Citation: 2010 TCC 399
Date: 20100727
Docket: 2009-3055(CPP)
2009-3054(EI)
BETWEEN:
GERALD LABRASH,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
EDITED VERSION OF TRANSCRIPT
OF REASONS FOR JUDGMENT
[delivered orally
from the Bench at Sudbury, Ontario, on
June 28, 2010]
Boyle J.
[1]
These are my oral
reasons delivered in Sudbury in this morning’s Employment Insurance (“EI”)
and Canada Pension Plan (“CPP”) appeals of Gerald Labrash involving Parry
Sound Taxi.
[2]
Mr. Labrash is one
of the owners of Parry Sound Taxi and, in addition, he owns at least one of the
taxicabs used in that business. The issue in these appeals is whether a taxi
driver hired by a taxicab owner is engaged in pensionable employment for CPP
purposes and is engaged in insurable employment for EI purposes.
[3]
A determination of
employee versus independent contractor for CPP purposes is required to be made
applying the traditional common law Sagaz Industries / Wiebe Door approach. However, for EI
purposes Regulation 6(e)
dealing with taxi drivers specifically must also be considered.
[4]
Parry Sound Taxi is
owned by a group of taxicab owners licensed as such by the City of Parry Sound.
The taxicab owners share the costs of operating the advertising, dispatch and
related office expenses of Parry Sound Taxi. They each pay a set amount to
Parry Sound Taxi for each shift that their cab is on the road, regardless of
whether their cab is being driven by them or by a driver hired by them. Parry
Sound Taxi has a number of dispatchers who are employees and treated as such
for all purposes.
[5]
The taxicab owners are
responsible for their car and their taxi owner’s licence as well as all
maintenance, gas, cleaning, insurance, licensing and similar expenses
associated with their cab.
[6]
Taxicab owners
typically drive their own cabs during the day shift. The taxicab owners each
typically hire taxicab drivers to drive their cabs during the night shift. The
appellant taxicab owner has regularly hired drivers for his cab.
[7]
Taxicab drivers must be
licensed by the City of Parry Sound as such. The drivers are responsible for
obtaining such a licence and its cost.
[8]
Taxicab owners and
drivers share the gross revenues from a driver’s shift on a 60/40 basis. The
driver bears no associated expenses. The taxicab owner is responsible for all
of the related expenses out of his 60% share. Drivers receive their 40% in cash
on a daily basis at the end of each shift unless there was insufficient cash as
a result of large charged accounts, in which case the owner will pay the driver
the following day.
[9]
Cab drivers are
responsible to cab owners for at-fault accidents to the extent they are not
insured.
[10]
Each cab owner hires
his or her cab drivers individually and it appears drivers tend to work for a
single driver at a time for long indefinite periods. Drivers are not prohibited
by owners or by Parry Sound Taxi, nor by the terms of their Parry Sound licence,
from driving for another local cab company.
[11]
Drivers receive customers
from Parry Sound Taxi’s dispatchers as well as picking up fares themselves on
the streets. Drivers are permitted by Parry Sound Taxi and the owners to refuse
any fare whether dispatched or otherwise, and do not have to explain their
decision.
[12]
It appears drivers are
not told which routes to drive customers to their destination from their pickup
point. Drivers are free to take breaks whenever they choose without advising
dispatch unless they leave their cab. Drivers are able to do personal errands
and similar trips when they wish.
[13]
The driver who testified
was one of Mr. Labrash’s two drivers during the period in question. He
drove regular night shifts on the same three nights each week for Mr. Labrash.
These were the shifts he was offered and agreed to when he was hired by
Mr. Labrash. If he could not make one of his shifts he was expected to let
Mr. Labrash know as soon as possible or, if he could not reach Mr. Labrash,
he would let dispatch know. The owners insisted that they be given as much
notice as possible so they could find a replacement driver.
[14]
Throughout the owners
treated the drivers as independent contractors and did not make statutory
remittances, issue T4s for tax purposes or pay vacation pay. It appears this
carried on to everyone’s satisfaction for a long time with no complaint by
taxicab drivers. It is unclear whether this changed as a result of a Canada Revenue
Agency payroll audit or because the driver who testified filed his taxes in a
different manner after his second year of working as a driver for Mr. Labrash.
I. Applicable Law
[15]
The tests for a
contract of service / employment versus a contract for services / independent
contractor in common law are well settled. 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. See the decisions in Market
Investigations, Ltd. v. Minister of Social Security, [1968] 3 All
E.R. 732 (Q.B.D.), 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.,
2001 SCC 59, [2001] 2 S.C.R. 983, and Wiebe Door
Services Ltd. v. M.N.R., 87 DTC 5025.
[16]
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 activities; 3) ownership of tools; 4) chance of
profit or risk of loss. 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.
[17]
The decision of the
Federal Court of Appeal in The Royal Winnipeg Ballet v. M.N.R.,
2006 FCA 87, 2006 DTC 6323, and several later cases, highlights
the importance of the parties’ intentions and of the control criterion in these
determinations.
[18]
Under the Income Tax
Act there is a deeming provision applicable to taxicab drivers. While
remarkably poorly drafted it has been interpreted by the Federal Court of
Appeal to essentially mean that a taxicab driver will be deemed to be engaged
in insurable employment for EI purposes unless he is 1) the owner of more than
50% of the taxicab, 2) the owner or operator of the taxicab business or 3) a
public authority operator.
