Citation: 2011TCC468
Date: 20111005
Docket: 2010-712(CPP)
2010-713(EI)
BETWEEN:
INTEGRATED AUTOMOTIVE GROUP,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Pizzitelli J.
[1]
These matters involve
appeals by the Appellant from the decisions of the Minister each dated December
30, 2009 that Margaret Alison Smith (the “Worker”) was employed by the
Appellant in insurable employment and pensionable employment throughout the
period from January 5, 2006 to December 31, 2008. The Appellant’s appeals only
pertain to the period from January 5, 2006 to September 6, 2007, (the
“Period”).
[2]
The only issues to be
decided in these matters is whether the Worker was during the Period employed
in insurable employment within the meaning of Subsection 5(1)(a) of the Employment
Insurance Act and whether she was employed in pensionable employment within
the meaning of Subsection 6(1)(a) of the Canada Pension Plan. In
short, whether the Worker was in a contract of services, and hence an employee
of the Appellant, or whether in a contract for services and hence an
independent contractor during the Period.
[3]
The parties submitted a
Statement of Agreed Facts which, together with the evidence not in dispute,
generally confirms that the Appellant, an Ontario corporation, has it corporate
address in Mississauga, Ontario, and is a leading provider of marketing services to
clients in the automotive industry, mainly car manufacturers, advertising firms
and automotive dealerships.
[4]
The Appellant’s
marketing services include: “ride and drives” which involve setting up for the
public or other targeted markets the ability to test cars and compare them to
others often at different locations across the country; “auto show support”
involving assisting customers to transport vehicles to auto shows, detailing or
cleaning the vehicles, and representing the manufacturer with personnel at such
shows including any necessary organizational and registration requirements;
“vehicle launches” which generally involves staging an event for the media to
introduce new products of clients; “automotive transportation” which involves
arranging transportation of client products to different events and between
events; “advertising photography shoots”, usually for advertising companies
that require finding the appropriate vehicle, transporting it to the required
location, modifying the vehicle as may be necessary for their purposes and pick
up and refitting of same; “displays” which generally involve arranging and
managing the displays of clients vehicles at public and private venues such as
hotels, the Air Canada Centre, The Centre for Performing Arts and other venues;
“vehicle management” which generally involves arranging for prototype vehicles
and others vehicles to be put on display at an event, tracking the vehicle
between locations and generally attending to the specific vehicle itself and
“automotive detailing” which generally involves cleaning and keeping the
vehicle in pristine looking shape inside and out for its events.
[5]
The Appellant’s
executives and management team included: Jason Guttman, the founder and Chief
Executive Officer who travels extensively and provides the leadership and
vision for the Appellant; Shane Bennett, the managing director who also travels
but spends most of his time in the office being in charge of day to day
operations and strategic growth; and Drew Black, the director of Client
Services during the Period whose main responsibility was to ensure the
Appellant’s services were delivered to its customers and accordingly was the
member of management who had the closest contact and interaction with the
Appellant’s employees and independent contractors during the Period, including
with the Worker in this matter. Mr. Black is no longer in that role for the
Appellant and presently works from home as an independent contractor for the
Appellant.
[6]
The Appellant is
involved in several hundred events a year across Canada, notwithstanding that
it is based in Mississauga, Ontario, and to
deliver its services to its customers employs both employees and utilizes the
services of independent contractors. The Appellant’s business is somewhat
seasonal in that its busiest times are in January to April of each year being
the time its main auto shows occur and during which time it ramps up its use of
independent contractors for short or longer periods depending on the level of
business. The evidence of the Appellant was that its business plan was, as the
Appellant’s non seasonal business grew, it would hire full time employees to
meet that demand. It was based on this rationalization that the Worker was
asked to join the Appellant as an employee in her third contract.
[7]
The Worker performed
work for the Appellant from January 5, 2006 to August 14, 2008 under three
different contracts, and under the third contract dated September 7, 2007 as an
acknowledged employee. The Appellant performed work under the first contract
dated December 15, 2005 (“First Contract”) which applied to the period January
5, 2006 to July 31, 2006 and under the second contract dated November 2, 2006 (“Second
Contract”) which applied to the period from August 1, 2006 to July 31, 2007 and
which the Appellant testified was effectively extended until August 5, 2007,
being the date before the third contract, being an Employment Contract, was
signed. Under the First and Second Contracts, whether described as an
“associate” or “contractor” respectively, the Worker was described as providing
freelance services which included the duties and responsibilities of a project
manager generally. Although the description of duties appears to have slightly
increased from the First to the Second Contract it is not disputed that the
Duties of the Worker pursuant to the Employment Contract were the same as she
had under the Second Contract, which included the somewhat extended description
of her project management duties. However, it should be noted that the actual
duties of the Worker during the entire Period were very similar if not the same
and were not really in dispute, consisting generally of meeting with management
and being assigned a project within the scope of services provided by the
Appellant described above, creating a plan for the delivery of such services
including identifying what specific services were required, preparing a budget
estimate and delivery of such plan, which was then reviewed with a manager and
discussed, usually by management with the client for budget approvals. Once
accepted by the client, the project manager was charged with carrying out the
contracted services or project and preparing bills on behalf of the Appellant
to send to clients. In effect, the project manager was involved with the
project assigned to him or her from beginning to end and while some project
managers were employees, others were independent contractors hired by the
Appellant as explained above, and had the same if not similar duties above
described.
