Citation: 2010 TCC 451
Date: 20100831
Docket: 2009-1042(EI)
BETWEEN:
1423087 ONTARIO INC.
O/A PLATINUM AIR CARE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Favreau J.
[1]
This is an appeal from the decision by the
Minister of National Revenue (the “Minister”) that Mr. John W. Ducharme (the “Worker”)
held insurable employment within the meaning of paragraph 5(1)(a) of the
Employment Insurance Act (the "Act") while working for
the Appellant during the period from August 26, 2007 to February 28, 2008 .
[2]
During the period in question, the Worker worked
as a salesperson from August 26, 2007 to September 30, 2007 (approximately one
month) and as a service technician from October 1, 2007 to February 28, 2008
(five months). At the hearing, counsel for the Respondent recognized that the Worker
was self-employed while he was working as a salesperson.
[3]
In making his decision, the Minister relied on
the following assumptions of fact set out in paragraph 10 of the Reply to the
Notice of Appeal:
(a)
the Appellant is in the
business of selling and servicing air purifiers; (admitted)
(b)
the Appellant’s
President, Nick Dereza, controlled the day‑to‑day operations and
made the major business decisions for the Appellant; (denied as written)
(c)
Ray Schneider was in
charge of sales and customer relations for the Appellant; (admitted)
(d)
Jim Travis was in
charge of service and sales part [sic] for the Appellant; (admitted)
(e)
the Worker was hired
initially as “Salesperson” and subsequently as “Service Technician” under a
written agreement; (admitted)
(f)
the Worker worked as
“Salesperson” from August 2, 2007 to September 30, 2007;
(admitted but the starting date was August 26, 2007)
(g)
the Worker worked as
“Service Technician” from October 1, 2007 to February 21, 2008;
(admitted but the termination date was February 28, 2008)
(h)
the Worker signed
different documents such as “Independent Dealer form” which outlined Worker’s
personal data, vehicle make, model and insurance information and emergency
contact information, “Injury Disclaimer” and “Non-Competition and
Confidentiality Agreement”; (admitted)
(i)
the documents
enumerated in (h) above, contained information about commissions, frequency of
payments, responsibility of [sic] expenses, specific services to provide,
confidential information, non-competitive clause and termination of work;
(admitted)
(j)
the Appellant’s
business hours [sic] were Monday to Friday, 8 am to 8 pm; (admitted)
(k)
the Appellant booked
the Worker’s appointment times with their clients; (admitted)
(l)
the Worker’s hours of
work were not recorded; (admitted)
(m)
the Worker was required
to report initially to pick up client lists and later to turn in completed
reports and work orders and funds collected; (admitted)
(n)
the Appellant was able
to track the task completed by the Worker and update the customer records based
on reports submitted by the Worker; (admitted)
(o)
the Worker’s rate of
pay was determined by the Appellant; (denied)
(p)
the Worker was paid by
cheque to his personal name, on a weekly basis; (admitted)
(q)
the Appellant did not
provide benefits such as vacation pay or paid vacation; (admitted)
(r)
the Appellant decided
the timing and amounts of bonuses which it paid as incentives; (admitted)
(s)
the Worker did not
invoice the Appellant for services performed; (admitted)
(t)
the Worker was required
to perform his services personally; (admitted)
(u)
the Worker did not have
a registered business name, [was] not registered with Canada Revenue Agency and
did not have a business bank account; (admitted)
(v)
the Worker was
instructed on tools, equipment and materials he needed to perform his duties;
(admitted)
(w)
the Appellant provided
maps, testers, screwdriver with a magnetic tip and vacuum, at no charge to the
Worker; (admitted)
(x)
the Appellant also
provided business cards which noted its name and its contact information;
(admitted)
(y)
the Worker provided his
vehicle, a GPS, some hand tools and his cell phone and was responsible for the
operating costs; (admitted)
(z)
the Appellant covered
the accommodation costs when out of town; (admitted)
(aa)
the Appellant required
professional dress but no uniform; (admitted)
(bb)
the Worker must wear a
name badge that displayed his picture as well as both his name and the
Appellant’s name; (admitted)
(cc)
the Appellant was
responsible to resolve customer complaints; (admitted)
(dd)
the Appellant covered
the costs of redoing work; (admitted)
(ee)
the Appellant
guaranteed the work performed by the Worker; (admitted)
Salesperson
(ff)
the Worker’s duties
were to sell air purifiers using customer lists or leads provided by the
Appellant; (admitted)
(gg)
the Worker’s work day
was filled by the sales leads; (admitted)
(hh)
the Worker performed
his duties at the Appellant’s customer’s [sic] homes; (admitted)
(ii)
the Worker received a
three-day session training [sic] which reviewed the Appellant’s products
and learned sales strategies; (admitted)
(jj)
the Appellant provided also
a “Sales book”; (admitted)
(kk)
the Worker’s hours of
work were Monday to Friday, 11 am to 7 pm, as determined by the Appellant;
(admitted)
(ll)
the Worker was
supervised by Ray Schneider; (admitted)
(mm)
the Worker required
permission to approve discounts, exchange machines and perform all but minor
repairs; (admitted)
(nn)
the Worker was paid
