Citation: 2010 TCC 601
Date: 20101125
Dockets: 2009-3455(CPP),
2009-3454(EI)
BETWEEN:
RYAN THOMAS McKENNA,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Bédard J.
[1]
These appeals are from
decisions by the Minister of National Revenue (the “Minister”) under the Canada
Pension Plan (“CPP”) and the Employment Insurance Act (the “Act”)
that during the period from October 2, 2008 to December 10, 2008 (the
“Relevant Period”) Ryan Thomas McKenna (the “Worker”) was not employed by
Rick’s Fine Drywall Ltd. (the “Payor”) in pensionable and insurable employment.
[2]
The Payor was in the
drywall installation business, installing drywall for a condominium developer
in Fort McMurray, Alberta, which was the Payor’s sole
client. The Payor supplied only the labour required to hang drywall for the condominium
developer. The Worker was hired by the Payor, under a verbal agreement, to
install drywall.
[3]
The Minister’s position
is that the Worker was an independent contractor and was not employed under a
contract of service.
[4]
Each case in which the
question of whether a worker is an employee or an independent contractor arises
must be dealt with on its own facts. The four components (control, ownership of
tools, chance of profit and risk of loss) of the composite test enunciated in Wiebe
Door Services Ltd. v. M.N.R., 87 DTC 5025, and 671122 Ontario
Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983, must each
be assigned its appropriate weight in the circumstances of the case. Moreover,
the intention of the parties to the contract has in recent decisions of the
Federal Court of Appeal become a factor whose weight seems to vary from case to
case (Royal Winnipeg Ballet v. M.N.R., 2006 FCA 87; Wolf v.
Canada, [2002] 4 F.C. 396; City Water International Inc. v.
Canada, 2006 FCA 350; National Capital Outaouais Ski Team v. M.N.R.,
2008 FCA 132).
[5]
The facts on which the
Minister relied to render his decision in the CPP case (2009‑3455(CPP))
and in the EI case (2009-3454(EI)) are the same. Those facts are in each case
set out in paragraph 10 of the Reply to the Notice of Appeal, as follows:
a.
the Payor was incorporated on July 2, 2008;
(no knowledge)
b.
Ricky Leclerc was the Payor’s sole shareholder; (no
knowledge)
c.
Ricky Leclerc was also the Payor’s President and
Director; (no knowledge)
d.
the nature of the Payor’s business was drywall
installation; (agreed)
e.
during the period under appeal, the Payor was
operating in Fort McMurray, Alberta; (agreed)
f.
the stated intent of the Payor in engaging the
Appellant was that the Appellant would be a sub‑contractor, while the
Appellant’s stated intention was to be an employee; (disagreed)
g.
during the period under appeal, the Payor
engaged the services of another worker (the “Other Worker”) and considered the
Other Worker to be a sub‑contractor; (no knowledge)
h.
the Other Worker’s stated intention was to be a
sub‑contractor and not an employee of the Payor; (no knowledge)
i.
the Appellant had no previous experience in
hanging drywall; (agreed)
j.
the Appellant received 1 or 2 days’ training
from Ricky Leclerc after which the Appellant was able to work independently; (disagreed)
k.
neither the Appellant nor the Payor kept a
record of the hours the Appellant worked; (disagreed)
l.
during the period under appeal, the Payor
obtained contracts from a condo developer; (no knowledge)
m.
the Payor supplied the labour required to hand
drywall for the condo developer; (agreed)
n.
the condo developer provided all the materials
needed to complete the work; (no knowledge)
o.
the Appellant’s and the Other Worker’s
remuneration was based on a fixed percentage of each of the Payor’s contracts; (disagreed)
p.
the Appellant and the Other Worker were each
paid semi‑monthly, by cheque, on or around the 15th and 30th
of each month; (agreed)
q.
it was the Payor’s usual practice to include the
notation “sub‑contract” on the Appellant’s and the Other Worker’s
cheques; (no knowledge)
r.
the hours of work were dependant [sic] on the
condo developer’s timetable and were further determined by mutual agreement
between the Appellant, the Other Worker and Ricky Leclerc, working as a team; (disagreed)
s.
during the period under appeal, the hours of
work varied from 50 to 60 hours per week, usually up to 6 days per week; (agreed)
t.
the Appellant and the Other Worker were each
free to engage a helper provided the helper was paid from their respective
share of the revenues; (disagreed)
u.