[8]
The Worker has several
years experience in event planning and was initially retained by the Appellant
because of such experience, which was not limited solely to the automotive
sector. As stated above, she became a full time employee pursuant to the Third
Contract which is not in dispute.
[9]
The remuneration of the
Worker during the Period covered by the First Contract was $869.39 per week
with no stipulation for any minimum hours of work to be given although the
Worker testified she usually worked about 40 hours or more a week which was not
disputed. The remuneration during the second contract was $903.85 per week with
a stipulation that the Worker had to provide a minimum of 40 hours of service
and the Worker would adjust its invoicing if less than 40 hours worked. The
contracts were silent as to any hours worked in excess of 40 hours and the
evidence is that no extra remuneration was ever paid although the Worker
testified it had raised that issue with the Appellant on one occasion. It
should be noted that the Worker testified that these weekly rates were
competitive rates for such services which by simple mathematics amount to an
annual total of about $45,000. In both the first and second contract the Worker
submitted an invoice as per the agreement and was paid semi-monthly without any
deductions for payroll taxes or other normal payroll remittances. Under the
contract of employment however, she was paid by direct deposit to her bank
account on a bi-weekly basis based on an annual salary of $51,000 and entitled
to paid vacation and other benefits offered by the Company. There is no dispute
the Appellant did not issue T4 slips to the Worker for the Period but did for
the time the Worker was employed under the Third Contract. The evidence also
not in dispute is that the Worker did not file its tax returns for the 2006 and
2007 years on the basis that the remuneration it received under the first two
contracts was employment remuneration from the Appellant and in fact the Worker
claimed in both periods expenses for motor vehicle use and home office expenses
which it did not claim for the period covered under the third being the Employment
Contract.
[10]
The Appellant provided
the Worker with a McIntosh laptop computer used by all employees and
independent contractors for the Appellant due to the special software developed
for and owned by the Appellant which ran on that system but the Worker executed
a Property Agreement with the Appellant acknowledging it was the property of
the Appellant and that the Worker would return it on termination of its
contract and would be responsible for it to the extent of its stated value. The
Worker was required to and did supply its own home office and computer and
vehicle, although the Appellant testified she did not keep a business phone
line but rather used the cell phone which also had two way radio capabilities
with the Appellant, as provided to her by the Appellant.
[11]
The Worker was
terminated pursuant to Notice of Termination dated August 14, 2008.
Position of the Parties
[12]
The Appellant takes the
position that for the Period, being the time represented pursuant to the First
and Second Contract, the Worker was an independent contractor because the
parties intended that relationship and the criteria used in determining the
issue to be discussed later favour a finding of such relationship namely that
the Appellant did not control how the Appellant performed her services, did not
provide all the tools to do so and the Appellant had the chance of profit and
risk of loss; in effect because it states the reality of the relationship confirms
the stated intention of the parties to be one of an independent contractor as
found in the First and Second Contract. The Respondent effectively disagrees
and takes the opposite view, in essence arguing that the First and Second
Contract did not reflect the reality of the relationship or acts of the
parties, which due to the determinative criteria establish she was an employee.
The Law
[13]
In considering the
factors to consider in determining whether a worker is an employee or
independent contractor, Justice Major of the Supreme Court of Canada in 671122
Ontario Ltd. v. Sagaz Industries Canada Inc. 2001 SCC 59, cited with
approval in paragraph 47 the approach of MacGuigan J. A. of the Federal Court
of Appeal in Wiebe Door Services Ltd. v. MNR 1986 3 F.C. 553, that:
“…there is no universal test to determine whether a person is an
employee or an independent contractor [but that] …the central question is
whether the person who has been engaged to perform 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.
[14]
Justice Major however
confirmed in paragraph 48 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.”
[15]
There is no dispute between
the parties that the approach taken in Wiebe Door Services supra, often
described as the four-in-one test of control, ownership of tools, chance of
profit and risk of loss, has been applied by the Federal Court of Appeal and
this Court continually since the Sagaz decision of the Supreme Court of
Canada including in City Water International Inc. v. Canada (Minister of
National Revenue-MNR) 2006 FCA 350 and Royal Winnipeg Ballet v Canada (Minister
of National Revenue-MNR) 2006 FCA 87, relied on by both parties.
[16]
It is accepted law that
the intention of the parties is another factor to be considered although there
appears to be a dispute between the parties as to the relevant weight to be
given to it in the context of what role it has on the analyses of the four in
one test. The Appellant’s has suggested that if the intention of the parties is
clear from the Contracts that it is one of a contract for services, which is
its position, then the four in one test factors should be analyzed on the basis
of whether the factors are consistent with the parties’ understanding and if so
such understanding should prevail. Although counsel for the Appellant
acknowledged in argument that if the analyses of the factors clearly suggest
the relationship is one of employee then the stated intention of the parties
can be ignored, he is, it seems to me, taking the position that there should be
some kind of presumption in favour of respecting the clear intention of the
parties unless the four-in-one test clearly suggests otherwise. The Respondent
does not agree with this approach and takes the position that the analyses of
the factors from the four-in-one test in Wiebe Door Services above must
be done first and only if the analyses does not yield a result should the
intention of the parties be considered and only if the intent is shared by both
parties. Counsel for the Respondent states that any such mutual intention can
only be given weight if it reflects the reality of the legal relationship
between the parties. The difference in approach between the parties in my view
really goes to the weight the court should give to the stated intention of the
parties, with the Appellant suggesting that such weight should be such as to
invoke the existence of a presumption with respect to the intention of the
parties.
