasters was acquired by Cavalier, he was not
informed of any change in his working status except that he would no longer be
an employee of Landmasters. When the contract – Exhibit A-2 – was presented to
him for consideration, he regarded it as pertaining only to his function as an
Agent since it did not deal with any other duties he had performed at
Landmasters. With respect to the first invoice – dated April 12, 2009 – in the
bundle filed as Exhibit A-5 – Hoadley stated he did not have a Goods and
Services Tax (“GST”) number and the amount shown thereon for GST was added – by
Cavalier – to the amount billed for 97.5 hours work – at $40.00 per hour – together
with expenses for the use of his vehicle and telephone. Hoadley acknowledged he
had been informed that Cavalier wanted all Agents to provide services as
independent contractors. Hoadley was referred to a bundle of documents with the
heading: Time Sheet, Cavalier
Land, Mark Hoadley, which
were filed as Exhibit I-1. As of April 1, 2008, Hoadley submitted time sheets
to Cavalier for which he billed 8 hours each day – 5 days a week – the same
working hours as when employed by Landmasters. At that point, there was no
description of work performed and the notations of “time in” and “time out” and
the total hours per week were identical in each invoice. On the invoice in the
bundle covering the period from June 1 to June 30, 2008, Hoadley charged 4.0
hours overtime at 1.5 times his regular rate and was paid for that supplemental
work. He also charged – and received payment – for 4.0 hours overtime shown on
the invoice for the period from July 1 to July 15, 2008. As had been the
practise when working for Landmasters, Hoadley stated he sought payment – by
invoice – from Cavalier for statutory holidays and was paid until informed by
Zyla that would no longer be acceptable unless he had actually performed some
duties on that particular day and even then, the pay would be at the regular
rate without the 50% supplement. Hoadley stated he discussed with Lanaras or
someone else at Cavalier about entering into an agreement pertaining to those
other duties performed by him in the Medicine Hat office
but none was forthcoming. As for accepting work from other clients, Hoadley
stated he took the position that if someone wanted him to work as an Agent, he
accepted but only on the basis that Cavalier would be retained. In his
experience having worked in the industry, a competitor would not contact an
Agent who was providing services to another land services company. Hoadley
stated he was told to inform Cavalier if he had to be absent from the office.
Hoadley was referred to a series of e-mails - with an attached sheet entitled:
2009 Medicine Hat Analysis – Exhibit A-8 – exchanged between May 11 and August
31, 2009. Hoadley acknowledged that as of March, 2009, the revenue generated by
the Medicine Hat office had declined to the point where
operational costs exceeded income. Hoadley stated he suggested that he would
accept a fixed salary of $78,000 per year which could save Cavalier
approximately $10,000. He considered it would be appropriate to cancel rental
of the office space and relocate to Hoadley’s residence where he had office
space for which use he would bill Cavalier about $500 per month. Cavalier
required Hoadley to reduce his paid hours – as Agent – to 25 hours per week and
he signed the amending agreement dated September 23, 2009. In response to an
e-mail from Zyla dated May 14, 2009, Hoadley – on August 31, 2009 – sent an
e-mail – both are on a sheet filed as Exhibit A-9 – in which he pointed out
that his wife – Cherith – had health coverage provided to her as a status
Indian and Cavalier could eliminate her corporate coverage to save money. He
also referred to other cost-saving measures which he calculated as amounting to
$34,546.00. On August 26, 2009, Hoadley replied to an e-mail from Zyla –
Exhibit A-10 – in which the discussion centred on the operating deficit of the Medicine Hat office. Hoadley replied that he understood “the need
to have a viable office but not at the expense of the employees.” Underlining
for emphasis, Hoadley wrote, “I have been gainfully employed as full time
employee at this office since 2001 and never have been ‘just a land agent’.
This would be considered constructive demise.” Counsel suggested Hoadley had
come to regret signing the contract – Exhibit A-2 – and the subsequent
reduction of billable hours per week had caused him to consider such reduction
as constituting constructive dismissal, a concept applicable to the status of
employee. Referring to the amending agreement – Exhibit A-3 – Hoadley stated
that above his signature and the date of September 23, 2009 , he had added the
handwritten portion which read “ … and becomes null and void upon Revenue
Canadas (sic) ruling of employment.” He stated this wording was present when he
returned the amending agreement to Zyla. Hoadley stated he decided to request a
decision from CRA about his working status when – in April,
2009 – he was informed by Zyla that he was no longer going to be paid for any
statutory holiday unless he worked that day. Hoadley was referred to article
10.1 of the written agreement – Exhibit A-2 – which read:
This Agreement and any applicable policies established by Cavalier Land from time to time, in its
sole discretion, constitutes the whole and only agreement between the parties.
