Citation: 2010TCC583
Date: 20101116
Dockets: 2009-2758(EI)
2009-2759(CPP)
BETWEEN:
TRINITY INNOVATIONS INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1]
The issue in these
appeals is whether the following individuals, for the periods as indicated,
were engaged by the Appellant in contracts of service (and therefore were
employees) or contracts for services (and therefore were independent
contractors) for the purposes of the Employment Insurance Act (the “EI Act”) and the Canada Pension Plan (the “CPP”):
|
Individuals
|
Time Period Under Appeal
|
|
Matt Miske, Noel Schacher,
Carla Schacher,
and Sandra Bonnett
|
January 1, 2006 to April 8,
2008
|
|
Carman Penner and
Norman Ronsberg
|
January 1, 2006 to June 30,
2007
|
|
Dan Bonnett
|
January 1, 2007 to April 8,
2008
|
[2]
The Respondent had
determined that these individuals were employees of the Appellant and therefore
were engaged by the Appellant in insurable employment for the purposes of the EI
Act and pensionable employment for the purposes of the CPP during
the above periods.
[3]
Patricia Schacher, one
of the shareholders of the Appellant, testified during the hearing. She
described the business of the Appellant as follows:
THE
WITNESS: Trinity Innovations is a small operations and manufacturing
facility. We work mainly with natural gas and a little bit of oil. So it's
typical of the oil and gas industry ‑‑ it's very cyclical. You're
either really, really busy or extremely slow. And I do believe this is what led
us many, many years ago to go towards using local venders or subcontractors ‑‑
whatever you want to [sic] all them.
Trinity
basically has no need to have a lot of people around all the time. If we get a
purchase order sent in to build five units, we build the five units, and
everybody goes home. They bring their own vehicles.
Q JUSTICE WEBB: Sorry.
When you say the five units, what are the units that you're building?
A We build units that help
deliver methanol, down [sic] hole to keep things from hydrating. That's
about the simplest explanation I can give you. Most of [sic] the them ‑‑
the one [sic] unit's called a flow divider. The other [sic] one's
called an EFC which stands for electronic flow controller. And then we also
have a solar pump unit which has a 10cc lift pump attached to it, which
basically ‑‑ all of them deliver methanol, chemical soap, something
to be injected to aid in bringing the fluid to the surface as easily as
possible with no emissions, that type of thing.
Q Thank you.
A So normally if I would get
an order for five units, I would make a few phone calls or whatever and I would
see if people were available. And if they were, then we would form a verbal
contract. They could come when they wanted. If they had other jobs, they would
come and do the work that they were asked to do. There was usually ‑‑
they would give me a pay rate that they wanted for that work, and away they
would go once the job was complete.
[4]
If the Appellant was
building a control panel for an EFC unit, it would take approximately four
hours and if the Appellant was building an entire EFC unit it would take a
couple of days. The units were large. A full unit weighs around 3,200 pounds.
It seems clear that the individuals who worked on building the units were
retained for a specific task – build a unit or part thereof. It appears that
once the orders for units were filled, the engagement of these workers ceased.
It also appears that in 2006 the Appellant was very busy but since then the
recession has had a negative impact on the business of the Appellant.
[5]
The
question of whether an individual is an employee or an independent contractor
has been the subject of several cases. In 671122 Ontario Ltd. v.
Sagaz Industries Canada Inc., [2001] S.C.J. 61, 2001 S.C.C. 59 (“Sagaz”),
Justice Major of the Supreme Court of Canada stated as follows:
46 In my opinion, there is no one
conclusive test which can be universally applied to determine whether a person
is an employee or an independent contractor. Lord Denning stated in Stevenson
Jordan, supra, that it may be impossible to give a precise definition of the
distinction (p. 111) and, similarly, Fleming observed that "no single test
seems to yield an invariably clear and acceptable answer to the many variables
of ever changing employment relations ..." (p. 416). Further, I agree with
MacGuigan J.A. in Wiebe Door, at p. 563, citing Atiyah, supra, at p. 38,
that what must always occur is a search for the total relationship of the
parties:
[I]t
is exceedingly doubtful whether the search for a formula in the nature of a
single test for identifying a contract of service any longer serves a useful
purpose.... The most that can profitably be done is to examine all the possible
factors which have been referred to in these cases as bearing on the nature of
the relationship between the parties concerned. Clearly not all of these
factors will be relevant in all cases, or have the same weight in all cases.