[17]
With respect to the
Appellant, I do not agree with its suggested approach for a few reasons.
Firstly, the issue was directly considered by the Federal Court of Appeal in National
Capital Outaouais Ski Team v. Canada (Minister
of National Revenue-MNR)
2008 FCA 132. In paragraph 4 thereof Letourneau stated:
The appellant submits that the judge erred in law in looking first
to the reality of the relationship between the parties based on the facts
rather than looking first to see whether the intent of the parties is
consistent with that reality. I believe this complaint is not founded.
[18]
And at paragraphs 7-9:
At paragraph 17 of its memorandum of fact and law and the hearing
before us, the appellant contended that the judge should have started her
analysis of the parties’ relationship with the presumption that Mr. Belanger
was a contractor.
It is misleading and confusing to invoke the existence of a
presumption with respect to the intention of the parties to the contract
because it calls for a rebuttal of that presumption by the minister. Indeed,
this approach runs contrary to the way the law and the system operate in
matters of insurability of employment.
As a matter of fact, the minister’s assessment of the overall legal
relationship of the parties to a contract is based on assumptions of fact that
the minister makes. The assumed facts are presumed to be true unless they are
rebutted…….The burden of rebutting the assumptions and the presumption of truth
or correctness which attaches to the assumed facts is on the opposing party….
[19]
Accordingly the
approach suggested by the Appellant has been considered by the appellate court
and found unacceptable on the basis it would change the burden of proof from
the Appellant to the Minister.
[20]
Secondly, I am of the
opinion the appellate courts have well established the role of the intent
factor and that the weight to be given it is in accordance with the position of
the Respondent. In Royal Winnipeg Ballet v. MNR 2006 FCA 87, Sharlow
J.A. stated in paragraphs 60 and 61:
60…..The
inescapable conclusion is that the evidence of the parties’ understanding of
their contract must always be examined and given proper weight.
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 of 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”.
[21]
The inescapable
conclusions reached by Sharlow J.A. above is in my view totally consistent with
the finding of Major J.in Sagaz supra, in par 48 wherein he stated that
the Wiebe Door factors were not intended to be exhaustive, hence
acknowledging there was room for other relevant factors, such as intention for
example, to be considered with the weight of each factor dependent on the facts
and circumstances of each case. There is however no suggestion in either Royal
Winnipeg Ballet nor Sagaz that the intention of the parties as a
factor should be dominant or have attached to it a presumption of applicability
unless clearly overweighted by other factors. Sharlow J.A clearly took the
position in paragraph 62 above that the parties’ declarations as to the legal
character of their contract is not determinative and will be disregarded if the
facts do not reflect that stated relationship which suggests there is no such
presumption. This same sentiment was expressed in the recent decision of the
Federal Court of Appeal in TBT Personal Services Inc. v. Her Majesty The
Queen 2011 FCA 256, and brought to the intention of the Court by the
parties after the trial but before release of my judgement, where Sharlow J.A.,
in a situation where there were written contracts containing a clause
identifying the relationship as being one of a contract for services stated at
par 35:
Such intention clauses are relevant but not conclusive. The Wiebe
Door factors must also be considered to determine whether the contractual
intention suggested by the intention clauses is consistent with the remaining
contractual terms and the manner in which the contractual relationship operated
in fact.
[22]
In City Water, supra,
the Federal Court of Appeal considered the four-in-one test factors and only
when they did not yield an obvious result, considered the weight to be given to
the mutual intention of the parties. In paragraph 27 and 28 of City Water,
Malone J.A. stated:
27. “In balancing the above factors, the result of the inquiry is
not obvious. Therefore, it is necessary to determine what weight should be
given to the intention of City Water and the Service Workers at the time of
their initial engagement.
28, If it can be established that the terms of the contract,
considered in the appropriate factual context, reflect the legal relationship
that the parties intended, then their stated intention cannot be disregarded.”
[23]
Likewise, in the
earlier case of Wolf v. Canada (C.A.), [2002] 4 F.C.396, relied upon in City
Water above in par 29 thereof, Noel J. A. stated at paragraphs 122 to 124:
“…But in a close case such as the present one, where the relevant
factors point in both directions with equal force, the parties’ contractual
intent, and in particular their mutual understanding of the relationship cannot
be disregarded.
…My assessment of the total relationship of the parties yields no
clear result which is why I believe regard must be had to how the parties
viewed their relationship.”
[24]
What is clear from the
Federal Court of Appeal decisions in Royal Winnipeg Ballet, TBT Personal
Services, City Water and Wolf is that while the declaration of the
parties intentions is a factor to consider, such factor will only be given
weight if the analyses of the four–in–one test factors of control, ownership of
tools, chance of profit and risk of loss do not yield a result first. This is
more in keeping with a secondary factor to consider after consideration of the
primary factors and far from any presumption in favour of intention.
