Citation: 2007TCC71
Date: 20070212
Dockets: 2006-149(EI)
2006-150(EI)
2006-151(CPP)
BETWEEN:
A.L.D. ENTERPRISES INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Rowe, D.J.
[1] The appellant (ALD or payor) appealed from
a decision – dated October 14, 2005 - issued by the Minister of National
Revenue (the "Minister") wherein it was decided contributions to the Canada
Pension Plan (the "Plan") and premiums pursuant to the Employment
Insurance Act (the "Act") were payable on the earnings
paid to Remi-Paul Bellemare (Bellemare) by ALD for the period from January 1,
2003 to December 15, 2004 because Bellemare was employed under a contract of
service and – therefore – was an employee of ALD.
[2] ALD also appealed a decision of the
Minister issued on October 14, 2005 wherein it was decided the employment of
David Parks was insurable pursuant to the Act and also pensionable under
the Plan for the period from January 1, 2003 to December 17, 2004
because he was an employee of ALD and even though related to the payor’s
controlling shareholder, the Minister was satisfied he and ALD would have
entered into a substantially similar contract of employment had they been dealing
with each other at arm’s length.
[3] ALD also filed an appeal (2006-151(CPP))
from a separate decision – also dated October 14, 2005 – issued by the Minister
with respect to David Parks pursuant to relevant provisions of the Plan.
[4] All decisions were issued by the Minister
pursuant to subsection 93(3) of the Act and subsection 27.2(3) of the Plan.
[5] Counsel for the appellant and counsel for
the respondent agreed the Employment Insurance (EI) appeals could proceed on
common evidence and the Plan (CPP) appeal could follow the result.
[6] There was no issue arising from the finding
by the Minister that notwithstanding the fact
Parks and the shareholders of ALD were related; the Minister still considered
him to have been insurable employment.
[7] Ms. Shelley Kamin - counsel for the
appellant filed – as Exhibit A-1 – an Agreed Summary of Facts, (Summary) signed
by her and Daniel Bourgeois, counsel for the respondent. The first portion of
the Summary – Part A - is entitled: "Facts in Notice of Appeal Admitted by
Respondent". The contents of paragraphs 1‑20 thereof read as follows
:
1. The Appellant at all material times
carried on business year-round primarily transporting and hauling dairy
products for its client, Dairyland. The products were picked up in Brampton, Ontario and delivered to the main
distribution depot in Ottawa,
or picked up in Trois Rivières and delivered to Brampton. The Appellant also transported and hauled some fruit juice
products between Montreal and Brampton. [All NAPs, para. 1]
2. The sole shareholders and the directors of
the Appellant at all material times were André and Wendy Dupuis. Mr. and Mrs.
Dupuis controlled the day‑to‑day operations of the Appellant and
made the major business decisions, including obtaining clients, engaging
independent contractors, hiring and firing employees, signing contracts, and
deciding on the direction of the business. Mr. Parks is the brother of
Wendy Dupuis. [All NAPs, para. 2]
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)]
12. The CRA's Ottawa Tax Services Office
determined that Mr. Parks was in insurable employment with the Appellant under
the Employment Insurance Act during the period from January 1, 2003 to
December 17, 2004. The CRA's decision concerning Mr. Parks was rendered in
Employment Insurance Legislation ruling number CE0433 5114 7304[sic]
and ruling number CE0434 9075 8398[sic], dated December 17, 2004.
[All NAPs, para. 9]
13. The CRA's Ottawa Tax Services Office also
determined that Mr. Bellemare was in insurable employment with the
Appellant during the period from January 1, 2003 to December 15, 2004. The
CRA's decision concerning Mr. Bellemare was rendered in Employment Insurance
Legislation ruling number CE0434 9080 32894 and ruling
number CE0433 5114 6210, dated December 17, 2004. [All NAPs, para. 10]
14. The rulings mentioned above pertained only
to the issue of insurable employment under the Employment Insurance Act,
and did not address the issue of pensionable employment under the CPP. [CPP
NAP, para. 11]
15. The Respondent, by the Assessments dated
March 1, 2005, assessed the Appellant's 2003, 2004 and 2005 taxation years
for EI premiums and CPP contributions payable by the Appellant, on the basis
that the Workers were in insurable employment with the Appellant under the Employment
Insurance Act and in pensionable employment under the CPP. [CPP NAP, para.
