Citation: 2009 TCC 569
Date: 20091105
Dockets: 2009-1060(EI)
2009-1061(CPP)
BETWEEN:
DEWDNEY TRANSPORT GROUP LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Rowe, D.J.
[1] The Appellant, Dewdney Transport Group Ltd.
(“Transport” or “Dewdney”) appealed from two decisions – both dated January 8,
2009 – issued by the Minister of National Revenue (the “Minister”) pursuant to
the Employment Insurance Act (the “Act”) and the Canada
Pension Plan (the “Plan”) wherein the Minister decided the
employment of Sukhminder Singh Grewal (“Grewal” or “worker”) from January 1,
2007 to June 26, 2008 was both insurable and pensionable because he was engaged
under a contract of service and was considered an employee of Transport.
[2] The Appellant was represented by an agent -
Narinder Jaswal (“Jaswal”) - and he and counsel for the Respondent agreed both
appeals could be heard together.
[3] Jaswal testified he is President and sole
Director of Transport which carries on the business of mail delivery for Canada
Post and a courier service for other customers. He purchased a corporation – 12
years ago - that operated a transport business and changed that company’s name
since it would be operating in municipalities where references to Dewdney were
common. Transport had a 5-year mail delivery contract with Canada Post and had
entered into a written contract – dated April 30, 2007 - with Grewal pursuant
to which Grewal agreed to provide his services as an independent contractor for
a term of five years. Jaswal stated the agreement – Exhibit A-1 – was a
standard contract used by Transport in the course of its business and that
Grewal provided his delivery services in accordance with Schedule I, page 9 of
the contract and had done so since 2001 under similar terms in an earlier
written agreement. Jaswal stated Grewal attended at the Canada Post Delivery
Centre (“Centre”) at Maple
Ridge, British Columbia and
performed deliveries of bags and parcels for which he billed Dewdney by
recording the transactions on a daily sheet - titled Independent Contractor’s
Log Book – which also served as an invoice. A sample sheet/invoice was filed as
Exhibit A-2 and the amount billed thereon was $50.50. Jaswal stated he paid
Grewal once per month and produced a photocopy of a typical cheque stub –
Exhibit A-3 – dated 31/08/2009 – indicating the amount paid was $1,307.70
without any deductions for Employment Insurance (EI) premiums, Canada Pension
Plan (CPP) contributions or income tax. Jaswal stated Grewal still provides the
same service to Transport as during the relevant period and the system of
invoicing by Grewal and the method and frequency of payment by Transport is the
same. Jaswal stated Transport and Canada Post had entered into a contract
concerning the Centre at Maple Ridge, pursuant to which certain duties had to
be performed which required the services of 5 drivers, none of whom were
considered by Jaswal to be employees of Transport on the basis the service
provided was pursuant to a written contract wherein each had agreed to be an
independent contractor. The contract with Canada Post required Transport to
deliver mail to the Whannock/Albion facility and to deliver packages of mail
that weighed more than 3 pounds - 1.35 kilograms - and Transport billed Canada
Post at a certain rate for each item delivered by Grewal and the other drivers.
Jaswal stated he saw Grewal infrequently during the relevant period as there
was no need to do so unless some unusual event had occurred. Jaswal estimated
Grewal worked from 8:00 a.m. to about 1:00 p.m. – depending on the volume of
deliveries – and the speed with which the task could be completed on a
particular day. Jaswal agreed with the assumptions of the Minister – at
paragraphs 5 (l), (m), (n), (q), (r), (s) and (t) of the Reply to the Notice of
Appeal (“Reply”) as follows:
l)
the Appellant did not keep track of the Worker’s hours of work;
m)
the Appellant allowed the Worker to take the delivery van home and to
use it to go to work;
n)
the Payor covered all expenses associated with purchase and operation of
the van;
q)
Canada Post was responsible for resolving customer complaints;
r)
under the terms of the contract, the Worker was free to hire subcontractors;
s)
the Worker was free to work elsewhere during the Period outside of
his regular hours with the Appellant; and
t)
the Worker did not carry any insurance to cover himself in the performance
of his duties for the Appellant.
[4] Jaswal did not agree with the assumption -
at paragraph 5(o) - that Grewal had to report to Transport if he was unable to
work as he had the option of finding his own replacement driver from the pool
of other Transport workers and did not need to obtain prior permission. Jaswal
stated there was no special coverage in any insurance policy taken out by
Transport pertaining to any damage to items occurring in the course of Grewal’s
deliveries. Jaswal’s duties required him to deliver bags of mail to certain
“green boxes” at the end of a street and he used a key to place the bags inside
where they were collected by the Letter Carrier for delivery along his or her
route. The contract with Canada Post did not require Transport to deliver to
any destinations on rural routes but they did perform a service known as
Combined Urban Services Delivery. Jaswal referred to the invoice – Exhibit A-2
– and explained it indicated Grewal had delivered a total of 30 bags on August
4, 2009 and 15 additional items for a total of 45 which – at $.90 per piece –
amounted to $40.50 to which was added the $10.00 flat fee for the run to
Whannock/Albion for a total of $50.50. Typically, Grewal billed Transport
between $1,000.00 and $1,800.00 per month - depending on the season - and his
earnings were greater in the period before Christmas which produced increased
volumes of mail. Although he was not familiar with precise details of the work
performed daily by Grewal or the other drivers who provided their services to
Canada Post pursuant to their contract with Transport, he estimated Grewal
could deliver up to 50 bags in an hour because as many as 9 could be dropped
off at a single location. Jaswal stated he did not know how many hours of work
Grewal had worked to earn the amount billed in any invoice. Jaswal stated that
when Grewal was directed by someone at the Centre to carry out a particular
delivery service, the relevant details were recorded by him on the daily
sheet/invoice and Transport used that information to bill Canada Post according
to an applicable rate set forth in their contract. During the relevant period,
the services provided by Grewal were solely for the benefit of Canada Post and
he did not undertake any deliveries to private customers of Transport. Jaswal
described the overall operation as “smooth and efficient” in accordance with a
sheet of instructions and guidelines which formed part of the contract between
Canada Post and Transport.