100% commissions which was $500 per machine sold less 50% of any sales discount
offered to the customer; (admitted)
Service Technician
(oo)
the Worker’s duties
were to service, inspect and repair equipment and units sold by the Appellant
as well as service packages and replacement units to the Appellant’s clients;
(admitted)
(pp)
the Worker performed
his duties mostly on the road at the Appellant’s clients [sic] place;
(admitted)
(qq)
the Worker did not
receive any training; (admitted)
(rr)
the Appellant supplied
the Worker with manufacturer manuals and directives for those units sold and
serviced by the Appellant, to be used as guidelines for repairs; (admitted)
(ss)
the Appellant’s Service
Manager, Jim Travis, was also available as reference; (admitted)
(tt)
the Worker’s hours of
work were Monday to Friday, 7 am to 5 pm as determined by the Appellant;
(admitted)
(uu)
the Worker was
supervised by Jim Travis; (admitted)
(vv)
the Worker was paid a
stipend of $450 per week, plus gas allowance, bonuses and commissions (10% of
sales). (admitted)
[4]
The Worker testified at the hearing. He
explained what the three‑day training session he received when he applied
for a job with the Appellant as a commission salesman consisted of. He said
that he was not paid for the training session. He further stated that he
thought he was an employee of the Appellant and that is why, in February 2008, he
asked for a T4 slip for the 2007 taxation year, i.e. for the period of that
year during which he was a service technician. In his income tax return for
2007, he declared the income earned as a salesperson as business income and the
income earned as a service technician as employment income. He further testified
that he never obtained a business number or a goods and services tax (“GST”)
number. The GST that the Appellant paid to him on his remuneration was remitted
to the Receiver General of Canada.
[5]
The Worker’s request for a T4 slip came only a
few days after Mr. Jim Travis, the Appellant's service manager, had
written two letters confirming that the Worker had been a valued employee of
the Appellant since August 27, 2007. The first letter was dated
January 21, 2008 and was addressed to Mr. Michael G. Barry, barrister at law. The
second, dated February 5, 2008, was a "to whom it may
concern" letter, that is, it was not addressed to any person in
particular.
[6]
Mr. James Coe Travis also testified. He
explained that the letters referred to in the preceding paragraph were written
out of compassion, at the request of the Worker, in order to help him to retain
a lawyer (the first letter) and renegotiate the mortgage on his house (the
second letter). He further explained that those letters were part of other
measures intended to help the Worker get his life in order. The witness
confirmed having paid the Worker over $1,300 cash to perform renovations at his
residence and having sold him an eight-year-old vehicle on credit terms, with
no interest on a good portion of the purchase price. The witness also referred
to the fact that the president of the Appellant had made an interest‑free
loan of $2,200 to the Worker to help make him solvent. The loan was repaid in
full by means of payments of $100 per week.
[7]
The witness also explained that salespersons and
service technicians all signed the same agreements with the Appellant. No other
agreements are executed when a person becomes a service technician. When the
Worker was discharged as a salesperson and became a service technician, his
services were not terminated by the Appellant and no new agreement had to be
signed. However, the remuneration for the Worker’s services was renegotiated. As
a salesperson, the worker was paid a commission of $500 per unit sold less 50%
of any sales discount, while as a service technician the Worker was paid $450
per week, plus a gas allowance of $20 per day and a bonus of 10% of sales of
service plans, filters, units and spare parts.
[8]
Mr. Nicholas Dereza, the president of the Appellant,
also testified. According to him, the Worker was well aware of the terms and
conditions of his working relationship with the Appellant. No source deductions
were taken from his paycheque and GST was added despite the $30,000 threshold. He
recognized, however, that the agreements signed by the Worker were structured
for salespersons and he confirmed having made an interest-free loan of $2,200
to the Worker.
Analysis
[9]
In Lang v. Canada (M.N.R.), [2007] T.C.J.
No. 365 (QL), 2007 TCC 547, Chief Justice Bowman, as he then was, summarized in
the following manner the rules applicable where the matter of the legal status
of a worker arises:
4 Each case in which the question of employee
versus independent contractor arises must be determined on its own facts. The
four components in the composite test enunciated in Wiebe Door Services Ltd.
v. M.N.R., 87 D.T.C. 5025 and 671122 Ontario Ltd. v. Sagaz Industries
Canada Inc., [2001] 2 S.C.R. 983, must each be assigned their appropriate
weight in the circumstances of the case. Moreover, the intention of the parties
to the contract has, in recent decisions of the Federal Court of Appeal, become
a factor whose weight seems to vary from case to case. (The Royal Winnipeg
Ballet v. M.N.R., [2006] F.C.J. No. 339, 2006 FCA 87; Wolf v. Canada,
[2002] F.C.J. No. 375, 2002 FCA 96; City Water International Inc. v. M.N.R.,
[2006] F.C.J. No. 1653, 2006 FCA 350).