[25]
This Court has followed
that line of reasoning and refused to give any weight to the intention of the
parties when Wiebe Door factors above were sufficiently conclusive in
the cases of A&T Tire& Wheel Ltd. v. Canada (Minister of National
Revenue (MNR), 2009 TCC 640 and Choi v. Canada (Minister of National
Revenue-MNR), 2010 TCC 461. I note that the case of Vida Wellness Corporation
DBA Vida Wellness Spa v. Canada (Minister of National Revenue-MNR) 2006 TCC
534 pleaded by the Appellant in support of its position was decided before the
Federal Court of Appeal decision in National Capital Outaouais Ski Team
and accordingly has been overruled on this issue.
[26]
Accordingly, I am in
agreement with the Respondent that the four–in-one test facts must be examined
first to determine the legal relationship between the parties if possible,
regardless of any stated intent and will now examine those relevant factors
with a view to answering the central question as to whether the Worker here, as
the person who had been engaged to perform services, was performing them in
business on her own account.
Control
[27]
The Respondent takes
the position that the Worker was under the daily direct supervision of the
Appellant at the Appellant’s main office and was required to work fixed hours
of 40 hours per week during fixed hours of 9-5, report to the Appellant’s place
of business everyday when not on the road or at a client’s premises, wear the
Appellant’s or its clients’ uniforms and was evaluated in the same manner as an
employee on an annual basis, all of which indicate an employment relationship.
Furthermore the Respondent takes the position that the duties of the Worker
were the same under both the first two contracts wherein she was identified as
an independent contractor as under the third Employment contract and states
there was no change in her status and that notwithstanding that the terms of
the first two contracts allowing her to hire others, she was in reality
required to perform the services personally. The Appellant obviously disagrees
with the Respondent other than agreeing that the duties of a project manager
were similar regardless if the project manager was an employee or independent
contractor but disagreeing as to the level of supervision applied to the two on
that issue and the affect of other changes to the relationship.
[28]
With respect to the
issues of hours worked and place or work, the first of which is also relevant
to the factor of Chance of Profit to be discussed later, I must say that in the
context of evaluating the issues with respect to the Control factor I cannot
find there is any credible evidence to support the Respondent’s contention that
the worker was required to work a fixed 9-5, 40 hours a week let alone at the
Appellant’s main place of business, which would normally suggest the
relationship of an employee. There is no doubt from the evidence that not
withstanding that the First Contract makes no reference to any minimum number
of hours worked, while the Second Contract requires a minimum of 40 hours, that
in fact the Worker did in fact work a minimum of 40 hours per week for the
Appellant. The evidence of the Appellant is that if she did, that was what was
necessary to meet her obligations to complete her contracted services.
Furthermore, the evidence of the worker herself was that she often worked from
home evenings and weekends as well as attended weekend events, thus suggesting
she often worked in excess of 40 hours, but also testified she took days off on
occasion and hence did not invoice the Appellant the full weekly rate thus
suggesting she was not under an obligation to work 9-5 or meet her 40 hours at
the office. More importantly, the Worker testified she could not recall which
of the managers advised her she was to report to the office 9-5 when not at a
client’s or on the road, a fact I find difficult to accept considering she
testified she usually only dealt with one manager, Drew Black most of the times
and a second one on occasion. The Appellant’s witnesses on the other hand were
consistent in their testimony that she was not under any obligation to work
from the office let alone during the hours of 9-5, but that it would make sense
if she did so since the Appellant’s clients, mostly situated in the Toronto
area, would also keep those office hours, thus in performing her duties, the
Worker would be able to access the Clients more readily during those hours
which seems highly credible having regard to the stated duties of a project
manager. Moreover, the Respondent acknowledged in its Reply that the Worker
performed her duties both at the Appellant’s office and her personal home.
[29]
With respect to the
Respondent’s position and assumptions that the Worker reported to the Appellant
on a daily basis except when working at an event site and that the Worker was
supervised by two managers who gave her directions on how to complete the work,
the evidence is that the duties of a project manager effectively required a
project manager to take control of the project from beginning to end, with the
Appellant approving the budgets, after consultation with the client, after
preliminary budgets were created by the project manager, and providing whatever
support or dealing with whatever client complaints were necessary where the
project manager could not deal with them. The parties are not in disagreement
over the stated duties of a project manager as described earlier and the Worker
testified she effectively carried out these duties. It seems the only examples
of direct supervision appear to be that management assigned a specific project
to the Worker and briefed the Worker on what had to be done and the client
expectations, approval of the overall plan and budget estimate created by the
Worker, that the Worker had to get approval of any expenses over $2000 and the
Worker’s statement that she reported to Drew Black on a daily basis, with no
specific details in connection with same. The Respondent on the other hand
testified on a consistent basis that independent contractors were hired due to
their experience and expertise and were expected to be able to work without or
with a minimum of supervision, which frankly is reflected in the duties of a
project manager both parties agree with. The Worker herself admits she had
several years experience as an event planner which was the basis of retaining
her services in the first place, and thus qualified to take charge of a project
assigned to her, from beginning to end, which is consistent with the evidence
of the Appellant that the project manager was expected to get the job done.
[30]
In my view the so
called supervision exercised by the Appellant does not amount to day to day
supervision of the Worker nor supervision as to “how” to render her services.