No party will have any claim against any other party with respect to any
agreement or understanding written or oral made prior to the date hereof.
[10]
Hoadley stated he was
aware of that wording but “assumed it was part of the hiccups of the sale”,
referring to the process of merging Landmasters into the Cavalier Land
Department. Hoadley stated that when he billed Cavalier for usage of the cell
telephone – paid by him to Telus Mobility – those minutes for the described purpose
were used by Cavalier to bill the particular client.
[11]
The case for the Respondent
was closed.
[12]
Hoadley testified in
his capacity as Intervenor. He reiterated that Cavalier had an office in Carlyle, Saskatchewan. His understanding was that Dallyn, who acted both as
an Agent and a Coordinator, was an employee of Cavalier. In response to an
e-mail from Zyla – Exhibit I-2 – dated May 26, 2009 – Hoadley stated he
completed an employee evaluation on Cherith – found in said exhibit – signed it
and remitted same to Zyla on July 15, 2009. Earlier, the same information had
been transmitted by telephone to Zyla since the e-mail had referred to the
deadline of June 1 for the evaluations. Hoadley stated that because most of the
work is performed online, many reviews can be undertaken from a remote location
but he was required to complete the report relevant to the Medicine Hat office. In his experience, Agents do not provide
office support or perform administrative duties.
[13]
In cross-examination by
counsel for the Appellant, Hoadley stated that an Agent – Faber – in Carlyle
performed the administration work necessary and his time was billed to a
specific file. Hoadley stated he would add time to his invoice when it was
attributable to duties associated with the role of Coordinator.
[14]
Counsel for the Respondent
did not have any questions.
[15]
Hoadley – as Intervenor
- closed his case.
[16]
Counsel for the Appellant
submitted that while there may have been some misunderstanding arising from
time to time between Hoadley and various representatives of Cavalier in the
Land Department, that the written contract – Exhibit A-2 – was clear. As
clearly stated therein, Hoadley agreed to provide his services as an
independent contractor. Further, article 10.1 stated that the written agreement
constituted the whole and only agreement between the parties. Counsel pointed
out that Hoadley had been employed by Landmasters – a family company – and
appeared to not have appreciated nor accepted that this business had been
acquired by Cavalier which in turn was a member of the Divestco group of
companies. In terms of control, counsel submitted that Hoadley could take time
off from work and that there was nothing in the contract to prevent him from
doing so, although it was apparent Hoadley felt an obligation to continue to
look after the Medicine Hat Landmasters office as he had done for 3 years when
his father was ill. Hoadley chose not to offer his services to a third party
but was able to do so pursuant to the terms of the contract. Hoadley was an
experienced professional Agent and operated according to his own schedule and
methods in order to accomplish the required tasks on behalf of Cavalier’s oil
and gas company clients. Counsel acknowledged there was no risk of loss to
Hoadley but pursuant to article 1.3 of the agreement, Cavalier provided no
guarantee of work and the term of the agreement expired on December 31, 2008.
The main tools utilized by Hoadley to perform his duties as Agent were his
vehicle and cell phone, and expenses related thereto were invoiced and he was
reimbursed by Cavalier. Counsel submitted that the context of the e-mails
exchanged between Hoadley and Zyla in August, 2009, was indicative of Hoadley’s
desire to transform his status from that of independent contractor to that of
employee as evidenced by the suggestion that he receive an annual fixed salary
instead of billing for his time at an hourly rate. Counsel submitted the
evidence had established the Minister’s decisions were incorrect and that the
appeals should be allowed.
[17]
Counsel for the Respondent
submitted the evidence demonstrated Hoadley was not carrying on business on his
own account. While the contract – Exhibit A-2 – addressed Hoadley’s role as
Agent, it did not refer to his other duties as Manager of the Medicine Hat office and the performance of duties associated with
that role. Hoadley testified he anticipated these additional duties would be
the subject of a further contract or discussion but none was forthcoming.
