Citation: 2010 TCC 17
Date: 20100111
Dockets: 2006-1557(EI)
2006-1558(CPP)
BETWEEN:
DYNAMEX CANADA CORP.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Archambault J.
[1]
Dynamex Canada Corp. (Dynamex)
is appealing decisions made by the Minister of National Revenue (Minister)
under the Canada Pension Plan (CPP) and the Employment
Insurance Act (Act).
The issue raised in both appeals is whether Mr. Roger Fontaine was employed
by Dynamex under a contract of service and therefore held with that corporation
pensionable and insurable employment within the meaning of the above acts during
the period from January 1, 2002 to March 1, 2005 (relevant
period). The Minister ruled that Mr. Fontaine was indeed an employee
of Dynamex during the relevant period. Dynamex, on the other hand, contends
that Mr. Fontaine was an independent contractor. The two appeals were
heard on common evidence.
[2]
In making his
decisions, the Minister relied inter alia on the following facts,
which are set out in the reply filed in the appeal brought under the Act:
a) the Appellant
carries on the business carries on the business [sic] of pick‑up
and delivery of envelopes and parcels in Canada; [admitted]
b) the Appellant
hired Mr. Roger Fontaine for the purpose of delivering envelopes and
parcels of the Appellant’s customers in the Winnipeg area; [admitted]
c) the Appellant
directed, controlled and supervised the pick ups and deliveries made by
Mr. Roger Fontaine; [denied]
d) at all
material times, Mr. Roger Fontaine and his co‑workers of the Winnipeg area were collectively represented
by the Canada Union of Postal Workers - Red River Local; [admitted]
e) at all
material times, a collective agreement between the Appellant and the Canada
Union of Postal Workers - Red River Local - was in applicable; [admitted]
f) the Appellant
provided, amongst other things, security identification card, uniforms and
workers compensation coverage; [denied]
g) Mr. Roger Fontaine
has to perform his task personally; [denied]
h) Mr. Roger Fontaine
was paid twice a month by the Appellant and his remuneration was partially based
on a percentage of the deliveries he effected; [admitted]
i) Mr. Roger
Fontaine was obliged to
i) immediately
reports [sic] any accident; [admitted]
ii) maintains [sic]
daily summary of the pick up and deliveries effected; [admitted]
iii) presents [sic]
his requests for holidays or other time off work in advance; [denied]
iv) physically
appear in a manner acceptable to the Appellant who, if unsatisfied, could
request Mr. Roger Fontaine to return home; [denied]
v) provides [sic]
his own vehicle to perform his tasks; [admitted]
j) Mr. Roger Fontaine
was not registered as a supplier for the purpose of the Goods and Services Tax.
[admitted]
Factual background
[3]
Dynamex’s main business
activity in Winnipeg is same‑day pickup and delivery of
envelopes and parcels (both herein referred to as parcels). It also
provides overnight delivery and logistic services in Canada and in the United States. Dynamex is a subsidiary of a U.S. public corporation, Dynamex Inc. (see Exhibit R‑33,
Tab 42). Dynamex has business centres all across Canada,
from St. John’s to Victoria. According to Mr. James Aitken,
Dynamex’s president,
it is the only national same‑day delivery company in Canada. Dynamex has about 600 employees and all the
drivers who do its deliveries are independent contractors. In its business,
Dynamex uses the services of delivery people who walk (referred to as walkers),
delivery people who use a bicycle (referred to as bikers) and delivery people
who use their own vehicle (referred to as owners‑operators or drivers).
According to Mr. John McMaster, a representative of the Canadian
Union of Postal Workers (Union) and a Dynamex walker, there were in 2002
in the Winnipeg area 3 or 4 walkers, one biker and 140‑145
owners‑operators. During the relevant period, the walkers and the bikers
were treated by Dynamex as employees for the reason that, according to
Mr. Aitken, these people did not use and did not need to own substantial
assets to make their deliveries, and by reason of the application of the control
test developed by the courts. The owners‑operators used their own
vehicle, which could have been a car, a minivan, a van or even a tractor and
trailer. Some of the owner‑operators were also operating aircraft.
[4]
The types of deliveries
carried out within the city of Winnipeg during the relevant period can be divided
into two categories. The first is “delivery on demand”, which involved the
delivery of parcels from one point to another in the city. The orders for such deliveries
came from a dispatcher, an employee of Dynamex, who, through communication equipment,
kept in contact with the delivery persons and transmitted to them the addresses
at which the parcels were to be picked up and those to which they were to be delivered.
The second category was called the “dedicated route delivery”. This work involved
servicing the delivery needs of a particular client, such as a bank. The delivery
person had a regular schedule whereby he or she attended at the premises of the
customer, that is, the bank, and received there his or her delivery orders for
that particular customer.
[5]
Mr. Fontaine was
first hired in 1989 by a courier company called Zipper Courier Service Ltd. (Zipper),
which was purchased by Dynamex in 1995 or 1996, according to Mr. Aitken. At that time, Dynamex
assumed certain of Zipper’s obligations towards its drivers. For instance,
Zipper provided its independent contractors with a health benefits plan to
which Zipper made financial contributions. Mr. Fontaine continued to be
entitled to such benefits after the purchase of Zipper. During the relevant period,
Mr. Fontaine was generally involved in delivery on demand. One
exception was with respect to the dedicated route delivery for IBM, which he
had for a short period of time.
[6]
On June 16, 1998,
the director at the Winnipeg Tax Services Office issued a ruling that
Mr. Fontaine’s employment could not be considered pensionable pursuant
to paragraph 6(1)(a) of the CPP or insurable pursuant to
paragraph 5(1)(a) of the Act. This ruling was “binding for the
period January 1, 1997 to the present”.
[7]
According to
Mr. McMaster, a collective agreement (Collective Agreement) between
Dynamex and the Union was first entered into effective
March 1, 2000, and it expired on January 31, 2003. This
agreement was renewed and was to expire on January 31, 2006 (see
Exhibit R‑1, Tabs 1 and 2). The purpose of the Collective Agreement
was to establish and maintain rates of remuneration, hours of work and other
working conditions and to “provide appropriate procedures for the resolution of
grievances and problems arising during the term of the Collective Agreement”
(Article 1.01 of Exhibit R‑1, Tab 1).
[8]
Mr. Fontaine was
required to sign with Dynamex a contract for services entitled “Owner Operator
Contract for Retention of Services” (Fontaine contract). Mr. Fontaine
was not given an opportunity to negotiate the terms of this contract. He had to
sign it if he wanted to continue providing his services to Dynamex. He was told
by the Union that it was all right for him to sign the contract. It is useful
to reproduce here the main provisions of this contract dated
March 13, 2000:
. . .
WHEREAS the
Company carries on a same day transportation and distribution business and is
licensed to use certain trademarks in connection therewith;
AND WHEREAS
the Owner Operator owns/leases a vehicle
(the “Vehicle”) suitable to the business and the provision of services for the
Company, and the Owner Operator desires to perform, and the Company desires to
engage the Owner Operator to perform, certain distribution and delivery
services for the Company;
AND WHEREAS, subject
to the prevailing provisions of any applicable Collective Agreement,
the Company and the Owner Operator desire to fix and determine between
themselves their respective rights and obligations:
NOW THEREFORE
in consideration of the mutual covenants and agreements hereinafter contained
the parties hereto agree as follows:
1. The Owner
Operator making use of the Vehicle shall perform the Services by Company
standards in a timely and efficient manner.
2. The Owner
Operator shall maintain the Vehicle in a safe, damage‑free,
serviceable and clean condition and shall maintain, repair, license,
insure (for Public Liability and Property damage in the amount of
$1,000,000 all‑inclusive coverage and supply proof of same to the
Company), and operate each Vehicle used by it at its own expense.
3.
Provide all services in a safe, efficient, courteous and lawful
manner and comply with all relevant laws, rules and regulations concerning
the operation of the Vehicle and the provision of services hereunder. The Owner
Operator shall at all times conduct itself so as not to jeopardize the
relationship between the Company and its customers.
4.
In consideration of the Company entering into this Agreement with the
Owner Operator and allowing the Owner Operator to Service the Company’s
customers, the Owner Operator hereby covenants, agrees, acknowledges and
confirms that during the term hereof, and upon the cancellation
of this Agreement for any cause or means whatsoever, then for a period of
one (1) year from the cancellation of this Agreement, the Owner Operator
shall not either personally or by its agents, or by letters, circulars or
advertisements, or in any manner whatsoever, whether on its own behalf or on
behalf of any person, persons, firm, association, syndicate, company or
corporation, canvas, solicit or do business of a similar nature as that of
the Company with any person, persons, firm, association, syndicate, company
or corporation who:
4.1
Either are customers of the Company at the time of the
cancellation of this Agreement, or,
4.2
Have been customers of the Company within a period of twelve (12)
months prior to the cancellation of the agreement; and,
4.3
Have become known to the Owner Operator as customers of
the Company, and,
4.4
By reason of the Owner Operator having over a period of time Services [sic]
such customers, have become known to the Owner Operator.
5.
In consideration of the Company entering into this Agreement with the
Owner Operator and allowing the Owner Operator to Service the Company’s
customers, the Owner Operator hereby covenants, agrees, acknowledges and
confirms that, during the term hereof, and upon the termination of this
Agreement for any cause or by means whatsoever, then for a period of one (1)
year from the termination of this Agreement, the Owner Operator shall not
use or disclose any information concerning the business or customers of the
Company which may have been acquired by it during the course of its
relationship with the Company for its own benefit or to the detriment or to the
intended or probable detriment of the Company.
. . .
9. Upon termination of this
Agreement, the Owner Operator shall forthwith remove from the Vehicle all
trademarks, logos and other elements of decoration which are distinctive of
the Company or its customers and immediately return, in good condition, any
Company property, material or documentation, including all communication
equipment.
10. The Owner Operator undertakes
to indemnify and hold the Company harmless from all claims, debts, demands,
suits, actions and causes of action whatsoever for loss, damages, delay and
liability of any nature or kind whatsoever made or brought by any person, firm
or corporation with the Services rendered by the Owner Operator.
. . .
12. The Owner Operator
acknowledges and agrees that the Owner Operator’s function and status under
this agreement shall be, and is intended to be wholly and exclusively
that of a dependent contractor. No partnership, employer-employee,
joint venture or other similar relationship is intended. The Owner
Operator agrees that the Owner Operator shall, at all times, hold himself out
as a dependent contractor, not as an agent, employee or legal representative of
the Company, in any respect. The Owner Operator shall take all necessary steps
and shall be responsible for the payment of all federal, provincial and local
taxes arising out of his activities.
13. The Owner Operator expressly
acknowledges that the Company will not on behalf of the Owner Operator
remit employment insurance premiums, nor withhold income tax, C.P.P. or provide
T-4 slips and that the Owner Operator shall be solely and wholly liable and
responsible therefore.
