Citation: 2010 TCC 461
Date: 20100914
Dockets: 2009-2455(EI)
2009-2454(CPP)
BETWEEN:
DONG SUN CHOI,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
ELIZABETH HELPS,
Intervenor.
REASONS FOR JUDGMENT
Hershfield J.
[1] The Appellant
operates a tutoring business and engaged a Ms. Elizabeth Helps as a tutor at
the premises at which the tutoring occurs. I will refer to Ms. Helps as the Worker.
[2] The Appellant
appeals the determination by the Minister of National Revenue (the “Minister”)
that the Worker was engaged in insurable employment and pensionable employment
during the period January 1, 2007 to December 31, 2007.
[3] The Appeals were
heard on common evidence.
[4] The Appellant
relies heavily on a written agreement entered into between him, operating under
the name Dong Sun Choi Starlet Leaders Club (“Starlet”), and the Worker.
[5] That agreement has
an independent contractor provision but it is worded strangely. It says Starlet
is a contractor and the contractee is the Worker and that the contractor,
Starlet, is engaged as an independent contractor to provide services to the
contractee, the Worker.
[6] It also says the
contractee, the Worker, is to pay the contractor, Starlet, at the rate of $18
dollars per hour. It is clear from the common evidence of the parties that the
$18 dollars per hour is the rate being paid to the Worker by Starlet even
though the written agreement states that it is payable to the contractee,
Starlet. Admittedly, this appears to be a simple error likely caused by
language difficulties. The Appellant is Korean and has difficulty with English
to the point of requiring an interpreter. He could easily have misunderstood
who is who in filling out a form contract presumably prepared for him by
someone else.
[7] On the other hand,
he testified at times that the tutoring business or businesses were that of the
tutors and that he just facilitated the introduction of students to the tutors
and provided the premises for the Worker and other tutors to carry on their
business.
[8] Indeed his
accountant, who testified at the hearing, stated that the concept or business
model was for Starlet to charge students two fees: one for the tutor in the
context of the tutor providing a service directly to the student and one for
his service as acting as the facilitator and provider of the physical facility.
This contemplates the Appellant as some sort of agent for the Worker conveying
her fee to, and collecting her fee from, students all on her behalf.
[9] The Appellant even
testified that the tutors set their own fees and that he just passed it on.
[10] This is a totally
bizarre and totally fictitious portrayal of the real business operation
conducted by Starlet. It is a crude distortion of the true nature of his
business which clearly and unequivocally is to operate an after school hours
tutoring program for Korean school children who are having language related and
other academic problems at school. Starlet offered one-on-one tutoring and
imposed on the Worker a strict regime in respect of the curriculum, the
materials, testing, reporting and even imposing how the tutoring had to be
done. He sought out students
offering tutoring in English reading, spelling, grammar and vocabulary and
hired tutors to perform that role for his school under his direction. An example of the extent
of his direction aside from setting the curriculum was his insistence that the Worker
curtail her preference or tendency to use games as a teaching tool. Indeed, the
Appellant directed her not to tutor in this fashion and directed her to follow
the program he set and wanted followed.
[11] Further, the Appellant was responsible for resolving
complaints or issues with parents, not, in my view, because of language
differences as asserted by the Appellant, but rather because the Worker had no contractual
relationship with the students or their parents. That relationship was
singularly between the parents and the Appellant and the Appellant was not
acting as any sort of agent on behalf of the tutor in that regard.
[12] In summing up his
argument, the Appellant stressed as a main point that his control and
supervision of tutors and direct dealing with parents was a cultural
requirement that had to be considered in a different light than it might be
considered in other contexts. He said he knew the parents of the Korean
children expected a strict regime of strict lessons, strict testing and
frequent reporting not games. Accordingly, he required the Worker to do regular evaluations of the student’s work
which he had to supervise to ensure the Korean parent’s expectations were met. This may be true.