[5] Jaswal was cross-examined by Counsel for
the Appellant. Jaswal stated the contract between Transport and Canada Post
included certain terms and conditions pertaining to performance but there were
no specific delivery standards pertaining to time. The contract did not include
any door-to-door delivery as that was performed by Letter Carriers. Jaswal
stated Grewal worked Monday through Friday but was not aware of any start or
end times as Transport only relied on the daily sheets/invoices to calculate
payment due to him at the end of each month based on the rate per item and the
flat rate for delivery to a specific location. Jaswal stated the remuneration
to Grewal and others was always based on a piece rate and could not recall a time
when Grewal or any other delivery person contracted to Transport was paid an
hourly wage - whether $10.00 or some other amount - as counsel had suggested.
During the relevant period, remuneration was based on the piece rate of 70% of
the gross fee paid by Canada Post to Transport as stated in the contract -
Exhibit 1 – at page 10. If Grewal or any driver used his or her own vehicle,
Transport had a policy whereby it paid a higher percentage of the gross
delivery fee to compensate for such usage. The cargo vans used by Grewal and
other drivers who made deliveries for Canada Post carried signage stating the
vehicle’s owner was “Dewdney Transport Group Ltd., a Canada Post contractor.”
Jaswal stated the fee arrangement of 70% was arrived at through negotiation
with the drivers and that all remuneration - whether paid by Canada Post to
Transport or by Transport to any sub-contractor - was based on piece rate or a
flat rate for a special delivery. Transport paid premiums to Workers’
Compensation Board for coverage of the drivers. Jaswal stated he was not aware
whether a person – Darnell - had played any role in supervising Grewal or in
finding a replacement if Grewal was unable to work. Jaswal stated that
sometimes a driver had hired a replacement without his knowledge. He was not
aware of any complaints or disputes arising from Grewal’s performance or that
of other drivers and assumed such matters would have been handled by Canada
Post. There was no contact between any Transport drivers and any residential
mail recipients as the mail delivery undertaken by them was either to the green
boxes or to a Canada Post facility and any complaints would originate from a
Letter Carrier or other Canada Post employee. Counsel referred Jaswal to
Schedule 1, (b) at page 9 of the contract which required Grewal – as Contractor
– to “Be available to perform delivery services for Dewdney at the times, dates
and places as Dewdney may stipulate.” Jaswal stated the contract had been
designed to apply also to the courier service component of the business
operated by Transport and had not been modified to cover those agreements with
individuals – such as Grewal – who provided delivery services exclusively to
Canada Post, even though each of them could have performed other deliveries.
Jaswal acknowledged that - at clause 7.1 of the contract - Transport had the
right to assign certain areas to a contractor but stated that term applied only
to the courier services provided to other customers and not to Canada Post. In
paragraph (f) of Schedule I, there was a reference to a requirement that a
Contractor notify Dewdney of any disputes or discrepancies arising from any
deliveries. Jaswal stated this wording was intended to apply to those delivery
services performed for customers – generally in the private sector – but not
for Canada Post. However, clause 2.3 of the contract applied to all components
of the business and permitted Grewal and others to employ – at their own
expense – such assistance as deemed necessary to perform services under the agreement
and Dewdney agreed it did not have the ability to “control, direct or supervise
the Contractor or the Contractor’s assistants or employees in the performance
of those services.” Jaswal stated the practice followed where a replacement
driver had assumed responsibility for deliveries on a certain day or period was
for Transport to review the daily sheets/invoices submitted and to note the
volume of deliveries. Remuneration was calculated on that basis and payment was
made directly to the replacement driver who was one of the 5 drivers who
provided the same or similar service to Canada Post. Jaswal stated that because
the contract with Canada Post required all vans used by Transport to be current
- 3 years or newer – the drivers could purchase - upon termination of their
contract – the particular vehicle used for their deliveries and one driver had
exercised that option. Any driver/contractor could use his own vehicle whether
performing services for the benefit of Canada Post or other customers and this occurred
during the Christmas season when Transport did not have enough vans to handle
the volume of business. Jaswal stated that when drivers used their own
vehicles, an increased rate was negotiated and even Grewal had used his own
vehicle on occasion which he noted on the particular daily sheet/invoice.
Jaswal stated there were no delivery time limits imposed on Transport by Canada
Post and that all operations were performed from the Centre at Maple Ridge.
Over the course of 12 years, no problems pertaining to any deliveries had been
brought to his attention and if some had arisen, he assumed they had been
resolved by Canada Post management. In Jaswal’s view, everyone involved in the
Centre’s operation understood the mandate was to “move the mail” even when
challenged by unusual conditions such as excessive traffic, blocked roads due
to accidents, road construction, detours or bad weather conditions.