Ricky Leclerc, the Appellant and the Other
Worker were all accountable to the condo developer for the quality of the work
performed by the team; (disagreed)
v.
the Appellant paid his own expenses to travel to
Alberta; (agreed)
w.
the Appellant purchased a drill (screw‑gun)
used in drywall installation, for which he was not reimbursed; (agreed)
x.
the Payor provided the Appellant with a used
tool‑belt; (agreed)
y.
the condo developer provided shared living
accommodations to the workers actively working on its construction projects;
and (no knowledge)
z.
the Payor did not withhold income tax or any
other statutory payroll deductions from either the Appellant or the Other
Worker. (agreed)
[6]
Robert A. Grant and
Ricky Leclerc testified in support of the Respondent’s position. In support of
the Worker’s position, only the Worker testified.
[7]
I would like to make a
few comments on the witnesses’ credibility. First, Mr. Leclerc and the Other
Worker came and they simply told their story. They were not vague. They addressed
themselves to the specific questions asked. They held up remarkably well under
cross‑examination. Mr. Leclerc provided details and examples and
documentary evidence (see Exhibits R‑2 and R‑3), especially in
regard to the basis on which the Payor was paid by the condominium developer
and the basis on which the Payor’s gross revenues were shared between the Worker,
the Other Worker and him, operating as a team. On the other hand, the Worker
provided evasive explanations. Moreover, I would say that the hesitancy of the
Worker, the amount of time he took to answer questions, and his attitude raised
doubt in my mind as to the Worker's credibility. His testimony that he was not
sure if the Payor had withheld income tax or other statutory payroll deductions
from his remuneration was simply not credible since he received the gross
amount of that remuneration (i.e. $30 an hour). It is also implausible that a worker
(one who had been an employee for many years and who consequently was familiar
with the statutory payroll deductions, with T4 slips and with Records of
Employment) whose stated intention was to be an employee never inquired of the
Payor why the statutory deductions were not made and why a T4 slip and a Record
of Employment were not issued. For all these reasons, I preferred
Mr. Leclerc and the Other Worker's version of the facts.
The Worker’s testimony
[8]
The Worker’s testimony was
essentially the following:
i.
Before he was engaged
by Mr. Leclerc to perform services for the Payor, he worked for Boncor Building
Products (“Boncor”) as an employee. I would point out immediately that the
reasons invoked by the Worker in his Notice of Appeal and in his Application
for Employment Insurance Benefits (see Exhibit R‑2, pages 8 and
9) are quite different. In his Notice of Appeal, he alleged that he left his
job at Boncor “which was a full time permanent position that had set hours of 40
a week with free health and dental benefits, which [he] had worked at for four
years, because Ricky had guaranteed [him] 2‑3 years of work with his
company”. However, in his Application for Employment Insurance Benefits, the Worker
essentially declared that he left his job at Boncor due to dangerous work
conditions and to a bad relationship with his “main manager”. In his testimony,
he spoke in an evasive way about the discussions that took place between
Mr. Leclerc and him before he entered into an oral agreement with the
Payor. He said that Mr. Leclerc promised him that he would make a lot more
money with the Payor than he was making with Boncor since he would be paid at an
hourly rate of $30 and be working an average of 50 hours a week.
ii.
Both the Payor and he
kept a record of his hours worked.
iii.
He was not aware that
the Payor was paid by the condominium developer on a square‑foot basis.
iv.
He did not notice or
question the notation “sub‑contract” on the cheques he received from the
Payor.
v.
He was not aware that
the Other Worker’s remuneration was based on a fixed percentage of the Payor’s
revenues.
vi.
He could not and did
not hire substitutes or helpers.
vii.
The hours of work were
determined by Mr. Leclerc.
viii.
He was not responsible
for any defects in his work and did not have to do repairs on his own time or at
his own expense.
ix.
During the relevant
period he shared a condominium with Mr. Leclerc. He admitted that the
living accommodation was free, but said he was not aware whether it was the
Payor or the condominium developer that was providing this free living
accommodation.
x.
