Citation: 2011TCC423
Date: 20110913
Dockets: 2011-1452(EI)
2011-1453(CPP)
BETWEEN:
SIP DISTRIBUTION INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1]
The Appellant has
appealed the determination made by the Minister of National Revenue that, for
the purposes of the Employment Insurance Act and the Canada Pension
Plan, Erin Hrushowy was an employee of the Appellant during the period from
March 17, 2008 to December 17, 2008.
[2]
The Appellant is a
wholly owned subsidiary of GreenWorks
Building Supply Inc. The Appellant was formed as a distributor to import large
quantities of building materials and then sell these to GreenWorks Building
Supply Inc. and other retailers. The initials “SIP” stand for “Sustainable
Innovative Products”. At the time that Erin Hrushowy was retained, the
Appellant wanted to let the architectural and design community in Canada know
that the products that the Appellant was distributing were available.
[3]
Erin Hrushowy’s duties
were initially marketing tasks and projects but over time she did more
administrative tasks. The office of the Appellant was small. Only Peter McGee
and Erin Hrushowy worked in the office and Peter McGee was out of the office
travelling at least twenty-five percent of the time. The Appellant did not deal
with the general public.
[4]
The
question of whether an individual is an employee or an independent contractor
has been the subject of several cases. In 671122 Ontario Ltd. v.
Sagaz Industries Canada Inc., [2001] S.C.J. 61, 2001 S.C.C. 59 (“Sagaz”),
Justice Major of the Supreme Court of Canada stated as follows:
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.
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.
[5]
In Royal
Winnipeg Ballet v. Minister of National Revenue, 2006 FCA 87, 2006
DTC 6323, the dancers and the ballet company had a common intention that the
dancers would be hired as independent contractors. The Federal Court of Appeal
reviewed the relevant facts of that case as determined by the factors outlined
in Wiebe Door Services Ltd. v. Minister of National Revenue,
[1986] 2 C.T.C. 200, 87 DTC 5025 (“Wiebe Door”). A majority of the
Justices of the Federal Court of Appeal concluded that the relevant facts in
that case did not change the intended relationship between the dancers and the
Royal Winnipeg Ballet and that the dancers were independent contractors.
Justice Sharlow of the Federal Court of Appeal made the following comments in
the Royal Winnipeg Ballet case in writing for the majority of the
Justices of the Federal Court of Appeal:
65. The judge chose the following factors
as relevant to the Wiebe Door analysis (it is not suggested that he
chose the wrong factors or that there are any relevant factors that he failed
to consider):
· The indispensable element of
individual artistic expression necessarily rests with the dancers. The RWB
chooses what works will be performed, chooses the time and location of the
performances, determines where and when rehearsals will be held, assigns the roles,
provides the choreography, and directs each performance.
· The dancers have no management or
investment responsibilities with respect to their work with the RWB.
· The dancers bear little financial
risk for the work they do for the RWB for the particular season for which they
are engaged. However, their engagements with the RWB are for a single season
and they have no assurance of being engaged in the next season.
· The dancers have some chance of
profit, even within their engagement with the RWB, in that they may negotiate
for remuneration in addition to what is provided by the Canadian Ballet
Agreement. However, for the most part remuneration from the RWB is based on
seniority and there is little movement from that scale.
· The career of a dancer is
susceptible to being managed, particularly as the dancer gains experience.
Dancers engaged by the RWB have considerable freedom to accept outside
engagements, although there are significant contractual restrictions (the need
for the consent of the RWB, and the obligation to hold themselves out as being
engaged by the RWB).
· Although the dancers bear many
costs related to their engagement with the RWB and their dancing careers
generally, the RWB is obliged to provide dance shoes, costumes, tights, wigs and
certain other necessary items.
· The dancers are responsible for
keeping themselves physically fit for the roles they are assigned. However, the
RWB is obliged by contract to provide certain health related benefits and
warm-up classes.
66. The control factor in this case, as in
most cases, requires particular attention. It seems to me that while the degree
of control exercised by the RWB over the work of the dancers is extensive, it
is no more than is needed to stage a series of ballets over a well planned
season of performances. If the RWB were to stage a ballet using guest artists
in all principal roles, the RWB's control over the guest artists would be the
same as if each role were performed by a dancer engaged for the season. If it
is accepted (as it must be), that a guest artist may accept a role with the RWB
without becoming its employee, then the element of control must be consistent
with the guest artist being an independent contractor. Therefore, the elements
of control in this case cannot reasonably be considered to be inconsistent with
the parties' understanding that the dancers were independent contractors.