[6] Jaswal closed the case for the Appellant.
[7] Grewal was called to the stand by counsel
for the Respondent. Grewal testified he resides in Maple Ridge and has been a
driver for Transport since 2005. Just as he had done throughout the relevant
period, he uses a cargo van to deliver bags of mail to green boxes for
collection by Letter Carriers and bulk mail to Canada Post customers such as
schools, real estate offices or any other recipient when the bundle of mail
exceeds 3 pounds. He attends at the Centre at 8:00 a.m. and delivers bags to
between 2 and 5 green boxes for collection by Letter Carriers. He works Monday
through Friday and each working day occupies 5 or 6 hours. Grewal stated, “I
know my job, same thing every day” and that there was no need for any
instruction by anyone at Transport. The first delivery or “run” of the day is
the same and he delivers bags to certain green boxes after which he returns to
the Centre and picks up additional bags for a second run to a different area.
If there is a need for a third or fourth run, those deliveries are to other
designated locations. The mail is sorted at the Centre by each Letter Carrier
according to his or her route which is identified – by colour - on a map.
Grewal is the only Transport worker at the Centre for purposes of the first run
but 3 or 4 other Transport drivers carry out other deliveries after completion
of that first run. He did not know whether other entities also provided a
similar service to Canada Post operating from the Centre. Grewal recorded the
pieces delivered by completing the daily sheet/invoice – Exhibit A-2 – and
entered the trip from the Centre to the Whannock/Albion Post Office for which
he billed the sum of $10.00. This trip was the first duty carried out each
morning but was not designated as the “first run” which was performed between
9:00 a.m. and 9:45 a.m. and involved transporting mail bags to the green
boxes. Grewal retained the daily sheets/invoices until the end of each month
when he delivered them personally to Jaswal. He was paid – by cheque – once per
month. Concerning the piece rate of 90 cents per item, Grewal stated he
understood this was the amount paid to the former driver on that route and
accepted the contract with Transport based on that sum and never was paid at an
hourly rate. Grewal referred to the entry in the space marked “Extra” on the
sample sheet/invoice – Exhibit A-2 – and explained the number – 15 - therein
indicated he had delivered 15 bundles of mail – each exceeding 3 pounds – in
addition to the other items recorded. The usual daily delivery of such bundles
ranged from 10 to 20. Grewal stated he paid his CPP premiums when filing his
annual income tax return and thought he had paid his own replacement driver at
some point during his working relationship with Transport. In any event, he
arranged – personally - for his own replacement, as required, by speaking with
his fellow Transport drivers and had never encountered any problem. Grewal
stated that during the 5 or 6 years he has been performing the same duties from
the Centre, he is unaware of any complaint arising from his work and any minor
issues were resolved between him and the particular Letter Carrier. He did not
carry any liability insurance covering any aspect of his delivery work for
Transport. Grewal understood that when his contract with Transport expired, he
had the option to buy the van he drove every day to make his deliveries. He did
not incur any expenses except for clothing and food and did not have any
investment or equity in Transport. He did not have a business license and was
not a registrant for purposes of the Goods and Services Tax (“GST”) since his
annual gross was less than the threshold for mandatory registration even when
his income from delivering pizza – with his own vehicle – was included. When
working for the pizza business, the deliveries occupied only a small amount of
his time because his main duty there was to make pizzas.
[8] Grewal was cross-examined by Jaswal who
referred him to a letter – Exhibit A-4 – dated October 16, 2008 – signed by P.
Sandhu employed by the Individual Sources and Benefits section of Canada
Revenue Agency. The letter confirmed that Grewal’s 2005 and 2006 income tax
returns were reassessed to relocate reported income to the category of
self-employment income and to advise that he was required to pay CPP
contributions. Grewal stated that during the relevant period, all income earned
pursuant to the contract with Transport was reported as self-employed income.
[9] The agent for the Appellant submitted the
parties intended Grewal to provide his services as an independent contractor
and that he had done so without any problem for many years. There was no
control exercised over Grewal in the course of his duties and he had the option
to use his own vehicle and to negotiate a higher percentage of the gross fee
paid by Canada Post to Transport for delivery of various items.
[10] Counsel for the Respondent submitted the
evidence did not support the view that Grewal was operating a business on his
own account. There were no usual indicia of commercial activity and the
evidence established Grewal was a part-time van driver who was paid according
to a piece rate. Counsel submitted the Appellant had failed to demonstrate the
Minister was incorrect in deciding Grewal was an employee working under a
contract of service and that the decision should be confirmed.
[11] In the within appeals, I am satisfied there
was a clearly expressed intention by Grewal and Jaswal – on behalf of Transport
– that Grewal provide his services as an independent contractor as specified in
the written contract. Grewal stated he was aware of the piece rate paid to the
former driver and was satisfied with that amount and assumed the contractual
obligations to make deliveries for the benefit of Canada Post and subsequently
renewed that agreement by signing the current 5-year contract – Exhibit A-1 –
dated April 1, 2007. As stated by Jaswal in his testimony, the contract was a
standard one used by Transport whether the individual contractor was engaged
solely in duties relating to Canada Post or involved in the wider aspect of the
overall business which provided courier service to other customers.