14. The Owner Operator shall
protect and indemnify the Company, and any of its officers, directors,
employees and agents from all losses, claims, costs, damages, or
liabilities which the Company may suffer or incur, whether at law or in
equity, directly or indirectly, from any act or omission, made or not made by
the Owner Operator in providing services to the Company under this
agreement, including without limitation, any damage to person or property whether
it be that of the Company, its customers or accounts or that of a third party.
15. This contract may not be
sold, assigned or transferred without the express written consent of the
Company.
. . .
19. Lease from the company
suitable Radio and Pager or other communications equipment as may be
designated by the Company with the terms and conditions contained in the form
of lease attached hereto.
20. Either obtain at its own
expense, or reimburse the Company for the cost of a Fidelity Bond as
per attached Fidelity Bond Schedule.
21. Charge no expense whatsoever for
any reason to the Company except where authorized by the company.
22. The Parties hereto acknowledge
and agree that they both would benefit by the greater exposure of the Company’s
presence in the marketplace and to that end agree as follows:
i) The Owner Operator shall
wear uniforms approved by the Company while servicing the company’s
customers. Uniforms for purchase by the Owner Operator at the Company’s cost
price, plus applicable taxes, payable by the Owner Operator on invoice
therefore.
ii) When the Company’s
trademarks, tradename, logos or decals are
displayed or shown on a uniform or the Owner Operator’s motor
vehicle, not to place any other name, notice, advertising, decal or
painting of any nature or kind whatsoever on the uniform or motor vehicle
other than as expressly permitted by the Company which may not be unreasonably
and arbitrarily withheld.
iii) The trademark “Dynamex”,
distinctive colour and designs used in connection
therewith, are all the property of the Company and their use accrues
wholly to the benefit of the Company. Upon written request of the Company, the
Owner Operator shall immediately surrender to the Company, any item bearing any
of its trademarks and shall remove any such trademarks from its vehicle.
23. In the event the Contractor
is successful in obtaining a new customer for the Company, the Company
shall pay the Owner Operator as additional compensation five percent (5%)
of the first three (3) months billings the customer uses the Company’s service.
This compensation shall only apply if the amount billed to the customer exceeds
one hundred dollars ($100.) per month. IN [sic] the course of accepting
new business, the Owner Operator may pledge the credit of the company to the
limited extent of such credit being acceptable to the Company and subject to a
credit application being completed and turned in to the Company by the
Contractor and the new client subsequently passing the Company’s credit check.
24. The parties agree that this Agreement
shall be terminated as follows:
i) With 2 weeks notice by
the Owner Operator or the Company upon written notice of either
to the other; or
ii) By the Company following a
material breach by the Contractor of the terms of this agreement; or
iii)
Upon the insolvency or bankruptcy of either Party. In the case of
drivers, only if unable to provide the requisite equipment to perform the work.
25. Upon the demand from the Company
the Owner Operator shall immediately return to the company, but not
limited to, all equipment loaned and provided, including identification
cards, radios and advertising signs.
. . .
28. This agreement shall be
interpreted in accordance with the Laws of the Province in which the Owner
Operator’s services are primarily performed, and if any provisions of this
Agreement contravene the Law of such Province, then such provisions shall be
deemed not to be part of this Agreement, but all other provisions shall remain
in full force and effect.
[My
emphasis.]
[9]
The Fontaine contract
was terminated at the end of March 2005 because Mr. Fontaine was
asked to choose between devoting himself full‑time to Dynamex and
carrying on the massage therapy business that he had started in September 1999.
It is my understanding that at first he saw his massage clients during the
evening and on weekends. Later, Dynamex allowed him some flexibility to devote
time to this new business during Dynamex’s regular business hours. For
instance, he was authorized to leave work on a short notice to provide service
to his own clients. The massage therapy business grew over the years. It produced
revenues of $ 2,500 in 2002 and $ 7,800 in 2004. Mr. Fontaine considered
himself to be working for Dynamex part‑time as of
November 1, 2004. He worked only 3 days for Dynamex in January 2005
and 5 days in February 2005 (up to February 23). (See Exhibit A‑2.)
[10]
My colleague
Justice Bowie issued a decision on January 31, 2008 in which he
concluded that a Mr. Gareth Palmer provided his services to Dynamex under
a contract for services during the period from August 13, 2003 to
April 11, 2004. His work was performed in the city of Toronto and the surrounding area. The decision in question is
Dynamex Canada Corp. v. the Minister of National Revenue, 2008, TCC 71
(Palmer decision).[7] Dynamex’s counsel began his argument
in the present appeals by stating that his client did not understand why it had
to argue again the status of its owners‑operators given the fact that
independent contractor status was the norm in the industry, that this status
had been recognized in the Palmer decision and in many other similar
decisions of this Court and of the Federal Court of Appeal. In particular, he referred
to Justice Bowie’s statement in Palmer that, “in view of the number of
previous decisions of this Court that have reached the same result in similar
circumstances,” he regretted that he was “unable to make a substantial award of
costs to the appellant” (paragraph 20). In addition, counsel stated that the courier
business is a very competitive one and that the margin of profit is narrow. A
finding of employee status could therefore have a detrimental impact on his
client’s business. However, I was informed by the respondent’s counsel that the
worker, Mr. Palmer, did not testify before Justice Bowie and this was one
of the reasons why the Minister did not appeal the decision to the Federal
Court of Appeal. In addition much of the documentary evidence introduced in these
appeals, such as the Dynamex Driver’s Handbook (Exhibit R‑2) and several
of the internal memoranda referred to below, was not before the Court in
Palmer.
[11]
In addition to Palmer,
there are four referees’ decisions concerning 27 of Dynamex’s workers who performed
similar delivery services in Winnipeg and Saskatoon. All 27 workers were found to be employees of Dynamex. The relevant
periods for those 27 workers are the 1997 to 2001 calendar years. The decisions
in question are the Mamona and Morgan decisions (supra)
and two other decisions rendered by two different referees, namely: the Hogg
decision by Referee Wallace, dated January 20, 2003 and the Derksen
decision by Referee Hood, dated March 8, 2005 (see Exhibit R‑32,
Tabs C and D). Counsel for Dynamex in the appeals before me and a union
representative were involved in each of these cases, except possibly Derksen
as in that decision the names of counsel are not mentioned.
[12]
Like the other 26
Dynamex workers, Mrs. Mamona was found to be an employee of Dynamex for
the purposes of the labour standards provisions found in Part III of the Canada
Labour Code and was therefore entitled to vacation pay. Unlike Part I, Part
III of the Canada Labour Code does not define what an employee is.
Therefore, the referees had to apply common law principles in making their
determinations. The Mamona decision of Referee Taylor was affirmed by
the Federal Court, Trial Division, and by the Federal Court of Appeal. See Dynamex
Canada Inc. v. Mamona, (2002) 218 F.T.R. 269 (F.C.T.D.), 2002 FTC 393, and (2003)
305 N.R. 295 (F.C.A.), 2003 FCA 248. Leave to appeal to the Supreme Court of
Canada was denied in March 2004.
As a result of the aforementioned referees’ decisions, Dynamex, with the
consent of the Union, adjusted the rate of commission paid to its drivers to
take into account its higher costs of remuneration. According to
Mr. Fontaine, his rate of commission went from 71% to 66%. It was the workers’
success in Mamona that encouraged Mr. Fontaine to attempt to get his
status as an employee recognized by the respondent. His goal was to have Dynamex
contribute to the Canada Pension Plan. If successful, he would get a refund of
half of his own contributions to the Plan. Mr. Fontaine did not ask for
employment benefits.
Dynamex’s detailed position
[13]
Counsel for Dynamex
outlined in his Notice of Appeal the reasons why independent contractor status
should be held to exist here:
16.
The Appellant states that Mr. Fontaine was an independent contractor for
the following reasons:
The Appellant applies a four-fold test in reaching the
conclusion that Mr. Fontaine was not an employee.
Control test
17.
Mr. Fontaine decided when he wanted to work and he set his own
schedule. In addition to the services he provided to the Appellant, Mr.
Fontaine operated his own message [sic] therapy business. Mr. Fontaine decided
when he wanted to perform services to Dynamex and when he wanted to work, or
not work at his message [sic] therapy business.
18.
Mr. Fontaine would decide whether he was going to provide services to
the Appellant on a given day or work in his other business, or work the morning
for the Appellant and the afternoon for his other business or vice versa. These
were choices for Mr. Fontaine to make.
19.
The hours of service were dictated by the customer. Mr. Fontaine
was a member of a fleet of drivers servicing the downtown core of Winnipeg.
This again was Mr. Fontaine’s choice. He could have provided service
throughout numerous areas of the city of Winnipeg.
20.
When Mr. Fontaine decided to provide his services were [sic] up
to him. If he wanted to start at 7:00 a.m. or 9:00 a.m. that was his choice. If
Mr. Fontaine wanted to quit work at 3:00 p.m., 4:00 p.m. or 5:00 p.m. – that
was his choice. The start times and the ending days were within the
exclusive domain of Mr. Fontaine.
21.
These arrangements fit directly with the concept of being an independent
contractor nor [sic] an employee.
Ownership of tools test
22.
Mr. Fontaine, as an independent contractor, had to provide his own
vehicle. He could decide what type of vehicle to use.
23.
Furthermore, he supported all the expenses related to his vehicle
like insurance coverage, maintenance of licenses, upkeep of the vehicle and
fuel.
24.
Such onerous obligations clearly indicate that Mr. Fontaine was an
independent contractor.
Risk of profit and loss test
25.
The key in the courier business is to use the asset, i.e.
the vehicle for as long as possible and as efficiently as possible.
26.
Profit is of course also related to expenses. The operation of
Mr. Fontaine’s vehicle is an expense, and the higher that expense the less his
profit. Of course how Mr. Fontaine operated the vehicle and how he maintained
the vehicle were solely factors within Mr. Fontaine’s control.
27.
Mr. Fontaine as an independent contractor needs to maximize his time
receiving commission generating work and reduce his operating expenses.
But it all depends on how he determines and plans his deliver [sic]
routes and the number and types of deliveries he decides to do.
28.
Generally, a person in Mr. Fontaine’s position wants the quickest
fastest deliver [sic] as
they are the most profitable, and it allows the best use of his time. If Mr.
Fontaine decided his priority was to take call [sic] from downtown to
the far west end of the city of Winnipeg – that would be his decision to make.
The downside, less time spent in the downtown core means missing the quick high
profit business inter office traffic.
29.
As previously noted Mr. Fontaine controlled the crucial asset, his
vehicle. How he utilized his crucial asset to maximize his earnings and
minimize his expenses was solely up to him and is indicative of a
contract for services.
Integration test
30.
Mr. Fontaine’s business is not integrated into the Appellant’s
business. Mr. Fontaine is working on his own behalf. He is not
dependent on the Appellant’s clients. Mr. Fontaine can move to another courier
company and take his equipment – the key asset his vehicle with him. There
is no non-competition covenant in Mr. Fontaine’s services agreement.
31.
Furthermore, as already mentioned, Mr. Fontaine operated a second
business (message [sic] therapy) and he even decided when he wanted to
perform services to Dynamex and when he wanted to work at his message [sic]
therapy business.
