Citation: 2007TCC653
Date: 20071023
Dockets: 2005-2744(EI)
2005-2745(CPP)
BETWEEN:
CHANTELLE LOMNESS-SEELY,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
GACELAS BALLET INC.,
Intervenor.
REASONS FOR JUDGMENT
Boyle, J.
[1] The Appellant, Ms. Lomness-Seely,
is appealing from determinations made by the Minister of National Revenue that
she is engaged in insurable employment for purposes of the Employment
Insurance Act and in pensionable employment for purposes of the Canada
Pension Plan.
[2] The Appellant is a
professionally trained and accredited dancer. In addition she is an
enterprising dance choreographer and dance instructor.
[3] In the period in
question, Ms. Lomness-Seely worked as a dance instructor at the Gacelas
Ballet Inc. dance school in Drayton Valley, Alberta. The written teaching contract
entered into with Gacelas Ballet was for a one season term from September
through May, provided a “contract wage” of a fixed hourly rate and acknowledged
that Ms. Lomness-Seely would be required to report and pay income tax as
there would be no deductions. Importantly, the evidence is clear that Ms. Lomness-Seely
and Gacelas Ballet both intended that the Appellant be a self-employed
independent contractor and not an employee of the dance studio. The owner of
the dance studio did not testify but did intervene by way of letter on the
basis that the Appellant was a self-employed contracting dance instructor.
While the teaching contract does on one occasion use the word “employment”, it
does talk about contract wages, no withholdings, no overtime, no holiday pay
and no sick days. The owner of Gacelas Ballet who wrote the standard teaching
contract speaks English as a second language; her first language is Spanish.
[4] The owner of the
dance studio was only qualified to instruct ballet lessons. The Appellant was
the only teacher qualified to teach and conduct examinations of dance styles
and genres other than ballet. She taught jazz, tap, modern dance, and musical
theatre. The schedule for the lessons taught by the Appellant was set based
upon her availability and willingness to teach the classes. Since they were catering
to students of school age, they were in the after-school period of the
afternoon or the evenings. The dance studio did not exercise any further say in
setting the timing of the classes.
[5] As part of her
teaching for the dance studio, she was expected or required to attend dance
festivals, competitions and recitals with her classes.
[6] Apart from her work
for Gacelas Ballet, the Appellant was entitled to teach private lessons for
students, including those in the dance studio’s classes. She was entitled to do
contract choreography work including with dance class students. The Appellant
charged a rate significantly in excess of the rate paid by the dance studio for
the choreography and private lessons and she was paid directly by the dance
students not by the dance studio for that work. In the period in question she
did teach paid private lessons separate from her work for the dance studio. In
addition, she earned fees from doing choreography work in the period in
question.
[7] Further, she was
allowed to teach at other dance studios. In the period in question she did not
teach at the only other dance studio in town because she felt it was of a
significantly different quality. She did consider accepting a position offered
to her at another dance studio but did not teach there because it was in a town
45 minutes away which made it largely uneconomic. She is now teaching at two unrelated
dance studios and had previously taught at multiple studios.
[8] The Appellant as
instructor was responsible for grouping the students in classes based on
proficiency levels. This was entirely her decision and not that of the dance
studio. Ms. Lomness-Seely was entitled to refuse students and did. The
dance studio did not seek to overrule her decisions. While she was expected to
act in a professional manner and maintain the school’s desired standards, she
had free rein as regards to what she taught, what music she used, etc. She had
complete control over her classes. This meant that she effectively ran the
dance programs other than the ballet classes.
[9] In dance classes,
the instructor is responsible for choreographing the productions the students
perform in. In this case, the choreography developed by Ms. Lomness-Seely
was her artistic property and did not become the studio’s property nor did the
studio have the right to use it for other classes or in later years without her
consent.
[10] Gacelas Ballet was
the owner of its dance studio. The dance studio was properly equipped with
mirrors, sprung floors and a built-in sound system. Ms. Lomness-Seely was
responsible for providing all of the other equipment and materials used in her
dance classes. Given the nature of tap, jazz and modern dance classes, she had
an inventory of dance music CDs costing her in the thousands of dollars. The
music CDs and instructional videos were acquired and developed on her own time.