[10]
In André Gagnon v. The Minister of National
Revenue, 2007 FCA 33, the Federal Court of Appeal reiterated the principle
that the burden is on the party who opposes the Minister’s decision to rebut
the assumptions of fact made by the Minister (Le Livreur Plus Inc. v. The Minister
of National Revenue and Laganière, 2004 FCA 68, at paragraph 12).
[11]
In the present case, the Worker signed various
written agreements with the Appellant when he started his working relationship
with that company. Clearly, the intent of the parties at that time was to
establish a business relationship based on independent contractor status for
the Worker. When the Worker joined the service department, no new
agreements were signed and the understanding of the Appellant’s representatives
was that the Worker entered the service department under the same agreements as
those that were signed by the Worker on August 27, 2007. According to
the testimony of the Appellant's representatives, the Worker knew very well what
the contractual arrangements were and agreed to them. The financial terms were
renegotiated and were accepted by the Worker. Despite the fact that the
agreements were structured for salespersons and not for service technicians,
they should not be disregarded.
[12]
The factors that have been applied in
determining the legal status of a worker include the following:
(a)
control
(b)
ownership of tools
(c)
chance of profit
(d)
risk of loss (sometimes (c) and (d) are
combined)
(e)
integration.
According to Chief Justice Bowman, referring to Wiebe Door,
factors (a) to (d) are part of one single test. The integration factor is not
part of that test, is difficult to apply and is not by itself relevant in
determining whether or not a person is an employee.
[13]
The term “control” has been defined by Justice
Bowie of this Court in André Gagnon v. The Minister of National Revenue,
2006 TCC 66, as being “the right to direct the manner of doing the work”, rather
than the actual exercise of that right.
[14]
In the present case, the evidence at the
hearing, which was essentially based on the testimony of the Appellant’s
representatives and of the Worker and/or representations made by the said
representatives to the Canada Revenue Agency, was as follows:
-
The Appellant booked the Worker’s appointment
times with its clients. Normally, the clients dictated the work that the Worker
was required to perform and on what day and at what time he was to do it. The
basic schedule prepared by the Appellant was often negated or defeated by the
Worker’s other commitments (such as meetings with banks and mortgage companies,
medical, legal and counselling appointments or other job commitments).
-
The worker worked independently and on his own,
without supervision, in clients' homes;
-
The Worker did not receive any training from the
Appellant on how to do the repairs and was supplied by the Appellant with
manufacturer's manuals and directions for the units sold and serviced by the
Appellant. These manuals and directions were to be used as guidelines for
repairs.
-
The Worker kept his own daily records on a daily
journal pad and wrote reports, all of which allowed the Appellant to track job
completion and to update customer information in its data bank.
-
The Worker was not required to record his
working hours.
-
The Worker performed his duties on the road at
the Appellant’s clients’ premises and did not have any specific or allotted
space on the Appellant’s premises.
-
The Worker was not subject to any restriction
preventing him from hiring or using the services of someone else to assist him
in performing the required services.
[15]
Concerning the ownership of tools, the evidence
was to the effect that the Worker was required to supply his own tools,
vehicle, cell phone and equipment. The Worker was responsible for insurance,
repairs and maintenance for his own tools and equipment including his vehicle (however,
a gas allowance of $20 per day was paid by the Appellant).
[16]
Concerning the chance of profit and risk of
loss, the following has been established:
-
The Worker had to assume a significant financial
risk. He was responsible for all his personal expenses (meals and clothes) and
for fines, traffic offences, tickets, accidents and personal injuries. He had
to bear the acquisition costs, as well as insurance, repair and maintenance costs,
with respect to his tools, equipment and vehicle.
-
The Worker did not receive any fringe benefits
from the Appellant, unless one considers perhaps the gas allowance, and there
were no income guarantees or job security.
-
The Worker was not at risk with respect to the
collection of accounts receivable (for example, NSF cheques).
-
The Worker had a lesser chance of profit and
risk of loss when he became a service technician because he was entitled to a
basic salary of $450 per week and to a commission of only 10% on his sales. Even
if the chance of profit and the risk of loss were substantially reduced, they
were nonetheless present and the Worker had the opportunity to work more hours
to generate greater earnings.
[17]
The application of the Wiebe Door test to
the facts of this case clearly points to a legal status of an independent
contractor. There was no supervision or control over the providing of the repair
services on the customer’s premises. The Worker had a chance of profit and
bore the risk of loss; he supplied his own tools and equipment; he had no job
security and could take on other jobs or contracts (for example, the
renovations at Mr. Travis’s residence).
[18]
The application of the intention test also
points towards an independent contractor status.
[19]
Therefore, the appeal is allowed and the
decision of the Minister is vacated on the basis that the Worker was carrying
on the sale and service of air purifiers as an independent contractor through
the Appellant and was not employed in insurable employment within the meaning
of paragraph 5(1)(a) of the Act during the period from August 26,
2007 to February 28, 2008.
Signed
at Ottawa, Canada, this 31st day of August 2010.
"Réal Favreau"
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