|
Citation: 2010 TCC 174
|
|
Date: 20100415
|
|
Docket: 2009-194(EI)
2009-195(CPP)
|
|
BETWEEN:
|
|
ACE-J TRANSPORTATION INC.,
|
|
Appellant,
|
|
and
|
|
|
|
THE MINISTER OF NATIONAL REVENUE,
|
|
Respondent.
|
REASONS FOR JUDGMENT
(Edited from the transcript of Reasons for Judgment
delivered orally from the Bench on November 24, 2009 in Toronto, Ontario)
Weisman D.J.
[1] I have heard two
appeals by ACE-J Transportation Inc. against determinations by the Minister of
National Revenue that five truck drivers by the names of Shou Qiang Huang, who
was a witness before the Court today, Mr. Shuang Chen, Faramarz Reyhanifar,
Xian Wei Bu and Hong Cuong Ly were employees of the Appellant under contracts
of service during the period under review, which is between January 1, 2008 and
July 24, 2008, and that accordingly the Appellant is responsible for
Canada Pension contributions and Employment Insurance premiums. The
Appellant, of course, appeals on the basis that the five gentlemen in question
during the period under review were independent contractors and, therefore, the
Appellant is not responsible for the aforementioned deductions.
[2] It was agreed ab initio that, since we don't have all five
workers before us, the hearing would proceed on the common evidence that was
heard on a viva voce basis and would be applicable to all five workers
because there was agreement that they all had the same working terms and
conditions. There was a minor caveat on the part of counsel for the Minister
that the terms and conditions set out in the five written contractor contracts
were not identical, but I did not hear any evidence indicating that it made any
difference in the result.
[3] In
order to resolve the question as to whether the five gentlemen are employees or
independent contractors, the total relationship of the parties and the combined
force of the whole scheme of operations must be considered. To this end, the
evidence in this matter is to be subjected to the four-in-one test laid down as
guidelines by Lord Wright in Montreal City v. Montreal Locomotive Works,
[1947] 1 D.L.R. 161, which guidelines were adopted by Justice MacGuigan in Wiebe
Door Services v. Minister of National Revenue, which is cited as [1986] 87
D.T.C. 5025 in the Federal Court of Appeal.
[4] The four guidelines
are: the payer's control over the worker; whether the worker or the payer owns
the tools required to fulfil the worker's function; and the worker's chance of
profit and risk of loss in his or her dealings with the payer.
[5] The
parties placed great weight upon the contracts which were executed by the
parties, and they are all in Exhibit A-1. In that regard the law is that such
contracts are not binding upon the court because the status of a worker is not
a question of agreement between the parties; it is a matter of law, because the
rights of third parties are involved -- and that was clarified or determined by
the Supreme Court of Canada in Sagaz Industries, [2001] Supreme
Court Judgments No. 61. The Court said:
The distinction between an employee
and an independent contractor applies not only in vicarious liability…
which was the fact situation before the Court in Sagaz,
…but also to the application of
various forms of employment legislation,…
which is what we are dealing with,
…the availability of an action for
wrongful dismissal, the assessment of business and income taxes, the priority
taken upon an employer's insolvency, and the application of contractual rights.
[6] Similarly,
there was some weight placed upon the fact that all parties have registered business
names and have business licence registrations and upon such registration the
remuneration was paid to their business rather than their personal names. Again,
very little weight, if any, is placed on that, whether or not it was a matter
of coercion by the payer, because you cannot avoid the tests set out in Wiebe
Door by the simple expedient of having people register business names,
whether those people want to be held to be independent contractors or not.
[7] Of interest in this
case is the Respondent's Book of Authorities because its tabs consist primarily
of cases at the trial level where the truck drivers were found to be employees
on the whole. Some of them are fairly dated, such as tab 4, Lister
Transportation which was back in 1998.
[8] Why
that is of interest is because based on these trial level authorities one could
make out a strong case that the Wiebe Door factors point to these five
gentlemen being employees under contracts of service during the period under
review.