Counsel pointed out the jurisprudence is clear that parties cannot opt out of Employment
Insurance coverage pursuant to the Act nor participation in the Plan.
Counsel submitted that all clients were those of the Appellant. Hoadley was
not registered for purposes of GST and the managerial functions performed –
such as competing a performance review on his wife, a Cavalier employee – were
for the benefit of Cavalier. Hoadley did not hire helpers but, in his role as
Agent, participated in the process to assign other Agents – if needed – to
perform duties in the Medicine
Hat region. The office and
equipment was owned by Cavalier and Hoadley was reimbursed for expenses arising
from the use of his vehicle and cell phone. Counsel submitted there was no
chance of profit and no risk of loss. In reviewing the evidence and assessing
all of the requisite factors, counsel submitted it was clear the Appellant had
not demonstrated that Hoadley was carrying on business on his own account when
providing his varied services during the relevant period.
[18]
Hoadley – as Intervenor
– referred to the evidence that for a certain period he was remunerated at a
fixed hourly rate for 8 hours per day, 5 days a week and that his duties included
managing not only the Medicine
Hat office but also the one
in Carlyle. In providing details of his work to Cavalier when submitting an
invoice, it should have been apparent that he was performing a managerial role
not encompassed by the original contract nor the amendment thereto on September
23, 2009. Hoadley referred to his evidence concerning the acquisition of
Landmasters which occurred suddenly without any transition period and the
office needed to continue operating – as usual – to satisfy the needs of those Landmasters
clients who had become clients of Cavalier.
[19]
The Supreme Court of Canada in 671122
Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983 – (“Sagaz”)
dealt with a case of vicarious liability and in the course of examining a
variety of relevant issues, the Court was also required to consider what
constitutes an independent contractor. The Judgment of the Court was delivered
by Major, J. who reviewed the development of the jurisprudence in the context
of the significance of the difference between an employee and an independent
contractor as it affected the issue of vicarious liability. After referring to
the reasons of MacGuigan, J.A. in Wiebe Door Services Ltd. v. Canada
(Minister of National Revenue - M.N.R.), [1986] 2 C.T.C. 200 and the
reference therein to the organization test of Lord Denning – and
to the synthesis of Cooke, J. in Market Investigations Ltd. v. Minister of
Social Security, [1968] 3 All E.R. 732 - Major, J. at
paragraphs 47 and 48 of his Judgment stated:
47
Although there is no universal test to determine whether a person is an
employee or an independent contractor, I agree with MacGuigan J.A. that a
persuasive approach to the issue is that taken by Cooke J. in Market
Investigations, supra. The central question is whether the person who has been
engaged to perform the services is performing them as a person in business on
his own account. In making this determination, the level of control the
employer has over the worker's activities will always be a factor. However,
other factors to consider include whether the worker provides his or her own equipment,
whether the worker hires his or her own helpers, the degree of financial risk
taken by the worker, the degree of responsibility for investment and management
held by the worker, and the worker's opportunity for profit in the performance
of his or her tasks.
48 It
bears repeating that the above factors constitute a non-exhaustive list, and
there is no set formula as to their application. The relative weight of each
will depend on the particular facts and circumstances of the case.
[20]
I will examine the facts in the
within appeals in relation to the indicia set forth in the Judgment of Major,
J. in Sagaz.
Level of Control:
[21]
Hoadley was an experienced Agent
and prior to obtaining his licence had worked in the Landmasters Medicine Hat
office performing a variety of administrative functions, including acting as
Manager for a period of 3 years prior to the sale of the corporation to
Cavalier via the Divestco group. He contacted the Senior Coordinator of
Cavalier in Calgary – when necessary – but also arranged for the services of
another Agent in the Medicine Hat region when required due to client demand. He was
able to negotiate directly with a landowner and to report progress or lack of
it to a representative of the particular resource company client. With regard
to the matter of requiring permission from Zyla or another Supervisor at Cavalier,
if he were to be absent, Hoadley testified it was a requirement but it is also
likely he followed that practice as a matter of courtesy and practicality since
it was necessary to ensure progress was being made on a particular file or
group of files. In the modern business world, supervision and control can be
accomplished via a myriad of electronic devices. The ability to control the
quality of the work rather than controlling its performance by a worker is a
significant distinction. In the within appeals, there is little evidence that
Zyla, Dallyn or others at Cavalier exercised control over the activities of
Hoadley during the relevant period. He was assigned a task or obtained a client
directly and went about achieving the result according to his own methods,
experience and instincts as a person experienced in that field and familiar
with the area. His background with Landmasters enabled him to function with
substantially more knowledge of the region and some clients compared with the
personnel at the Cavalier office in Calgary. Hoadley could control his time and apportion it
between out-of-office tasks and that portion of the work that was either
required or more conveniently performed in the office. Unless he discussed
certain matters with Zyla or others in Calgary by cell phone or e-mail, often the precise nature of
his activities would not be known until the file was completed, even though he
provided some details of his daily duties in the sheet which accompanied his
invoices. Although the contract expressly permitted Hoadley to provide his
services to third parties when doing so did not conflict with this obligations
to Cavalier, I accept Hoadley’s explanation that – for most of the relevant
period – that was impractical because he was busy and it would not have been
acceptable according to his own professional standards as Agent when providing
services to oil and gas companies involved in exploration.