Indeed, I accept that it probably is true and that without his keen sense of
what was required to make his businesses a success, his school would lose
students. He had to be the Principal, so to speak. He needed the Workers to be
subordinate to his direction. This comes through loud and clear from his own
testimony, as well as that of the Worker.
[13] The Worker’s
subordination to the Appellant’s direction has no doubt created a
Master/Servant relationship in respect of which I find that the Worker has been
retained under a contract of service. The reason he needed to invoke this regime
and to have this control, is not relevant. That is, it is the nature of the
relationship and not the reasons for establishing it that determines the status
of the Worker. To imply, as he might want to, that this regime was set up on
her behalf to enhance her business is nonsense. This is his school and he needs
tutors to teach his method or his business suffers.
[14] Lest it appears that
I have put too much emphasis on control in the determination of the Worker’s
engagement under a contract of service as opposed to a contract for services, I
will briefly run through the Wiebe Door Services Ltd. v. M.N.R. tests and other
tests applicable to that determination.
[15] One factor in that broader
analysis most certainly requires a determination of the degree of control that
the Appellant has over the Worker. While I have already expressed my views on
this, it is necessary for me to consider some points that might favour the
Appellant’s position.
[16] The Appellant
suggested that the Worker can work when she wants and there is evidence that
she took a considerable number of days off and that he exercised no control
over that. She was, to an extent, free to tutor as and when she wanted.
[17] The Worker testified
that she did take a number of days and time off for sickness and other reasons including
taking off the entire summer when the school teaching model changed from a
one-on-one model to a classroom model run during the day instead of after
school. That was not a tutoring role she wanted to participate in and she was
free to opt out.
[18] While this freedom
of times to work is most often more indicative of an independent contractor
status than an employment status, it does not override the overwhelming
evidence that she worked in a subservient capacity. Teachers who have more
control over their teaching methods might be employees because of their
requirement to attend their work at regular hours but teachers who have no
control over the teaching methods cannot be cast as independent contractors
simply because of work-time flexibility. Work-time flexibility, in this case,
carries little weight against the evidence of such a considerable degree of
subordination as I have found existed. Accordingly, the control factor must
fall in favour of the finding of a contract of service.
[19] Another factor
considered in the Wiebe Door tests is the chance of profit and risk of
loss.
[20] An hourly rate
worker with work-time flexibility arguably has a chance of earning more by
simply choosing to work more hours. But this is not a chance for profit in an
entrepreneurial sense. There is no investment of capital, no reward based on
anything other than an hourly rate paid twice a month by cheque by the
Appellant to the Worker on the first and fifteenth of every month for hours
worked which the Appellant tracked as well as the Worker.
[21] The Appellant also
argued that if the student did not show up, the Worker would not get paid. The
risk was hers.
[22] That, in my view, is
not a particularly helpful way to frame the risk of loss question. A better
question would be whether she gets paid when she teaches but the student fails
to pay the amount billed by the Appellant. Her contract, regardless of how it
was written, can only be construed in one way. She works, he pays. He is not
her agent. That is a myth. She would not suffer a risk of loss if the
children’s tutoring fees are not paid to the Appellant. In my view, based on
the nature of the relationship as I have found it, she would have a clear
contractual right to insist on being paid for the hours she worked regardless
of whether or not the Appellant’s business received the income that might have
been related to her services.
[23] I acknowledge that the
Appellant has asserted that any such loss was a loss that she would suffer but I
find that to be an unsupportable and not credible assertion. The oral testimony
of both parties was that the Worker was engaged at $15 to $19 dollars an hour.
I find that she did not set that rate even though she threatened to leave on
more than one occasion in order to get a raise. Employees can use any number of
means at their disposal to help obtain a raise. This does not indicate that the
employee was, in an entrepreneurial sense, working to increase a profit. In any
event, it is clear to me that he promised her payment for hours worked
regardless of his receipts and any testimony of his suggesting the contrary is
simply not credible.