Equally clearly no magic formula can be propounded for determining which
factors should, in any given case, be treated as the determining ones.
47 Although there is no universal
test to determine whether a person is an employee or an independent contractor,
I agree with MacGuigan J.A. that a persuasive approach to the issue is that
taken by Cooke J. in Market Investigations, supra. The central question is
whether the person who has been engaged to perform the services is performing
them as a person in business on his own account. In making this determination,
the level of control the employer has over the worker's activities will always
be a factor. However, other factors to consider include whether the worker
provides his or her own equipment, whether the worker hires his or her own
helpers, the degree of financial risk taken by the worker, the degree of
responsibility for investment and management held by the worker, and the
worker's opportunity for profit in the performance of his or her tasks.
48 It bears repeating that the above
factors constitute a non-exhaustive list, and there is no set formula as to
their application. The relative weight of each will depend on the particular
facts and circumstances of the case.
[6]
In Royal
Winnipeg Ballet v. Minister of National Revenue, 2006 FCA 87, 2006 DTC 6323,
the dancers and the ballet company had a common intention that the dancers
would be hired as independent contractors. The Federal Court of Appeal reviewed
the relevant facts of that case as determined by the factors outlined in Wiebe
Door Services Ltd. v. Minister of National Revenue, [1986] 2 C.T.C.
200, 87 DTC 5025 (“Wiebe Door”). The Federal Court of Appeal concluded
that the relevant facts in that case did not change the intended relationship
between the dancers and the Royal Winnipeg Ballet and that the dancers were
independent contractors. Justice Sharlow of the Federal Court of Appeal made
the following comments in the Royal Winnipeg Ballet case:
65. The judge chose the following factors
as relevant to the Wiebe Door analysis (it is not suggested that he
chose the wrong factors or that there are any relevant factors that he failed
to consider):
· The indispensable element of
individual artistic expression necessarily rests with the dancers. The RWB
chooses what works will be performed, chooses the time and location of the
performances, determines where and when rehearsals will be held, assigns the
roles, provides the choreography, and directs each performance.
· The dancers have no management or
investment responsibilities with respect to their work with the RWB.
· The dancers bear little financial
risk for the work they do for the RWB for the particular season for which they
are engaged. However, their engagements with the RWB are for a single season
and they have no assurance of being engaged in the next season.
· The dancers have some chance of
profit, even within their engagement with the RWB, in that they may negotiate
for remuneration in addition to what is provided by the Canadian Ballet
Agreement. However, for the most part remuneration from the RWB is based on
seniority and there is little movement from that scale.
· The career of a dancer is
susceptible to being managed, particularly as the dancer gains experience.
Dancers engaged by the RWB have considerable freedom to accept outside engagements,
although there are significant contractual restrictions (the need for the
consent of the RWB, and the obligation to hold themselves out as being engaged
by the RWB).
· Although the dancers bear many
costs related to their engagement with the RWB and their dancing careers
generally, the RWB is obliged to provide dance shoes, costumes, tights, wigs
and certain other necessary items.
· The dancers are responsible for
keeping themselves physically fit for the roles they are assigned. However, the
RWB is obliged by contract to provide certain health related benefits and
warm-up classes.
66. The control factor in this case, as
in most cases, requires particular attention. It seems to me that while the
degree of control exercised by the RWB over the work of the dancers is
extensive, it is no more than is needed to stage a series of ballets over a
well planned season of performances. If the RWB were to stage a ballet using
guest artists in all principal roles, the RWB's control over the guest artists would
be the same as if each role were performed by a dancer engaged for the season.
If it is accepted (as it must be), that a guest artist may accept a role with
the RWB without becoming its employee, then the element of control must be
consistent with the guest artist being an independent contractor. Therefore,
the elements of control in this case cannot reasonably be considered to be
inconsistent with the parties' understanding that the dancers were independent
contractors.
67. The same can be said of all of the
factors, considered in their entirety, in the context of the nature of the
activities of the RWB and the work of the dancers engaged by the RWB. In my
view, this is a case where the common understanding of the parties as to the
nature of their legal relationship is borne out by the contractual terms and
the other relevant facts.
