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Citation: 2009 TCC 252
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Date: 20090508
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Dockets: 2008-1137(EI)
2008-1138(CPP)
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BETWEEN:
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FRANCES HONSINGER & MARIANNE COLLINS,
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Appellants,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
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REASONS FOR JUDGMENT
Little J.
A. FACTS:
[1] The
Appellants owned and operated a business under the name of Sunrise Learning
Centre (“Sunrise”) with offices in Courtenay and Campbell River, British Columbia.
[2] Students
who attended Sunrise received tutoring in academic subjects
such as reading, writing and mathematics.
[3] Sara
Kerr (the “Worker”) was a tutor at Sunrise for the period
of August 21, 2006 to July 7, 2007 (the “Period”).
[4] The
issue in these appeals is whether the Worker was engaged by Sunrise as an employee or an independent contractor during
the Period.
[5] Sometime
in 2007, the Worker applied to receive benefits under the Employment
Insurance Act (the “EI Act”).
[6] By
letter dated September 14, 2007 an official of the Canada Revenue Agency (the
“CRA”) wrote to the Appellants. The letter provided, in part, as follows:
Based on our analysis we have ruled
that
For the period of August 21, 2006
to July 7, 2007, Sara Kerr was an employee and her employment was insurable
pursuant to paragraph 5(1)(a) of the Employment Insurance Act and pensionable
pursuant to paragraph 6(1)(a) of the Canada Pension Plan.
Appellants’ Position
[7] The
Appellants maintain that since they commenced to operate Sunrise in 1999, Sunrise has had 22 tutors who worked as independent
contractors. The Appellants said that they took the position that all of the
tutors were independent contractors and the CRA accepted this position. However,
in one situation a tutor by the name of Pamela Merritt was initially considered
by the CRA to be an employee of Sunrise. After the CRA
reviewed the arrangement between Sunrise and Pamela
Merritt it determined that Ms. Merritt was a self-employed independent
contractor. The letter from the CRA dated March 3, 2006 reads, in part, as
follows:
It has been decided that Pamela
Merritt’s employment was not pensionable and insurable for the following reason(s):
She was engaged under a contract for services and therefore, she was not an
employee of Sunrise Learning Centre during the period mentioned above.
Respondent’s Position Re: The Worker (Sara Kerr)
[8] The
Reply to the Notice of Appeal prepared by the Minister of National Revenue (the
“Minister”) states as follows:
In making his decision the Minister
relied on the assumptions of fact as follows:
a) during the
Period, the Appellant operated a learning center that provided instruction and
tutoring to students;
b) the
Appellant’s learning center provided the tutoring mostly after school and on
Saturdays;
c) the Appellant
advertised for students;
d) the Appellant
assessed the learning needs of each student;
e) the Appellant
established an instruction program for each student dependent on that student’s
needs;
f) the
Appellant hired instructors to tutor each of the Appellant’s students;
g) the Appellant
provided the classroom facilities, including the desks and the curriculum
materials, used by the instructors to tutor students;
h) the Appellant
required that each of the instructors have a British Columbia teacher’s certificate;
i) the
Appellant hired Kerr to instruct its students;
j) the
Appellant required Kerr to complete reports and records for each student
assigned to her;
k) the Appellant
trained Kerr in respect to the record keeping that was required;
l) the
Appellant matched the students to the instructor that the Appellant felt best
suited each student’s learning needs;
m) the Appellant
set the ratio of students to instructor and the limit was a maximum of two
students for each hourly instructional session;
n) the Appellant
established the rate of pay and paid Kerr $10 per hour for a single student and
$20 per hour for a two student instructional session;
o) in addition
to the hourly rate for instructional duties, Kerr was also paid $15 for each
student report that she was required to complete;
p) Kerr was
required to follow the individual program established by the Appellant for each
student;
q) the Appellant
required Kerr to provide her personal services;
r) in the event
that Kerr was not able to teach a scheduled session she was required to arrange
for a replacement from the Appellant’s list of instructors;
s) it was the
Appellant and not Kerr that paid the replacement instructor; and
t) Kerr was not
in a position to make a profit nor was she required to incur expenses in the
performance of her instructional duties.
(Note: The Appellants do not agree with
all of these assumptions.)
B. ISSUE:
[9] The
issue is whether the Appellants employed Ms. Kerr under a contract of service
in pensionable employment during the Period within the meaning of paragraph
5(1)(a) of the EI Act and paragraph 6(1)(a) of the Canada Pension
Plan (the “Plan”).