In the Federal Court of Appeal decision in Poulin v. Canada (Minster of
National Revenue-MNR) 2003 FCA 50, Letourneau J.A. acknowledged there is
always some measure of control in a contract of enterprise and at paragraph 16
stated:
Furthermore, the notion of control is not necessarily lacking in the
contract for service. It is generally apparent, albeit to varying degrees, as
it is somewhat in the contract of employment, and sometimes to a surprising
extent without necessarily distorting its nature as a contract of enterprise.
For example, control in regard to the premises in general and the specific
places in which the work is to be performed is exercised over general
contractors and their subcontractors. The latter are also given specific
instructions as to the materials and the drawings and specifications with which
they must comply. Often the times and work schedules of some in relation to
others is also controlled and determined to ensure the effective and harmonious
operation of the construction site. The work performed by contract for services
is also subject to some performance, productivity and quality controls.
[31]
Furthermore, in times
of increased specialization, the courts acknowledge that the control factor can
be less reliable particularly when a worker is retained on a results oriented
basis. In Direct Care In-Home Health Services Inc. v. Minister of National
Revenue 2005 TCC 173, Hershfield J of the Tax Court in analysing the
Control factor stated at par 11:
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.
[32]
The case at hand, it
seems, is just the type of scenario addressed by the comments of J. Hershfield,
where the Worker was given a project and was expected to complete it, due to
her expertise and experience in event management. The Worker may have been told
who the client was, what the clients goals were, what the ultimate budget would
be agreed upon by the client and where and when to complete the task, just like
a subcontractor referred to in the comments of Letourneau J. A in the Poulin
case above, and the worker may have been monitored, but these do not amount to
a level of subordination necessary to place the worker in the realm of being an
employee. As counsel for the Respondent pointed out in On Masse Inc. v.
Minister of National Revenue 2010 TCC 250, Webb J. commented that in Royal
Winnipeg Ballet, the dancers were told what works would be performed, at
what time and location, where and when rehearsals would be held, what roles
they were assigned, given choreography and even direction at each performance,
and were still not found to be employees because they provided the element of
individualistic expression to the Work. I share the view of Webb J. in On
Masse, that the level of control over the Worker here, as in that case, is
hardly comparable to that of the dancers in Royal Winnipeg Ballet.
[33]
It follows from the
above analyses that the Respondent’s position that the Worker was subject to
annual reviews is not conclusive of an employment relationship. The Appellant
testified that it conducted annual reviews of all its employees and independent
contractors alike each year as it found it useful to provide feedback in order
to provide better services to its clients which I consider an astute business
practice. As Hershfield J. stated in Direct Care In-Home Health Services
above, the monitoring of services should not be confused with control or
subordination of a worker. The Respondent points to the fact that the Worker
signed these work appraisals, entitled Project Manager Performance Appraisal
Review Document above a line with “employee” identified under her signature as
evidence of such relationship, however it is clear in the body of both the
appraisals that she was not considered an employee. In the Appraisal dated
August 21, 2006 the goal expressed for the Worker in the Development Plan for
2007 was: “Continue in developing your knowledge with Integrated’s services”
referring to the internal operations and employees of the Appellant and in the
Overall Comments of such appraisal the words: “Alison, over the past few
months, you have built strong relationships with Integrated Staff..” The fact
the same form was used for both employees and independent contractors of the
Appellant alike is in my view inconsequential and I accept the testimony of the
Appellant that it did so due to its limited resources.
[34]
With respect to the
argument of the Respondent that the Appellant required the Worker to wear
uniforms as indicative of control over an employee, the evidence is that the
Worker was indeed provided a company jacket, golf shirt and other items of
clothing. However the Worker herself testified that whether she wore them or
Client branded clothing, provided either directly by the Client or through the
Appellant, was a decision of the Client. Clients often required the Worker and
other project managers or independent contractors and employees of the
Appellant alike to wear Client branded clothes at an event for their branding purposes.
The evidence was also that the Appellant’s clothing was worn for branding
purposes at events where Client branded clothing was not required so the public
could identify who to seek for help or who were the representatives available.
The Appellant conceded that in such situation its own branding was important to
convey. There was however no evidence the Worker was required to wear any
Appellant branded clothing at the office or anywhere outside the actual events.
Frankly, it seems to me the Client ultimately controlled the uniform to be worn
by the Employee, and even when it didn’t, the Appellant’s explanation for its
own branding at events hardly seems unreasonable, particularly in light of the
type of business the Appellant was in where branding is an important element of
marketing strategy. The requirement to wear any such uniform in these
circumstances is not determinative of any relationship.
[35]
The Respondent also
takes the position that the Worker was required to work exclusively and
personally for the Appellant, a form of control suggestive of an employee
relationship. The Worker however testified that in effect she was not
prohibited from working for others as permitted in the First and Second
Contracts and that she had the skills to work for others who did not compete
with the Appellant but in effect testified that since she dedicated 40 hours
per week for the Appellant that she in fact had no time to do so and hence in
reality could not do so. The fact that she only provided services to the Appellant
during the Period, as the Worker testified, does not in my view mean she was
required to work exclusively for the Appellant. The Appellant testified,
through different witnesses, that she had the ability to do so as also stated
in the First and Second Contracts. In the On Masse Inc. case, the
worker, one Robert C. Caputi, an artist, was able to work for other clients but
was spending 40 hours a week in the service of the appellant in that case was
not found to be in a role of subordination to the appellant by choosing not to
work for others. Moreover, nothing prevented the Worker from hiring others to
undertake the work for other clients if she so chose. Short of strong evidence
that you are prohibited from doing so by the party engaging your services, not
choosing to work for others when you have the legal right and ability to do so
should lead to the inference you can in fact do so.