[7]
In D.W. Thomas Holdings Inc. v. Minister of National Revenue, 2009 FCA 371,
Justice Layden-Stevenson, stated, on behalf of the Federal Court of Appeal,
that:
5 Contrary to
the appellant's assertion, Miller J. did consider the issue of intention. In
keeping with the approach set out in Royal Winnipeg Ballet v. Canada
(Minister of National Revenue), [2007] 1 F.C.R. 35 (FCA), she examined the
evidence to ascertain whether it supported that intention and concluded that it
did not.
[8]
In this case it is
clear that it was the Appellant’s intention that all of the individuals
referred to above would be independent contractors and not employees. Two of
the individuals testified during the hearing and it was clear that it was also
their intention that they would be independent contractors and not employees.
All of the individuals kept records of the hours that they worked and submitted
invoices to the Appellant for their services. If the individual was registered
for GST purposes, the individual also charged GST.
[9]
In Royal
Winnipeg Ballet, the facts related to the dancers and the circumstances of
their work were not sufficient to alter the arrangement from that which was
intended by the parties. Therefore it seems to me that “in keeping with the
approach set out in Royal Winnipeg Ballet”, the relevant facts in this
case, as determined by the factors as set out in Wiebe Door and Sagaz, would have
to more strongly indicate an employer-employee relationship than did the facts
in the case of the Royal Winnipeg Ballet in order for these individuals to
be considered to be employees. In both the Royal Winnipeg Ballet case
and in this case, there was an intention to create an independent contractor
relationship and not an employer-employee relationship.
[10]
With respect to the
control factor, the evidence in this particular case was that the amount of
control that the Appellant had over these individuals would have been less than
the amount of control that the Royal Winnipeg Ballet had over the ballet
dancers. In the Royal Winnipeg Ballet case, Justice Sharlow described
the degree of control that the Royal Winnipeg Ballet had over the dancers as
“extensive”. The dancers in the Royal Winnipeg Ballet case would not
have been allowed to set their own hours and were only allowed to work for
others with the consent of the Royal Winnipeg Ballet. As noted in the above
decision:
The RWB chooses what works will be performed, chooses the
time and location of the performances, determines where and when rehearsals
will be held, assigns the roles, provides the choreography, and directs each
performance.
[11]
The individuals in
this case were able to set their own hours of work, although within certain
limits, as they were retained to build units that would have to be ready for
delivery when the customer wanted the unit. Each individual had a key to the
Appellant’s premises and therefore could come and go as they chose. Patricia Schacher
described the hours of work as follows:
A … Where Matt is
concerned here ‑‑ when I first talked to Matt about doing some
small work for Trinity, Matt was an up and coming hockey player, and he needed
to be able to go to morning practice.
And
sometimes he would not get there until ‑‑ he would, you know, say,
I think I can be there by 10. Can I work from 10 to 2, and then I have to go
back to practice, and I have a game. And that worked just fine for me. If he
came and went as he pleased.
Q What
about the other individuals? How were their hours determined?
A They would set
their own hours. If they could get the work done I wanted ‑‑ and
that's how they did it. If they had another job to go to in the morning, they
did that. If they could be at my shop by afternoon and they knew they could get
their work done, that was fine. It was their job to keep track of their own
hours; I didn't do that.
[12]
The individuals in
this case were able to work for other clients and did not need the consent of
the Appellant to do so.
[13]
Some of the work was
done at the Appellant’s facility and some work (welding, painting, and powder
coating) was done at a facility that was controlled by Patricia Schacher’s
ex-husband. It appears that all of the individuals (except Norman Ronsberg and
Sandra Bonnett) were involved in building the units. Norman Ronsberg would
deliver supplies from Camrose and ride along on deliveries of the units. It was
a requirement that there be two people in the vehicle that was delivering the
unit to the oil field. Sandra Bonnett would clean the premises of the Appellant
when she was called to do so and would also help with some office work.