[9] Starting first with
control, there are various exhibits that constitute an unusual degree of
control over the workers. The primary one, of course, is the Contractor
Agreement. It has in its provisions various onerous and unreasonable requirements
that constitute control over the worker. I would point directly to section 1,
Contractor's Duties. Under (b)(2) there is a $50 fine for failing to report
and a $200 fine for any unreported late deliveries. In my experience, it is
unusual, to say the least, for an agreement to impose fines. That is
inconsistent with the person being fined being an independent contractor or
independent in any way.
[10] On the other hand, there
is clause (g) which called for the driver paying a $2,500 deductible which is
applicable both to the tractor-trailer and to the cargo if he was at fault. That
is a provision that is reasonable and that I have seen in a number of cases
involving drivers. However, 3(d), a two-trip holdback as a security deposit for
the various fines and penalties in the contract, again is an unusual degree of
control, which indicates that the person subject to such controls is an
employee.
[11] The $1,000 training
compensation in paragraph 5, in the event that the worker is terminated prior
to six months, by way of reimbursement for his training, is again something
that I call an unreasonable degree of control and inconsistent with the person
being controlled being independent.
[12] The final unreasonable
control is the 3.0 per cent management fee that came out in the evidence as a
regular deduction from these gentlemen's pays for which I cannot find any authorization
in their agreements. It was said that this management fee was to assist them
with their schedules, but I repeat that that is unusual, unreasonable and a
great deal of control over the worker.
[13] The only one, aside from
the deductible, that I thought was reasonable was Exhibit R-3, the urgent
notice. In a situation where there is a very expensive piece of equipment being
entrusted to the care of the worker, I did not think it was at all unreasonable
for there to be consequences for failure to take normal precautions, such as
walk around the truck before you embark upon a lengthy journey and making sure
that all the various fluid levels were safe throughout the trip, and that there
was a financial penalty for failing to do so. Accordingly, there is a case to
be made for a degree of control in this matter that indicates that the workers
were employees.
[14] If one considers the
truck a tool and the main tool aside from the worker's licence, then the tools
factor would indicate that the workers were employees. With these gentlemen
having a fixed rate of remuneration per kilometre for their trips, it would be
difficult at first blush to see any chance of profit, and indeed that reason is
reflected in some of these cases found in the Minister's Book of Authorities.
[15] There is a minimal risk
of loss. It is true that there are these fines, but normally they involve some
degree of culpability or negligence that caused damage or delay of delivery of
the goods, and the evidence was that some of these penalties are only incurred
if a customer deducted money from the Appellant and they would pass that
deduction on to the driver.
[16] I say all this is
interesting because one gets a different picture if one takes a look at the
cases emanating from the Federal Court of Appeal. Referring first to the
criterion or guideline of control, the Federal Court of Appeal aligns that
closely with the concept of subordination. There is a series of cases that do
so. In that regard, I draw your attention to Le Livreur Plus, [2004]
F.C.J. No. 267. The exact reference is at paragraph 25. Then there is D
& J Driveway, [2003] Federal Court of Appeal, page 453 at paragraph
26. There is a judgment of my own where I simply summarize those cases in
paragraph 13, which is called Mediclean Incorporated v. The Minister of
National Revenue, [2009] Tax Court Judgments No. 288.
[17] The reasoning is that
the Civil Court of Quebec in Article 2099 says that the essential
characteristic of an independent contractor is if there is no relationship of
subordination between the principal and the agent. Therefore, the courts have
adopted the converse proposition that to be a contract of employment there must
be a relationship of subordination between the employer and the employee or the
payer and the payee.
[18] Of great importance in
this case is that these same cases talk about the importance of a worker having
a right to refuse assignments. The evidence in this case is quite clear that
the five workers indeed had such a right, and that the controls mentioned above
only came into effect once the driver accepted an assignment.
[19] It was the very clear
and credible evidence of the sole witness for the Appellant, Mrs. Jin, that if
a co-driver smoked or if it was too dangerous to cross the Rocky Mountains on the way to
Vancouver, these drivers could simply refuse to take the assignment. That was a
degree of independence and lack of control which is inconsistent with a
relationship of subordination, which indicates that the workers were
independent contractors.
