Citation: 2010 TCC 225
Date: 20100503
Dockets: 2009-2409(EI)
2009-2410(CPP)
BETWEEN:
HAROLD ISAAC OP SUNRISE
ELECTRICAL,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Boyle J.
[1]
Mr. Harold Isaac,
who operates as Sunrise Electrical in the Vernon
British Columbia area, has appealed from rulings and assessments made under the
Employment Insurance (“EI”) and Canada Pension Plan (“CPP”) legislation in
respect of the paid work done for him by Justen Kitchener in 2008 as an
apprentice electrician.
I. The Motion for Adjournment
[2]
These matters were set
down to be heard on Tuesday, March 23 in Kelowna.
At the opening of Court Mr. Isaac asked for an adjournment of the trial in
order to better prepare given that he had only just received a copy of
Exhibit A-10, the Canada Revenue Agency Report on an Appeal, which
described why his appeal to the Canada Revenue Agency (“CRA”) of the rulings
and assessments were not allowed. The Court gave Mr. Isaac an adjournment
of more than 45 minutes to review the five‑page document and advise
the Court if and why he felt any further delay was needed to allow him to
prepare differently.
[3]
The document made it
clear that the CRA had obtained virtually all of its information from
Mr. Kitchener and that Mr. Isaac had not replied to any of its
queries by telephone, mail and registered mail.
[4]
Following that
adjournment, Mr. Isaac maintained that he would need an adjournment until
later in the week to even assess if there was anything in the document that
required him to need more time to prepare. The Court advised Mr. Isaac it did
not feel he was entitled to a further adjournment but was prepared to defer
hearing the case until the afternoon, almost two hours later. The Court advised
Mr. Isaac that it would instead be prepared to consider his request for an
adjournment until Friday, March 26 provided there was no prejudice that
could not be compensated in a costs award against him. His appeals were the
only matters before the Court on Tuesday. They would be the only matters before
the Court on Friday. Thus, the judge, registrar, court reporter and Crown counsel
would be engaged a further day solely because of his adjournment request. The
Crown had subpoenaed Mr. Kitchener to attend on Tuesday requiring him to
miss work and this young man would need to miss another day’s paid work to
attend on Friday to accommodate Mr. Isaac’s request for a further
adjournment to allow him more time to prepare. The Court advised Mr. Isaac
that, if he wanted a three‑day adjournment instead of a two‑hour
adjournment, the Court would be ordering costs payable by him to the respondent
in the amount of $250, one‑half of which I would order the Crown to pay
to Mr. Kitchener in compensation for a further lost day of work.
[5]
After a further
adjournment to consider his options, Mr. Isaac indicated he wanted the
matter adjourned until Friday upon those terms.
II. The Evidence at the Trial
[6]
Mr. Kitchener and
Mr. Isaac testified on Friday.
[7]
Mr. Kitchener is
an honest and forthright young man and I accept his testimony in its entirety.
[8]
Mr. Kitchener was
19 at the relevant time, in the early stages of completing his required
training and apprenticeship in order to become a certified journeyman
electrician. He had been laid off due to a shortage of work by his previous
electrical contractor employer after having completed about one‑third of
his needed apprenticeship hours. His previous employer helped arrange the work
opportunity for him with Mr. Isaac’s Sunrise Electrical.
[9]
When he was hired by
Mr. Isaac, he was told he would be paid by Mr. Isaac with a personal
cheque at the agreed rate of $15 per hour worked and that there would be no
taxes withheld which meant he would be responsible for that. The specific issue
of whether this was to be employment or a contract for services or an
independent contractor relationship was not discussed.
[10]
Mr. Kitchener
understood that, as an apprentice, he could not carry on business independently
and was required to be an employee. He understood that only journeyman
electricians could carry on business independently. He considered himself to be
an employee. Mr. Kitchener was not asked how he accounted for his taxes
and that is not before the Court in these appeals.
[11]
Mr. Kitchener was
only able to, and only did work together with a certified journeyman
electrician during his apprenticeship stage. Most of the time he worked with a
journeyman electrician who worked for Mr. Isaac’s Sunrise Electrical but
on occasion he worked with Mr. Isaac. He was not able to and did not work
alone on a job site before, during or after regular work hours.
[12]
Mr. Kitchener
worked between the hours of 7 a.m. and 3 p.m., Mondays through Fridays. He did
not work these hours each day throughout each week of the period in question
but those were the Sunrise Electrical working hours. During the period
Mr. Kitchener worked 808 hours in a fully supervised capacity which
qualified toward his certificate apprenticeship requirements. There was no
evidence Mr. Kitchener worked for anyone else during this time nor that he
tried to.