[14]
In the case of Direct
Care In-Home Health Services Inc. v. Minister of National Revenue,
2005 TCC 173, Justice Hershfield made the following comments in relation
to control:
11 Analysis of this factor involves a determination of who
controls the work and how, when and where it is to be performed. If control
over work once assigned is found to reside with the worker, then this factor
points in the direction of a finding of independent contractor; if control over
performance of the worker is found to reside with the employer, then it points
towards a finding of an employer-employee relationship.* However, in times
of increased specialization this test may be seen as less reliable, so more
emphasis seems to be placed on whether the service engaged is simply “results”
oriented; i.e. “here is a specific task -- you are engaged to do it”. In such
case there is no relationship of subordination which is a fundamental
requirement of an employee-employer relationship.* Further, monitoring the
results, which every engagement of services may require, should not be confused
with control or subordination of a worker.*
12 In the case at bar, the Worker was free to decline an
engagement for any reason, or indeed, for no reason at all. …
(emphasis added)
(* denotes a
footnote reference that was in the original text but which has not been
included.)
[15]
The arrangement with the
individuals appears to be very similar to the arrangement described by Justice
Hershfield as the individuals who were building the units were assigned
specific tasks in relation to the assembly of the units. They were retained to
build units for the Appellant and when the orders were filled, their tasks were
completed. It is also clear that the individuals were free to decline an
engagement to build a unit or a number of units.
[16]
While there would be
some supervision of the workers in this case, the supervision of these workers
would be less than the supervision of the dancers by the Royal Winnipeg Ballet.
[17]
With respect to the
ownership of equipment, the Appellant provided some of the tools that the
individuals used and the individuals also provided some of their own tools. The
Appellant had a truck and a trailer that was used to deliver the finished units
to the customers. The individuals would use their own trucks to pick up
supplies and charge an hourly rate for the use of their vehicles. Sandra Bonnett
purchased her own cleaning supplies. The Appellant provided a machine for
cleaning cement floors. In Royal Winnipeg Ballet the dancers bore many
costs but the Royal Winnipeg Ballet was obliged to provide dance shoes,
costumes, tights, wigs and certain other necessary items.
[18]
It does not appear
that the individuals would have been able to hire other workers to perform the
tasks that were assigned to them. If an individual would have been unable to
perform a certain task, it appears that the Appellant would simply have
retained someone else to do that task. In the Royal Winnipeg Ballet
case, there was no discussion with respect to whether or not the dancers could
hire any helpers but it would seem illogical to suggest that the dancers could
hire any person to replace them in the production.
[19]
With respect to the
degree of financial risk/opportunity for profit, the individuals had little
financial risk. In the Royal Winnipeg Ballet case, the dancers, as
acknowledged by the Federal Court of Appeal, had little financial risk.
[20]
With respect to the
opportunity for profit, the dancers with the Royal Winnipeg Ballet could
negotiate for additional remuneration, although most were paid in accordance
with a predetermined scale. In this case the hourly rate that would be paid to
the individuals was determined before the individuals commenced work. The
individuals would state what rate that they were seeking and if that rate was
acceptable, they would be retained. If not, either the worker would not be
retained or the Appellant would try to negotiate a different rate. In Royal
Winnipeg Ballet the dancers were allowed to accept outside engagements
provided that they had the consent of the Royal Winnipeg Ballet and provided
that they held themselves out as being engaged by the Royal Winnipeg Ballet. In
this case, there were no such restrictions imposed on the individuals in
accepting outside engagements.
[21]
In the Royal
Winnipeg Ballet case, the dancers did not have any management or investment
responsibilities with respect to their work with the Royal Winnipeg Ballet. In
this case the individuals did not have any management or investment
responsibilities with respect to their work with the Appellant.
[22]
It should
also be noted that in this
case Sandra Bonnett carried on her business under the name “Cleaning with Care”
and she had her own liability insurance coverage.
[23]
As a result, I find
that the relevant facts related to the engagement of the individuals by the
Appellant as determined by the factors as set out in Wiebe Door and
Sagaz do not suggest more strongly an employer/employee relationship
than did the facts in Royal Winnipeg Ballet and since there was clearly
a mutual intention to create an independent contractor relationship, the
individuals were independent contractors and not employees of the Appellant
during the period under appeal.
Signed at Halifax,
Nova Scotia, this 16th day of November, 2010.
“Wyman W. Webb”
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