[12] The Supreme Court of Canada in 671122 Ontario Ltd. v. Sagaz
Industries Canada Inc., [2001] 2 S.C.R. 983 – (“Sagaz”) dealt with a
case of vicarious liability and in the course of examining a variety of
relevant issues, the Court was also required to consider what constitutes an
independent contractor. The judgment of the Court was delivered by Major, J.
who reviewed the development of the jurisprudence in the context of the significance
of the difference between an employee and an independent contractor as it
affected the issue of vicarious liability. After referring to the reasons of
MacGuigan, J.A. in Wiebe Door Services Ltd. v. Minister of National Revenue,
[1986] 2 C.T.C. 200 and the reference therein to the organization test of Lord
Denning - and to the synthesis of Cooke, J. in Market Investigations Ltd. v.
Minister of Social Security, [1968] 3 All E.R. 732 - Major, J. at
paragraphs 45 to 48, inclusive, of his judgment stated:
45 Finally,
there is a test that has emerged that relates to the enterprise itself.
Flannigan, ... ("Enterprise control: The servant‑independent
contractor distinction" (1987), 37 U.T.L.J. 25, at p. 29) sets out the
"enterprise test" at p. 30 which provides that the employer should be
vicariously liable because (1) he controls the activities of the worker; (2) he
is in a position to reduce the risk of loss; (3) he benefits from the
activities of the worker; (4) the true cost of a product or service ought to be
borne by the enterprise offering it. According to Flannigan, each justification
deals with regulating the risk-taking of the employer and, as such, control is
always the critical element because the ability to control the enterprise is
what enables the employer to take risks. An “enterprise risk test" also
emerged in La Forest J.'s dissent on cross-appeal in London Drugs where he
stated at p. 339 that "[v]icarious liability has the broader function
of transferring to the enterprise itself the risks created by the activity
performed by its agents.”
46 In
my opinion, there is no one conclusive test which can be universally applied to
determine whether a person is an employee or an independent contractor. Lord
Denning stated in Stevenson Jordan, ... ([1952] 1 The Times L.R. 101) that
it may be impossible to give a precise definition of the distinction (p. 111)
and, similarly, Fleming observed that "no single test seems to yield an
invariably clear and acceptable answer to the many variables of ever changing employment
relations..." (p. 416). Further, I agree with MacGuigan J.A. in Wiebe
Door, at p. 563, citing Atiyah, ... (Vicarious Liability in the Law of Torts. London:
Butterworths, 1967) at p. 38, that what must always occur is a search for the
total relationship of the parties:
[I]t is
exceedingly doubtful whether the search for a formula in the nature of a single
test for identifying a contract of service any longer serves a useful purpose ...
The most that can profitably be done is to examine all the possible factors
which have been referred to in these cases as bearing on the nature of the
relationship between the parties concerned. Clearly not all of these factors
will be relevant in all cases, or have the same weight in all cases. Equally
clearly no magic formula can be propounded for determining which factors
should, in any given case, be treated as the determining ones.
47 Although
there is no universal test to determine whether a person is an employee or an
independent contractor, I agree with MacGuigan J.A. that a persuasive
approach to the issue is that taken by Cooke J. in Market Investigations,
supra. The central question is whether the person who has been engaged to
perform the services is performing them as a person in business on his own account.
In making this determination, the level of control the employer has over the
worker's activities will always be a factor. However, other factors to consider
include whether the worker provides his or her own equipment, whether the
worker hires his or her own helpers, the degree of financial risk taken by the
worker, the degree of responsibility for investment and management held by the
worker, and the worker's opportunity for profit in the performance of his or
her tasks.
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.
[13] I will examine
the facts in relation to the indicia set forth in the judgment of Major, J. in Sagaz.
Level of control:
[14] The testimony of
both Jaswal and Grewal is clear that there was no daily supervision exercised
by Transport over the manner in which the delivery duties were performed. There
were long periods when Jaswal did not have any contact with Grewal and there
was no requirement that Jaswal grant permission for a replacement driver to
assume Grewal’s duties on any particular day or days and often only discovered
a substitution had taken place when examining the daily sheets/invoices at the
end of the month. Jaswal decided to pay the substitute driver directly in
accordance with details on the sheets/invoices because that replacement driver
was someone who was regarded by him as a contractor pursuant to a written
agreement with Transport. Grewal accepted that he had to attend the Centre
early each morning to carry out the required work and that it was important the
mail bags be transported promptly to the green boxes so the Letter Carriers could
commence delivery on their assigned routes. There was no reporting requirement
and no complaints needed to be resolved by Jaswal within the context of the
contract between Transport and Canada Post. Pursuant to the contract between
Grewal and Transport, Grewal agreed to comply with certain terms and conditions
as set forth in Schedule 1, many of which did not apply specifically to the
duties performed by him for Canada Post. The facts in the within appeals are
not like those in some cases where control over a worker has been assigned to
the actual recipient of the services pursuant to a type of secondment. Instead,
Grewal knew what had to be done and carried out those duties efficiently and
without supervision.
Provision of equipment and/or
helpers:
[15] Grewal had the
option of using his own vehicle and did so infrequently, probably during the
busier Christmas season when Transport did not have enough vans. There was no
evidence that he had done so during the relevant period nor was there any
specific reference to the remuneration per piece in such event. Jaswal
testified that a higher rate “could be negotiated” which would have been based
on the driver/contractor receiving a percentage higher than the regular 70% of
the gross fee otherwise payable pursuant to the contract. Under the terms of
said contract, Grewal had the right to hire a helper at his own expense and
Transport agreed it would not control, direct or supervise any such assistant
or employee in the performance of the required duties. As mentioned earlier,
when required, Grewal arranged for a replacement driver from within the pool of
other Transport drivers. It was convenient for Jaswal to pay that person
directly – by adding it to the regular cheque – based on details provided on
the relevant daily sheet(s)/invoice(s) recorded by the substitute driver and
submitted in the usual manner.