[19]
The Federal Court of
Appeal in Canada (Attorney General) v. Skyline Cabs (1982) Ltd., [1986]
F.C.J. No. 335, and in Yellow Cab Co. Ltd. v. Canada (Minister of National
Revenue), 2002 FCA 294, confirmed that the use of the word employment in
Regulation 6(e) does not mean employment in the narrow legal sense of a
contract of service but has the broader meaning of activity or occupation. Otherwise
the regulation would have little meaning or effect in overriding the common law
determinations.
[20]
With respect to the
second exception for the regulation, for a driver who is also the owner or
operator of the business, the Federal Court of Appeal in Yellow Cab, in
paragraph 33 in particular, makes it clear that the driver must be an
owner or operator of the taxicab business, not merely in the business of
driving a cab. Otherwise the deeming provision would again have little effect
in overriding the common law determinations.
II. Analysis
A. Intention
[21]
There is no evidence of
a shared common intention between the appellant and his driver at the time the
driver was hired. However, it seems clear on the evidence that there was a
shared understanding throughout the relevant period that the drivers were self‑employed
contractors of the taxicab owners. At no time did workers object to not
receiving T4s, not having deductions made or not receiving vacation pay. There
is no evidence drivers did not report their income as self‑employment
income. The driver who testified did not pursue any employment related claims
until after
his contract was terminated by Mr. Labrash.
[22]
On the evidence before
me there was a shared understanding during the work period that drivers were
independent contractors not employees of the taxicab owners. That is entitled
to considerable weight but must be tested against whether there were any legal
or contractual impediments to self‑employment status and whether the
parties carried on in a manner consistent with such a characterization of their
relationship.
[23]
The by‑laws of
the City of Parry Sound do not require that licensed taxicab drivers be employees
of licensed taxicab owners. While the by‑law does refer to persons
employed by an owner as a driver, that is clearly using the term employed in
the broader sense of activity or occupation not the narrower legal sense. In
fact the Ontario Superior Court of Justice, Small Claims Court, has recently
arrived at a similar decision in a garnishment hearing involving Parry Sound
Taxi and one of its drivers.
B. Control
[24]
In this case the extent
of control exercised by owners over drivers leans in favour of self-employment
status. Drivers signed up in advance for particular shifts. They were free to turn
down any fare for any reason with no explanation needed. Drivers could take the
routes they chose, could take breaks of their own choosing, and were allowed to
run personal errands with the cab. They had flexibility in deciding how late
the night shift ended after 2:00 a.m.
[25]
This would appear to be
less control than the Royal Winnipeg Ballet had to exercise over its dancers in
its business, so it cannot be a degree of control that precludes or is
necessarily inconsistent with the drivers having independent contractor status
at common law.
[26]
In any event, in this
case a consideration of the extent of control over the work leans in favour of
independent contractor status.
C. Chance of Profit / Risk of Loss
[27]
In this case the
drivers were not assured of any regular income. Their revenues were made up
only of 40% of the night’s fare revenue. The amount they earned would depend in
large measure on them being on the streets, on the look out for fares and being
responsive and engaged with dispatch. While they had no risk of actual loss, they were at
considerable risk of receiving little or no income and could undoubtedly have
considerable influence and control over their earnings on any shift. In this
case this also leans slightly in favour of independent contractor status and is
certainly not inconsistent with it.
D. Ownership of Tools
[28]
I do not find this a
particularly helpful consideration in a case such as this. The taxicab owners
owned or controlled everything needed to run the overall taxi business except,
of course, the drivers. On the other hand the taxicab drivers owned and paid
for what they needed if they were in the business of driving taxicabs for
others. That is, their city licence and their provincial driver’s licence. This
does not usefully lead in either direction in businesses such as these.
[29]
I conclude that for
common law purposes the taxicab drivers were not employees of the taxicab
owners but were independent contractors. That is determinative for CPP
purposes.
[30]
For EI purposes however
I must go on to address the application of Regulation 6(e) and whether the
taxicab drivers are excluded from being deemed to be in insurable employment.
[31]
I can see no basis for
concluding that the drivers are excluded from this regulation. A driver is in
the taxi driving business as an independent contractor with the cab owner being
his customer. The driver is not the owner or operator of the overall taxicab
business.
[32]
My conclusion in this
case is consistent with the decision of Woods J. in 1022239 Ontario Inc. v.
M.N.R., 2004 TCC 615. I agree with Woods J. that it would be
inappropriate to extend the application of the exception for drivers who own or
operate the business beyond the facts before the Federal Court of Appeal in Yellow
Cab which involved lease operators as drivers and the payment of fixed
monthly fees to the cab company, not a sharing of fare revenues.
[33]
Accordingly, I will be
allowing the appellant’s appeal with respect to Canada Pension Plan and
dismissing his appeal with respect to Employment Insurance.
[34]
Thank you
Ms. Akalehiywot. Thank you Mr. Registrar and Madam Court Reporter.
Signed at Ottawa, Canada, this 27th day of July 2010.
"Patrick Boyle"
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