C. ANALYSIS AND DECISIONS
[10] The question as to whether a Worker was an employee or an independent
contractor has been litigated before Canadian Courts on many occasions. Some of
the leading cases in this area are Wiebe Door
Services Ltd. v. M.N.R., 87 DTC 5025
(FCA), 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.,
[2001] S.C.J. No. 61 and Royal
Winnipeg Ballet v. Canada, [2006]
FCA 87. The tests established in the Wiebe Door case for determining
whether a person was an employee or an independent contractor are:
(a) control;
(b) ownership
of tools;
(c) chance
of profit;
(d) risk
of loss; and
(e) integration.
[11] In Royal Winnipeg Ballet (supra) the Federal Court of
Appeal relied upon the intention of the parties as an important factor.
I. Control
[12] In commenting upon the control exercised by Sunrise on Ms. Kerr, the Appellant, Francis Honsinger, said that Sunrise exercised very little control over the Worker. Ms.
Honsinger quoted with approval from the case of Learning Loft Ltd. v. M.N.R.,
[2001] T.C.J. No. 380, at paragraph 24 which reads as follows:
…it was the tutor who determined, with the
student, who would be taught, what would be taught, how the lesson would be
taught, when the lesson would be taught and where the lesson would be taught.
These were not the appellant's decisions. There was no master servant
relationship between the Worker and the appellant. The appellant did not
exercise any meaningful control over the Worker, nor did it wish to exercise
such control. The Worker could always teach students for her own account without
the intervention of the appellant.
(Transcript page 23, lines
4-16)
[13] Ms. Honsinger referred to the above comment and said:
Which was applicable in our case. (Transcript page 23, line 17)
[14] The Appellant again quoted from paragraph 26 of Learning Loft Ltd. (supra):
…The business of the appellant is to get
students requiring help and tutors together to establish and promote a
relationship between a tutor and a pupil. The appellant's business is not to
teach the pupil, that is the business of the tutor.
(Transcript page 23, lines 19-24)
[15] In referring to the independent responsibility of the Worker, Ms. Honsinger
said:
Tutors had a number of management chores that
they had to do in the running of their own businesses. They had to invoice us.
They had to arrange for the replacement teachers. They had to re-arrange
schedules where necessary. They discussed with parents if a student needed to
be moved to a private lesson as opposed to a semi-private lesson, in which case
the tutor charged twice as much.
They would discuss any behavioral issues with the parents and evaluate
options with them for the students. They maintained their daily records. They
sent the reports. They contacted parents in consideration of curriculum
development and they notified parents when educational objectives had been met.
(Transcript page 24, lines 2 to 15)
[16] Ms. Kerr was called as a witness by Counsel for the Minister. Counsel
for the Minister asked Ms. Kerr how closely she was supervised by the
Appellant. Ms. Kerr said – “We were not supervised at all”.
[17] The Appellants and Counsel for the Minister each referred to the
decision of the Supreme Court of Canada in 671122
Ontario Ltd. v. Sagaz Industries Canada Inc. (supra). At paragraph 44 of the Sagaz
decision, Justice Major referred to the decision of MacGuigan J.A., in Wiebe
Door and said:
According to MacGuigan J.A., the best synthesis found
in the authorities is that of Cooke J. in Market Investigations, Ltd. v.
Minister of Social Security, [1968] 3 All E.R. 732 …..
The observations of LORD WRIGHT, of
DENNING, L.J., and of the judges of the Supreme Court … is this: “Is the person
who has engaged himself to perform these services performing them as a person
in business on his own account?”. If the answer to that question is “yes”, then
the contract is a contract for services. If the answer is “no” then the
contract is a contract of service. …
[18] In connection with answering the test outlined by Justice Major, I
refer to the following comment made by the Appellants in the Rebuttal that they
filed with the Court. The Appellants referred to the activities of the Tutors
and said:
J. Tutors
a. Invoiced Sunrise
b. Arranged for
replacement teachers
c. Re-arranged
schedules to satisfy changing schedule of either the student or the tutor,
student absence, or tutor absence
d. Discussed with
parents if a student needed to be moved to a private lesson as opposed to a
semi-private lesson
e. Discussed
behavioural issues and evaluated options with parents
f. Maintained
daily records of student progress
g. Regularly sent
reports to parents
h. Contacted
parents in consideration of curricular development
i. Notified
parents when educational objectives had been met or could not be met
These were aspects of
managing their own business. (Emphasis
added)
[19] In his argument Counsel for the Minister referred to the binder that
was provided by Sunrise to Ms. Kerr and said:
… You heard her talking about how
she had the binder, how it was an individualized learning program put together
by Frances Honsinger and Marianne Collins, and that she felt that she couldn’t
largely deviate from that.
(Transcript page 12, lines 6-9)
[20] In answer to the comment made by Counsel for the
Minister concerning the binder provided by Sunrise to the Worker, Ms. Honsinger said:
… in each individual student’s binder it had the results of the
diagnostic assessment … That it’s just what the diagnostic assessment showed,
combined with about the parents said that they wanted to work on.