She also provided her own computer to cut or edit the music as she desired. In
addition to the choreography, her instruction methods and materials belonged to
her. In addition, she provided the mats, ropes and exercise bands used by the
students. She also provided her own necessary dance outfit, dance shoes, etc.
She was not given any form of allowance or reimbursement for her music or other
supplies nor did she receive anything towards maintaining her qualifications as
a professional dance instructor. She was not reimbursed or provided an
allowance for accompanying her students to events and competitions outside the
dance studio.
[11] Gacelas Ballet had
no right to tell her what to do beyond what was agreed to between them nor did
they have any right to discipline her. If the dance studio did not like what
she was doing, its only contractual right was to inform her and terminate the
contract. They did not have the right to make her change her ways of
organizing, structuring or teaching her class.
[12] The owner of Gacelas
Ballet was the other Senior Instructor at the studio. The owner of the dance
studio could have run the studio without the Appellant. The owner was a
qualified ballet instructor and, even though she wasn’t credentialed in jazz,
she could have taught jazz although she did not. The owner could not have
taught tap or musical theatre or the other dance genres that the Appellant
taught.
Analysis
[13] The issue of
employee versus independent contractor for purposes of the definitions of
pensionable employment and insurable employment are to be resolved by
determining whether the individual is truly operating a business on her own
account. This is the question set out by the British courts in Market
Investigations, Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732
(Q.B.D.), approved by the Federal Court of Appeal in Wiebe Door Services Ltd.
v. The Minister of National Revenue, 87 DTC 5025 for purposes of the
Canadian definitions of insurable employment and pensionable employment, and
adopted by the Supreme Court of Canada in 671122 Ontario Ltd. v. Sagaz
Industries Canada Inc., [2001] 2 S.C.R. 983. This question is to be decided
having regard to all of the relevant circumstances and having regard to a
number of criteria or useful guidelines including: 1) the intent of the
parties; 2) control over the work; 3) ownership of tools; 4) chance of
profit/risk of loss and 5) what has been referred to as the business
integration, association or entrepreneur criteria.
[14] The decision of the
Federal Court of Appeal in Royal Winnipeg Ballet v. The Minister
of National Revenue, 2006 DTC 6323 highlights the particular importance of the
parties’ intentions and the control criterion in these determinations. This is
consistent with the Federal Court of Appeal’s later decision in Combined
Insurance Co. of America v. Canada (Minister of National Revenue), 2007 FCA
60 as well as its decision in City Water International Inc. v. Canada
(Minister of National Revenue), 2006 FCA 350. The Reasons of this Court in Vida
Wellness Corp. v. Canada (The Minister of National Revenue), 2006 TCC 534 also
provide a helpful summary of the significance of the Royal Winnipeg Ballet decision.
Most recently, the Chief Justice’s Reasons in Lang v. Canada (The Minister of
National Revenue), 2007 TCC
547 are
also very helpful on this point.
[15] The Minister
determined that the Appellant’s work for Gacelas Ballet Inc. dance studio was
an employment relationship not a business carried on by the Appellant. The
Minister did not challenge the fact that Ms. Lomness-Seely’s contract
choreography work for dancers and aspiring dancers and her private lessons were
a separate business carried on by her. The Crown’s position is that
Ms. Lomness-Seely’s private teaching and choreography was a separate
business activity of hers distinct from her work for Gacelas Ballet.
The intent of the parties:
[16] In this case both parties intended the
relationship to be that of independent contractor not one of employment. The
Appellant’s entitlement to work for other dance studios or directly with
dancers for her own account is consistent with that. While it is not
necessarily the case that employment precludes an employee from also working
for a competitor or in competition, that is generally the exception in cases of
employment and the norm in cases of the self-employed. I find that the parties
intended the contract to be an independent contractor relationship not an employment
relationship and that they did not do anything inconsistent with their
relationship being that of independent contractor.