12; EI NAPs, para. 11]
16. The Assessment for the 2003 taxation year
identified the amounts payable as federal and provincial tax. The Assessment
for 2005 assessed EI premiums and CPP contributions payable by the
Appellant with respect to Mr. Parks, even though the period covered by the rulings
did not extend to the 2005 taxation year. [CPP NAP, para. 13; EI NAPs, para.12]
17. The Appellant on March 16, 2005 made
appeals to the Respondent from the above-mentioned rulings under section 91 of
the Employment Insurance Act. [CPP NAP, para. 14; EI NAPs, para. 13]
18. In addition, the Appellant on May 27, 2005
made appeals to the Respondent from the Assessments for the 2004 and 2005
taxation years under section 27.1 of the CPP and section 92 of the Employment
Insurance Act, and served the Respondent with a Notice of Objection under
the Income Tax Act to the Assessment for the 2003 taxation year. [CPP
NAP, para. 15; EI NAPs, para. 14]
19. The Respondent decided that the Workers
were in insurable and pensionable employment with the Appellant, and those
decisions were communicated to the Appellant on October 14, 2005. The
Respondent purported to deal with the Appellant's appeal of a ruling on whether
CPP contributions were payable, even though there was no such ruling and the
Appellant had not filed any such appeal. [CPP NAP, para.16; EI NAPs,
para. 15]
20. To date, the Respondent has not formally
notified the Appellant of the Respondent's decision on the reconsideration of
the Assessments. [CPP NAP, para. 17; EI NAPs, para. 16]
[8] In Part B of the Summary, the respondent
denied the allegation in the Notices of Appeal that ALD was a client of the
workers.
[9] Part C of the Summary set out – in
paragraphs 1-11, inclusive – facts contained in the Notice(s) of Appeal of
which the respondent had no knowledge.
[10] Part D of said Summary set out – in
paragraphs 1-5, inclusive – assumptions of fact relied on the respondent in the
Replies to the Notices of Appeal which were denied by the appellant. These are
as follows:
1. The Workers were required to meet
deadlines and timeframes imposed by the Appellant to meet the needs of the
Appellant's customers. [CPP and Parks Reply, para. 15(h); Bellemare Reply,
para. 15(g)]
2. The Workers' rates of pay were based on kilometres
driven and charged a flat rate for going depot to depot. [CPP Reply, para.
15(i)]
3. Mr. Bellemare's rate of pay was based on kilometres
driven (0.245/km). [Bellemare Reply, para. 15(h)]
4. The Workers did not have the right to hire
helpers without the Appellant's consent. [CPP Reply, para. 15(y); Parks and
Bellemare Replies, para. 15(x)]
5. The Workers had to provide their services
personally. [CPP Reply, para. 15(aa); Parks and Bellemare Replies, para.