Degree
of financial risk and responsibility for investment and management:
[16] Grewal did not have any financial risk nor was he required to bear any
responsibility for anyone other than himself in performing his duties.
Opportunity for profit in the performance of tasks:
[17] The only way Grewal could increase his revenue was to deliver more
items which occurred during the extended Christmas season when his income
increased to approximately $1,800.00 per month compared to $1,000.00 - and up -
in accordance with some fluctuations in delivery volume during the rest of the
year. Grewal had no control over the volume and merely continued to perform his
usual routine to the best of his ability in the face of varying traffic or
weather conditions. According to Grewal’s evidence, his duties occupied 5 or 6
hours a day and the most efficient performance would allow him – at best – only
an extra hour to earn additional revenue by working at the pizza outlet where
he used his own vehicle to make some deliveries. Grewal had the option to use
his own vehicle while carrying out his contractual duties for Transport but
there is no basis for finding this choice would have generated additional net
revenue.
[18] In the case of Standing v. Canada (Minister of
National Revenue – M.N.R.)(F.C.A.), [1992] F.C.J. No. 890 Stone, J.A. stated:
... There is
no foundation in the case law for the proposition that such a relationship may
exist merely because the parties choose to describe it to be so regardless of
the surrounding circumstances when weighed in the light of the Wiebe Door test .
…
[19] In several recent cases including Wolf v.
The Queen, 2002 DTC 6853 (“Wolf”), The Royal Winnipeg Ballet v. The Minister of National Revenue, 2006 DTC 6323 (“Ballet”), Vida
Wellness Corp. (c.o.b. Vida Wellness Spa) v. Canada (Minister of National
Revenue - M.N.R.), [2006] T.C.J. No. 570 (“Vida Wellness”) and City Water International Inc. v. Canada, [2006] F.C.J. No. 1653 there was no issue
in this regard due to the clearly-expressed mutual intent of the parties that
the person providing the services would be doing so as an independent
contractor and not as an employee. That clarity of intention is also applicable
to the within appeals.
[20] Subsequent to the
decision in Wolf, supra, the issue before the Federal Court of Appeal in
Ballet was whether the dancers performing for that world-renowned ballet
company were employees or independent contractors. The Royal Winnipeg
Ballet (“RWB”) was supported in its position by Canadian Actors’ Equity
Association (“CAEA”) as the bargaining agent for the dancers. In the course of
deciding the dancers were not employees of RWB, at paragraphs 60-64, inclusive
of her reasons Sharlow, J. A. stated:
[60] Décary,
J.A. was not saying that the legal nature of a particular relationship is
always what the parties say it is. He was referring particularly to Articles
1425 and 1426 of the Civil Code of Quebec, which state principles of the
law of contract that are also present in the common law. One principle is that
in interpreting a contract, what is sought is the common intention of the
parties rather than the adherence to the literal meaning of the words. Another
principle is that in interpreting a contract, the circumstances in which it was
formed, the interpretation which has already been given to it by the parties or
which it may have received, and usage, are all taken into account. The
inescapable conclusion is that the evidence of the parties' understanding of
their contract must always be examined and given appropriate weight.
[61] I
emphasize, again, that this does not mean that the parties' declaration as to
the legal character of their contract is determinative. Nor does it mean that
the parties' statements as to what they intended to do must result in a finding
that their intention has been realized. To paraphrase Desjardins, J.A. (from
paragraph 71 of the lead judgment in Wolf), if it is established that
the terms of the contract, considered in the appropriate factual context, do
not reflect the legal relationship that the parties profess to have intended,
then their stated intention will be disregarded.
[62] It
is common for a dispute to arise as to whether the contractual intention
professed by one party is shared by the other. Particularly in appeals under
the Canada Pension Plan and the Employment Insurance Act, the
parties may present conflicting evidence as to what they intended their legal
relationship to be. Such a dispute typically arises when an individual is
engaged to provide services and signs a form of agreement presented by an
employer, in which she is stated to be an independent contractor. The employer
may have included that clause in the agreement in order to avoid creating an
employment relationship. The individual may later assert that she was an
employee. She may testify that she felt coerced into signifying her consent to
the written form of the contract because of financial need or other
circumstances. Or, she may testify that she believed, despite signing a
contract containing such language, that she would be treated like others who
were clearly employees. Although the court in such a case may conclude, based
on the Wiebe Door factors, that the individual is an employee, that does
not mean that the intention of the parties is irrelevant. Indeed, their common
intention as to most of the terms of their contract is probably not in dispute.
It means only that a stipulation in a contract as to the legal nature of the
relationship created by the contract cannot be determinative.
[63] What
is unusual in this case is that there is no written agreement that purports to
characterize the legal relationship between the dancers and the RWB, but at the
same time there is no dispute between the parties as to what they believe that
relationship to be. The evidence is that the RWB, the CAEA and the dancers all
believed that the dancers were self-employed, and that they acted accordingly.