Common Intention of the parties
32.
In addition, or in the alternative to the above, the Appellant states,
that in accordance with the modern approach applicable to taxing statutes, that
the common intention of the taxpayers supports the Appellant’s view that
Mr. Fontaine is an independent contractor. In particular, we note the
following:
a)
In 1998 the Minister of National Revenue decided that
Mr. Fontaine was [an] independent contractor. In our view nothing has
changed in the nature of that relationship to now make him, Mr. Fontaine,
an employee;
b)
Since 1998, Mr. Fontaine has freely entered into other contracts with
the Appellant confirming that he is an independent contractor and not an
employee. – See the March 2000 Agreement; and
c)
The March 2000 Agreement expressly states that Mr. Fontaine is not an
employee in any circumstances.
33.
To the knowledge of the Appellant, Mr. Fontaine has always declared
himself to be an independent contractor to the taxing authorities. This
would include of course filing tax returns claiming business expenses.
34.
Clearly, the parties freely contracted with each other. The parties
clearly signalled an intention that they were
contractors and not in an employee and employer relationship. Since 1998 until
this current claim, Mr. Fontaine has never claimed that he was an employee,
but always represented himself as an independent contractor. Clearly Mr.
Fontaine operated “at will” – he decided when to provide service to the
Appellant – or his other business interests. That relationship between the
parties should be respected.
Collective Agreement
35.
There is a Collective Agreement for Owner Operators and employees of the
Appellant in Winnipeg. The Collective Agreement is not determinative on
Fontaine’s status. We refer the Court to the decision of the Tax Court in
DHL Express Canada Ltd. vs. MNR 2005 docket 2004 – 4055 (EI)
& 2004 – 4057 (CPP).
36.
The independent contractor may be entitled to collective bargaining,
but that does not mean they are employees. In particular, according to the DHL
Express Canada Ltd. case, independent contractor [sic] certified under Part I
of the code are not employees for tax purposes.
37.
It is interesting to note that the contractors at issue in DHL
Express Canada Ltd. were assigned a dedicated route. Mr. Fontaine
operated off a call board in the downtown area of Winnipeg taking calls as they
came in, or not. It would seem the assigned route is a greater control
factor than Mr. Fontaine’s situation.
38.
Like the Appellant, the DHL Express Canada Ltd. Collective Agreement
requires that independent contractors provide their own vehicles and insure
their own vehicles.
39.
The nature of DHL Express Canada Ltd. business dictated the service
level. For instance, packages had to be delivered by 9:00 a.m. That in our
view, is not much different than Mr. Fontaine’s situation where he must get a
package from A to B within a certain time window. It is that certain time
window that the customer is paying for.
40.
Like DHL Express Canada Ltd., the Appellant provides independent
contractors, like Mr. Fontaine, with the opportunity if they wish under
the Collective Agreement to have replacement drivers. The purpose of course,
is to allow the independent contractors to keep their vehicle working – when
the Owner Operator does not want to provide the service. There is, however, no
indication that Mr. Fontaine ever took advantage of this part of the
Collective Agreement – although other the Appellant independent contractors has
[sic].
41.
The DHL Express Canada Ltd. driver had to provide a route sheet giving
details of the delivery, pickup, weight etc. Mr. Fontaine has to provide a
bill of lading with similar information.
42.
The DHL Express Canada Ltd. case acknowledges that DHL Express Canada
Ltd. had some control over the independent contractors. For instance
packages had to be delivered within certain times – just like the
Appellant. However, the Tax Court in DHL Express Canada Ltd. dealt with the
control issue by quoting the Federal Court of Appeal in Livreur Plus Inc. vs.
Minister of National Revenue 326 NR 123:
“The Court should not confuse control over the result or
quality of the work with control over its performance by the worker
responsible for doing it . . . It is indeed rare for a person to give out work
and not insure that the work is performed in accordance with his or her
requirements at the locations agreed upon . . .”
43.
Given all the factors stated above, the relationship of Mr. Fontaine and
Dynamex had been that on [sic] an independent contractor.
[My
emphasis.]
Analysis
Statutory provisions
[14]
The relevant provisions
for the purpose of deciding the appeals herein are paragraph 5(1)(a)
of the Act and subsections 6(1) and 2(1) of the CPP:
5(1) Subject to subsection (2), insurable
employment is
(a) employment in Canada by one or more employers, under
any express or implied contract of service or apprenticeship, written or
oral, whether the earnings of the employed person are received from the
employer or some other person and whether the earnings are calculated by time
or by the piece, or partly by time and partly by the piece, or otherwise;
6(1) Pensionable
employment is
(a) employment in Canada
that is not excepted employment;
(b) employment
in Canada under Her Majesty in right of Canada
that is not excepted employment; or
(c) employment
included in pensionable employment by a regulation made under section 7.
2(1) In this
Act,
. . .
“employment” means the performance of services
under an express or implied contract of service or apprenticeship, and
includes the tenure of an office;
[My emphasis.]
Common law principles
[15]
To decide if Mr. Fontaine was employed
in insurable employment under the Act and pensionable employment for the
purposes of the CPP, this Court must determine whether the contract between him
and Dynamex was a contract of service or a contract for services. If it was the
latter, Mr. Fontaine could not be found to have held either pensionable or
insurable employment during the relevant period while working for Dynamex.
Given that neither act defines what a contract of service is, it is necessary
to refer to concepts of the law of property and civil rights of the province
where the contract was entered into in order to determine whether or not it was
a contract of service.
Here, the Fontaine contract was governed by the laws of Manitoba pursuant to
section 28 of that contract (reproduced above) given that
Mr. Fontaine’s services were provided mainly in Winnipeg. It is
therefore the common law rules
that must govern the determination whether Mr. Fontaine was employed under
a contract for services or under a contract of service, even though these
appeals were heard in Quebec City.
[16]
The two leading cases
dealing with the distinction between these two kinds of contracts are 671122
Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983 (Sagaz),
a decision of the Supreme Court of Canada, and Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553 (Wiebe
Door), a decision of the Federal Court of Appeal. The Supreme Court of Canada stated that
there is no one conclusive test which can be universally applied to make the
determination. The key passage of the Supreme Court’s pronouncement on this
point is at paragraphs 47 and 48:
47 . . . 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.
[My emphasis.]
[17]
One of the limitations
of the approach adopted by the Supreme Court of Canada in Sagaz and the
Federal Court of Appeal in Wiebe Door is that it focuses on the
distinction between employee status and independent contractor status without
defining the essence of an employment relationship. However, I found enlightening
the following analysis in Employment in Canada. The author
refers to the English decision Ready
Mixed Concrete (South East) Ltd. v. Minister of Pensions and
National Insurance, [1968]
2 Q.B. 497,
in which MacKenna attempts to better define what an employment relationship is:
2.13 . . . His Lordship stated that there are three
necessary conditions for the existence of an employment relationship.
First, there must be a wage or remuneration paid by the employer
because, without consideration, there could be no contract of any kind, and the
servant “must be obliged o provide his own work and skill”.
2.14 Second, the employer must exercise a
sufficient degree of control over the essential incidents of the parties’
relationship as follows:
Control includes the power of deciding the thing to be
done, the way in which it shall be done, the means to be employed in doing it,
the time when and the place where it shall be done. All theses aspects of
control must be considered in deciding whether the right exists in a sufficient
degree to make one party the master and the other his servant. The right need
not be unrestricted.
2.15 The prerequisite that the employer must
exercise a sufficiently high degree of control over the worker (the modern
law emphasizes control in the sense of directing the residual “when and where”
employment is carried on rather than the manner in which the job is done, as
was the case in the previous century) reflects a fundamental truth about the
nature of the employment relationship that the courts have long sought to
reflect in their determinations of “employee” status and to defend in their
formulation of the employee’s implied duty of fidelity. The truth is that there
is more to the employment contract than an economic exchange of work for
remuneration. Rather, given employer’s need for flexibility in deploying its labour force in the dynamic economic and technological
environment of the workplace, the primary “consideration” for which the
employer bargains is the right of command, the power to direct the worker to
suit the changing needs of the labour process. Since the hallmark of the
employment relationship in the social sense is subordination, it makes
sense for the courts to make subordination its legal hallmark too, and
this is exactly what they have done. Nevertheless, it appears that a
relatively low level of control will pass the threshold for “employee” status
if it is clearly harmonious with the broader policy goals of the legislation
that the worker in question qualify as an employee.
2.16 Two recent decisions involving the alleged
wrongful dismissal of salesmen are illustrative. In the first, a real estate
salesman was held to be an employee despite the fact that he had considerable
freedom to set his own working hours, was paid entirely by commission
and declared himself as “self-employed” for income tax purposes. This is
because he was subject to “substantial control” by the company in several
ways: he was bound by company policy regarding discipline and
dismissal; he used the company’s office and secretarial services according
to prescribed policies; he was covered by the company’s fringe benefit
package; and he was eligible for promotion in the company hierarchy.
In the second case, a worker who incorporated his own company and sold
advertising for a broadcasting station was held to be an “employee” because he
was subject to close direction and supervision by the station over his working
hours, which clients he was to service, the number of clients he could meet
each day, how he should present the station’s offerings to clients and even the
sort of business lunches he could order on his expense account.
2.17 The third requirement for “employee” status,
according to Mckenna [sic] J. in Ready Mixed Concrete, is that
the other provisions of the contract must be consistent with its being a
contract of service.
. . .
2.19 What, then, are the “economic realities” which
will point to the relationship being characterized as either “employee” status
or “independent contractor” status? The most comprehensive recent attempt
by a Canadian court to categorize the relevant “economic realities” is that of
Wood J. of the British Columbia Supreme Court in a case involving the alleged
wrongful dismissal at common law of a salesman. He listed the following
criteria as being of “major importance”:
1.
Whether or not the agent was limited exclusively to the services of
the principal;
2.
Whether or not the agent is subject to the control of the principal
not only as to the product sold, but also as to when, where and how it is
sold;
3.
Whether or not the agent has an investment or interest in what are
characterized as the “tools” relating to the service;
4.
Whether or not the agent has undertaken any risk in the business
sense or, alternatively, has any expectation of profit associated
with the delivery of his service as distinct from a fixed commission;
and
5.
Whether or not the activity of the agent is part of the business
organization of the principal for which he works. In other words, whose
business is it?
[My
emphasis.]
[18]
The author offers his
own observations, which I find useful. I will reproduce some of them here:
2.21 . . .
2.
The ownership of tools and equipment must not be accorded decisive
weight in and of itself since many employees, such as carpenters,
meatcutters and garage mechanics own their own tools. However, usually
it suggests independent contractor status if the worker personally makes a
substantial capital investment, such as purchasing a vehicle of his or her
own.
3.
