Citation: 2010TCC569
Date: 20101104
Docket: 2009-758(EI)
BETWEEN:
TOM HUMPHRIES,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller J.
[1]
The issue in this
appeal is whether the Appellant was employed in insurable employment by
Stoneridge Inc. (the “Company”) for the period April 30, 2007 to December 15,
2007.
[2]
The Minister of
National Revenue (the “Minister”) decided that the Appellant was not engaged by
the Company pursuant to a contract of services in accordance with paragraph
5(1)(a) of the Employment Insurance Act (the “Act”); and,
in the alternative, if a contract of services existed, then the Appellant’s
employment was excluded employment as he and the Company were not dealing with
each other at arm’s length in accordance with paragraph 5(2)(i) of the Act.
[3]
In support of his
decision, the Minister made the following assumptions of fact:
(a)
the Payor was incorporated in 1994;
(b)
the Appellant and his spouse each held 39% of
the Payor’s shares and the Appellant’s brother held the remaining 22% of the
shares;
(c)
the Payor’s primary business activity was
pavement marking;
(d)
the Payor’s business was seasonal, generally
from May to December;
(e)
the Payor’s business activities were conducted
in Newfoundland and in Ontario;
(f)
the Appellant was responsible for the Payor’s
day-to-day operations;
(g)
the Appellant made all the Payor’s important
decisions;
(h)
the Appellant established his hours of work;
(i)
the Appellant was not supervised and was not
accountable to anyone for his time;
(j)
the Appellant’s stated rate of pay was $825 per
week;
(k)
for the period under appeal, the Appellant was
issued a Record of Employment (the “ROE”), serial number E06866188, indicating
1240 hours of work and total earnings of $21,450.00;
(l)
during the period under appeal, the Appellant
was not paid;
(m) in addition to his participation in the Payor’s business activities,
the Appellant was also the sole proprietor of a business operating under the
name Quality Line Marking (“QLM”);
(n)
QLM’s primary business activity was also
pavement marking;
(o)
QLM operated in Newfoundland and in Ontario;
(p)
QLM’s operations were seasonal, generally from
May to December;
(q)
The Payor and QLM had the same telephone number,
both in Newfoundland and in Ontario;
(r)
The Appellant’s spouse was the only person on
the QLM payroll; and
(s)
QLM and not the Payor owned the line marking
equipment used by the Payor and QLM in their respective business activities.
11. In concluding that the Appellant and the Payor were not dealing
with each other at arm’s length, the Respondent relied on the following
assumptions of fact:
(a)
the facts stated in paragraph 10 above;
(b)
for the last several years, the Payor has had no
other workers;
(c)
for the fiscal periods ending April 30, 2006 and
April 30, 2007 the Payor had no other material expenses other than the expenses
claimed in respect of the Appellant’s wages; and
(d)
the Appellant and the Payor did not provide
sufficient information to allow the Respondent to review and analyze the
circumstances of the Appellant’s engagement with the Payor.
[4]
The Appellant had an
appeal before this Court with the same issue for the period May 16, 1994 to
September 30, 1994. The Reasons for Judgment in that appeal disclosed that the
Appellant had a diploma in civil engineering technology. He had worked with a
major Ontario firm as project manager, site manager,
estimator, and employee supervisor.
[5]
In 1994, the Appellant
caused the Company to be incorporated in Newfoundland. Prior to 1997, the Company performed work in both Newfoundland and Ontario. However, after 1997, it worked only in Ontario and its business was the cleaning and removing of
paint from structures by soda blasting. The Appellant candidly explained that
the Company’s business was seasonal; and, on the advice of his accountant and
lawyer, he set up the shareholder structure so that employment insurance
benefits (the Benefits) would be available. He and his spouse, Wanda, each
owned 39% of the Company’s shares and his brother owned 22% of the shares.
[6]
It was his evidence
that he and his spouse lived in Deer
Lake, Newfoundland where they
had built a house. They worked in Ontario from April to
November or December and then they returned to Newfoundland for the winter where they drew Benefits.
[7]
During the period and
for several years prior to 2007, the Appellant was the only worker for the
Company. He was responsible for the Company’s day-to-day operations. He did not
have to report to anyone and he supervised himself. His hours of work depended
on the jobs that had to be done and he was responsible for getting those jobs
for the Company. He stated that he worked Monday to Friday from 8 A.M. to 8
P.M. He earned $825 weekly for the period.
[8]
The Appellant explained
that it was his intention to have the Company operate in St. John’s, Newfoundland; and, in 2007, he trained his brother to
perform soda blasting. However, when the Appellant’s application for the
Benefits was refused, his brother’s financial situation would not allow him to
work for the Company as he needed the Benefits to be available to him.
[9]
During this same period,
the Appellant operated a business called Quality Line Marking (“QLM”) as a sole
proprietor. Its business was that of pavement marking and it operated only in Ontario after 1997. He explained how he and his spouse,
Wanda, performed their duties for QLM. During the period June to December 2007,
Wanda was the line painter assistant and the Appellant operated the line
painter machine. I gathered that they were the only workers for QLM in 2007.