The dispute as to the legal relationship between the dancers and the RWB arises
because a third party (the Minister), who has a legitimate interest in a
correct determination of that legal relationship, wishes to assert that the
evidence of the parties as to their common understanding should be disregarded
because it is not consistent with the objective facts.
[64] In
these circumstances, it seems to me wrong in principle to set aside, as worthy
of no weight, the uncontradicted evidence of the parties as to their common
understanding of their legal relationship, even if that evidence cannot be
conclusive. The judge should have considered the Wiebe Door factors in
the light of this uncontradicted evidence and asked himself whether, on
balance, the facts were consistent with the conclusion that the dancers were
self-employed, as the parties understood to be the case, or were more
consistent with the conclusion that the dancers were employees. Failing to take
that approach led the judge to an incorrect conclusion.
[21] In concurring
reasons, Desjardins, J.A. – at paragraphs 71 and 72 – stated:
[71] The
determination of whether or not the parties have entered into a contract of
employment for the purpose of the EI or the CPP has proven over the years to be
a difficult and somewhat perilous exercise as the jurisprudence of our Court
demonstrates. I would not deprive the common law judge of the possibility of
being made apprised of the intention of the parties so as to test such
intention against objective factors and the surrounding circumstances of the
case when he makes the final determination.
[72] As
demonstrated by Sharlow, J.A., if the intention of the parties is uncontested,
save by third parties, as in the case at bar, the common law judge has
nevertheless the responsibility to "look to see" if the terms used
and the surrounding circumstances are compatible with what the parties say
their contract is. The common law judge must make sure that what the parties
say they have agreed upon is in fact what is contained in the contract they
have signed.
Desjardins,
J.A. continued at paragraphs 79-81 inclusive as follows:
[79] In
the case at bar, it is the nature of the contract which must be determined,
through an analysis of its terms in light of the fourfold test, namely the
level of control, the ownership of the equipment, the degree of financial risk
and the opportunity for profit.
[80] Given
the above case law, I see no compelling reason why the common law judge, who
embarks on the difficult task of determining whether a contract is one of
service or for service, should be deprived of the possibility of adverting to
as many criteria and indicia as may reasonably be recognized in order to assess
the true nature of the relationship governing the parties.
[81] The
Tax Court judge erred in law, in my view, when he said that the intention of
the parties could only be used as a tie-breaker (paras. 31 and 82 of his
reasons). I accept Sharlow, J.A.'s analysis, at para. 64 of her reasons, that
what the Tax Court judge should have done was to take note of the
uncontradicted evidence of the parties' common understanding that the dancers
should be independent contractors and then consider, based on the Wiebe Door
factors, whether that intention was fulfilled. In so doing, she relied, at
para. 61 of her reasons, on a long line of cases of this Court as expressed by
Stone, J.A. in Standing v. Canada (Minister of National
Revenue -- M.N.R.), (1992), 147 N.R. 238, which I reformulated in
Wolf v. Canada, [2002] 4 F.C. 396 at para. 71, when I said that the
parties' intention will be given weight only if the contract properly reflects
the legal relationship between the parties.
Because the Wolf decision involved a
contract in which the law of Québec applied, Desjardins, J.A. added:
[82] For
the purpose of disposing of this case, I need not decide whether the words
"the intention of the parties" have conceptually the same extension
in the common law systems as in the civil law of Quebec. This matter can only
be decided on a case by case basis.
[22] Justice Miller
heard an appeal subsequent to Ballet. In the case of Vida Wellness he
considered the work situation of six massage therapists whom the Minister
considered to have been engaged in both insurable and pensionable employment
notwithstanding each worker had entered into a written agreement in which it
was stipulated they were independent contractors. In the course of reviewing
the facts, Justice Miller noted that all workers had spent thousands of dollars
and a significant number of hours training in order to obtain the necessary
qualification to perform their work. The therapists were remunerated based on a
rate varying between 27.5% and 47% of the fee received by Vida Spa from the
client. They could earn a commission as a result of selling spa products. If
the workers showed up for a shift and there were no customers, no remuneration
was paid to them. They were entitled to retain cash tips but had to pool tips
paid through credit cards. The workers were able to schedule their shifts three
or four times a year for three or four months at a time and Vida Spa operated
two shifts per day. Workers could work - or not - as they chose and were able
to provide their services to other massage therapy businesses provided they did
not solicit those customers to switch their patronage from Vida Spa. The payor
in Vida Wellness provided tables, linens, oils and workers were required
to wear black pants and shirts in order to provide consistency. Justice Miller
referred to certain risks inherent in the performance of their duties and at
paragraph 11 stated:
11 Ms.
Hegedus and the workers described some inherent risks in providing massages.
Particular attention had to be paid to massages of pregnant women, avoiding
certain parts of the body and even avoiding certain oils. Similarly, if a
customer displayed any pre-existing condition or contra-indication the workers
would proceed cautiously. For these reasons, it was important that the workers
obtain a fairly detailed medical history prior to providing a massage. The
workers were required by their governing body to carry insurance. Vida did not
pay for the workers' coverage.
[23] After referring to the relevant jurisprudence
including Wolf, Sagaz and Ballet, supra, Miller, J. – at
paragraph 18 of his reasons stated:
18 Following this approach, was there a clear understanding between Vida and
the workers as to the nature of the contract? Yes, there was. There was a
written agreement which stated unequivocally the workers were independent contractors.