The question of “chance of profit and risk of loss” also must be
handled carefully. It does not refer to incentive pay but rather
inquires whether the person in question has something in the
nature of a financial investment in the business, so that his or her
gains or losses are dependent on something other than his or her own work
effort. Thus, in Lycar v. Lonnie W. Orcutt Farms Ltd., a truck
driver was held to not be an employee for the purpose of a wrongful dismissal
suit, despite the facts that his truck was registered in the employer’s name
and the employer signed the financing agreement, primarily because he had
purchased the truck in his own name with a downpayment of $12,000 of his own
money. The court reasoned that this represented a substantial capital
investment, given the worker’s means, and was consistent with him running a
business of his own. In contrast, in Racz v. Southern Trucking Ltd.,
a truck driver was held to be an employee for the purpose of Part III of
the Canada Labour Code primarily because the employer leased the
vehicle to the driver and limited the fee he could charge other customers
for each trip. Therefore, the driver could only make more money by his
own work efforts, namely making more trips, and this was insufficient to
establish him as an independent business owner.
. . .
7.
The traditional employment relationship is one in which an employee
works for only one employer, whereas the typical independent
contractor is available to anyone who will pay for his or her services.
Consequently, it will point towards “independent contractor” status if the
individual has his or her own business name and address, stationery,
invoice forms, business card and advertising brochures,
and provides his or [her] services to several customers rather than
one. However, there is no rule of common law that an “employee” cannot work
for more than one employer. Indeed, the recent expansion of part-time and
casual work has resulted in more employees becoming multi-job holders. Thus,
the fact that a person works for more than one employer does not necessarily
indicate he or she is an independent contractor rather than an employee. On the
other hand, if a self-styled “independant [sic] contractor” is
expressly bound by the terms of his or her con-tract [sic] to
perform services exclusively for one customer, this will indicate the
relationship is really one of “employee” status. In a similar vein, if a
self-styled independent contractor is legally entitled to sell his or her
services to the world at large but in practice works entirely or substantially
for one employer, this suggests that the individual is really an employee.
8.
In the traditional employment relationship of indefinite duration, the
employee will usually be expected to perform a relatively wide range of job
duties upon demand by the employer, whereas an independent contractor will
usually be brought in to perform a single task or tasks, often within a
specified time period. Accordingly, it may indicate “employee” status if
the employee is expected to perform a relatively broad range of tasks. This is
not determinate [sic], however, for “employees” are often hired to
perform narrow or specialized work functions, and have very little work variety
in the course of their careers.
[My
emphasis.]
Referees’ decisions concerning Dynamex
[19]
There are a number of
court and referees’ decisions dealing with the status of drivers in the courier
business. As mentioned above, these include the Palmer decision by
Justice Bowie of this Court and the Mamona decision by Referee Taylor.
Indeed, the latter decision was invoked by the respondent’s counsel in Palmer
in support of her position that Mr. Palmer should be treated as an
employee. At paragraph 11, Justice Bowie concluded that the Mamona
decision was of no assistance to the respondent for several reasons, one of
them being that Mr. Aitken had testified that the drivers in Mamona
had formerly worked for Zipper and “that at the time to which the decision
pertained their terms of employment were not the terms on which Dynamex
couriers elsewhere worked”. Before me, counsel for Dynamex attempted to
establish the same fact in questioning Mr. Aitken as follows: “Now I’d
like to talk about the famous Mamona case . . . can you tell the Court whether
this was based on Zipper facts or on Dynamex facts? (Question 246, page 65 of Volume
2 of the Transcript.) Counsel for the respondent objected to this question and
counsel for Dynamex stated at pages 65 and 66: “I’m rather surprised to hear
Ms. Tremblay because I asked the very same question to Mr. Aitken in
front of Mr. Justice Bowie and she made no objection at all . . . . It’s
central to the distinction that needs to be made concerning the Mamona
case. . . .” I overruled the objection and allowed the question.
This is the answer that was given by Mr. Aitken at page 67: “Yes, the
decision was based on, you know, on the way that the owner‑operators were
treated in the Zipper years, prior to the takeover of Dynamex.” I then asked: “So
the relevant year that was under issue was when the employees were working for
Zipper, is that what you’re saying?” His answer was: “Yes.” (Question 247,
pages 67 and 68.) He went to explain: “Most of . . . you know, there could
have been, you know, one or two little carryovers, but, you know, but
ninety-nine per cent (99%) of the stuff was from the Zipper years and the way
they were treated . . . ” (question 248, page 68). “Prior to the acquisition”,
I said, to which he responded: “Correct” (question 249, page 68).
[20]
The Zipper facts had
been established just prior to the above-mentioned questions as follows:
[244] Q. Let’s
talk about the Zipper acquisition now. Could you please tell the Court when
that was made in the first place and describe this company as it was then . . .
.
[245] . . .
A. Okay. It was made in . .
. it was at the IPO, so it would have been late ‘95, early ‘96 when the
transaction was completed. And Zipper had a wide variety of, you know,
people. They had walkers, they had employee drivers, they had drivers that
they were treating like owner‑operators, but in fact they were employees
by our standards.
As I say, they were given a vehicle that
the company was paying the vehicle and they were just paying them an hourly
wage, it was all over the place and, you know, and they were, you know,
they were disappointing people at will. They had no rules and regulations and
terminating at will. The owner ran a pretty, you know, hard nose shop at the
time.
[My
emphasis.]
[21]
A reading of the
decision rendered by Referee Taylor in Mamona contradicts
Mr. Aitken’s testimony. If not misleading, that testimony is at least
mistaken. First, the relevant period in Mamona is 1997, 1998 and a
portion of 1999 for two of the workers, that is, Mrs. Mamona and Mr. Cyr,
and from January 1, 1997 to October 15, 1998 for Mr. Hepner.
According to the evidence given by Mr. Aitken, Dynamex acquired Zipper in late
1995 or early 1996, so the relevant period in Mamona was not prior to
the acquisition by Dynamex but subsequent to it. The workers in Mamona
were therefore working under Dynamex’s new management. It is true that the
workers’ original contracts were signed with Zipper. However, this is what
Referee Taylor said:
Each Respondent signed a contract with
Zipper Courier Service Ltd. (‘Zipper’), a corporation acquired in 1996
by Dynamex Canada Inc., the present Appellant. I shall be referring to
Zipper and Dynamex interchangeably throughout these Reasons, since the
contracts in question were those of Zipper but, by operation of law,
became equally those of Dynamex. (Exhibit R‑32, Tab A,
page 2)
[22]
I have also reviewed
the facts as described by Referee Taylor and I find them substantially similar
to the facts before me. Therefore, there is no substantial basis for distinguishing
the Mamona case from this one. To illustrate my point, it is worth
citing from Referee Taylor’s decision the following extract dealing with the
similarities of the contracts of the three drivers (Exhibit R‑32,
Tab A, pages 2‑4):
. . . Those contracts, while containing many
provisions in common, were not identical. The distinctions between them will be
discussed later in these reasons, but the salient, common factors may be
summarized this way:
i.
Zipper agreed to employ the Respondent as an
independent driver to provide courier, messenger and delivery services to
Zipper’s customers;
ii.
the driver was described, in each case,
as an “independent contractor” and, in the cases of Messrs. Hepner and
Cyr, the phrase “and not an employee” was added;
iii.
the driver was required to wear uniforms
provided by Zipper, with the driver contributing to the cost of the uniforms;
iv.
either expressly, or by necessary implication, the
driver was to provide his or her own vehicle and was to display on that
vehicle, in such place and in such prominence as Zipper might designate, logos
or designs depicting Zipper’s trademarks. The logos were to be paid for by the
driver and no other name, notice, advertising or painting of any kind was
to be allowed on that vehicle without the prior approval of Zipper “which
consent may be unreasonably and arbitrarily withheld”;
v.
the driver was
made fully responsible for all losses to cargo and was required either
to contribute to a ‘Driver’ claim fund’ or to pay an insurance premium
to cover potential losses in that regard;
vi.
the driver was to maintain the vehicle in
good working order, neat and presentable;
vii.
the driver was required to lease from Zipper
a mobile radio unit, the monthly rental being paid in advance at the
beginning of each month;
viii.
all customers,
including any new customers introduced to Zipper by the driver, were and
were to remain customers of the company and not of the driver;
ix.
the customers were invoiced by Zipper, and Zipper paid each driver an agreed rate of commission
based upon the invoice, whether or not the customer had paid its bill; a small percentage
of the commissions otherwise payable to each driver was deducted for bad debts;
x.
the driver was to
be responsible for all maintenance, repairs, registration, licensing and insurance
for the driver’s vehicle, although the required amount of insurance
coverage differed—Messrs. Hepner and Cyr agreed to carry at least $200,000 of
third-party liability coverage, whereas Mrs. Mamona undertook to carry
$500,000;
xi.
the driver was to use daily manifest forms,
waybills and other documents supplied by the corporation;
xii.
each driver agreed to be bonded (Mrs. Mamona in the amount of $10,000, Messrs.Cyr and Hepner
for $5,000 each) and to reimburse the corporation for the bond premium by equal
monthly instalments;
xiii.
the contract was of indeterminate duration
but could be terminated by either party on written notice;
xiv.
the corporation, while promising to act fairly,
reserved the right to allocate work amongst its owner-drivers as it saw fit,
and to dispatch any driver to any customer, regardless of location.
[My
emphasis.]
[23]
There are obviously
some differences in the facts, as there are always. Some are favourable to
Mr. Fontaine and some to Dynamex. For instance, the drivers in Mamona were
made fully responsible for all losses to cargo and the cargo insurance premiums
were paid by the drivers. Here, the cargo insurance premium was paid by
Dynamex. Under the Zipper contract, the drivers were required to show on their vehicules
“in such prominence as Zipper might designate logos . . . depicting Zipper’s
trademarks”. There was no similar requirement in Mr. Fontaine’s case.
However, it should be stated that, under the Zipper contract, the drivers were
entitled to a higher commission if they displayed the Zipper logo. In Mrs. Mamona’s
case, had her car not been marked with a decal containing the corporate logo
she would have been entitled to receive only 65% of gross earnings instead of
70% (see page 5 of Mamona). Mrs. Mamona was required to have her
vehicle painted polar white or have her commission rate reduced to 65%. Such was
not the case for Mr. Fontaine. In Mamona, Dynamex deducted a small
percentage of the commission to cover bad debts and workers’ compensation
premiums. There is no evidence in Mr. Fontaine’s case of any deductions for
bad debts. The workers’ compensation premiums in Mr. Fontaine’s case were
paid by Dynamex. Overall, I believe it would have been easier in Mamona
to conclude that there was independent contractor status, but the referee still
held that the workers were employees!
[24]
It should also be
stressed that the decision of Justice Bowie in Palmer was based only on
the testimony given by Dynamex managers, namely Mr. Aitken and the operations
manager. The worker, Mr. Palmer, did not testify. Furthermore, counsel
for the respondent stated that the Driver’s Handbook and many of the memoranda
that were filed as exhibits before me were not introduced as evidence before
Justice Bowie. So Justice Bowie did not have a complete picture of what really
took place in Toronto during the relevant years. The Palmer
decision is therefore of no assistance to Dynamex.
