Citation: 2007TCC541
Date: 20070913
Dockets: 2007-1503(CPP) and 2007-1504(EI)
BETWEEN:
MAXWELL C. BISHOP O/A ULTRA-MAX CONSTRUCTION,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Webb J.
[1] This case deals with the issue of whether
five different individuals were employees or independent contractors of the
Appellant. The five individuals are Claude Jesso, Brian J. Oakley, Philip K.
Kaiser, Brian L. White and Gerry G. Gibbons. The period under appeal
for Brian J. Oakley, Brian L. White and Gerry G. Gibbons is 2003 and the
periods under appeal for Clause Jesso and Philip Kaiser are 2003 and 2004.
[2] The Appellant carried on a general
contractor business as a sole proprietor. He would have various jobs for
different clients and during the period under the appeal some of the jobs
included installing a new roof on a house and essentially rebuilding a separate
house.
[3] The Appellant indicated that when he hired
individuals as needed for the various projects, he would hire them as
independent contractors and not as employees. He would pay the individuals a
fixed amount per hour for the number of hours that each one worked, although
the hourly rate paid to each one was not the same. Of the five employees
involved, only three of the employees testified during the hearing. Philip
Kaiser confirmed that it was his understanding and his intention that he was an
independent contractor and not an employee. Brian White and Gerry Gibbons both
testified that it was their understanding that they were employees and not
independent contractors. Neither Claude Jesso nor Brian Oakley testified during
the hearing. Therefore, the only evidence in relation to the engagement of
Claude Jesso and Brian Oakley was that of the Appellant. He indicated that
Claude Jesso was hired as a painter and that Claude Jesso worked as a painter
for various customers from time to time. He also indicated that Brian Oakley
had an advertisement in the local newspaper that had been running for some time
advertising his services for hire.
[4] Brian Oakley had completed a questionnaire
that was supplied in relation to the determination made by the Minister that he
was an employee. This questionnaire was tendered into evidence only to
establish that the questionnaire was completed and not for the truth of its
contents as Mr. Oakley was not called to testify. The two witnesses who
testified that it was their understanding that they were employees were called
as witnesses by counsel for the Respondent. Philip Kaiser was called by
the Appellant as his witness.
[5] In the Law of Evidence in Canada, second edition,
by Sopinka, Lederman and Bryant, it is stated at p. 297 that:
In civil cases, an unfavourable inference can be
drawn when, in the absence of an explanation, a party litigant does not
testify, or fails to provide affidavit evidence on an application, or fails to
call a witness who would have knowledge of the facts and would be assumed to be
willing to assist that party.
[6] Because:
(a) the
Respondent was represented by counsel but the Appellant was not represented by
counsel;
(b) no adequate
explanation was provided by counsel for the Respondent for not calling Clause
Jesso and Brian J. Oakley as witnesses;
(c) the
Appellant had testified that all individuals were retained as independent
contractors; and
(d) the Respondent did call
Brian White and Gerry Gibbons as witnesses,
the inference that I draw from the fact
that Clause Jesso and Brian J. Oakley were not called as witnesses is that their
evidence would not have assisted the Respondent. As a result, I conclude that
the intention of the Appellant in relation to the engagement of Claude Jesso,
Brian J. Oakley and Philip Kaiser was that they would be engaged as independent
contractors of the Appellant and that each of these individuals had the same
intention.
[7] In the recent decision of the Federal
Court of Appeal in Royal Winnipeg Ballet v. M.N.R., 2006 FCA 87, 2006 DTC
6323, the Federal Court of Appeal reviewed the role that intention should play
in determining whether or not individuals are employees or independent
contractors. In the subsequent case of Combined Insurance Co. of
America, 2007 FCA 60, Nadon J.A. of the Federal Court of Appeal summarized this as
follows:
35. In my view, the following
principles emerge from these decisions:
1. The relevant facts,
including the parties’ intent regarding the nature of their contractual
relationship, must be looked at in the light of the factors in Wiebe Door,
supra, and in the light of any factor which may prove to be relevant in the
particular circumstances of the case;
2. There is no predetermined
way of applying the relevant factors and their importance will depend on the
circumstances and the particular facts of the case.