(Transcript page 3, lines 1-7)
…
JUSTICE: And what would it translate to in terms of pages in a
binder?
MS. HONSINGER: Oh, terms of a -- one sheet.
JUSTICE: One page, two pages?
MS. HONSINGER: One page of the summary of the diagnostic assessment.
(Transcript
page 3, lines 15-21)
[21] Ms. Honsinger referred to the binder and said:
… mostly it was the teacher’s notes
that she would take on the student, because as she was -- she would make
comments about how the child was doing on things, so that at the end of the 12
lessons she would be able to go back and review her notes. That is just
standard professional practice as a teacher.
(Transcript page 5, lines 22-25 and page 6, lines
1-2)
[22] I do not believe that the fact that Sunrise
provided a binder to the Worker indicates that Sunrise was exercising “control” over the Worker. I believe that the evidence
indicates that the “binder” was more of a “progress report” prepared by the
tutor than a recommendation from the Appellants on how the student should be taught.
[23] From a review of
the above evidence it is apparent, I believe, that the tutors were performing
their services as a person in business would perform them.
II. Tools and Equipment
[24] Ms. Honsinger referred to this test and said:
To go to provisions of tools and
equipment, we strongly recommended that tutors bring in many resources and it
wasn't up to us which ones. That was up to them. (Transcript
page 25, lines 14 to 17)
[25] Ms. Honsinger also said:
They (i.e. the tutors) had to invest a lot
of time and money in their education. They had to have a Bachelor or Education
degree. That represents a significant investment of money just to be able to
do the work in the first place. (Transcript page 26,
lines 9 to 13)
[26] In a Rebuttal document filed by the Appellants with the Court, the
Appellants said:
Provision of Tools and Equipment
We strongly recommended that the
tutors bring in many resources. It is up to the tutors to address the students’
needs with whatever materials they see fit. We did not suggest to the tutors
which learning resources to use; it was up to their professional judgment and
expertise. We observed that tutors brought in abundant materials, but we did
not monitor how much any one tutor brought in. Tutors did not have to purchase
all the materials they used, because they shared amongst themselves.
Furthermore, students often brought in their own materials, e.g. math texts,
novels, poetry, writing assignments, and other homework.
[27] I believe that the evidence on this test points in favour of
independent contractor status rather than employee status for the Worker.
III. Chance of Profit and Risk of Loss
[28] Ms. Honsinger said:
If a teacher did not teach well and a parent
complained, then a teacher was responsible for re-teaching that hour at his or
her own expense. … And if it a student un-enrolled, her contract terminated. (Transcript page 29, lines 12 to 17)
[29] In my opinion the evidence on this issue points in favour of
independent contractor status for the Worker.
IV. Intention
[30] In the Royal Winnipeg Ballet case (supra), Justice
Sharlow of the Federal Court of Appeal said at paragraphs 63 and 64:
[63] … The evidence is that the
RWB, the CAEA and the dancers all believed that the dancers were self employed,
and that they acted accordingly.
…
[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.
Justice Sharlow also said at paragraph 67:
…the common understanding of the parties
as to the nature of their legal relationship is borne out by the contractual
terms and the other relevant facts.
[31] It will be noted that Madam Justice Sharlow put a lot of emphasis on
Intention because of the common understanding of the parties.
[32] In this situation Ms. Kerr was asked whether there was any discussion
about the position of a tutor being an independent contractor as opposed to an
employee and she said “I do not remember”.
[33] However, Ms. Kerr did say that she understood that a tutor would not
have any withholding for income tax, she would not receive an employment
invoice and she would receive no benefits such as holiday pay or pension.
[34] Since the intention of Ms. Kerr was uncertain and the intention of the
Appellant was that the Worker would be an independent contractor we cannot
apply the Intention test in this situation.
[35] I have also considered the following Tax Court decisions:
1.
Kids Count
Consultants Corporation Ltd. o/a Sylvan Learning Centre Brampton v. M.N.R., 2005 TCC 99.
Justice McArthur held that a tutor at the
learning centre was an independent contractor.
2.
Preddie v. The
Queen, 2004 TCC 181.
Justice McArthur held that a tutor at a
learning centre (Sylvan Learning Centre) was an independent contractor.
3.
Learning Loft Ltd.
case (supra).
Justice Rip (now Chief Justice Rip) held
that a tutor at a learning centre was an independent contractor.
I agree with the decision in the above three appeals.
[36] Based upon an analysis of the evidence before me and the statements by
the Appellants and a consideration of the Court decisions referred to above, I
have concluded that in the relevant Period Sara Kerr was an independent
contractor and not an employee of the Appellants for the purpose of the E.I.
Act and the Plan.
[37] The appeals are allowed without costs.
Signed at Vancouver, British Columbia
this 8th day of May 2009.
Little
J.
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