[25]
However, the decision
rendered by Referee Taylor is of great assistance to the respondent in the
present case. As mentioned earlier, Referee Taylor concluded on the basis of
common law principles that each of the workers was an employee and thus entitled
to vacation pay. His decision was subjected to judicial review by the Federal
Court of Canada, Trial Division. Justice Kelen concluded that Referee Taylor’s
decision was not patently unreasonable “even if the decision was contrary to jurisprudence
before the Tax Court that the courier industry is normally made up of
independent contractors, not employees of the courier company . . .”. That decision
was affirmed by the Federal Court of Appeal.
Sharlow J.A. stated: “The referee went on to identify the applicable common law
principles as those set out in Wiebe Door Services . . . . In
my view, his analysis of the relevant common law principles discloses no error
of law.” At paragraph 50, she concluded that the referee’s application of
the common law principles to the facts was “reasonable and should not be
disturbed”. As mentioned above, Dynamex was refused leave to appeal to the
Supreme Court of Canada. Given that seal of approval, it should not be
inappropriate to rely on the precedent created by the Mamona decision of
Referee Taylor, provided that the evidence before me supports a similar
conclusion herein.
US Case law
[26]
In his testimony in the
appeals concerning Mr. Fontaine, Mr. Aitken was asked to describe the
practices of the courier industry. He stated that the courier industry, for
both same‑day and overnight deliveries, “just about exclusively uses
independent contractors” (question 195, pages 47 and 48 of Volume 2
of the Transcript). He then added: “the odd time they could have employees, you
know, we run into that, but for the most part they are independent contractors”
(question 196, page 48). In cross‑examination, however, he acknowledged
that UPS and Fedex in Canada treated their drivers as employees (see
questions 576 to 578 in Volume 2 of the Transcript).
[27]
Similar statements were
made in at least one other case relied on by Dynamex and submitted in its book
of authorities: the decision of the British Columbia
Supreme Court in Tajarobi v. Corporate Couriers Ltd., [2006] B.C.J. No. 639
(QL). In that case, DHL‑Loomis was a third party. The defendant,
Corporate Couriers, operated a same‑day courier service for his own
customers and provided route courier service on behalf of DHL Worldwide Express
for customers of DHL. At paragraph 40, Justice Halfyard states that a
witness for Corporate Couriers testified that it’s “drivers were contract
drivers, and that in his experience, all courier drivers in North America were independent contractors.” (My emphasis.) In concluding that the
plaintiff had failed to meet his burden of establishing that he was an
employee, Justice Halfyard stated the following in paragraphs 56 and 57:
56 The second
additional factor is that the conduct of the parties during this six
year period occurred in the context of an industry in which (according to
the evidence) couriers are generally considered to be independent contractors.
Except for Mr. Lalli’s assertion that he considered himself to be an employee, the
evidence supports the inference that all of the other route drivers were
treated as being independent contractors, and considered themselves to be
such.
57 Both of
these additional factors point to the conclusion that the plaintiff was an
independent contractor, although the second cannot carry much weight.
[My
emphasis.]
[28]
Given that Dynamex is a
Canadian subsidiary of a U.S. Corporation which happened to own the logo used
by Dynamex’s drivers on their vehicles, and given the position taken by
Mr. Aitken that the industry almost exclusively uses independent
contractors, it is worth noting that in the U.S. the status of owner‑operators
is far from being as clear as it is described as being. The business model
followed by the courier industry, which treats its drivers as independent contractors,
is under attack in the U.S. courts. A major class action involving
Fedex Ground Package System, Inc. is under way in the U.S. District Court for
the Northern District of Indiana, South Bend Division. Judge Robert
Miller granted on July 27, 2009 motions for class certification with
respect to eight American states. In 2007 and 2008, he had ruled on similar
motions concerning 28 other American states.
[29]
In addition, there are
three decisions of the Court of appeal of California holding that drivers in the courier business are to be treated as
employees notwithstanding their being described in contracts as independent
contractors. These decisions are: Estrada et al. v. Fedex Ground Package
System, Inc., 154 Cal. App. 4th 1; 64 Cal. Rptr. 3d 327; 2007 Cal. App.
Lexis 1302; 154 Lab. Cas (CCH) P60, 485; Air Couriers International et al.
v. Employment Development Department et al., 150 Cal. App. 4th 923; 59
Cal. Rptr. 3d 37; 2007 Cal App. Lexis 738; 2007 Cal. Daily Op. Service 5325;
and JKH Enterprises, Inc. v. Department of Industrial Relations/State of
California, 71 Cal. Comp. Cas 1257; 2006 Cal. Wrk. Comp. Lexis 329; 142
Cal. App 4th 1046; 48 Cal. Rptr. 3d 563.
[30]
In Estrada, the
drivers worked full time for Fedex, were paid weekly, had regular schedules and
regular routes, received many standard employee benefits, wore uniforms, used
company‑specific scanners and forms, and were required to work
exclusively for the company. The common law principles applied by the
California Court of Appeal are to a great extent similar to the common law
principles applied in Canada, as appears from this dictum by Vogel J.:
(1) Because
the Labor Code does not expressly define “employee” for purposes of section
2802, the common law test of employment applies. (Reynolds v.
Bement (2005) 36 Cal.4th 1075, 1087.) The essence of the test is
the “control of details” — that is, whether the principal has the right
to control the manner and means by which the worker accomplishes the work—but
there are a number of additional factors in the modern equation, including (1)
whether the worker is engaged in a distinct occupation or business, (2)
whether, considering the kind of occupation and locality, the work is usually
done under the principal’s direction or by a specialist without supervision,
(3) the skill required, (4) whether the principal or worker supplies
the instrumentalities, tools, and place of work, (5) the length of time
for which the services are to be performed, (6) the method of payment,
whether by time or by job, (7) whether the work is part of the principal’s
regular business, and (8) whether the parties believe they are
creating an employer‑employee relationship . . . . The parties’
label is not dispositive and will be ignored if their actual conduct
establishes a different relationship.
[My
emphasis.]
[31]
The California Court of
Appeal concluded that the trial court’s findings that the drivers were
employees were supported by substantial evidence. What follows is the trial judge’s
decision as described by the Court of Appeal of California :
The trial court
found, and set forth in its statement of decision, that the drivers were FedEx
employees, not independent contractors, and that they had not been indemnified
for any of the expenses at issue. The court described the Operating Agreement
as “a brilliantly drafted contract creating the constraints of an employment
relationship with [the drivers] in the guise of an independent contractor model”—because
FedEx “not only has the right to control, but has close to absolute actual
control over [the drivers] based upon interpretation and obfuscation.”6
. . .
The court found,
in addition, that the drivers are “totally integrated into the [FedEx]
operation,” that they perform work essential to FedEx’s core business, that
they are required to work exclusively and full time for FedEx, that
their customers are those assigned to them by FedEx, that no
specialized skills are required, that they must wear uniforms and conform
absolutely to FedEx’s standards and that, in the end, each driver has a “job”
with “little or no entrepreneurial opportunities.” Although the drivers
provide their own trucks and equipment, FedEx is involved in the purchasing
process, providing funds and recommending vendors.
The
essence of the trial court’s statement of decision is that if it looks like a
duck, walks like a duck, swims like a duck, and quacks like a duck, it is a
duck.
_____________________
6 The court
found the drivers’ right to control their own routes and schedules was
illusive because they were “constrained by customer pick up and delivery
windows contracted by the [FedEx] sales force” and by FedEx’s paperwork
requirements that required the drivers’ presence at the terminal.
[My
emphasis.]
[32]
Vogel J. himself concluded
that the drivers were employees:
FedEx’s control
over every exquisite detail of the drivers’ performance, including the color of
their socks and the style of their hair, supports the trial court’s
conclusion that the drivers are employees, not independent contractors. The
drivers must wear uniforms and use specific scanners and forms, all obtained
from FedEx and marked with FedEx’s logo. The larger items—trucks and
scanners—are obtained from FedEx‑approved providers, usually
financed through FedEx, and repaid through deductions from the drivers’
weekly checks. Many standard employee benefits are provided, and the
drivers work full time, with regular schedules and regular routes. The terminal
managers are the drivers’ immediate supervisors and can unilaterally
reconfigure the drivers’ routes without regard to the drivers’ resulting loss
of income. The customers are FedEx’s customers, not the drivers’ customers.
FedEx has discretion to reject a driver’s helper, temporary replacement,
or proposed assignee.
. . .
Drivers—who need
no experience to get the job in the first place and whose only required skill
is the ability to drive—must be at the terminal at regular times for
sorting and packing as well as mandatory meetings, and they may not leave until
the process is completed. The drivers are not engaged in a separate
profession or business, and they are paid weekly, not by the job. They
must work exclusively for FedEx. Although they have a nominal opportunity
to profit, that opportunity may be lost at the discretion of the
terminal managers by “flexing” and withheld approvals, and for very slight
violations of the rules. Most drivers have worked for FedEx for a long
time (an average of eight years), and drivers employed by FedEx’s
competitors (UPS, DHL, and FedEx’s sister corporation, FedEx Express) are
classified as employees.
[My
emphasis.]
Characterization
of the contract by the parties
[33]
Before we apply the
common law principles to the facts of these appeals, it is necessary to deal
with another preliminary legal matter. It has to do with the weight to be given
to the statement in the Fontaine contract that Mr. Fontaine acknowledges
and agrees that his status is that of a dependent contractor and that there is
no employer‑employee relationship. (See section 12 of the contract,
above.) The law on this issue is clear. Sharlow J.A. in Dynamex (above)
expressed it well at paragraph 52:
52
The referee
recognized, correctly in my view, that in determining whether a person is an
employee or an independent contractor, the terminology used in his or her
contract is not determinative (see Sagaz, supra, at paragraph
49). Such a contractual term cannot prevail if the evidence of the actual relationship
between the parties points to the opposite conclusion, as the referee found
to be the situation in this case. The referee also recognized that a person
whose employment status is ambiguous may well find it advantageous to take
inconsistent positions in different proceedings. That is relevant but not by
itself determinative of which of the two inconsistent positions is correct in
fact and law.
[My
emphasis.]
This statement has been approved in many
other Federal Court of Appeal decisions such as D & J Driveway Inc. v.
Canada (Minister of the National Revenue), [2003] F.C.J. No. 1784 (QL),
at paragraph 2.
[34]
In my view, the courts
have a duty to verify that the terms of a contract have been adhered to and
that the terminology used adequately reflects the true intent and the conduct of
the parties, so that a “brilliantly drafted contract” does not create a
contract of service (employment) “in the guise of” a contract for services. Failure
by the courts to be alert in this regard would give true employers the ability
to unjustly deprive their true employees of many benefits that have been
legislated by Parliament and its provincial counterparts. Alertness is of even greater
necessity in circumstances such as those in the present case where the parties to
the contract come to different conclusions as to the true nature of their
relationship.