Although as a general rule the control test is
of special importance, the tests developed in Wiebe Door and Sagaz, supra,
will nevertheless be useful in determining the real nature of the contract.
[8] In the Royal Winnipeg Ballet case,
the dancers and the ballet company had a common intention of hiring the dancers
as independent contractors. The Federal Court of Appeal then reviewed the facts
of that case to determine whether or not the facts, as they relate to the
factors as outlined in Wiebe Door Services Ltd. v. Minister of National
Revenue, [1986] 2 C.T.C. 200, 87 DTC 5025, altered the arrangement between
the ballet company and the dancers. The Court concluded that in that case the
application of the facts did not change the relationship and that the dancers
were independent contractors. Sharlow J.A. of the Federal Court of Appeal made
the following comments in the Royal Winnipeg Ballet case:
65. The judge chose the following factors
as relevant to the Wiebe Door analysis (it is not suggested that he
chose the wrong factors or that there are any relevant factors that he failed
to consider):
· The indispensable element of
individual artistic expression necessarily rests with the dancers. The RWB chooses
what works will be performed, chooses the time and location of the
performances, determines where and when rehearsals will be held, assigns the
roles, provides the choreography, and directs each performance.
· The dancers have no management or
investment responsibilities with respect to their work with the RWB.
· The dancers bear little financial
risk for the work they do for the RWB for the particular season for which they
are engaged. However, their engagements with the RWB are for a single season
and they have no assurance of being engaged in the next season.
· The dancers have some chance of
profit, even within their engagement with the RWB, in that they may negotiate
for remuneration in addition to what is provided by the Canadian Ballet Agreement.
However, for the most part remuneration from the RWB is based on seniority and
there is little movement from that scale.
· The career of a dancer is
susceptible to being managed, particularly as the dancer gains experience.
Dancers engaged by the RWB have considerable freedom to accept outside
engagements, although there are significant contractual restrictions (the need
for the consent of the RWB, and the obligation to hold themselves out as being
engaged by the RWB).
· Although the dancers bear many
costs related to their engagement with the RWB and their dancing careers
generally, the RWB is obliged to provide dance shoes, costumes, tights, wigs
and certain other necessary items.
· The dancers are responsible for
keeping themselves physically fit for the roles they are assigned. However, the
RWB is obliged by contract to provide certain health related benefits and
warm-up classes.
66. The control factor in this case, as
in most cases, requires particular attention. It seems to me that while the degree
of control exercised by the RWB over the work of the dancers is extensive, it
is no more than is needed to stage a series of ballets over a well planned
season of performances. If the RWB were to stage a ballet using guest artists
in all principal roles, the RWB's control over the guest artists would be the
same as if each role were performed by a dancer engaged for the season. If it
is accepted (as it must be), that a guest artist may accept a role with the RWB
without becoming its employee, then the element of control must be consistent
with the guest artist being an independent contractor. Therefore, the elements
of control in this case cannot reasonably be considered to be inconsistent with
the parties' understanding that the dancers were independent contractors.
67. The same can be said of all of the
factors, considered in their entirety, in the context of the nature of the
activities of the RWB and the work of the dancers engaged by the RWB. In my
view, this is a case where 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.
[9] The application of the facts to the Wiebe Door factors in Royal Winnipeg Ballet was not sufficient
to alter the arrangement from that which was intended by the parties. Therefore,
unless the application of the facts in this case to the Wiebe Door factors would more strongly indicate an employer-employee
relationship than in the case of the Royal Winnipeg Ballet, it seems to
me that the individuals, for whom the intention was to create an independent
contractor relationship, would be independent contractors.
[10] With
respect to the control factor, the evidence in this particular case was that
the amount of control that the Appellant had over Claude Jesso, Brian Oakley
and Philip Kaiser would have been less than the amount of the control that the
Royal Winnipeg Ballet had over the ballet dancers.