67. The same can be said of all of the
factors, considered in their entirety, in the context of the nature of the
activities of the RWB and the work of the dancers engaged by the RWB. In my
view, this is a case where the common understanding of the parties as to the
nature of their legal relationship is borne out by the contractual terms and
the other relevant facts.
[6]
In D.W. Thomas Holdings Inc. v. Minister of National Revenue, 2009 FCA 371,
Justice Layden-Stevenson, stated, on behalf of the Federal Court of Appeal,
that:
5 Contrary
to the appellant's assertion, Miller J. did consider the issue of intention. In
keeping with the approach set out in Royal Winnipeg Ballet v. Canada
(Minister of National Revenue), [2007] 1 F.C.R. 35 (FCA), she examined the
evidence to ascertain whether it supported that intention and concluded that it
did not.
[7]
It is the position of
the Appellant that the Appellant and Erin Hrushowy had agreed that she would be
retained as an independent contractor. The following is an excerpt from the
testimony of Erin Hrushowy when she was being questioned by Peter McGee:
Q Okay.
In section 3(a) of the questionnaire, you state the relationship was
payor/employee. When you were hired, did you agree to be hired as a
contractor?
A Yes.
We had a conversation about having your own business and working on contract. I
don't think you called it independent contractor at the time. And we discussed
it. Quite a few discussions leading up to the agreement that I would be hired
on at SIP. And -- yes, I would say that when I was hired, that was the
agreement.
Q So, why
in 3(a) did you say it was a payor/employee agreement? Sorry, I'm just curious.
I'm asking why, in 3(a), on the questionnaire, she wrote that the working
relationship was a payor/employee. When you've just said that you were hired on
contract.
A We also
agreed that, in three months' time, we would review how things were going.
Being the start-up business that it was, I recall you saying you weren't sure
how it was going to go and so we'd go from there. And as time went on, it
turned into something else, is how I felt. So, at the end of the experience,
working at SIP, it was much different than what we had agreed on originally.
Q But you
do agree there was a portion of time there that was, without doubt, on a
contract basis?
A A
portion of time. I mean, if -- I'm not sure. It was not -- there was no end to
when that time could have been because we did not sit down in three months'
time to discuss how things were going. So, perhaps there was a portion. But at
the same time --
Q But did
you not agree, at the time of hiring, that you were working on contract?
A At the
time of hiring? Yes.
Q So, did
that last a minute in your mind, or did it last a week, or three months, or six
months? Or the term? I'm just -- I'm trying to clarify where and when what you
agreed to stopped and where and when your relationship became the employer --
or, sorry, the payor/employee relationship you referred to in 3(a).
A Well, I
can't -- I don't know if I can give it a definitive answer on that. It's not
that cut and dried for me to be able to answer.
[8]
The following is an
excerpt from the examination of Erin Hrushowy by counsel for the Respondent:
Q You
stated in your direct, that you agreed that you were an independent contractor
when you were hired. What was your intention when you were hired? What did you
think you were?
A Initially
when we had that conversation, the term "independent contractor" I
was more familiar with "self-employed" or "have your own
business". And I had never worked in that capacity before. So, and Pete
and I had in passing talked about his experience in doing that, that it is a
great thing to do, and so the idea that I was -- I went in with a poor
understanding of what "work on contract" meant. I had just come from
working on contract with a previous job, but I was paid, I had a contract that
I signed, taxes were taken off, EI, CPP all that was taken off. So, in working
with contract, I understood -- with SIP, I would be responsible for paying that
initially. And as time went on, everything just began to speed up, and the pace
of the day and communication with regards to -- everything changed it seemed.
And then -- okay, I'll stop there. I am rambling.
Q So you
mentioned in your previous -- you had a previous contract but then you
mentioned that you had paid CPP and EI? Could you tell us a bit more about
that?
A It was
-- I was working for Granville Island CMHC and it was a temporary contract
where we were launching a new event and so I worked for maybe three months, and
it was extended by two weeks, but it was all -- like, it was more like a
temporary job. I was an employee during that time. Put it that way. An employee
of CMHC. Or treated as an employee.