[35]
The Fontaine contract
was drafted by Dynamex and Mr. Fontaine was not offered any opportunity to
negotiate it. The contract may clearly express the intent of Dynamex but not
necessarily that of Mr. Fontaine. On the contrary, it appears that
Mr. Fontaine was not comfortable with signing this contract. He consulted
his union representative and asked whether he should sign. He had no choice but
to sign in order to keep his employment with Dynamex. The Union was also of the
view that the relationship of the drivers with Dynamex was an employer‑employee
relationship even though it was not successful in having its point of view
acknowledged in the Collective Agreement. It had to sign the Collective
Agreement, which defined employee/owner‑operator as including a dependent
contractor. In any event, it remains to be determined if Dynamex acted in a way
that was consistent with its intent that Mr. Fontaine not be considered as
part of its personnel, that is, one of its employees.
[36]
At first glance, the
Fontaine contract contains many provisions which appear to be more consistent
with an employment contract (contract of service) than a contract for services.
For instance, section 2 provides that the owner‑operator must
maintain his vehicle in a safe, damage‑free, serviceable and clean
condition. But how many of Dynamex’s clients require Dynamex to fulfil such a
requirement? In section 3, the contract states that the services are to be
provided in a safe, efficient, courteous and lawful manner. So the worker is
being told how to perform his services. Section 22 of the contract
stipulates that the owner‑operator shall wear a uniform approved by the
company and forbids the placing of any name, advertising or decal (other than those
of Dynamex) on the owner‑operator’s uniform or motor vehicle, except as
expressly otherwise permitted. Obviously, Dynamex would not have allowed Mr.
Fontaine to wear on his uniform or display on his car a corporate logo of
another courier company.
[37]
It is true that there
are also provisions in the Fontaine contract that could be consistent with the
existence of a contract for services. For example, section 14 provides
that the owner‑operator shall protect the company from, and indemnify it
for, all losses, claims, costs, damages or liabilities which the company may
suffer or incur from any act or omission of the driver in providing services to
the company under the agreement. (See also section 10 of the Fontaine contract.)
So an overall analysis of the conduct of the parties is necessary to determine
the true nature of the relationship between them.
Application of the common law principles to
the facts
- Whose business is it?
[38]
Let us see, then, if
the “evidence of the actual relationship between the parties points to the opposite
conclusion”. As stated in Sagaz, the central question is whether
Mr. Fontaine was performing services as a person in business on his own
account or whether he was performing them on behalf of Dynamex. Taking into
account the evidence as a whole introduced before this Court, I have no
hesitation in concluding that Mr. Fontaine was not carrying on any courier
business on his own account.
[39]
First, Mr. Fontaine
did not hold himself out as carrying on a business. He did not have a
registration number for GST purposes.
There is no evidence that Mr. Fontaine sent any invoices to Dynamex for
the purpose of receiving his remuneration, as a normal business person would
have done. His remuneration was paid by Dynamex without any request from him. All of the work
involved in computing his remuneration was performed by Dynamex, as any
employer normally does (see Exhibit R‑25). Mr. Fontaine did not have any
customers. He was delivering parcels to Dynamex’s customers. These customers belonged
to Dynamex. It was Dynamex that had to take the trouble to get those customers,
to negotiate its remuneration with them and to collect that remuneration. It
bore the risk of not being paid. There was no contractual relationship between
Mr. Fontaine and Dynamex’s customers. The drivers, of whom
Mr. Fontaine was one, only had to show up and wait for the dispatcher’s
instructions concerning pickup and delivery location for the parcels.
[40]
Given that the
customers that Mr. Fontaine serviced belonged to Dynamex, Mr Fontaine
could not have sold any list of customers nor benefited from the value
resulting from the goodwill associated with such a list. Under the Fontaine
contract, he could not provide similar services to competitors of Dynamex nor
could he, for one year following the termination of the contract, solicit or do
business similar
to that of Dynamex with any persons who were then, or had been within the last
year, customers of Dynamex (see section 4 of the Fontaine contract reproduced
above).
[41]
An opportunity to make
a profit did not really exist. It would have existed had Mr. Fontaine not
been limited to providing his services to Dynamex only. In such a situation,
there would have been an incentive to hire employees of his own and to be in
business on his own account. That is what Dynamex did. It delivered parcels
coming not only from its own customers but also from other courier businesses
such as DHL and Purolator. Furthermore, the price paid for the delivery was
decided by Dynamex.
Had Mr. Fontaine had the freedom to service any customers and to fix the
remuneration for the delivery, he would have had an opportunity to increase his
profit, as entrepreneurs do. His only opportunity for higher income, however, was
to work longer hours (overtime), as many employees do.
[42]
Dynamex was the only
national same‑day‑delivery courier company in Canada (according to Mr. Aitken) and therefore
Mr. Fontaine’s services (as also those of the other drivers, the walkers
and the bikers) were used in the core activities of Dynamex. The Driver’s
Handbook makes it perfectly clear that
the drivers are integrated into Dynamex’s business, stating the following at
page 6: “by being
professional, courteous, friendly and helpful, you present a polished image
when making the customer’s overall experience a good one with Dynamex . . . . ‑You are not just an [sic] Driver − in the
eyes of our customers − YOU ARE DYNAMEX”. Mr Fontaine, like the other drivers,
walkers and bikers, provided a service which was essential to Dynamex. In
addition, Mr. Fontaine worked for Dynamex and it predecessor, Zipper, for close
to 16 years on a full‑time basis, Mondays to Fridays, between the hours
of 8:00‑8:30 a.m. to 4:30‑5:30 p.m., just as employees (such as the
walkers and the bikers) would normally do.
[43]
He was paid regularly (twice
a month) by Dynamex. There is no evidence that Mr. Fontaine ever
experienced a loss. The remuneration paid by Dynamex and Zipper from 1991 to 2002
varied from a low of $ 21,302 in 1991 to a high of $ 28,113 in 2000. From those
amounts, Mr. Fontaine would have had to deduct at least his car expenses.
[44]
Dynamex was the one
providing most of the mandatory equipment necessary for
the courier business, including the radio equipment, a telephone
book, an extra set of keys, notepads, waybills, a handcart, a map book, an ID tag,
and manifests and bills of lading. It also provided the trade name and the Dynamex
logo. One big exception was the car, which had to be provided by
Mr. Fontaine (in which respect he was like the other drivers). The car in
question was a small personal vehicle, namely a Firefly. There is no evidence
that Mr. Fontaine would not have purchased the car had he not been working
for Dynamex. It is reasonable to expect that Mr. Fontaine would have owned
such a car in any event.
Therefore, Mr. Fontaine was in no different situation than many salespersons
who are required to provide their own cars to provide their services on behalf
of their employer. It is true that it is normal practice for such an employer to
provide a car allowance to cover vehicle expenses. Here this was achieved by
paying a substantial commission. It is fair to assume that the costs incurred
by the drivers for the operation of their vehicles were taken into account in
determining the level of commission paid by Dynamex. When it lost the Mamona
case, Dynamex reduced commissions by approximately 4% to take into account paid
vacation. Mr Fontaine’s commission went from 71% to 66%.
[45]
In addition, the
conduct of ZTS/Dynamex as described in the Morgan decision further
supports this inference. Mr. Morgan was originally hired to work for ZTS.
Initially, he drove a one‑ton cube truck which was owned by ZTS. ZTS also
paid for all gas and maintenance with respect to this vehicle. For his
services, Mr. Morgan received a commission of 40% (of the amount received
by ZTS for its services). Before starting to work for ZTS, he had signed an
agreement, in March 1996, under which he was required to operate his own
vehicle at his own expense.
His rate of compensation in that case would be 60% (64% if his vehicle was
painted white and had decals on it). (See Exhibit R‑32, Tab B, at pages 4-5.)
Its seems that in 1997 Mr. Morgan purchased a five‑ton truck that
had previously been owned by Dynamex, and that he then became entitled to
receive a commission of 80% (see page 5 and 6 of Exhibit R‑32, Tab B).
[46]
It is clear that the
management of the delivery services was carried out by Dynamex thorough its
dispatchers, managers and supervisors. They were the ones investing time and
energy in increasing the efficiency of Dynamex’s courier business. It was
Dynamex that — as any other employer would do — drafted or revised a handbook instructing not
only its employee walkers and bikers but also its drivers on how to perform
their delivery services. In addition to the Drivers’ Handbook, there are many
internal memoranda containing directives in this regard. I will review these in
greater detail below.
[47]
Another example is the
fact that Dynamex instituted on June 13, 2000 a national fuel purchase
program in order to reduce its drivers’ vehicle expenses. It provided its
drivers with a Petro-Canada credit card which enabled them to avail themselves
of a discount. It is true that the cost of fuel under this national program was
borne by the drivers. However, what is significant here is that the program was
implemented by Dynamex, which shows that it, not the drivers, was devoting
management time to making the business more efficient (see Exhibit R‑8). By
so doing, Dynamex was able to reduce the risk of being asked by its drivers to
increase their commission.
[48]
The drivers were contractually
required to maintain their vehicles in a good state of repair, and Dynamex
inspected them twice a year. It should be noted that in the event of an
accident involving the vehicle or the parcels, a form prepared by Dynamex and bearing
its logo had to be filled out by the drivers and handed in to Dynamex (see
Exhibit R‑31). This, in my view, is also indicative of the fact that it
was Dynamex and not the drivers (in this case Mr. Fontaine) who devoted
management time to matters concerning how to carry on the business in the most
efficient manner.
[49]
The stipulation in the
Fontaine contract that Mr. Fontaine must indemnify Dynamex with respect to
all liabilities is consistent with the existence of a contract for services.
However, in my view, it should not be given much weight because the likelihood
of such circumstances occurring was not very high. Dynamex had cargo insurance for
which it paid the premium. Mr. Fontaine, being the owner of the car, had
to obtain his own car insurance. So Dynamex’s exposure would have been limited.
In my view, the indemnification provision is not sufficient to detract from the
overall conclusion that Mr. Fontaine was not carrying on a business on his
own account.
[50]
Mr. Fontaine had
to perform his services personally (see section 1 of the Fontaine contract,
above). While the contract does not expressly so provide, such was nonetheless the
reality because, although Mr. Fontaine had the right to hire helpers, this
was subject to the control of Dynamex (see the Collective Agreement, article 17.08,
in Exhibit R-1, Tab 1). In any event, this right was not exercised by
Mr. Fontaine. He did not hire any helpers, nor did he not look for
substitutes when he did not show up for work.
[51]
In my view, to state, in
an attempt to establish that he was behaving like an entrepreneur, that
Mr. Fontaine was free to decide when he would work, to accept a proposed delivery
or not and to choose the best routes for making his deliveries, is inaccurate.
The evidence referred to above and below contradicts these allegations by
Dynamex. In particular, as to the alleged freedom to refuse less profitable
deliveries, article 15.02 of the Collective Agreement specifically provides that
the employee/owner operator (which term includes the drivers, the walkers and the
bikers) “will not refuse to handle such calls” (the less profitable ones). We will
see below the consequences of refusal by a driver in such a case (see Exhibit R‑13).
Thus, Mr. Fontaine had no (or little) freedom in this regard.