Provision of equipment and/or helpers:
[22]
The office space and equipment in Medicine Hat
had been owned by Landmasters and was acquired by Cavalier. Cherith worked in
that office and had the status of employee. Hoadley was requested to complete a
performance review on Cherith and return it to Cavalier in Calgary. He did
so by telephone and later by filling out the requisite form provided. Hoadley
used his vehicle and cell phone and was reimbursed at a fixed rate per
kilometer and for that portion of the telephone bill associated with work
performed for a Cavalier client. Although there was no direct evidence on the
point, it is reasonable to draw the inference that the office had been
maintained by Cavalier for reasons other than accommodating Hoadley in his role
as Agent and that Cherith performed other duties under the direction of
management situated in Calgary.
Degree of financial risk and responsibility for
investment and management:
[23]
Hoadley was not exposed to any
financial risk in the performance of his duties. He had no investment in the Medicine Hat
office. However, it is apparent that he assumed the responsibility of managing
that office while performing his duties as Agent. The degree to which his
presence in the office was required by Cavalier is unclear. One must take into
account that Hoadley had been the manager of that office while employed by
Landmasters and his wife – Cherith – worked there as a Cavalier employee. The
office was equipped with the necessary furniture, equipment and supplies to
enable him to carry out his Agent duties in an efficient manner and he was
acting as a representative of Cavalier when dealing with both the landowner and
the particular oil and gas company seeking rights of entry or other interests
in land. A review of Hoadley’s notations on the sheets attached to his invoices
– Exhibit A-5 – for the period from March 30 to July 17, 2009 indicates there
was a mixture of work performed described as “office hours” or “office time”
but entries in the space headed: Details/Comments often referred to dealing
with a landowner or various people – including clients – as part of
accomplishing the tasks required by a particular file or group of files. Merely
because Hoadley utilized the office and equipment in Medicine Hat
does not mean he was doing so on behalf of Cavalier directly but was permitted
to do so to fulfil his role as Agent. Some duties pertained to the Saskatchewan
office including preparation of documents associated with obtaining surface
leases or other rights. On May 14, 2009, according to the sheet attached to his
invoice – dated May 26 – he spent 8 hours working on a cost appraisal and also
cleaned the office, vacuumed, took out garbage, cleaned windows, answered
e-mails and the phone. Details in the invoices during the period referred to,
indicated a major part of the activity appears to have a direct nexus with
Hoadley’s role as an Agent and a notation that he spent 8 hours some days to
answer phones, send and receive e-mails does not exclude a connection with the
functions of Agent. The duties appeared to have been intertwined and as Hoadley
stated in his testimony there was a “crossover of roles.”
Opportunity
for profit in the performance of his tasks:
[24]
According to the contract, there
was no guarantee of work and the amending agreement established a maximum of 40
billable hours per week, of which no more than 25 could be attributable to
functions described as “office time.” When it came to the attention of the
Calgary office that Hoadley had been receiving payment for statutory holidays,
Zyla informed him that he would no longer be paid unless he actually worked and
then only at his regular hourly rate. The jurisprudence is clear that working
more hours does not constitute a chance of profit in this sense.