[24] All said, I am
satisfied that this factor of a chance of profit and risk of loss urges the
finding that the engagement of the Worker is an engagement of, or contract of,
service.
[25] The next factor to
consider under the Wiebe Door tests is ownership of tools.
[26] The Appellant
asserted the Worker provided all the teaching materials used in the tutoring
sessions. He had photos of her bookshelf at the school.
[27] I accept the
Worker’s testimony, however, that many of these books belonged to the Appellant
and that many of those, on those shelves that were hers, were copies of the
same materials that he provided as required materials and that by being on
those shelves, made her personal materials appear greater in number. The
shelves also contained many materials that she was prohibited from using. In
any event, her testimony was that she used his materials at his insistence. I
accept her testimony.
[28] In addition to the
necessary teaching materials, the Appellant provided the desks, chairs, whiteboard,
computer, printer, internet and classroom facilities all at no charge to the
Worker.
[29] Clearly, this factor
supports a finding of a contract of service.
[30] Another test that
has complimented the tests in Wiebe Door has been known as the
integration test. This test has generally been accepted in recent times as
looking less at whether the Worker was integrated into the engager’s business
to the point of being such a necessary part of it as to preclude a finding that
the Worker was an independent contractor. Rather, a variation of this test has
become a useful tool in determining a worker’s status. It looks more at whether
the Worker has his or her own business. As stated in 671122 Ontario Ltd. v.
Sagaz Industries Canada Inc.,
the better test asks, whose business is it? Or, more particularly, is the
Worker in business on her own account? This requires a preliminary finding of
whether the Worker has a business of her own as a worker must have to be an
independent contractor.
[31] In the case at bar,
the Worker clearly does not have a business of her own. Not only does she not
purport to have a business, there is nothing to point to her having a business
of her own. The only other tutoring student she has had is a neighbour’s child.
She does not look for other contracts or engagements; she has no business cards
of her own; she does not advertise; she has no business name or number; she
claims no business expenses. She provides tutoring for Starlets’ students on
Starlets’ premises and on Starlets’ terms. The provision of tutoring services
is clearly his business and not hers.
[32] Lastly, the Courts
can look at the intention of the parties.
[33] The Worker admitted,
regardless of issues as to the construction of the written contract, that she
was required to acknowledge as a term of her engagement that she was not an
employee and she agreed to that requirement or condition in order to get the
work. I believe that the Appellant is misguided as to the significance of that
acknowledgement or agreement. He is misguided to believe that an employer can
contract out of the legislative requirements of the Employment Insurance and
Canada Pension Plan provisions simply by getting a worker to say that he or she
is an independent contractor. Both these legislated social programs are
designed to protect workers from such abuse. Admittedly, if a worker wants to
respect such an agreement, the system may not be able to intervene. Another
tutor may be happy to respect such a condition of engagement. Indeed, a second
tutor who testified at the hearing on behalf of the Appellant acknowledged that
he understood and respected the requirement that he be an independent
contractor but that worker also saw himself as an independent contractor. There
was another tutoring enterprise which he sought out and for which he provided
services. This is reflective of a more entrepreneurial approach to the way in
which he offers his services. His perspective, however, has no bearing on the
legal perspective in relation to the Worker.
[34] In any case, the
other factors here so strongly favour employment that the intention factor,
even without the duress that existed here, cannot assist the Appellant. As the
case law cited by Respondent’s counsel clearly underlines, the intention test
only becomes a relevant factor when the other factors are inconclusive. They
are not inconclusive in this case. Accordingly, I find that the Worker was
engaged in both insurable and pensionable employment under the respective
provisions of the respective legislation, namely the Employment Insurance
Act and the Canada Pension Plan.
[35] Accordingly, the
appeals are dismissed.
Signed at Winnipeg, Manitoba this 14th day of September 2010.
"J.E. Hershfield"
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