[9]
Later Erin Hrushowy
stated that:
A It's a
very interesting -- it's difficult to convey all that happened. To sort of
capsulate -- encapsulate the whole dynamics and how things sort of
metamorphosed into something else.
There
were great intentions at the beginning, and it seemed to just turn into
something else completely, and so that is why -- you know, people remember
things differently. I remember things differently than Pete. But at the end
of the day, after talking to an accountant -- I mean, I didn't know how to
claim when it came tax time. I talked to an accountant, which started things
moving in this direction. Because I was confused. I didn't have any write-offs,
and so he asked me why I was claiming as a contractor. And I said, "Well,
I don't know. This is what we talked about." And so that's when I
underwent these tests.
(emphasis
added)
[10]
Erin Hrushowy would
have talked to her accountant about the preparation of her tax return for 2008
in 2009. This would have been after the period in question in this appeal. I
find that it was more likely than not that Erin Hrushowy did agree, when she
was retained, that she would be an independent contractor. Therefore there was
a mutual intention that she would be an independent contractor. I also find
that this agreement continued throughout the period under appeal. When she
filed her income tax return for 2008 (which would have been in 2009 after the
period in question and after she had met with her accountant), she would have
reported her income in a manner that would have reflected the position she was then
taking in relation to whether she was an employee. It would not necessarily
reflect the agreement that she had reached with the Appellant in March 2008
when she was retained. Therefore, it does not seem to me that her income tax
return (which was not introduced) would have assisted in determining the issue
before me.
[11]
In the Royal
Winnipeg Ballet case, the facts related to the dancers and the
circumstances of their work were not sufficient to alter the arrangement from
that which was intended by the parties. Therefore it seems to me that “in
keeping with the approach set out in Royal Winnipeg Ballet”, the relevant
facts in this case, as determined by the factors as set out in Wiebe Door and Sagaz, would have
to more strongly indicate an employer-employee relationship than did the facts
in the case of the Royal Winnipeg Ballet in order for Erin Hrushowy to
be considered to be an employee. In both the Royal Winnipeg Ballet case
and in this case, there was an intention to create an independent contractor
relationship and not an employer-employee relationship.
[12]
With respect to the
control factor, the evidence in this particular case was that the amount of
control that the Appellant had over Erin Hrushowy would have been less than the
amount of control that the Royal Winnipeg Ballet had over the ballet
dancers. In the Royal Winnipeg Ballet case, Justice Sharlow described
the degree of control that the Royal Winnipeg Ballet had over the dancers as
“extensive”. As noted by Justice Sharlow in the above decision:
The RWB chooses what works will be performed, chooses the
time and location of the performances, determines where and when rehearsals
will be held, assigns the roles, provides the choreography, and directs each
performance.
[13]
It does not seem to me
that the level of control in this case would more strongly indicate that Erin
Hrushowy was an employee than the level of control that the Royal Winnipeg
Ballet had over the dancers would have indicated that the dancers were
employees. During questioning by Peter McGee, Erin Hrushowy agreed with Peter
McGee that he was out of the office at least 25% of the time. During questioning
by counsel for the Respondent she stated as follows:
Q And who else worked in the
office on a regular basis beside yourself?
A Besides myself, there was
-- I was mostly by myself. Pete would come in. Maybe throughout the day he
might be in for a couple of hours in the morning or in the afternoon. But for
the most part, it was just myself.
[14]
It seems to me that
more often than not that Erin Hrushowy would be the only person in the office.
In City Water International Inc. v. Minister of National Revenue,
2006 FCA 350, Justice Malone writing on behalf of the Federal Court of Appeal
stated that:
18 A
contract of employment requires the existence of a relationship of
subordination between the employer and the employee. The concept of control is
the key determinant used to characterize that relationship (see D&J
Driveway Inc. v. Canada (Minister of National Revenue),
[2003] F.C.J. No. 1784, 2003 FCA 453). City Water also referred the panel to Livreur
Plus Inc. v. Canada (Minister of National Revenue), [2004] F.C.J. No. 267,
2004 FCA 68, where this Court applied the Wiebe Door test to determine
whether the employment of two workers was insurable under the EIA. In
considering the control component of the test, Létourneau J.A. stated at
paragraph 19:
... the Court should not confuse control over the result or
quality of the work with control over its performance by the worker responsible
for doing it ... As our colleague Décary J.A. said in Charbonneau v. Canada
(Minister of National Revenue - M.N.R.), ... , [1996] F.C.J. No. 1337,
"It is indeed rare for a person to give out work and not to ensure that
the work is performed in accordance with his or her requirements and at the
locations agreed upon. Monitoring the result must not be confused with controlling
the worker."