[11] As well,
Brian Oakley and Claude Jesso were retained to perform certain tasks. Brian
Oakley was retained to help the Appellant with respect to a particular roofing
job and Claude Jesso was retained to do painting work on a job that the
Appellant had with his clients.
[12] In the case
of Direct Care In-Home Health Services Inc. v. M.N.R., 2005 TCC
173, Justice Hershfield made the following comments in relation to control:
11 Analysis of this factor involves a determination of
who controls the work and how, when and where it is to be performed. If control
over work once assigned is found to reside with the worker, then this factor
points in the direction of a finding of independent contractor; if control over
performance of the worker is found to reside with the employer, then it points
towards a finding of an employer-employee relationship. However, in times
of increased specialization this test may be seen as less reliable, so more
emphasis seems to be placed on whether the service engaged is simply “results”
oriented; i.e. “here is a specific task -- you are engaged to do it”. In such
case there is no relationship of subordination which is a fundamental
requirement of an employee-employer relationship. Further, monitoring
the results, which every engagement of services may require, should not be
confused with control or subordination of a worker.
12 In the case at bar, the Worker was free to decline
an engagement for any reason, or indeed, for no reason at all. …
(emphasis added)
[13] The
arrangement with Brian Oakley and Claude Jesso appears to be very similar to the
arrangement described by Justice Hershfield in that each of these individuals was
assigned a specific task and engaged to do it.
[14] With
respect to the ownership of equipment, these three individuals all provided
their own hand tools and smaller tools. The larger tools were provided by the
Appellant. This appears to be very similar to the situation in Royal
Winnipeg Ballet where the dancers bore many costs but the Royal Winnipeg
Ballet was obliged to provide dance shoes, costumes, tights, wigs and certain
other necessary items.
[15] There was
no indication as to whether there were any discussions between these three
individuals and the Appellant as to whether they could hire any helpers. The
Appellant testified that any one of these individuals would have been allowed
to hire anyone to take their place as long as the quality of work was
maintained but there was no indication whether these discussions actually took
place. In the Royal Winnipeg Ballet case, there was no discussion with
respect to whether or not the dancers could hire any helpers but it would seem
illogical to suggest that the dancers could hire any person to replace them in
the production.
[16] With
respect to the degree of financial risk/opportunity for profit, these three
individuals had some financial risk for the work they did as they would bear
the cost of fixing any errors that they made. In the Royal Winnipeg Ballet
case the dancers, as acknowledged by the Federal Court of Appeal, had little
financial risk. Therefore, the individuals in this case bore a little more
financial risk than did the dancers in Royal Winnipeg Ballet.
[17] With
respect to the opportunity for profit, the dancers with the Royal Winnipeg
Ballet could negotiate for additional remuneration, although most were paid in
accordance with a predetermined scale. In this case these individuals were paid
amounts that were set by the Appellant. In Royal Winnipeg Ballet the
dancers were allowed to accept outside engagements provided that they had the
consent of the Royal Winnipeg Ballet and provided that they held themselves out
as being engaged by the Royal Winnipeg Ballet. In this case, there were no such
restrictions imposed on these individuals in accepting outside engagements.
[18] As a
result, I find that the application of the facts related to Claude Jesso, Brian
Oakley and Philip Kaiser in relation to the Wiebe Door factors does not
suggest more strongly an employer/employee relationship than did the facts in Royal
Winnipeg Ballet and since there was a mutual intention to create an
independent contractor relationship, these three individuals were independent
contractors and not employees of the Appellant during the periods under appeal.