The
issue of intent:
[25]
In several recent cases including Wolf
v. The Queen, 2002 DTC 6853, The Royal Winnipeg
Ballet v. The Minister of National Revenue – M.N.R., 2006 DTC 6323, Vida Wellness Corp. (c.o.b. Vida Wellness
Spa) v. Canada (Minister of National Revenue - M.N.R.), [2006]
T.C.J. No. 570 and City Water International Inc. v. Canada (Minister of
National Revenue – M.N.R.), [2006] F.C.J. No. 1653, there was a clearly‑expressed
mutual intent of the parties that the person providing the services would be
doing so as an independent contractor and not as an employee. In other cases,
there is a dispute about whether one of the parties agreed at the outset – or
thereafter during the course of the working relationship – to provide services
in the context of a particular status.
[26]
In Winnipeg Ballet, there
was no dispute by the parties as to their intention and desire to have the
working relationship with the payor characterized as that of independent
contractor. At paragraphs 61 to 64, inclusive of her judgment, Sharlow, J.A.
stated:
[61] I
emphasize, again, that this does not mean that the parties' declaration as to
the legal character of their contract is determinative. Nor does it mean that
the parties' statements as to what they intended to do must result in a finding
that their intention has been realized. To paraphrase Desjardins, J.A. (from
paragraph 71 of the lead judgment in Wolf), if it is established that
the terms of the contract, considered in the appropriate factual context, do
not reflect the legal relationship that the parties profess to have intended,
then their stated intention will be disregarded.
[62] It
is common for a dispute to arise as to whether the contractual intention
professed by one party is shared by the other. Particularly in appeals under
the Canada Pension Plan and the Employment Insurance Act, the
parties may present conflicting evidence as to what they intended their legal
relationship to be. Such a dispute typically arises when an individual is
engaged to provide services and signs a form of agreement presented by an
employer, in which she is stated to be an independent contractor. The employer
may have included that clause in the agreement in order to avoid creating an
employment relationship. The individual may later assert that she was an
employee. She may testify that she felt coerced into signifying her consent to
the written form of the contract because of financial need or other
circumstances. Or, she may testify that she believed, despite signing a
contract containing such language, that she would be treated like others who
were clearly employees. Although the court in such a case may conclude, based
on the Wiebe Door factors, that the individual is an employee, that does
not mean that the intention of the parties is irrelevant. Indeed, their common
intention as to most of the terms of their contract is probably not in dispute.
It means only that a stipulation in a contract as to the legal nature of the
relationship created by the contract cannot be determinative.
[63] What
is unusual in this case is that there is no written agreement that purports to
characterize the legal relationship between the dancers and the RWB, but at the
same time there is no dispute between the parties as to what they believe that
relationship to be. The evidence is that the RWB, the CAEA and the dancers all
believed that the dancers were self-employed, and that they acted accordingly.
The dispute as to the legal relationship between the dancers and the RWB arises
because a third party (the Minister), who has a legitimate interest in a
correct determination of that legal relationship, wishes to assert that the
evidence of the parties as to their common understanding should be disregarded
because it is not consistent with the objective facts.
[64] In
these circumstances, it seems to me wrong in principle to set aside, as worthy
of no weight, the uncontradicted evidence of the parties as to their common
understanding of their legal relationship, even if that evidence cannot be
conclusive. The judge should have considered the Wiebe Door factors in
the light of this uncontradicted evidence and asked himself whether, on
balance, the facts were consistent with the conclusion that the dancers were
self-employed, as the parties understood to be the case, or were more
consistent with the conclusion that the dancers were employees. Failing to take
that approach led the judge to an incorrect conclusion.
[27]
In the case of Dempsey v.
Canada (Minister of National Revenue – M.N.R.), [2007] T.C.J. No. 353; 2007
TCC 362, Hershfield, J. considered the appeal of a service
provider who – as a chartered accountant – had entered into a written contract
with the payor in which he agreed to perform auditing and professional services
in relation to loans and grants made by said payor and to do so as an
independent contractor who would submit invoices based on a stipulated daily
rate with a maximum amount during the contract period based on a maximum number
of days. Pursuant to said contract, the parties agreed the worker would be an
independent contractor. The worker submitted invoices each month for the number
of hours worked on each day of the month and GST was charged on the relevant
amount. In the course of his analysis at paragraph 39, Hershfield, J. commented
as follows:
Analysis
[39] If
intentions were determinative of the status of the Appellant's engagement,
there would be no doubt that his engagement would be that of an independent
contractor. The Appellant not only accepted the status imposed by circumstance
and organizational structure but played out the role of an independent
contractor until it was no longer to his benefit to do so. He honoured the
contract which defined his status by becoming a GST registrant, invoicing his
time with GST set out and bidding on new contracts as existing contracts
expired. He claimed business expenses on his income tax return and paid no
union dues as a public servant. He had no benefits and was not part of the
public service pension plan. These were all contractually established, understood
and accepted by the Appellant. At the end of the day, he preferred the
independent status that this contractual arrangement gave rise to, although
when he lost it he seized on the opportunity to deny that which he had accepted
for almost 13 years.