[36]
As for the Respondent’s
suggestion and assumption that the Worker had to personally perform the
services for the Appellant, the evidence of the Appellant is that she was
permitted to hire help at her own expense as per the terms of the First and
Second Contracts but the Appellant agrees that notwithstanding such contractual
terms she could not send another person to meet with the Appellant’s Clients
without the Appellant’s approval. There is no evidence by the Worker that she
ever sought any such approval or even that she ever hired others to perform the
services on her behalf so there is no way for the court to weigh the position
of the Respondent. However, I do not consider a requirement of having to obtain
prior approval before you send a stranger to meet your clients when it is your
reputation and business contract at risk to be an unreasonable control by the
Appellant. The stipulation is clearly a form of monitoring or quality control.
Even if it were found to be the case that the worker had to render its services
personally, Letourneau J.A. in Poulin above made it clear in paragraph
20 thereof, in agreeing with Madam Justice Desjardins in Wolf, supra
“that the fact that a person cannot delegate his labour to someone does not
necessarily mean that this person is an employee.”
[37]
Finally in dealing with
the Control factor, I wish to examine the Respondent’s contention that the
acknowledged fact that the duties of a project manager were identical and were
performed by both independent contractors such as the Worker and employees of
the Appellant suggests the level of control must have been the same as an
employee. The argument of the Respondent is in effect that nothing changed for
the Worker between its time under the First and Second Contracts and the Third
Contract which was acknowledged to be an employment agreement.
[38]
With respect to the
Respondent, the Federal Court of Appeal has made it clear in Poulin that
the control factor is not decisive in situations where services supplied can be
rendered equally under a contract for services or a contract of employment and
one must look to the other factors of the test. Frankly, the Respondent’s
position is suggestive of a presumption in favour of a finding of an employment
relationship in such circumstances which I find unacceptable; just as I would
equally find in favour of a presumption of a contract for services. The clear
rationale of Sagaz Industries as expounded by Major J. in his decision
above referred to is that all of the factors must be considered with the
appropriate weight assigned to them as the circumstances require. There is no
presumption given in the decision of the Supreme Court of Canada or any of the
Federal Court of Canada decisions above referred to either.
[39]
I must also disagree
with the contention of the Respondent that the services were the same and that
nothing changed. While the duties performed by an independent contractor such
as the Worker on behalf of the Appellant are decidedly very similar or the same
as the duties performed by project managers in the employ of the Appellant, the
other terms under which such services were provided were clearly not the same.
Under the Worker’s Third Contract, the Employment contract, the Worker was
given vacation pay and employee benefits not available to it as an independent
contractor. The Worker was also given a higher salary, about $6000 more per annum,
required to perform her services personally, required to abide by the
Appellant’s Company manual not applicable to independent contractors, not
permitted to work for others, had payroll deductions such as income tax and
other source deductions deducted from her pay and had her pay deposited into
her bank account directly rather than having to invoice and receive a cheque as
before and was required to show up for work at the Appellant’s offices unless
outside the office on the Appellant’s business. The Worker also had the benefit
of job security and the right to enforce her tenure of employment under the
employment laws of the Province of Ontario and common law which would
include damages for wrongful dismissal. In all, the conditions under which a
Worker performs the services can change substantially in my view when the
Worker transitions from an independent contractor to an employee which is the
case here.
[40]
It also bears
mentioning that the services performed by the Worker appear also to have
changed somewhat in the sense there is evidence that the Worker did not like
undertaking smaller projects assigned to her and preferred to work on big
projects only. The Appellant’s president testified that one of the reasons she
was given an employment contract was to gain a further element of control over
her work so as to ensure she would undertake small projects as well. Such
evidence is corroborated by the work Appraisals signed by the Worker and
described earlier. In particular, in the Overall Comments found in the second
Project Manager Performance Appraisal Review Document dated September 7, 2007
relating to the Second Contract states:
“You are extremely motivated and attentive
when challenged with large scale projects. I believe you thrive and are most
happy while working on these types of projects. However, your motivation seems
to decrease when given smaller projects that need to be executed. As you know,
all projects, big and small are just as important.”
[41]
Clearly, the ability to
take away a Worker’s option as to whether to work any particularly sized
project is a departure from the independent contract relationship. While there
is no evidence the Worker refused to work on smaller projects, there is
evidence her services were not performed to the same level of satisfaction of
the Appellant, suggesting there was concern that if her preferences for being
assigned bigger projects was not met that her services might not be available
in the future.
[42]
Having regard to all of
the above analyses regarding the Control factor, I am of the view the Appellant
did not exercise a degree of control over the worker so as to be indicative of
an employment relationship but rather that such level of control is more
consistent with a contract for services.