Control:
[17] It is clear that
Gacelas Ballet did not exercise the degree of control over its working
relationship with Ms. Lomness-Seely of the type that an employer would
normally exercise over an employee. Gacelas Ballet did not direct how the dance
classes were to be taught nor indeed were they even credentialed or qualified
to do so. The studio could not require her to teach a student who she did not
feel should be in the class. Ms. Lomness-Seely exercised her control over
those areas of her class and her decisions were never challenged. Her control
of the classroom was absolute. What was taught, from warm-up to the end of
class, and how it was taught, was unique to her and in her control. Upon
hearing the evidence in this case, the Crown conceded that the Royal
Winnipeg Ballet had greater control over its dancers than the studio does
over the Appellant in this case.
[18] I find the
consideration of the issue of control inclines in favour of an independent
contractor status not an employee relationship.
Ownership of tools of the trade:
[19] Ms. Lomness-Seely
did not own a fully-equipped dance studio. That is why she held herself out to
dance studios as an available contract instructor. She did own her choreography
library developed by her and, in addition, she owned all of the recorded music
selected and used by her in teaching her different classes. She also owned and
provided the other equipment used in her particular classes. Ms. Lomness-Seely
had the necessary credentials and qualifications to instruct and examine in the
areas she taught and bore the cost of maintaining those qualifications. She
provided her own dance suits and dance shoes and her own travel to competitions
and events away from the studio. While the professional dance studio was
necessary, music was equally necessary to the dance genres taught by her. I
find that the issue of the ownership of tools of the trade inclines only
slightly in favour of an independent contractor relationship. It is certainly
not inconsistent with the desired independent contractor relationship.
Chance of profit/Risk of loss:
[20] Since Ms. Lomness-Seely
was paid by the dance studio at an hourly rate, her chance of profit and risk
of loss were not so great as they would be for a person not paid on that basis.
However, she was able to make considerably more money by teaching private
lessons and providing private choreography. Within her community her target
audience for these services were in fact current students at her dance studio
classes. Thus she was not only able to increase her profit by working more hours,
she was able to generate more revenues from her dance studio class for private
lessons and choreography by maintaining strong professional teaching
relationships and goodwill with her dance studio students. She also made a
considerable investment of her own time trying to generate choreography fees
from a planned dance show at Disneyland which did not come to fruition. Because
she was paid an hourly rate by the dance studio, Ms. Lomness-Seely’s risk
of loss was the risk that her largest single client at the time became financially
unable to pay her monthly invoice. It was the dance studio who bore the risk of
a parent’s failure to pay. With respect to her chance of profit in the studio
setting, Ms. Lomness-Seely testified that she negotiated her rate with the
dance studio. In her experience, if a class grew because it was successful, she
was able to re-negotiate for a greater hourly rate. The success of a
specialized dance class in a small, two dance studio town is to quite an extent
determined by the qualities and success of the instructor, perhaps moreso than
the business promotion and similar advertising of the studio.
[21] In these
circumstances, considering the chance of profit/risk of loss criteria does not
appear to favour either employment or independent contractor over the other.
Conclusion
[22] In these
circumstances, I find that the Appellant was not in insurable employment or in pensionable
employment in providing her dance instructor services to Gacelas Ballet. Each
of the intent and control considerations leans strongly in favour of
independent contractor status. The Federal Court of Appeal in the Royal
Winnipeg Ballet decision considered these two considerations of particular
importance in the case of dancers. The parties did not do anything inconsistent
with the relationship being the desired independent contractor relationship.
For these reasons, I will be allowing these appeals and vacating the Minister’s
decision.
[23] The Crown relied in
argument on this Court’s decision in Quantum Fitness Inc. v. Canada,
2007 TCC 280. I note that in that case the fitness instructors were not allowed
to act as a fitness instructor anywhere else and the B.T.S. fitness instruction
process appears to have been proprietary to the employer. In Quantum Fitness,
the training was to be done to the particular B.T.S. standard. The Quantum
Fitness instructors had to teach the B.T.S. program. In this case the
Appellant’s training and accreditation was entirely up to her and was not
provided by a B.T.S. proprietary type system.
Signed at Ottawa,
Canada, this 23rd day of October 2007.
"Patrick Boyle"
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