[28]
Hershfield, J.
continued as follows at paragraphs 41 –
44, inclusive:
[41] Applying the
Wiebe Door tests the Appellant is clearly an
employee. He was engaged in a wholly subordinate position as subject as any
professional employee would be to do what his manager required of him. He had
no freedom as to how, when or where he performed his services. In virtually
every sense he was subject to the control of his manager at WD. He was treated
in almost every respect as an employee and held out as one. He did what was
asked of him in the context of his position. He had to correct reports as
dictated by persons above him and was subject to deadlines. The specific list
of duties that the Appellant was contracted to do for WD was an expanding list
that covered everything that WD might require of an employee in the position
occupied by the Appellant and even then at the direction of his manager, the
Appellant did more than the specified duties that he was contracted to perform
and he was paid in the normal course for such services. The reason for that is
that he was under the complete control of his manager in WD as any employee
would be. If control over the worker is the relevant test, the Appellant's
engagement status is employment.
[42] The
Appellant provided no tools in respect of the performance of his duties. All of
the tools were provided by WD. If the provision of tools is the relevant test,
the Appellant's engagement status is employment.
[43] The
Appellant worked at a fixed rate for fixed hours and had no expenses in respect
of the performance of his duties. There is no more entrepreneurial risk of loss
or opportunity for profit than any employee working on a fixed term employment
contract basis has. That he had no job security at the end of the term of each
contract and that he had to bid on each contract are compatible with a series
of negotiated term employment contracts. During the term of each contract, work
was done for a wage. If this is the relevant test, the Appellant's engagement
status is employment.
[44] All the Wiebe Door factors point to the Appellant being an
employee. This is not a close case where the intentions of the parties can
impact the status of the engagement.
[29]
Earlier – at paragraph
31 of his reasons, Hershfield, J. commented that “it was pretty much a foregone
conclusion that the Appellant’s contract would be renewed as long as the job
existed.” In the within appeals, the contract had an expiration date of
December 31, 2009 without any inherent expectation it would be renewed. The
contrast pertaining to the indicia of control between Dempsey and the
within appeals is significant and in that case the intent of the contract was
inconsistent with the actual working conditions.
[30]
In many of these cases,
there is a disparity in the negotiating power of the parties and to obtain
work, a person will sign an agreement thrust upon them and accept – reluctantly
– the unilaterally imposed status of independent contractor when their intent
had been to provide services under a contract of service and to be included on
the payroll as a regular employee with the appropriate deductions for EI, CPP
and income tax taken from their pay cheque. In the within appeals, that is not
so. Hoadley was an experienced Agent, with 8 years experience in the industry,
having worked in the family company – Landmasters – where he performed a
variety of administrative functions prior to becoming a licensed Agent. A
perusal of the details of work performed provided by Hoadley when submitting
invoices – within Exhibit A-5 – reveals he was dealing with a variety of
matters requiring an understanding of legal issues and contractual obligations.
He prepared various documents including directions to pay, offers, releases
related to settlements of damages, negotiated with a municipality concerning
crossing agreements and dealt with surveyors and others in the course of his
work which required an understanding of legal rights, duties and contractual
obligations. Hoadley acknowledged he was aware that Cavalier wanted him to
provided his services – as Agent – as an independent contractor and understood
the wording of the articles comprising said agreement. His characterization of
those otherwise legally binding conditions as being merely “part of the hiccups
of the sale” is not plausible. Hoadley signed the amending agreement of
September 23, 2009, although he did so after advising Cavalier that a ruling on
his working status was forthcoming and – in his view – would render that
agreement null and void.