[13]
Mr. Kitchener
usually reported to work at the worksite of the Sunrise Electrical customer at
which Mr. Isaac or the other journeyman was working. Occasionally, he was
taken to the worksite by the other journeyman. He never worked alone on an
unsupervised basis.
[14]
The work he did for Sunrise
Electrical was similar to the work and terms of his previous employment.
[15]
Mr. Kitchener
provided his own work boots, safety hat, pliers and screwdrivers. The other
tools and supplies, including ladders and power tools needed for Sunrise
Electrical’s commercial and residential customers, were provided by
Mr. Isaac. Mr. Kitchener did not pay anything for the use of Sunrise
Electrical’s equipment.
[16]
Mr. Kitchener
signed time sheets and was paid each Friday by cheque at the negotiated agreed
rate of $15 an hour for each hour recorded. The rate increased by a dollar an
hour near the end of the period. There were no other amounts charged or paid
nor did Mr. Kitchener submit invoices. Mr. Kitchener had no other
financial investment, participation or incentive than his set hourly wage. His
only financial risk was if Mr. Isaac did not or could not pay him on
Friday which never happened. Mr. Kitchener was paid for each hour worked
even if the time exceeded the time allotted for the task.
[17]
In order to qualify towards
his certification apprenticeship requirements, Mr. Kitchener had to do the
work himself.
[18]
Mr. Kitchener
never had any say in settling the terms of service or arrangements with the
paying customers, including scheduling when their work would get attended to.
[19]
There was no written
agreement and Mr. Kitchener has yet to submit his 808 hours worked
for Mr. Isaac for credit towards his certification but it remains his
intention to do so. Presumably this will involve some paperwork which will
require Mr. Isaac’s signature.
[20]
The Court was not told
why Mr. Kitchener’s work for Mr. Isaac came to an end. When it did,
Mr. Kitchener applied for EI and at that time inquired whether his work at
Sunrise Electrical qualified towards his EI entitlement and benefits. Based
upon the information provided by him, and based upon Mr. Isaac’s refusal
to respond to inquiries, it was ruled that it did.
[21]
Mr. Kitchener and
Mr. Isaac agreed that the total hours worked were 808 hours. Their evidence
was also consistent on the total amount paid.
[22]
Mr. Isaac also
testified. I must begin by saying I found that he was often unhelpful in his
direct testimony and, in cross‑examination and in answering the Court’s
requested clarifications, he was often evasive, argumentative and generally dodging,
bobbing and weaving. By way of example, he insisted he was not carrying on a
business and that Sunrise Electrical was not a trade name. He said he was
merely engaged in a non‑business personal endeavour of providing
electrical services to others who paid him for service and that these people
identified his activities as Sunrise Electrical. He also changed his answer
three times in one breath as to whether he reported the revenues of his
personal endeavour for tax purposes. His answers on whether the people who
hired him paid him for his services were also progressive. His behaviour,
demeanour and answers compel me to reject his testimony wherever it departs
from the testimony of Mr. Kitchener or the other evidence. It also causes
me to doubt the totality of his evidence since I take it as compelling
evidence that Mr. Isaac does not value truthfulness. While the saying “the
truth, the whole truth and nothing but the truth” may seem redundant in the
case of most Canadians, it appears that Mr. Isaac chooses to be Clintonesque
and goes to great lengths to parse ordinary words and rationalize things away
by defining words uniquely. Mr. Isaac struck me as a man in complete
charge of his faculties and his irrational testimony on these and other points,
and his attempts to rationalize things, leads to no other conclusion.
[23]
In addition to casting
doubt on all of his testimony, it occurs to me that EI and CPP assessments in
respect of Mr. Kitchener may prove to be the least of Mr. Isaac’s
issues with the CRA. According to one of the documents he put into evidence, he
has not been filing income tax returns or GST returns as required for years.
However, those questions are not before the Court in these appeals.
[24]
Mr. Isaac did
acknowledge in cross‑examination that his endeavour’s insurance extended
to the work performed for him by Mr. Kitchener.
III. Law, Analysis and Conclusion
[25]
The facts and evidence
in this case leave me with no doubt that Mr. Kitchener was engaged by
Mr. Isaac in insurable employment for EI purposes and in pensionable
employment for CPP purposes.