[20] On the issue of tools,
the case of Precision Gutters [2002] Federal Court Judgments No. 771 in
the Federal Court of Appeal, was a case where the gentlemen on a job installed
eavestroughing. When they installed the eavestroughs, the payer for whom they
did this work had a very large and expensive machine that took raw aluminum and
turned it into gutters, and they would install them. Of course, that was a necessary
tool for them to use to do the job and, didn't that therefore indicate that the
tools were provided by the payer.
[21] The Federal Court of
Appeal in Precision Gutters said that, if the worker owns the tools of
the trade which it is reasonable for him to own, that indicates that he is an
independent contractor even though the alleged employer provides special tools
for the particular business. That sounds to me a lot like this situation where
the drivers are supplying tools, and they were listed by Mrs. Jin -- things
such as a GPS, a cell phone -- she thought that they all had laptops, but it
turned out that the witness before the Court on behalf of the Minister did not
have one -- repair kits, safety boots, a blanket, and they paid for their own meals.
That begins to sound like these workers had the normal tools of the trade.
[22] This brings me back to
the truck. The truck is of interest because I am not sure that it is a tool in
these circumstances. This goes directly to a submission made by counsel for the
Minister that surely a driver needs a truck to drive. I had not read a case
that says this and I have yet to see one, but it seems to me that there is a
difference between a business where the person's business is to drive trucks
and a business where it is the person's business to do haulage which involves
having a truck with which to do the hauling.
[23] I would think that for
someone who is in the haulage business a truck is a necessary tool. I am not
sure whether or not it is in a business where the person is solely a driver. I
do know that some of the cases at the provincial level say that the truck is an
essential tool.
[24] That brings me back to Precision
Gutters. It does sound to me like this machine that made gutters and these
gentlemen were found to be independent contractors, notwithstanding that the
payer supplied that essential instrument just as the payer here was supplying
and repairing a truck.
[25] On the chance of profit
and the risk of loss, I refer again to Precision Gutters. Unfortunately,
I don't have the exact quote before me or the paragraph, but in Precision
Gutters the court says that the right to refuse an assignment involves a
chance of profit and a risk of loss. The more assignments you accept, the more
profit you make, and the fewer you accept is a loss of profits.
[26] The cases talk about a
worker's ability to profit by sound management. There is a lot of evidence in
this case that these workers could profit by sound management, and that arises
in a two-fold way, the first being the fact that they get paid by kilometre. Therefore,
it is patently clear that, if a driver is quick and expeditiously, with or
without the assistance of a teammate, gets himself to Los Angeles or to
Vancouver quickly and has a return load or then can take off on another trip
because he is refreshed because he had the assistance of a worker or otherwise,
then he can get in more kilometres. Conversely, the person who is slow will not
do as many trips and not get as many kilometres, and they will not have the
same chance to profit by sound management.
[27] I am saying that there
is a chance of profit and a risk of loss in two ways: from the Federal Court
of Appeal's point of view, the one arising out of Precision Gutters in
that the right to refuse inherently involves a chance of profit and a risk of
loss, and in the circumstances before me sound management and maximizing your
kilometres can increase your profit.
[28] It is possible -- and I
don't think there is a good deal in it, but I mention it for the sake of
accuracy -- that wherever there is the right to hire a helper there is some
element of profit and loss. You may be required to hire that helper in urgent
circumstances and pay him a higher rate than you are getting. Conversely, if you
hire a helper and pay him less, you are assured a profit. I have not forgotten
that these driver substitutes have to be approved by the payer. One of the
cases in the Respondent's Book of Authorities does not look upon that as an
unfettered right to hire others but, in my view, if a worker is entrusted with
a very expensive tractor and trailer and its cargo, it is not at all unreasonable
to require that the person who is going to help be licensed, have a safe
driving record and be a responsible person to be entrusted.
[29] This brings me to the
total relationship between the parties. A very important fact that comes to
mind -- there are really two in the evidence. The first is the right to refuse
assignments, which really separates employees from independent contractors. The
other is the ability to hire helpers. That one is important because of a case
called Ready-Mixed Concrete v. The Minister of National Revenue. That is
cited as [1968] 1 All E.R. 433, Queen's Bench Division. Justice
McKenna said:
Freedom to do a job
either by one's own hands or by another's is inconsistent with a contract of
service where limited or occasional power of delegation may not be.