Yet, a clear statement of intention alone is not determinative. For example, if
the parties to a contract simply want to avoid the employer making source
deductions, they insert a provision stipulating the worker is an independent
contractor and is responsible for looking after his or her own source
deductions. This is evidence of an intention that the employers not make source
deductions: it is not evidence of an independent contractor relationship. In
this case, however, I am satisfied the parties' intention to create a contract
of independent contractor is clear. The Respondent argued that there was not so
much a clear intent to be independent contractors, as there was an indifference
to their status. There was no evidence to suggest any of the workers would have
preferred employment status. They all knew what was being offered, appeared to
have understood the implications (for example, no minimal wage) and certainly
willingly signed an agreement proclaiming their independent contractor status.
While the circumstances do not reflect an insistence by the worker on the
independent contractor status (except perhaps for Ms. Frame), they do reflect
something more than indifference.
[24] Justice Miller then began analyzing the various factors of control,
risk of loss, chance of profit and ownership of tools in order to determine
whether said factors were consistent with the stated intention of the parties
that the workers supply their services as independent contractors. In my view,
paragraph 20 of his judgment is extremely important because it addresses the
problem that can occur by looking through the wrong end of the telescope.
Miller, J. commented:
20 It is important to distinguish at the outset between the identifying
elements of employee versus independent contractor, as opposed to the results
of the finding of employee or independent contractor. For example, in
attempting to identify the difference between employed massage therapists and
those massage therapists opting for independent contractor status, Ms. Hegedus
suggested the following:
- employee received 4% vacation pay;
- employee received time and one-half
on statutory holidays; and
- employee was entitled to severance.
These,
however, are differences arising as a result of being an employee. They are not
factors that go to identifying an employment relationship. The identifying
factors are those I have listed earlier.
21 How fine the line can be between employment and independent contractor
cannot be any better demonstrated than by this situation. The workers can
choose to take the benefits that flow from employment, or reject them for the
benefits that flow from being self-employed. That choice, willingly agreed to
by Vida, cannot be ignored for purposes of the analysis. Indeed, it sets the
stage for the analysis.
[25] Miller, J. considered the element of control to be consistent with the
relationship the parties had agreed to and while he put little emphasis on the
ownership of tools, found that factor was no more consistent with employment
than with the status of independent contractor. With respect to the chance of
profit, Miller J. found there were a number of things a Vida Spa worker could
do to maximize earnings including double shifting or refusing to take shifts
during slow times and to promote an ensuite or deep tissue massage for which
the worker to retain the extra fee without sharing with Vida Spa. As well, the
massage therapists could promote the sale of products and earn commission and
could avoid providing services to customers whose medical coverage paid a
lesser fee than that ordinarily charged by Vida Spa. Dealing with the factor
concerning the risk of loss, Miller, J. - at paragraphs 28-31, inclusive –
stated:
28 A business loss can arise in at least three ways; first, the business'
ordinary expenses outstrip the business' regular income; second, there can be a
catastrophic event arising from harm done by the operation of the business; and
third, the source of business income can dry up.
29 The workers did incur some expenses, for example, cellular telephone,
updating and training (including the cost of courses offered by Vida itself),
and insurance. It is unlikely though that such expenses would surpass their
income, although for a particularly slow period with few or no customers, there
may have been some slight risk. Recall, no customers – no remuneration.
30 The possibility of risk from causing harm however was very real. The
witnesses explained the potential danger of treating pregnant women or those
with pre-existing conditions. Results can be harmful to the point of being
lethal. For this reason, the workers were required by the governing body to
carry insurance. Vida did not cover the workers' insurance. It was their
responsibility.
31 Finally, the possibility of losing Vida as a source of income was also
very real. There was no security. The contract could be terminated on two
weeks' notice for any reason, with no remuneration. I would characterize these
circumstances as accepting a significant risk of loss consistent with someone
in business on his or her own account.
[26] At paragraph 32, Justice Miller concluded:
32 Reviewing the traditional factors in light of the
parties' understanding of the nature of their contract has satisfied me that
the contract does accurately represent the legal relationship of a contract for
services. The workers intended to be and were independent contractors.
[27] In the case of A.L.D.
Enterprises Inc. v. Canada (Minister of National Revenue – M.N.R.), [2007] T.C.J. No. 36 (“A.L.D.”), I heard the
appeal of the payor which had entered into a written contract with two drivers
who operated the Appellant’s trucks on a long-haul basis. The facts in that
case relevant to an analysis in the within appeals were as follows:
…
3. All trucks displayed the name of the
Appellant. The refrigerated trailers that were hauled by the trucks displayed
the name of either the Appellant or Dairyland. [All NAPs, para. 3]
4. The Appellant at all material times
engaged drivers to drive the trucks. [All NAPs, para. 4]
5. David Parks and Rémi-Paul Bellemare (the
"Workers") were engaged and paid by the Appellant, and performed
services for the Appellant. [All NAPs, para. 6]
6. Each of the Workers was responsible for
obtaining and maintaining the main tool of his trade, namely, a Z-endorsed
Class A driver's licence. [All NAPs, para. 7(c)]
7. The Workers' only reporting requirement
was pursuant to the Hours of Work Regulations under the Highway
Traffic Act (Ontario).