In other
words, controlling the quality of work is not the same as controlling its
performance by the worker hired to do it.
19 In my
analysis, the simplicity of the task can have no bearing on control and should
not be considered in determining whether a degree of subordination exists. As
such, the Judge made a legal error in concluding that the control factor should
bear little weight because of the simplicity of the tasks conducted by the
Service Workers. In the present case, City Water attracted the customers but
left the actual performance of the service function to the Service Workers
without any supervision. Accordingly, control here clearly points to a contract
for services.
[15]
In this case, there was
very little if any supervision of Erin Hrushowy by the Appellant. Therefore
there would be very little control exercised by the Appellant over Erin
Hrushowy. The amount of control exercised by the Appellant over Erin Hrushowy
was less than the amount of control exercised by the Royal Winnipeg Ballet over
the dancers. Also the control that was exercised in this case was related to
the quality of the work. The example that was provided was a situation where
Peter McGee would request that Erin Hrushowy, after she had received a quote for
freight costs, try to find another company that could transport the goods at a
lower cost.
[16]
Erin Hrushowy also stated
that she was required to be at the office from 9:00 a.m. to 5:00 p.m. each day
to answer the phone. However there was no indication of the number of phone
calls that the Appellant would receive on a daily or weekly basis. As well, the
only access to the office was through the premises of GreenWorks Building
Supply Inc. which operated a retail store. It appears that the retail store did
not open until 10:00 a.m. and that Erin Hrushowy did not have a key. Since
there were only two individuals who could be in the office of the Appellant
(Peter McGee or Erin Hrushowy), it does not seem to me that Erin Hrushowy
was required to be at the office every day from 9:00 a.m. to 5:00 p.m. since it
appears that she could not access the office until 10:00 am if Peter McGee was
not there (which happened frequently).
[17]
It also seems to me
that Erin Hrushowy was retained to perform certain tasks. Peter McGee stated
during his testimony as follows:
… And she was
hired to effectively market these products in Canada for SIP Distribution and
that involved coordinating a CRM program with the reps, coordinating a direct
mail-out to architects and designers with Tugboat Media and in some cases doing
graphic work.
[18]
She was retained to
perform certain tasks. In
the case of Direct Care In-Home Health Services Inc. v. Minister of
National Revenue, 2005 TCC 173, Justice Hershfield made the
following comments in relation to control:
11 Analysis of this factor involves a determination of who
controls the work and how, when and where it is to be performed. If control
over work once assigned is found to reside with the worker, then this factor
points in the direction of a finding of independent contractor; if control over
performance of the worker is found to reside with the employer, then it points
towards a finding of an employer-employee relationship.* However, in times
of increased specialization this test may be seen as less reliable, so more
emphasis seems to be placed on whether the service engaged is simply “results”
oriented; i.e. “here is a specific task -- you are engaged to do it”. In such
case there is no relationship of subordination which is a fundamental requirement
of an employee-employer relationship.* Further, monitoring the results,
which every engagement of services may require, should not be confused with
control or subordination of a worker.*
12 In the case at bar, the Worker was free to decline an engagement
for any reason, or indeed, for no reason at all. …
(emphasis added)
(* denotes a
footnote reference that was in the original text but which has not been
included.)
[19]
Over time the tasks
changed but it seems clear that it was a task oriented engagement and that it
was not intended to continue indefinitely. The following is an excerpt from the testimony of Erin Hrushowy
when she was being examined by Peter McGee:
Q Did you view your position
as a long-term position?
A No. I don't -- no, there was
nothing saying that it was, and there was nothing saying that it wasn't. It
was almost going day by day.