[26]
The tests for a
contract of service / employment versus a contract for services / independent
contractor are well settled. The issue of employee versus independent
contractor for purposes of the definitions of pensionable employment and
insurable employment are to be resolved by determining whether the individual
is truly operating a business on his or her own account. This is the question
set out by the British courts in Market Investigations, Ltd. v. Minister of
Social Security, [1968] 3 All E.R. 732 (Q.B.D.), approved by the
Federal Court of Appeal in Wiebe Door Services Ltd. v. M.N.R.,
87 DTC 5025, for purposes of the Canadian definitions of insurable
employment and pensionable employment, and adopted by the Supreme Court of
Canada in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59,
[2001] 2 S.C.R. 983. This question is to be decided having regard to
all of the relevant circumstances and having regard to a number of criteria or
useful guidelines including: 1) the intent of the parties; 2) control over the
work; 3) ownership of tools; 4) chance of profit / risk of loss and 5) what has
been referred to as the business integration, association or entrepreneur
criteria. There is no predetermined way of applying the relevant factors and
their relative importance and their relevance will depend upon the particular
facts and circumstances of each case.
[27]
The decision of the
Federal Court of Appeal in The Royal Winnipeg Ballet v. M.N.R., 2006 FCA 87,
2006 DTC 6323, highlights the particular importance of the parties’
intentions and the control criterion in these determinations. This is
consistent with the Federal Court of Appeal’s later decisions in such cases as National
Capital Outaouais Ski Team v. Canada (The Minister of National Revenue),
2008 FCA 132, Combined Insurance Company of America v. Canada (The
Minister of National Revenue), 2007 FCA 60, and City Water
International Inc. v. Canada (The Minister of National Revenue),
2006 FCA 350. The Reasons of this Court in Vida Wellness
Corporation (Vida Wellness Spa) v. M.N.R., 2006 TCC 534, also
provide a helpful summary of the significance of the Royal Winnipeg Ballet
decision.
[28]
In this case the degree
of supervision and control over the work done by Mr. Kitchener, and the
fact that such supervision and control is mandated in the case of apprentices,
compellingly points in favour of employment and not independent contractor
status.
[29]
Similarly, the complete
absence of any financial upside or downside makes Mr. Kitchener appear to be a typical wage‑earning employee.
[30]
The tools necessary to
get the job done were in large measure provided by Mr. Isaac. While that
is far from determinative, it is entirely consistent with the relationship
being one of employment and, combined with the other considerations, leans
somewhat in this case towards employment.
[31]
The intention of the
parties is not a helpful factor in a case such as this where there was no
shared common intention at the outset or during the work period.
[32]
None of the factors or
considerations leans in favour of an independent contractor relationship.
[33]
Overall,
Mr. Kitchener would not be considered by anyone, as a matter of law or in
common parlance, to be in business for himself while working as an apprentice
under the constant supervision of qualified electricians at Sunrise Electrical.
The Court finds that Mr. Kitchener was engaged in insurable employment for
EI purposes and in pensionable employment for CPP purposes by virtue of being employed
under a contract of service. Further, the Court finds that Mr. Kitchener
was engaged in insurable employment for EI purposes by virtue of him having
been employed under a contract of apprenticeship within the meaning of that
term in paragraph 5(1)(a) of the Employment Insurance Act as
applied by this Court in Eastern Ontario Health Unit v. M.N.R., [2002] T.C.J.
No. 170, and Charron v. M.N.R., [1994] T.C.J. No. 47.
[34]
It appears to the Court
that Mr. Kitchener may have been concerned that, depending upon the
outcome of these appeals or his testimony, he might not be able to get credit
for his 808 hours worked for Mr. Isaac’s Sunrise Electrical towards his
certification apprenticeship requirements. This Court can state categorically
that it is entirely satisfied that Mr. Kitchener did work 808 hours under
the supervision of a journeyman electrician in his period at Sunrise
Electrical. Mr. Isaac did not dispute the 808 hours and, according to
the evidence, he was the source of that total hours worked number. I am hopeful
that, if the matter is ever questioned, Mr. Kitchener will get full credit
for these hours apprenticeship worked towards his certification requirements.
IV. Disposition
[35]
The appeals are
dismissed.
[36]
This Court does not
have general authority to award costs in an EI or CPP appeal and the respondent
did not ask for costs in respect of the trial on an extraordinary basis. The
Court makes no further order of costs in respect of the hearing of the appeals.
[37]
The appellant is
ordered to pay $250 costs to the Crown in respect of his motion for adjournment
to reflect the many costs thrown away to accommodate his requested delay. While
this Court is not given a general power to award costs against a party in the
EI and CPP legislation, the Federal Court of Appeal has confirmed in Fournier
v. Canada, 2005 FCA 131, [2006] G.S.T.C. 52, that, even
absent such a general power, the Tax Court of Canada has the inherent
jurisdiction to award costs in appropriate circumstances to regulate its
process.
Signed at Ottawa, Canada, this 3rd day of May 2010.
"Patrick Boyle"
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