Under those regulations all truck drivers, whether independent contractors or
employees, are required to prepare daily logs, and forward the logs and
supporting documents to the motor vehicle owner (i.e., the Appellant). The
regulations also require the motor vehicle owner to keep all of the daily logs
and supporting documents for six months at the owner's principal place of
business. [All NAPs, para. 7(d)]
8. The Workers had certain delivery deadlines
because they were transporting perishable goods. However, within those product-determined
deadlines, the Workers determined the manner in which they would make each
delivery: their own schedule, which routes to take, meal times, and rest
periods. [All NAPs, para. 7(e)]
9. Each of the Workers was paid by the
Appellant based on work performed, that is, pick-ups and deliveries that he
did. The Appellant made payment only following receipt of an invoice from each
of the Workers. Each of the Workers issued his invoices at irregular intervals
and for varying amounts, depending on the work he performed. If he did not
work, for whatever reason, he was not paid. [All NAPs, para. 7(i)]
10. The Workers were not reimbursed by the
Appellant for meals or any of their other expenses. The Appellant was
responsible for paying for fuel and maintenance for the truck and/or trailer,
and liability insurance on the loads was carried by the Appellant. [All NAPs,
para. 7(g)]
11. The Workers were not entitled to any
vacation, statutory holiday, sick leave, disability pension or other benefits
from the Appellant. The Appellant did not deduct employment insurance
("EI"), CPP contributions or income tax from the Worker's
remuneration. The Workers did not receive T4 slips. [All NAPs, para. 7(i)]
…
[28] In A.L.D., I
commented as follows:
47 In the within appeals, I reiterate
there is no doubt about the good faith of the parties. The drivers – Parks and
Bellemare – wanted to provide their services within the context of operating
their own business. Parks had never provided his services to ALD in any other
context whether driving truck or carrying out construction/renovation projects
for ALD or other customers. Bellemare had driven for another company as an
independent contractor and was adamant that status continue when driving for
ALD. He and Parks both thought working as an independent contractor provided a
sense of freedom - in conformity, perhaps – with the erstwhile perception of
long-haul truckers as Knights of the Open Road.
48 With respect to the
element of control, there was no supervision of their driving function or any
other aspect of their duties during the course of the various trips they
accepted. Certainly, there was less control over their performance than that
exercised in relation to the RWB dancers. The drivers did not have an
opportunity for profit like the massage therapists in Vida nor did they have a
real risk of loss as a result of carrying out their duties. They did not need
to carry out any management functions nor hire helpers in order to drive the
ALD tractor and trailer from A to B to C and back nor did they provide tools of
any consequence.
49 Without the RWB decision,
I would not have considered the clear intention of the parties to have been as
compelling, particularly within the context of the combined effect of the other
factors. However, the drivers in the within appeal were unwavering in their
pursuit of the desired status of independent contractor and there was no
subsequent material deviation in their conduct nor on the part of the employer.
The parties acted throughout in conformity with their stated intention and
there were no unusual circumstances arising within the course of the working
relationships that damaged – let alone obliterated - the effect of their
original agreement.
[29] Turning to the
facts in the within appeals, there is no doubt the parties wanted Grewal to
provide his services as an independent contractor and that the current contract
perpetuated this status which had been specified in an earlier agreement. The
lack of control was similar to that in the A.L.D. case and Grewal’s
opportunity for profit required him to deliver more packages. He did not have
any risk of loss and the only management function he exercised was to arrange
for a replacement driver from the pool of Transport contractors. One significant
point is that Transport earned its revenue by delivering items for Canada Post
pursuant to its contract and was remunerated on a piece basis. The drivers
earned 70% of the gross fee collected by Transport provided the delivery was
made using a van owned by Transport. Therefore, the ability of Grewal and
Transport to generate additional revenue was dependent on an increased number
of items to be delivered from the Maple Ridge Centre to various destinations.
The relationship between Grewal and Transport was somewhat unusual as they were
able to function as though on automatic pilot without need for supervision or
even communication on a regular basis. The parties functioned according to the
intention expressed in the written contract even though some of the terms
therein were not relevant to Grewal’s performance because his services related
only to Canada Post and not to any other Transport customers.
[30] The jurisprudence
is clear that one must not decide these cases on the basis that a majority of
the traditional factors tend to favour a particular status. One must guard
against relying strictly on a finding of preferred status in each analysis of
those factors as such compartmentalization in the absence of taking into
account the total substance of the evidence can produce an erroneous result. The
lack of control in the within appeals is a significant force which supports the
view Grewal was an independent contractor. On the other hand, he did not have
any financial risk. He played a role in managing his important part of the
Centre delivery operation by ensuring his loads of mail were delivered in a
timely manner even if that required him to arrange for a replacement driver. He
had no investment in Transport and his ability to earn more money was tied to
the number of items delivered. Due to the peculiar limits of the activity
carried on by Grewal, it is not difficult to accept that he was providing his
services to Transport on his own account. There was no need for him to have
acquired the usual trappings of commerciality in order to generate revenue.
Grewal was content to enter into a written contract which – pursuant to clause
8.1 - permitted either party to terminate the agreement – without cause – by
giving 30 days notice of such intent. Notwithstanding the escape clause, the
working relationship of the parties has endured for several years.
[31] This has been one of those close cases but the impact of the decisions
referred to herein as applied to the facts have led me to conclude these
appeals must be allowed. The decisions of the Minister are hereby varied to
find that:
Sukhminder Grewal was not employed in either
insurable or pensionable employment with Dewdney Transport Group Ltd. from
January 1, 2007 to June 26, 2008.
Signed at Sidney,
British Columbia this 5th day of November 2009.
“D.W. Rowe”
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