Ownership of Tools
[43]
There is no dispute
that both parties provided some of the tools for the provision of the services
of the Worker. The Appellant provided a Macintosh computer together with its
proprietary software that ran on the Macintosh system, together with a cell
phone that had two way radio capability with the Appellant’s office as well as
the Appellant’s branded jacket, golf shirt and other minor items. Reference has
been made in the analyses of the Control factor above as to the “branding”
reasons for the uniform pieces and does not bear repeating here. As to the
provision of the computer and software, explanation was also discussed in the
facts earlier that the proprietary software of the Appellant was used by the
Appellant, all its employees and independent contractors and even its clients for
the provision of the Appellant’s services and was a necessary tool to deliver
same, especially when out of office. Obviously the cell phone with two way
radio between the office and other employees and independent contractors was
necessary to keep in touch with the main office and each other during events.
As above mentioned the Worker signed a Company Property Agreement which all
independent contractors and employees alike signed, agreeing to return the
tools at the end of their contract or employment and taking responsibility for
their loss or damage to the extent of their stated value.
[44]
Considering the nature
of the Appellant’s business and unique proprietary software it makes ultimate
sense that anyone providing services would need to use the Macintosh laptop
computer which ran the unique software and cell phone with two way radio to
keep in touch with each other and the clients of the Appellant as explained by
the Appellant and it is clear that the proprietary software at least could not
be a tool capable of being provided by the Worker on its own in any event. As
Letourneau J.A. stated in Poulin above in par 24 of that decision:
Once again, I do not think that in this case much weight can be
accorded to this factor, given the nature of the services rendered, the needs
served and the few work instruments used. Furthermore, ownership and supply of
equipment must not be confused with ownership and supply of work instruments.
[45]
In On Masse
above, in a situation where the Worker was provided use of the appellant’s
computer and software Webb J. stated in par. 13 that:
“He needed to use the
Appellant’s computer system and software to integrate his work with the work of
the other individuals who were working on the film.”
[46]
In my view the
provision of those tools by the Appellant was just that; equipment necessary
for the integration of work of the Worker with the Appellant, its staff and the
Clients of the Appellant and was a necessity in order for the services to be
performed, and practically speaking, in respect of the software and two way
radio connection at least, only providable by the Appellant. Accordingly, I do
not see the provision of these tools by the Appellant to be indicative of an
employee relationship.
[47]
The Appellant also
provided the use of a desk at its main office together with the office
equipment to the Worker. The First and Second contracts provide that the
Workers primary base of operations would be her home office but that she would
be given use of a work station and computer at the Appellants office only on an
as required basis; a temporary use. The evidence however is that the Worker
attended at the office on an almost daily basis, had her own phone extension at
such desk and kept her plants and family pictures there and stated that this
was her permanently assigned desk. Interesting enough, a witness called by the
Respondent testified that while she was an employee of the Appellant she shared
a work area with the Worker who kept her plants and family pictures there as
stated by the Worker thus corroborating her evidence. The Appellant’s evidence
is that work stations were not specifically assigned to any independent
contractors and all independent contractors were furnished business cards for
the same branding reasons given above and that calls could be rerouted so that
the provision of a phone extension did not limit mobility between stations. The
same witness who corroborated the Workers evidence as to the use of her desk
above also testified however that when she left the employ of the Appellant and
agreed to become an independent contractor, that she worked mainly from home,
as did Drew Black who testified he had left the employ of the Appellant and was
now a stay at home dad who worked mainly at home, in the Township of Severn, a
few hundred kilometres from the Appellants office, as an independent contractor
for the Appellant. Clearly independent evidence establishes that at least one
of those independent contractors, who testified she also did project management
work, was able to work from home and did, demonstrating a daily trip to the
office was not a necessity and supporting the Appellant’s contention that the
Worker used the office desk and facilities on an almost daily basis simply as a
matter of choice. In addition I note that the Worker could not recall which of
the management team had assigned the desk to her on a permanent basis when
asked, even though there were only a few members that could have done so thus
drawing her credibility into issue here. Likewise, if the contracts provided she
was to use the office facilities on an as required, temporary basis, one must
question why she would be allowed to use them on an almost daily basis, even if
by choice. In all, it is clear from the conflicting evidence that the issue of
the use of the Appellant’s office desk and facilities is not indicative, one
way or another of the relationship between the parties.
[48]
The Worker on the other
hand, pursuant to its contractual obligation in the First and Second
Contractors provided computer equipment and a home office used by her in the
delivery of her services while working at home, mainly evenings and weekends
together with a vehicle and claimed expense deductions for all of these items
in her tax returns for those years. The Worker however ceased claiming these
expenses for the period she was an employee under the Third Contract. The
provision of such tools and premises by the Worker would seem indicative of a
contract for services. The Respondent’s argument that she prepared her own tax
returns using preparation software to suggest she was not aware of the
consequences of such filing is not convincing. The Worker was an intelligent
and educated person who knew enough when to claim such expenses and when to
cease claiming them and I find her actions here supports the Appellant’s
contention that she was an independent contractor.
[49]
On balance, I find that
the Ownership of Tools factor tends to support the relationship of a contract
for services, particularly due to the provision of equipment and home office and
vehicle by the Appellant and her tax treatment of same.
Chance of Profit/Risk of Loss
[50]
I do not find these
factors on their own to be determinative of any of the relationships.