[20]
Therefore it seems to
me that retaining Erin Hrushowy to perform certain tasks when she was not being
supervised for most of the time in an arrangement that was described by Erin
Hrushowy as being “day by day”, suggests that the arrangement was an
independent contractor relationship and not an employer / employee
relationship.
[21]
With respect to the ownership of
equipment, there appears to have been very little equipment that Erin Hrushowy
needed to complete the tasks that were assigned to her. Because there was very
little equipment required, this test is of little assistance in this appeal.
[22]
It does not appear
that Erin Hrushowy would have been able to hire other workers to perform the
tasks that were assigned to her. In the Royal Winnipeg Ballet case,
there was no discussion with respect to whether or not the dancers could hire
any helpers but it would seem illogical to suggest that the dancers could hire
any person to replace them in the production.
[23]
With respect to the
degree of financial risk/opportunity for profit, Erin Hrushowy had little
financial risk. In the Royal Winnipeg Ballet case, the dancers, as
acknowledged by the Federal Court of Appeal, had little financial risk.
[24]
With respect to the
opportunity for profit, the dancers with the Royal Winnipeg Ballet could
negotiate for additional remuneration, although most were paid in accordance
with a predetermined scale. In this case the hourly rate that would was paid to
Erin Hrushowy was determined on the basis that she was an independent
contractor. In the Royal Winnipeg Ballet case the dancers were allowed
to accept outside engagements provided that they had the consent of the Royal
Winnipeg Ballet and provided that they held themselves out as being engaged by
the Royal Winnipeg Ballet. In this case, there were no such restrictions
imposed on Erin Hrushowy in accepting outside engagements.
[25]
In the Royal
Winnipeg Ballet case, the dancers did not have any management or investment
responsibilities with respect to their work with the Royal Winnipeg Ballet. In
this case Erin Hrushowy did not have any management or investment
responsibilities with respect to her work with the Appellant.
[26]
Counsel for the
Respondent argued that the integration test should be applied. He referred to
the following comments of then Chief Justice Bowman in 3868478 Canada Inc. v.
Minister of National Revenue, 2006 TCC 444:
17 If the
integration test has any meaning, it would seem that the hygienists' function
is an integral and essential part of the dental practice. They are not
extraneous or incidental to it. The bill that the patient gets from the dentist
has, as part of the total, an amount for the hygienist's services. The cleaning
and scaling of teeth as well as instructing patients in proper methods of oral
hygiene is as much a part of a dental practice as drilling and extracting. The
problem with the integration test is that an independent contractor can be as integral
a part of a business organization as an employee.
[27]
However, in a
subsequent decision of then Chief Justice Bowman in Lang v. Minister
of National Revenue, 2007 TCC 547, 2007 DTC 1754, stated
that:
34 Where
then does this series of cases leave us? A few general conclusions can be
drawn:
…
(c)
Integration as a test is for all practical purposes dead. Judges who try
to apply it do so at their peril.
[28]
As a result I will not
apply the integration test, which in any event in this case would not be conclusive.
[29]
As a result, I find that the relevant
facts related to the engagement of Erin Hrushowy by the Appellant as determined
by the factors as set out in Wiebe Door and Sagaz do not suggest more strongly an employer / employee
relationship than did the facts in the Royal Winnipeg Ballet case. In
this case the relevant facts related to the engagement of Erin Hrushowy by the
Appellant more strongly indicate an independent contractor relationship than
they do an employer / employee relationship. As a result Erin Hrushowy
was an independent contractor and not an employee of the Appellant during the
period under appeal.
[30]
The appeal under the Employment Insurance Act with
respect to the decision of the Minister of National Revenue, dated April 8,
2011, is allowed, without costs, and the decision of the Minister is varied to
provide that Erin Hrushowy was not
engaged by the Appellant in insurable employment as determined for the purposes
of the Employment Insurance Act at any time during the period
from March 17, 2008 to December 17, 2008.
[31]
The appeal under the Canada
Pension Plan with respect to the decision of the Minister of National
Revenue, dated April 8, 2011, is allowed, without costs, and the decision of
the Minister is varied to provide that Erin Hrushowy was not engaged by the Appellant in pensionable
employment as determined for the purposes of the Canada Pension Plan at
any time during the period from March 17, 2008 to December 17,
2008.
Signed at Ottawa,
Canada, this 13th day of September 2011.
“Wyman W. Webb”
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