Since he had no
experience in hanging drywall, he was constantly supervised and monitored by
Mr. Leclerc.
xi.
He had to inform
Mr. Leclerc of any leave he required. He admitted that he had required no
leave during the Relevant Period.
xii.
At the beginning of his
relationship with the Payor, the Payor provided him with all the tools
necessary to install drywall (a drill, a measuring tape, a used tool belt). A
month later, he decided to buy his own tools. He paid $450 for the drill, $30
for the belt and $20 for the knife.
xiii.
He reported his income
as employment income and paid tax on that income. He was not sure if the Payor had
withheld income tax or any other statutory payroll deductions from his remuneration.
He realized that the Payor had not made these deductions when the CRA called
him (after he had filed his income tax return for the relevant year) to tell
him that he had not paid enough tax on his employment income.
[9]
Mr. Leclerc’s
testimony was essentially the following:
i.
He stated clearly to
the Worker that he would be engaged by the Payor as a subcontractor. He also
declared that during the Relevant Period the Payor hired Mr. Robert A. Grant
(the “Other Worker”) and considered him to be a subcontractor. I would point
out immediately that the Other Worker testified that Mr. Leclerc had clearly
stated to him that he would be engaged by the Payor as a subcontractor. He
added that his own stated intention was to be a subcontractor, and not an
employee of the Payor.
ii.
The Payor never kept a
record of the hours worked by the Worker and the Other Worker.
iii.
The Worker’s and the Other
Worker’s remuneration was based on a fixed percentage of each of the Payor’s
contracts. He explained that the Payor was paid on square‑footage basis,
usually between $0.30 and $0.35 a square foot. He added that the Payor’s gross revenues
were shared in the following manner: 20% to the Worker, 60% of the remainder to
him and 40% to the Other Worker. He also explained that the Other Worker
received a percentage of the Payor’s gross revenues higher than that paid to the
Worker simply because the Other Worker was more experienced and productive.
Mr. Leclerc explained that the Worker and the Other Worker were perfectly
aware of how the Payor’s gross revenues were calculated since they received
with their remuneration a sheet showing the number of square feet of drywall
installed by the Payor on each job, the total square footage of drywall installed,
the amount invoiced to the condominium developer, and lastly, the calculation
of how the amount so invoiced was shared. To corroborate his testimony in this
regard, he filed in evidence a copy of a cheque issued to the Worker on December 8,
2008 in the amount of $2,948.56 (Exhibit R‑1) and a copy of the
sheet (Exhibit R‑3) he gave to the Worker (and to the Other Worker) showing
the figures underlying this payment of $2,984.56.
iv.
It was the usual
practice to include the notation “sub‑contract” on the Worker’s and the Other
Worker’s cheques (see Exhibit R‑2).
v.
The Worker and the Other
Worker were each paid by cheque when the Payor was paid by the condominium developer,
usually semi‑monthly on or around the 15th and the 30th
of each month.
vi.
The hours of work were
dependent on the developer’s timetable and were further determined by mutual
agreement among Mr. Leclerc, the Worker and the Other Worker, working as a
team. Mr. Leclerc added that during the Relevant Period the hours worked
varied from 50 to 60 hours a week, spread over up to 6 days a week.
He testified lastly in this regard that all worked the same hours during the
Relevant Period.
vii.
The Worker and the Other
Worker were each free to engage a helper, provided the helper was paid from
their respective share of the revenues.
viii.
The Worker and the Other
Worker had the right not to work. Mr. Leclerc admitted, though, that the Worker
and the Other Worker did not exercise that right and that if they had done so
they would not have been paid for the time during which they did not work.
ix.
Mr. Leclerc, the Worker
and the Other Worker were all accountable to the condominium developer for the
quality of the work performed by the team. He added that during the Relevant
Period the team never had to redo a job.
x.
The condominium developer
provided free shared living accommodation to workers actively working on its
construction project. Mr. Leclerc added that the condominium developer
provided the Worker and him with a condominium that they shared during the
Relevant period.
xi.
During the Relevant
Period, the Payor obtained contracts from the condominium developer. The Payor
supplied the labour required to hang drywall for the condominium developer and
the latter provided all the materials needed to complete the work.
xii.