[51]
The Respondent argued
that the fact the Worker effectively worked about 40 hours per week and her
remuneration was based on a weekly amount are indicative of an employment
relationship. While I would normally tend to agree, the fact that the Worker
testified she often worked in excess of 40 hours per week, often at home or at
client events evenings or weekends, without further remuneration is not
indicative of an employment relationship but more of a contract for services at
a fixed price. The Worker testified she considered her remuneration competitive
as well. The Worker did indicate that she brought up the question of overtime
pay with the Appellant once but was not successful, which the Appellant denied.
It begs the question as to why the Worker would not have acted on the matter
further with the appropriate labour ministry or refused to work overtime if she
considered the relationship to be one of employment and why she would
contradictorily suggest her remuneration was competitive.
[52]
The Appellant suggests
the Worker had the chance of profit since, pursuant to the Second Contract at
least, if she did not work the 40 hours, had to reduce the normal weekly
amount, which the Worker testified it did on the occasion when she took a few
days off and by corollary that if sufficient hours were not worked the Worker
had a risk of loss if it did not cover its home office and vehicle expenses.
The evidence on the whole was that she normally met the 40 hour threshold and
it is not the case that employees are necessarily paid when they take days off
in any event.
[53]
The Respondent states
that, as the Federal Court of Appeal confirmed at paragraph 24 of the City
Water International case, the ability to earn more money if one works
longer hours at an hourly rate to increase pay does not constitute a chance of
profit as it is not the same as the commercial risk of running a business and I
would agree with this premise, but the Respondent counters that it is not extra
hours to be worked for the Appellant that gives her a chance for greater
profits, but the ability to work for others or hire staff to do so, which, as
discussed earlier, was an option the Worker had although never availed herself
of. Considering the Worker was not paid for extra hours any event, the ability
to earn more by the hour was not even an option so the issue of chance of
profit in that context is not even applicable.
[54]
On the whole while I
agree that the Worker had a chance of profit by availing herself of the ability
to work for others and hire staff to do so if she was so inclined and had a
risk of loss if it did not work the requisite 40 hours and had to invoice
amounts less than the cost of her expenses for home office and vehicle, it is
clear that the risk of loss was minimal having regard to the size of those
expenses and the chance of profit is speculative at best since the Worker did
not avail herself of the opportunity.
Conclusion
[55]
On balance I find that
the Wiebe Door factors as above analysed support a finding that the
Worker was an independent contractor. As a result I am of the view that it is
not necessary to consider the intention factor. However, since the
applicability of this factor was the subject of large debate between the
parties here I should like to add that if it had been necessary to consider it
I would have found that the intention of the parties at the time of entering
into the relationship, the relevant time to consider as confirmed in the
reasoning of Malone J.A. in City Water at par 27 above, was that they
were entering into a contract for services for three main reasons. Firstly, the
Worker testified she was aware she would not have income taxes and other
payroll deductions made and would not be entitled to benefits enjoyed by
employees, a clear indication she was not to be an employee. It is one thing
for her to argue she expected to be kept on and did not understand the
difference, but to not make an issue of these matters, or the matter of
overtime pay and still enter into a Second Contract defies credibility.
[56]
Secondly, the Worker
availed herself of the deductions available to businesses for home office and vehicle
expenses during the Period but did not during the time she was under a contract
of employment, indicating she clearly understood when such tax treatment was
available to her. Her actions are consistent and delineated the relationship.
[57]
Finally, the Appellant
referred to her relationship throughout the CRA Employee questionnaire
submitted into evidence as being “self–employed” or “self-employed as per the
contract”. While the Respondent explained such actions as the Worker wanting to
be consistent with the way she had filed her tax returns, the fact is she
referred to this role even in the Questionaire which was filled out after the
Worker had arranged to change the recording of her income from the Appellant
from “other income from employment” to “employment income”, after discussions
with the CRA and thus amend her tax returns for the Period. The Worker
testified she had no recollection of any such discussions yet they are referred
to in the Notice of Reassessment as the reason for the Minister to have changed
the income entry to “employment income”. Frankly, this, together with her
inability to remember other important facts such as who assigned her a
permanent desk at the office or who advised her that she had to report to the
office daily between the hours of 9-5, suggest a selective memory and I find
her evidence to have been suspect and not credible as a result. Her actions are
indicative of trying to change the record after the fact.
[58]
This is a case where
the Appellant had a growing business that allowed it to transition an
independent contractor to a full time employee. It makes absolute business
sense that the Appellant would look to its independent contractors, with whom
it tried to establish long term relationships for its benefit and the benefit of
its clients as part of its strategic business plan, to increase its employed
staff when volume of business allowed. This plan confirms its intention to have
entered into a contract of services with the Worker at the start. In my view it
was inappropriate for the Minister to have assumed, in argument, that “nothing
changed” after the transition solely because the duties of the Worker may have
been substantively the same without giving weight to the other terms of the
relationship that did in fact change.
[59]
In all, it is clear the
both parties had a mutual intention at the time of entering into their
relationship that such relationship was to be one of a contract for service.
Decision
[60]
The Appeals are
allowed. The Worker was not in insurable or pensionable employment with the
Appellant during the Period.
Signed at Ottawa,
Canada, this 5th day of October 2011.
“F.J. Pizzitelli”
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