[52]
As far as Dynamex’s
lack of control over which routes to take to make deliveries is concerned, it
did not have to exercise such control because of its choice of method of remuneration
for its drivers. Like the walkers and the bikers, the drivers received a
percentage of the fee collected for the delivery, that is, a commission. This formula
ensured that Dynamex’s employees would use the most efficient route for a
delivery. In any event, Mr. Fontaine was in no different a situation than
that of most sales representatives working on commission for their employer.
These employees are given a considerable degree of freedom in servicing their
employer’s customers. Whatever freedom Mr. Fontaine may have had during
the relevant period, it does not conclusively establish that he was carrying on
a business.
[53]
In my view, the degree
of financial risk taken by Mr. Fontaine, his degree of responsibility for
investment in tools and for management of the deliveries and his opportunity
for profit and risk of loss are not sufficient to establish that he was an
entrepreneur and that he carried on a business on his own account.
- Relationship of subordination with
Dynamex
[54]
Not only does the
evidence here clearly establish that Mr. Fontaine was not performing his
services on his own account, but it clearly establishes as well that he was an
employee of Dynamex because of the degree of direction and control that the company
exercised over him.
[55]
First of all, it is
interesting to note that in a memo addressed to all drivers respecting the transportation
of dangerous goods, one Candace Shadlock is described as “Driver Services
Supervisor”, which not only is clearly consistent with Dynamex having the right
to exercise control over the work performed by Mr. Fontaine, but also
shows that it had a supervisor responsible for exercising that right with
respect to all its drivers. (See Exhibit R‑12. Many other examples of similar
memoranda are referred to below.)
[56]
There is also plenty of
evidence that Dynamex exercised direction and control over the work of its
drivers in general and over Mr. Fontaine in particular. For instance, through
its employee dispatcher, Dynamex told him what to do and where to do it, that
is, where to pick up and where to deliver parcels. It is interesting to note as
well that the assignment of the deliveries by the dispatcher was done in a
similar fashion for the walkers and the bikers. Not only were there no
differences in the ways in which they were directed in the performance of their
work, they also had similar remuneration formulas. The only significant
difference between drivers on the one hand and walkers and bikers on the other
is that the drivers had to provide their own vehicle.
[57]
Dynamex did not limit
itself to “control of the result” or of the quality of the work; its
aim was to control the performance of the work, that is, how it was to be done.
First, there was a 29‑page Driver’s Handbook which was designed to assist
the drivers in carrying out their work.
According to Mr. McMaster, this handbook applied equally to him (a walker)
and to bikers. One of the three objectives of the handbook is stated thus:
a.
Gives you some practical advice on how to do
your job a little better and provides Policy and Procedure information on
Dynamex standards.
[My emphasis.]
[58]
The Handbook, at
page 20, describes the role of the dispatcher as consisting of three
functions:
1) To dispatch
the order to the driver most capable of completing the delivery on time.
2) To organize
and efficiently move drivers throughout the city such that income level
targets are met and exceeded.
3) To track the
status and update pending orders until completion by the driver.
[My emphasis.]
It also indicates that the drivers are to “[l]et
the dispatch department know where you are at all times, when you are
out of your vehicle, when you pick up or make a delivery.” (My emphasis.)
[59]
In addition to these
statements in the Driver’s Handbook, there are internal memoranda addressed to
the drivers. One of these, by Mr. Brian Bachinski, dated sometime in
2002 (Exhibit R‑26) , deals with requests for time off:
We are currently experiencing problems
servicing our customers on Many [sic] days. This seems especially a
problem Mondays, Fridays and month-ends where some drivers may have
booked appointments, time-off or simply not shown up for work. Since these are
busier days at work, it’s created service failures or poor service to many of
our customers. Our customers are now starting to compare rates to other
couriers because of service issues. We DO NOT want that to happen.
To help alleviate this problem we request
you do not book time-off on these days. Please schedule your
appointments or necessary time off at other times. If you
have some special circumstance needing time-off on these days, please see
Michelle Leber to discuss.
We need all drivers to be at work to care for our customer base. At times we have had 20, 30 or more
drivers off at the same time. As you can appreciate, this makes it nearly
impossible to meet our service commitments to our customers. We try not to hire
more drivers than needed, but the present circumstances are requiring us to
hire more drivers just to cover off unscheduled absenteeism.
Your cooperation in making sure you’re
available for work is appreciated. We will continue to use the Time Off
request form (with a few changes) to book your necessary appointments.
[60]
Another memorandum,
this one drafted by Brian Bachinski’s brother, Chris Bachinski, general
manager of Dynamex, a few months later, on November 20, 2002, is
stronger in its directives. Dealing with the availability of drivers and the refusal
of calls, it reads as follows (Exhibit R‑13):
We continue to work at providing great
service to our customers, and to provide proper earnings to our drivers. To do
this we balance many different issues each day such as call volume, driver
availability, and other daily variables.
We want to utilize drivers efficiently, please
be reminded of our company policies on working hours and refusal of calls.
WORKING HOURS:
1) Appointments may not
be accommodated on Friday’s [sic] and Month End days.
2) All drivers
that book‑on are expected to be available for a full day. Our
Dispatch opens at 7:45a.m., Monday to Friday, and drivers should be available
to start work between 7:45-8:30a.m. Monday to Friday, unless scheduled runs
require an earlier start time. In addition drivers must be available
to work until the calls are completed; this usually is between 4:45-5:45p.m.,
depending on volumes and scheduled runs.
Drivers who continue to book on late and
leave early will follow the same procedures as listed below for refusal of
calls.
Note: We will be reasonable when
extenuating circumstances arise.
REFUSAL OF CALLS:
Drivers are not allowed to refuse calls,
other than for Health & Safety reasons. We will continue to impose the
following:
1st Refusal
by a Driver: driver will be placed at
the bottom of the driver list.
2nd Refusal: driver will be requested to meet with manager/supervisor to
discuss the incident.
3rd Refusal: driver will be suspended for 1 (one)
day.
Note: further repeated refusal of calls
will lead to termination of your contract with Dynamex.
The above policies are assist [sic] in
accomplishing two objectives. One, great service to our customers, this allows
us to keep our prices up. Two, ensures work is distributed fairly and driver
earnings are at a fair level. These two objectives help you as the drivers to
make more money.
We appreciate the drivers who are continuing
to commence early and work until the calls are completed, and appeal to the
other drivers to recognize how imperative it is that we improve our service.
Customers are the driving force of our business, without our customer there is
no income for the 165 personnel associated with our branch.
We thank you in advance for your co‑operation.
[My emphasis.]
[61]
This memorandum showing
displeasure and reminding the drivers of their obligation to show up for work
must be set in its proper contractual context. Article 8.12 of the Collective
Agreement deals with the availability of “employee/owner operators” (see
Exhibit R‑1, Tab 1):
(a) The Company
shall endeavor, within the reasonable confines of ensuring a high quality of
customer service, to use the least amount of employee/ owner operators
as possible.
(b) Within Six (6)
months of the ratification of this collective agreement the company will
reduce the size of the on demand fleet by Five Per Cent (5%) with the aim of
redistributing the work equitably amongst the remaining drivers. This
reduction of the fleet size is contingent on average fleet attendance not
dropping below Ninety Three Per Cent (93%), including authorized leaves,
and maintenance of an overall average on time delivery rate of Ninety Six and
One‑half Per Cent (96.5%).
[My emphasis.]
[62]
Although
Mr. Brian Bachinski indicated in his testimony that the memorandum drafted
by his brother was written out of frustration, it does reflect the fact that
drivers were not allowed to refuse calls other than for health and safety reasons
and that the company expected all drivers to be available for a full day. In
addition, the drivers had to be available to work until all calls were
completed, which was normally around 4:45 or, 5:45 p.m. In Mr Fontaine’s
case, he would sign in (book in) between 8:00 and 8:30 a.m. and sign off
between 4:30 and 5:30 p.m., Monday to Friday. However, he was sometimes
unavailable by reason of his having to provide services to clients of his
massage therapy business. In those circumstances, he needed the authorization
of the operations manager (see Exhibit R‑19).
[63]
Another example of the constraints
on the drivers’ choice to work or not is the “Scheduled Leave Request -
Drivers” form (Exhibit R‑17). It states the following: “To assist in
scheduling time‑off please indicate below your 1st, 2nd
and 3rd choices. We will endeavor to
accommodate your request . . . .” It also says: “If you are
taking time‑off in July or August this form must be returned by
May 1st, 2000.” Article 14.02 of the Collective
Agreement provides that a driver with five years of service or less is entitled
to “absent himself/herself and his/her vehicle” for a period of up to two
weeks, and that the company has the right to allocate time off on a rotation
basis. In addition, as mentioned above, Mr. Fontaine was not required to
find a substitute to perform his work while he was on scheduled leave. Moreover,
he had no employee working for him either.
[64]
One can see from these
facts that there were both important legal and economic constraints that limited
the so‑called freedom of the owner‑operator to work or not to work
for Dynamex. The Union certainly wished that its members, the owner‑operators,
might be given an opportunity to make enough money, and the consideration for
Dynamex agreeing to give them that opportunity was that they had to be
available most of the time (93%). Therefore, this is not a situation in which
the drivers (the owners‑operators) were truly free to refuse any
particular delivery order. The situation is thus actually different from the
facts in Sauvageau Pontiac Buick GMC Ltée v. Canada, [1996] T.C.J. No. 1383 (QL), a decision which I
rendered regarding workers who were completely free to accept or refuse a car
delivery assignment.
[65]
As mentioned above, there are provisions
in the Fontaine contract dealing with how the work is to be done.
Section 3 stipulates that all services are to be provided in a courteous
manner. The Driver’s Handbook provides
a lot more detail on this subject. For instance, on page 5 it says that “[c]ustomers
are not people to match wits or argue with”. The Driver’s Handbook (at
page 7) also tells drivers what to do when dealing with angry and
emotional customers:
It is very important that you remember not to
react to this anger . . . . Identify and deal with the concern or issue, which
has created the anger. Do not take the situation personally and never argue
back . . . . If it is an issue or a concern that you cannot resolve . . .
suggest that they call the Operations Manager/Assistant or the Branch Manager
for immediate action . . . . [If] you are having a bad day . . . do
not take your frustration out on a customer!
[66]
The Driver’s Handbook
also tells drivers: “When you detect the first sign of difficulty with a
delivery or a pick up contact the customer directly. If further
assistance is required. Please contact Dynamex Help Desk . . .”
(Exhibit R‑2, page 19). The Handbook further states at p. 20:
“When you encounter difficulties at a customer site do the best you can to
resolve the situation but remember it is always okay to inform dispatch.”
(My emphasis.)
[67]
Directives in the
Driver’s Handbook specify how signatures are to be obtained on delivery (Exhibit
R‑2, page 23). The following are the detailed instructions with
respect to delivery:
1. Your greeting
and brisk pace have made the receiver aware of your presence, so while you
have his/her attention, get the signature. Do not make the receiver wait.
2. Offer your pen
(and route sheet or bill of lading) posed [sic] over the line
where the signature is required and indicate the area for signature.