At the beginning of
their relationship, the Payor provided the Worker with all the tools (except
the drill, which was provided by the condominium developer) necessary to
install drywall, namely a used tool belt, a measuring tape and a knife to cut
the drywall. He added that after a few weeks of work the Worker purchased his
own tools (including a $600 drill), for which he was not reimbursed.
xiii.
After a couple of days,
the Worker needed no supervision since the tasks he was performing did not require
any particular skills. He explained that the Worker’s tasks consisted
essentially in getting the materials for the Other Worker and him and screwing
screws with the drill.
xiv.
The Worker and Other Worker
were able to work for others.
Mr. Grant’s testimony
[10]
Mr. Grant (a
friend of Mr. Leclerc’s) essentially corroborated Mr. Leclerc’s
testimony. We also learnt from his testimony that:
i.
he was allowed to work
for others and that he did so during the Relevant Period;
ii.
he provided his own
tools;
iii.
he reported his income
as business income;
iv.
he did not have a
business number or a business name;
v.
he worked for the Payor
only 6 months.
[11]
The evidence also revealed
the following:
i.
The Appellant did not
have a business number or a business name and did not have previous experience
in the Payor’s particular field of business.
ii.
The Payor did not
provide the Worker with a Record of Employment.
iii.
The Payor did not issue
to the Worker a T4 or other information slip.
iv.
The Appellant paid the
income taxes payable on the income he reported when he filed his 2008 income tax
return.
Analysis and conclusion
[12]
Starting with the issue
of intention, what evidence do I have of the Payor’s and the Worker’s intention
as regards the legal relationship they entered into? Firstly, it should be
pointed out that there is no written agreement to which I can refer. Secondly,
the Payor stated that its intent in engaging the Worker was that the Worker
would be a subcontractor, while the Worker stated that his intention was to be
an employee. So I cannot infer from the evidence that the parties shared a common
understanding of the legal relationship they entered into. Where the intention
of the parties cannot be ascertained, it is quite proper, indeed necessary, to
look at all the facts to see what legal relationship they reflect. In that
regard, the four components of the composite test enunciated in Wiebe Door
are relevant and helpful in ascertaining both the intent of the parties to the
contract and the legal nature of that contract.
[13]
Turning now to the
facts, what factors suggest that the Worker was in business on his own account?
Control
• The Worker was not
really under any direct supervision by Mr. Leclerc since the tasks he was
performing did not require any particular skills. After a day or two of
training, the Worker knew what to do.
• The hours of work
were dependent on the condominium developer’s timetable and were further
determined by mutual agreement among the Worker, the Other Worker and
Mr. Leclerc, working as a team.
• He could work for someone else.
• He could have someone to help him.
Chance of profit/Risk of
loss
1.
Considering the way in
which the Worker was remunerated, there was in reality an opportunity for him
to increase his income: in fact, the more effective were the Worker, the Other Worker
and Mr. Leclerc, working as a team, the greater was the opportunity to
increase his income.
2.
There was a liability
exposing the Worker to a risk of loss: in fact, if a job was badly done by the
Worker, the Other Worker and Mr. Leclerc, working as a team, they had to
redo it at their own expense.
Tools
3.
The Worker provided his
own tools even though he was not obligated to do so.
[14]
What factors suggest
that the Worker was an employee of the Payor?
Tools
1.
At the beginning, the
Payor and the condominium developer provided all the tools and equipment required.
Responsibility for
investment and management
2.
The Worker had no such
responsibility.
[15]
Here we have a worker,
who, if I accept his submission, was an employee, and yet had a chance of
profit and risk of loss, provided his own tools, even though he was not
obligated to do so, and who did not really work under the supervision and
direction of Mr. Leclerc. In fact, the hours of work and the work to be performed
were dependent on the condominium developer’s instructions, directives and
timetable, and the work and the hours of work were further determined by mutual
agreement among the Worker, the Other Worker and Mr. Leclerc, working as a
team. I cannot see that in these circumstances the Worker was an employee.
[16]
For these reasons, the
appeal is dismissed.
Signed at Ottawa, Canada, this 25th day of November 2010.
“Paul Bédard”
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