[19] However,
with respect to Brian White and Gerry Gibbons, these individuals and the
Appellant did not have a mutual intention with respect to whether they would be
employees or independent contractors. Both Brian White and Gerry Gibbons
testified that it was their understanding that they were employees and not
independent contractors. Gerry Gibbons testified that he had approached the
Appellant for work. He indicated that he knew Brian White and saw him working
on a roof. He approached the Appellant at that time about the possibility of
working for him but the Appellant indicated to him that he was not looking for
anyone at that time. The Appellant later contacted him and hired him as a
labourer and not to perform a specific task but such tasks as may have been
assigned to him from time to time. Gerry Gibbons indicated that when he noticed
that no deductions were being taken from his paycheck, he contacted the
Appellant and indicated that such deductions should be made.
[20] Brian White
indicated that he started working for the Appellant after responding to a
manpower advertisement. Brian White is a journeyman carpenter. It also appears
that Brian White had more responsibilities as he was looking after various jobs
for the Appellant during this time and therefore he was not engaged to perform
a specific task but such tasks as may have been assigned to him from time to
time.
[21] The
Appellant indicated that he was very sick during the time period that is under
appeal in relation to Brian White and Gerry Gibbons and that he was on
medication during this time. As a result, it is not clear what, if any,
discussions took place between the Appellant and Brian White and between the
Appellant and Gerry Gibbons with respect to their status when they were hired
in 2003. As well, both Brian White and Gerry Gibbons were treated as employees
by the Appellant some time during the summer of 2003 without any change in the
terms or conditions of their engagement by the Appellant. Brian White indicated
that he was treated as an employee by the time he received his third paycheque.
As well, Brian White indicated that during this time there was only he and
Gerry Gibbons who were working for the Appellant and he confirmed that the
Appellant was not doing well at this time.
[22] The
situation in relation to Brian White and Gerry Gibbons is substantially similar
to that in Reed Marcotte, 2007 TCC 386. In Reed Marcotte the
appellant was a sole proprietor who carried on a general contractor business
and who stated that any workers that he retained to work on his various
projects were retained as independent contractors and paid by the hour. In that
situation, I found that there was no mutual intent with respect to whether the
particular individual involved in that case was retained as an independent
contractor or as an employee and I found that the particular individual in that
case was an employee and not an independent contractor. The only differences
between Reed Marcotte and the present appeal in relation to the
application of the Wiebe Door factors to Brian White and Gerry Gibbons
are that Brian White and Gerry Gibbons may have provided some of their own
small tools and in Reed Marcotte the individual testified that it was
his understanding that he was not permitted to work for anyone else but in this
case there were no discussions in relation to this. These factors in and of themselves
are not, in my opinion, sufficient to distinguish this case from Reed
Marcotte as the tools that were provided by Brian White and Gerry Gibbons
were small tools and many employees would be permitted to work for someone else
during the periods that they are not working for their employer, and therefore
I find that Brian White and Gerry Gibbons were employees of the Appellant for
the periods under appeal. It is also significant, in my opinion, that these two
individuals were treated as employees by the Appellant within a few months of
their being engaged by the Appellant without any change in the terms or
conditions of their engagement by the Appellant.
[23] As a
result, the appeal from the determination that Claude Jesso, Brian Oakley and
Philip Kaiser were engaged by the Appellant in insurable employment within the
meaning of paragraph 5(1)(a) of the Employment Insurance Act (“Act”)
and pensionable employment within the meaning of paragraph 6(1)(a) of the Canada Pension
Plan (“Plan”) is allowed, without costs, and the matter is referred
back to the Minister of National Revenue for reconsideration and reassessment
on the basis that Claude Jesso, Brian Oakley and Philip Kaiser were
independent contractors and were not engaged by the Appellant in insurable employment
within the meaning of paragraph 5(1)(a) of the Act and pensionable
employment within the meaning of paragraph 6(1)(a) of the Plan during
the periods under appeal.
[24] The appeal
from the determination that Brian White and Gerry Gibbons were engaged by the
Appellant in insurable employment within the meaning of paragraph 5(1)(a) of the Act
and pensionable employment within the meaning of paragraph 6(1)(a) of the Plan
is dismissed, without costs.
Signed at Toronto,
Ontario, this 13th day of September 2007.
“Wyman W. Webb”
Email this Content