[31]
The facts are indicative
of a breakdown in communications or understanding between Hoadley, the previous
manager of the Medicine Hat Landmasters office and the new, larger entity –
Cavalier – that itself was part of the Divestco group of companies. It is not
surprising that Hoadley continued to perform duties which were not required of
him contractually. His wife was the only other worker in that office and she
was an employee of Cavalier. He utilized that office space and equipment – with
the consent of Cavalier – to perform those tasks necessary to achieving the end
result of his role as Agent. Hoadley billed for his hours at the regular rate
but was upset by the refusal of Cavalier to continue paying him for a statutory
holiday when he had not worked. Hoadley was aware Cavalier was adding the
appropriate amount of GST to his invoices and remitting that revised amount to
him for each 15-day pay period. He was aware that none of the usual source
deductions were being made as had been the case when employed by Landmasters.
He had been issued an ROE by Landmasters stating that his last period of
employment ended on November 28, 2007 when that corporation was acquired by
Divestco. It was obvious to Hoadley that a transition had occurred and that he
was not going to be an employee of Cavalier but would have an opportunity to
provide his services as Agent – as specified in the contract – effective
January 1, 2008. When revenues generated in the Medicine Hat region declined at the end of March, 2009, Hoadley – in e-mails to
Zyla – subsequently made several suggestions to alleviate the shortfall
including moving business operations to the Hoadley matrimonial residence. In
an e-mail dated May 19, Hoadley suggested Cavalier put him on salary of $78,000
– effective June 1 – which he estimated would save Cavalier the sum of $10,000
per year. The desire to obtain the status of employee stemmed from the
reduction of billable time per week and the limit placed on billable office
time. Prior to signing the amending agreement on September 23, Hoadley had
rejected an earlier version which had the potential to reduce his billable
hours per week to zero. In an e-mail to Zyla – Exhibit A-10 – Hoadley stated he
had been “gainfully employed as full time employee at his office since 2001 and
never have been ‘just a land agent.’” Again, this demonstrates that Hoadley was
operating as though he was still employed by Landmasters and that the
acquisition of that company by Cavalier – through Divestco – was a mere
formality, a distinction without any legal difference. The fact is, he had not
been employed by Cavalier since 2001 and Cavalier had not regarded him as other
than an independent contractor pursuant to the terms of their written
agreement.
[32]
Hoadley and Cavalier
acted in accordance with the written agreement, although there were glitches in
communication and other differences arising from the merger of the former
Landmasters into the larger entity based in Calgary.
The difficulty arising when an individual seeks to retroactively characterize a
working relationship is that perceptions are skewed – subconsciously or
deliberately – to conform with what one wished had been achieved at the outset.
It is a form of buyer’s remorse fuelled by hope that this sense of regret
combined with disappointment with subsequent events during the working
relationship are able to re-write history and vitiate an otherwise legal,
binding agreement.
[33]
Without the written
agreements and the consistent conduct of the parties subsequent thereto, some
factors referred to in Sagaz pointed to a characterization of Hoadley’s
working relationship with Cavalier as that of independent contractor,
particularly the aspect of control. Also, Hoadley used his vehicle and cell
phone which were important tools in the course of carrying out his tasks. When
required to act as a Coordinator to obtain or direct the services of another
Agent in the Medicine Hat region, sometimes he did so based on his experience
without direction from Calgary and billed Cavalier for those particular
services at his applicable hourly rate.
[34]
In light of the
analysis of the relevant factors taken as a whole, it is important to assign
appropriate weight to the intention of the parties at the time of Hoadley’s
initial engagement. I find that intention was apparent at the outset
notwithstanding Hoadley’s efforts to resile on the written agreement based on
his newly-acquired desire to obtain employment status, capable of bolstering a
potential claim of constructive dismissal based on the effect of the amending
agreement of September 23, which reduced the amount Cavalier paid thereafter in
fees due to a decline in revenue – and resultant deficit - attributable to the
Medicine Hat office.
[35]
Taking all of the
evidence into account and applying the relevant jurisprudence, I am satisfied
the Appellant has discharged the requisite burden of proof. Both appeals are
allowed and the decisions of the Minister – both dated October 5, 2010 – are
hereby varied to find:
Mark Hoadley was not engaged in either
insurable or pensionable employment with Cavalier Land Ltd. during the period
from January 1, 2009 to October 14, 2009 because he was not employed pursuant
to a contract of service.
Signed at Sidney, British Columbia
this 19th day of October 2011.
“D.W. Rowe”
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