I take it from that that it is the
essence of a contract of service that you have to do the work personally.
[30] In these matters, the
burden is upon the Appellant to demolish the assumptions set out in the
Minister's Reply to the Notice of Appeal, inasmuch as I am bound by the Federal
Court of Appeal's decisions that I have set out in brief. The Minister's
assumptions are set out in paragraph 7, and I will start with (g):
…the Workers were
required to report to the Appellant twice a day, at 9:00 am and 4:00 pm, and
when they arrive at a destination, along with when they are fined or receive
notices.
The evidence did not exactly
support that, but I repeat that the burden is upon the Appellant. If there is
an assumption that has not been demolished, there is no burden on the Minister
to support the assumption. It is on the Appellant to demolish it. Anything that
is not demolished has to be taken as true, and I took (g) as true.
[31] Any other paragraph that
I don't mention is taken as true.
[32] The evidence was not
that Jin Liang or the dispatcher supervised the workers. I would say they
controlled the workers by keeping in contact and enforcing these fines and
penalties.
[33] I have already said that
(l) was primarily demolished because I found most of these written and oral
directions about how you clear customs and how you avoid weigh scales were not about
control. In either case it is simply a matter of giving a useful tip to the
driver. I won't comment on the propriety of doing so, but mainly for our
purposes it was not an instance of control.
[34] (n) was refuted as was
(o). Also (p) did not bear up under the evidence.
[35] I have already said
that, except for the truck, I think (q) bears up to scrutiny under the evidence
or lack of demolishing it.
[36] (ff) was demolished. It
was not the Appellant that determined the workers' hours. The evidence was that
the Appellant had ways of finding out the minimum kilometres between the
pick-up point and the delivery point of the cargo, and that would be all the
worker was paid for. If he went farther, that was on his own time. If there was
an appointment made, and there was evidence that in certain cases there were
appointments, they were set by the client or the end-user as to when the goods
were really needed.
[37] The evidence did not
satisfy me on (ii), "the Workers were expected to work long hours or they
could be terminated." It did not come out that way. Sometimes they worked
long hours and, depending on where they went and how quickly, sometimes they
did not.
[38] (jj) was established,
but it is irrelevant. There is confusion as to what business we are talking
about.
[39] (ll) was not supported
by the evidence in the way it is worded here. There was not anything about they
were not unreasonably to reject any assignments that were arranged by the
Appellant. The evidence was that they were free, without reason, to reject
assignments, and they worked as frequently or infrequently as they wanted to.
[40] I am moved to comment on
the Minister's Reply because, in fairness to the Appellant, there is not a lot
in the Reply to argue with because there is a not a lot in the Reply that is
determinative of the issue before the Court. You virtually never see a reply
that starts off with control and has assumptions that say that the workers were
controlled in such a way, and then goes to tools and then to profit and loss,
and there is something that the Appellant can tackle head-on.
[41] The one before me is
difficult for an Appellant to demolish head-on because there are some
assumptions that inferentially talk about control and inferentially talk about tools,
but there are not assumptions that are worded in such a way that they can be
rebutted as I have led you through the Federal Court of Appeal's key findings
in this area.
[42] Very important is the
right to refuse, and the Minister has it wrong. Very important is the right to
hire a helper, and the Minister has it wrong.
[43] I keep talking about the
right to refuse because the Federal Court of Appeal does, and it is significant
in two respects. It is inconsistent with subordination, which is akin to control.
If there is no subordination and the control in that regard is lacking, then
you are not dealing with an employee and, as I have already said more than
once, it also goes to the chance of profit and risk of loss.
[44] Having heard the
witnesses for the parties under oath for the first time -- and, by the way, I
found them both quite open and clear. I am talking about Mrs. Jin for the
Appellant and Mr. Huang for the Respondent. I have heard new evidence or
evidence that the Minister seems to have misinterpreted or misconstrued such
that I find that his findings with reference to all five workers were
unreasonable. These five workers were carrying on business on their own account
as truck drivers.
[45] Therefore, the two
appeals, each involving the five workers, will be allowed and the decisions of
the Minister are vacated.
Signed at Toronto, Ontario,
this 15th day of April 2010.
“N.
Weisman”
Email this Content