3. Always say “Thank
You” when accepting the pen and documentation from the receiver.
4. If the
receiver is on the phone, place the pen and documentation before him/her
and position the pen where the signature is required.
5. If the
delivery is a third party charge, then dispatch will give you all the proper
information for writing up you own waybills. Account numbers must be on all
third party billings.
6. All
deliveries must be delivered the same day. If you cannot complete the
delivery, check with dispatch as to whether or not you should mail‑slot
the delivery or deliver it the next day by 9:30 a.m. Always get
authorization from a Dispatcher or Supervisor for items that you
are holding.
[My emphasis.]
[68]
The Handbook also sets
out the following “Signature Requirements” (page 24):
1. Under no
circumstances are deliveries to be left outside a building unless prior
authorization directly from the client or your dispatcher has been received.
2. All deliveries
made during business hours must have a signature unless prior
authorization has been given by a Dispatcher, is received on your pager, or is
given by the customer (the person’s name must be obtained and written on the
waybill).
3. The following
guidelines must be met at single family dwellings if no signature is
available and only when approved by the Dispatcher, is received on your pager,
or is given by the customer (the person’s name must be obtained and written on
the waybill).
a.
The package is hidden from the passing public
b.
The package is protected from inclement weather
c.
The location is consistent with the customer’s
preference
d.
The customer can find it easily; and
e.
A door‑knocker is left identifying any
unusual location (eg. parcel left next door)
[My emphasis.]
[69]
The section of the
Driver’s Handbook dealing with waybills specifies at page 10:
Waybills, manifests or other shipping
documents MUST be filled out neatly and thoroughly, with all the
relevant information . . . . A clear signature and time of delivery is MANDATORY
. . . . Waybills, Manifests and Shipping Documents
for the previous days work must be turned in daily BEFORE NOON at
one of our drop boxes.
[70]
The section on Waybill
procedures states that the waiting time “must be authorized and signed for by
the client, if you are not at the client’s office, the dispatcher may give
authorization on the client’s behalf.” (Page 13; my emphasis.] The
Driver’s Handbook also states that proof of delivery must be communicated by
radio (“called in”) for certain deliveries, such as those performed for DHL
or Purolator or as a result of calls from other Dynamex branches (pages 13
and 21). In addition, “[a]ll changes to pces and weight must be radio’d [sic]
back to your Dispatcher, they will make the change and re‑page you
the call. Do not highlight these on your manifest.” (Page 13; my
emphasis.)
[71]
The Driver’s Handbook
also describes pickup procedures setting out all the information that is to be
provided and obtained at each pickup. The driver is asked to check the “[j]ob
number in the upper right hand corner” (page 22). If there is any
discrepancy between that number and the number that was given by the
dispatcher, the driver is to call the dispatcher. The drivers are also to call
the dispatcher if there is a waiting time over five minutes or if there is any
change in the service level agreed upon. The drivers are also told to look for
new business. When a driver has completed a pickup and returns to his vehicle,
he is to contact the dispatcher for further instructions.
[72]
The Driver’s Handbook
details the manner in which the drivers are to turn in their waybills. It says
that “waybills are placed in a manifest envelope in two bundles . . .”
(page 16). The first bundle includes cash, cheque, prepaid stamp or C.O.D.
call. It includes as well “Multiple Manifests Various Deliveries”; with respect
to this category, the drivers are asked to highlight the total, and the
Handbook goes on to state: “If you have any trouble pricing your manifest, call
the Admin Department or your Schedule Run Manager.” The Handbook further
indicates that “[i]f you go into a customer’s for a call and they give you
another delivery not called in: please call the office . . . .” It then says at
page 16: PAPERCLIP THE ABOVE WAYBILLS TOGETHER & SET ASIDE AS
BUNDLE #1”. (My emphasis.) With respect to Bundle #2, the Handbook
says: “Write your drop times beside your job numbers with 1 hour &
2 hour services only, except schedule runs, and do not highlight
them.” (Page 17; my emphasis.)
[73]
The Fontaine contract
provides that Mr. Fontaine is to perform his services “making use of the Vehicle”
(section 1). In addition, the driver “shall maintain the Vehicle in a safe,
damage‑free, serviceable and clean condition and shall maintain, repair,
license, [and] insure” the vehicle for a specific amount. The vehicle was inspected
twice a year by Dynamex according to Mr. Fontaine’s testimony. Similar
obligations with respect to the vehicle are described in article 8.13 of
the Collective Agreement, which provides as follows (Exhibit R‑1, Tab 1):
8.13 The employee/owner operator shall:
(a) Obtain and
maintain all licenses and permits required to carry out services to be
performed by him/her under this Agreement;
(b) Maintain in
sound physical and mechanical condition, repair, insure (in a manner and for
amounts prescribed by the Company) and operate each vehicle used by
him/her, at his/her expense under the applicable laws of the province in which
he/she works and provide proof;
[My emphasis.]
[74]
The Handbook also covers
preventive maintenance for the drivers’ vehicles (page 25), providing,
among other things, recommendations regarding things that should be done twice
a year and things that should be done for the winter months. For example, it
provides the following recommendations with respect to fuel stops and monthly
checks:
Fuel Stops
a.
Check the engine oil level;
b.
Check the windshield washer fluid level; and
c.
Look for low or under‑inflated tires, this
will help reduce fuel consumption
Monthly
·
Check the tire pressure — always check
tires when cold, not after a long drive;
·
Check coolant in the coolant recovery reservoir;
·
Check the operation of all exterior lights
including the brake lights, turning signals and hazard warning flashers
[75]
I am confident that
the delivery contracts between Dynamex and its customers do not require that Dynamex
maintain its delivery vehicles in clean condition, that preventive maintenance measures
be taken and that the vehicles be insured.
[76]
According to
Mr. Brian Bachinski, Mr. Fontaine was allowed to choose the colour
of the vehicle he used for the purpose of delivering Dynamex’s parcels.
Although there were no colour requirements for his vehicle, Mr. Fontaine
could have used magnetic decals identifying Dynamex. However, the letter issued
on August 7, 2002 by the general manager of the TD Centre in Winnipeg required that “[a]ll courier vehicles delivering to
TD Centre must have clearly visible signs identifying them as such”. The letter
stated that “[Y]our company name displayed on the side, or on the windshield is
fine — so long as the TD Centre Security and Dock Master can see the ID at
a reasonable distance” (Exhibit R‑3). Mr Fontaine testified
that he had to use a 2 inch by 2 inch decal (small decal) on his windshield but
said that he did not use the large decals.
[77]
Towards the end of the
Driver’s Handbook, there is a section providing “Useful Information and Tips”.
This section lists things that will hinder service and reduce the driver’s
earning potential. Among the items listed are not following the dispatcher’s
instructions, refusing calls/disappearing from the air, not keeping in constant
contact with the dispatcher, poor attendance, starting late, booking off early,
missing days, unwillingness to “hustle” (page 27 of the Handbook).
[78]
Evidence of direction
and control with respect to how the drivers’ work was to be done can be seen as
well in the fact that new drivers were given orientation training when they begun
working for Dynamex. In addition, training was given by employees of Dynamex on
specific subjects such as the transportation of dangerous goods.
[79]
Mr. Fontaine was
not only subject to the direction of Dynamex, but he was subject also to
disciplinary action if he did not comply with the policies and directives of
Dynamex. For instance, as seen above, if Mr. Fontaine turned down a parcel
delivery, he would be placed at the bottom of the drivers’ list after the first
refusal. After the second refusal, he would be requested to meet with his “manager/supervisor”
(my emphasis) to discuss the incident before he could be assigned any
deliveries by the dispatcher. He would be suspended for one day after the third
refusal (see Exhibits R‑13 and R‑14). So he would lose both delivery
time and money as a consequence of refusal.
[80]
If Dynamex’s customers
were unhappy with the service of a particular driver, they would complain to
Dynamex. This happened in the case of Mr. Fontaine, who was described as
having been rude with a particular customer. As a result, he was put on
probation for one year. If he was rude again during that period, his contract
could have been terminated. It was the policy of Dynamex to put a letter in the
files of its drivers in such cases.
[81]
Section 22 of the
Fontaine contract requires the drivers to wear uniforms approved by the
company. It should be added that Dynamex contributed a portion of the cost of
these uniforms (see Exhibit R‑23). The Driver’s Handbook describes the
uniform requirements at page 8. For example, it says that the drivers must
wear the Dynamex shirt and jacket with clear identification markings consisting
of the Dynamex logo and colour. Furthermore, the drivers are required to keep
the uniform neat, clean and tidy. “NO blue jeans” are permitted
(Exhibit R‑2, page 8). Under subparagraph 22(ii) of the
Fontaine contract, the drivers are not allowed to place any other name, notice,
advertising, decal or painting of any nature or kind whatsoever on the uniform (or
the motor vehicle), except if expressly permitted by Dynamex.
[82]
Not only does the
Dynamex uniform policy detail what constitutes an acceptable uniform, but it is
Dynamex’s policy that it be strictly enforced. There is a driver uniform
deficiency form that must be signed by the “Supervisor/Manager” (my
emphasis) of the driver when he or she notices that a driver is not in a full
uniform as required by Dynamex. It is indicated on this form that repeated
failure to comply with the uniform policy may lead to suspension and/or
termination of the driver’s contract (Exhibit R‑5). In its
memorandum dated August 13, 2002, addressed to all Dynamex drivers,
the management team states that the uniform policy will be strictly enforced: “Drivers
that are observed not in uniform will be subject to having no work offered to
them and/or suspension and cancellation of their contract” (see Exhibit R‑4).
[83]
The conclusion that
Mr. Fontaine was an employee during the relevant period is very consistent
with the decisions of the four referees who concluded that the 27 drivers
working for Dynamex in the Winnipeg and Saskatoon areas were employees for purposes of the Canada Labour Code and
were entitled to vacation pay.
Holding otherwise here would create an odd situation: independent contractors
would be entitled to vacation pay from their client!
[84]
In addition to being
consistent with the four referees’ decisions rendered under the Canada
Labour Code, this is consistent with U.S.
decisions, in particular the three California Court of Appeal decisions mentioned
above. Although it is true that courier companies have generally preferred for
whatever reasons, including greater efficiency and competitiveness, to have
their drivers treated as independent contractors, they are failing to get the
approval from several American judges for this practice, contrary to the
perception reflected in some Canadian court decisions. It should be stressed,
however, that the situation is not completely settled given that there is a
large number of class actions that are under way in the United Stated. However, the decisions
of the California Court of Appeal holding that the drivers of courier companies
are employees may become the norm as opposed to the exception. This should be
so, in my view, as long as the courier companies continue to exercise a high
degree of control over the work of their drivers. I might add that it would
appear difficult for these companies not to exercise such control given their
inherent interest in remaining efficient in carrying on their courier businesses.
[85]
For all these reasons,
Dynamex’s appeals are dismissed.
Signed at Ottawa, Canada, this 11th day of January 2010.
“Pierre Archambault”
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