However, Wanda was the only person on the QLM payroll. According to the Record
of Employment (ROE) filed with Services Canada, Wanda worked 746 hours during
the period June 4, 2007 to December 1, 2007 and she received insurable earnings
of $12,606. The ROE was signed by the Appellant.
[10]
The ROE filed with
Services Canada on behalf of the Appellant was signed by Wanda and it stated
that the Appellant’s occupation was “Construction Project Co-ordinator”; his
insurable earnings were $21,450; his insurable hours were 1240 and the employer
was the Company.
[11]
The question that I must
decide is whether the Appellant was engaged by the Company as an employee. In 671122
Ontario Ltd. v. Sagaz Industries Canada Inc.[1], Major J. described the analysis that
should be used when making that decision. He wrote:
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.
(emphasis added)
[12]
These factors described by Major
J. were those given in Wiebe Door. In Combined Insurance Company of America v.
M.N.R.[2],
Nadon, J.A. reviewed the case law and stated the principles to be applied as
follows:
[35] In my view, the following
principles emerge from these decisions:
1. The relevant facts,
including the parties’ intent regarding the nature of their contractual
relationship, must be looked at in the light of the factors in Wiebe Door,
supra, and in the light of any factor which may prove to be relevant in the
particular circumstances of the case;
2. There is no
predetermined way of applying the relevant factors and their importance will
depend on the circumstances and the particular facts of the case.
Although as a general rule the control test is of special
importance, the tests developed in Wiebe Door and Sagaz, supra,
will nevertheless be useful in determining the real nature of the contract.
[13]
It was the intent of
the Appellant that he be engaged by the Company as an employee. In fact, the
Company was structured to accomplish this goal. However, when I consider all of
the evidence presented in this appeal and the assumptions made by the Minister,
which were not rebutted by the Appellant, I have concluded that a contract of
service did not exist between the Appellant and the Company.
[14]
I have not considered
whether the relationship between the Appellant and the Company was a sham as it
was not assumed by the Minister. However, the ROE filed with Services Canada on
behalf of the Appellant has raised several questions. One question is why are
the duties listed in the ROE different than those described by the Appellant at
the hearing?
[15]
The Appellant was responsible
for all aspects of the Payor’s business. He sought and obtained the clients for
the Company; he was the only worker for the Company and he determined his hours
of work. He stated that if he had more work than he could complete, he would
have subcontracted the work. Neither the Company nor by extension, its
shareholders, had any control over the Appellant or the work he performed. The
Appellant was the directing mind of the Company.
[16]
I have also considered
the fact that the Appellant’s spouse and brother, who owned 39% and 22% of the
Company’s shares, respectively, did not testify. The evidence showed that they
were not involved in any manner in the operation of the Company.
[17]
The tools used by the
Appellant to perform his duties were either rented by him or were owned by him.
He stated that he was told not to hold the equipment in the Company and
therefore QLM held the equipment and rented it to the Company. However, QLM is
the Appellant. He had no documents to support that the Company paid rent for the
equipment it used.
[18]
The Minister assumed
that the Appellant was not paid by the Company. Aside from his testimony, the
Appellant did not rebut this assumption. He did not submit any cheques or bank
statements to support his testimony. One would have expected that if the
assumption was not correct, the Appellant would have come to this hearing
prepared to give documentary evidence to support his testimony. His former
appeal before this Court was dismissed on the basis that he did not cash the
pay cheques he received from the Company until after the period of employment.
[19]
The fact that the
Appellant was not paid by the Company is in itself sufficient reason to find
that a contract of services did not exist between the Appellant and the
Company. As stated by Tardiff J. in Laverdière v. Canada (Minister of National Revenue)[3]:
51 The Act insures only genuine contracts of
service; a contract of employment under which remuneration is not based on the
period during which work is performed cannot be defined as a genuine contract
of service. It is an agreement or arrangement that is inconsistent with the
existence of a genuine contract of service since it includes elements foreign
to the contractual reality required by the Act.
[20]
The Appellant did not
give any evidence with respect to the Company’s clients. I do not know if the
Company had clients in 2007; who the clients were; how much the Company earned;
how the Appellant’s wages were determined; if the Company had any books and
records. There was a definite paucity of documentary evidence in this appeal.
[21]
In his appeal for the
1994 period, Bell J. found that a contract of services existed between the
Appellant and the Company. However, he dismissed the appeal because he found
that the Appellant and the Company did not operate at arm’s length.
[22]
When I considered all
of the evidence that was presented at the hearing of the present appeal, I have
concluded that the Appellant was not employed by the Company, during the
period, pursuant to a contract of services. The facts presented to me were very
different than those presented to Bell J. In the former appeal, the Company was
engaged in the business of pavement marking; all shareholders were employed by
the Company and had knowledge of the Company’s business. The Company operated
in Newfoundland and Ontario.
[23]
I do not have to
consider whether the Appellant was employed in excluded employment because I
have concluded that the Appellant was not engaged by the Company pursuant to a
contract of services. For all of the above reasons, the appeal is dismissed.
Signed at Ottawa, Canada, this 4th day of November 2010.
“V.A. Miller”
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