15(z)]
[11] David Parks testified he resides in Ottawa and has driven a truck for ALD – on and off – for 6
or 7 years. He described himself as an independent contractor and stated he had
discussed that matter with his brother-in-law André (Andy) Dupuis,
who controlled the operations of that company. Parks stated he wanted to be an
independent contractor rather than an employee and had provided certain
construction services to ALD in his capacity as a private contractor. He had
also done similar work for other customers in 2003 and sent them invoices for
his work which were included in the bundle of invoices – filed as Exhibit A-2 –
pertaining to his truck driving services provided to ALD. Parks referred to
invoice #6 – in said bundle – issued to a customer for $1,230.00 - based on an
hourly rate of $15 - for performing certain construction work. Parks was
registered pursuant to the Goods and Services Tax (GST) provisions of the Excise
Tax Act and charged GST in the sum of $86.10 with respect to his services
and sought reimbursement for the cost of materials supplied to the job. Parks
also referred to invoice #7 – in which he charged a customer the sum of
$1,346.05 for materials purchased as well as a flat rate of $750.00 for
performance of the work, together with GST. Parks stated he had provided his
services - as a building contractor - to ALD pertaining to an addition to the
company office in the Dupuis residence and sent an invoice - #9 – dated 10/06/2003
- in which he charged a total of $1,900.00 for labour together with an amount
to reimburse him for materials purchased. Again, GST was collected by Parks on
the amount attributable to his labour. Parks stated the finished job cost less
than he had estimated at the outset and so discounted the labour portion of the
invoice by $400.00. Parks was referred to invoice #14 – issued to another customer
– dated 28/10/2003 - in which he charged the sum of $400 for his services and
added the correct amount - $28.00 – for GST. With respect to providing his
services to ALD as a truck driver, Parks stated he had an informal arrangement
with Dupuis whereby he perused a list of trips offered by ALD to various
locations, some of which he refused, including Trois Rivières, Québec, because
his ability to speak French was limited. Parks stated he did not drive truck
for other companies in 2004 but when he chose to drive a particular trip, was
able to take a relative or friend along for the ride. Parks stated he did not
have an office in the premises occupied by ALD and did not have to report to
anyone at ALD either before or after a trip. Ontario
legislation required him to complete a Driver’s Daily Log (log) pertaining to
the trips driven and he left the relevant documents in the truck. Several
examples of the daily log sheets were filed as Exhibit A-3. He purchased his
own log book and submitted the completed forms to ALD so it could forward them
to the appropriate Ministry of the Ontario government.
In order to drive a particular route, Parks picked up the Volvo tractor and
3-axle trailer – owned by ALD - at one of two locations. ALD was in the
business of hauling finished milk products for its main client, Saputo Foods
Ltd. (Saputo) that used the trade name Dairyland. Parks estimated the value of
the combined tractor-trailer unit as about $200,000. He held a Z-endorsed Class
A driver’s licence which was necessary in order to operate that type of vehicle
and equipment. In order to obtain that licence, he had to pass appropriate
examinations and road tests and there was a mandatory application for renewal
after a certain period for which a medical examination was required. He was
responsible for all costs associated with obtaining and maintaining the proper licence.
Within the bundle of invoices at Exhibit A-2, there were several issued by
Parks to ALD with respect to driving certain distances between named geographical
locations on specific dates. Parks stated he charged ALD the sum of 20 cents a kilometre
plus a separate charge of $10 for participating in any loading or unloading of
product at a particular location. Parks referred to an invoice – Exhibit A-4 – submitted
by him to ALD in which he charged 20 cents per kilometre for various trips as
well as several separate charges of $10 for delivery. The invoice – dated 02/04/2004
- in the sum of $4,274.22 - included GST - and that amount was paid by ALD in
the form of cheque - dated April 3, 2004 - as evidenced by the photocopy at the
bottom of the second page of said Exhibit. Parks filed - as Exhibit A-5 –
copies of his GST returns for 2003, including therein revenue generated from
his building renovation activities, and also for 2004, in which year all the
revenue generated was derived from driving truck for ALD. Parks stated he paid
his own meal expenses, and purchased work boots, cell phone, safety equipment
and small tools that were needed from time to time during trips. Parks recalled
there had been a Canada Customs and Revenue Agency (CCRA) payroll audit of ALD,
subsequent to which he and Dupuis entered into an agreement – Exhibit A-6 –
which, although undated, he believed was signed at some point in 2003 or 2004,
at the request of Dupuis. Earlier, there had been no written agreement
pertaining to the supply of his services to ALD as a truck driver during
various periods since the mid-1990s. In Park’s view, the written agreement
merely set out what had always been the arrangement between himself and Dupuis
– on behalf of ALD – throughout their relationship, whether he was driving a truck
or doing renovation/construction work. Parks stated he had received a demand
from CCRA to file tax returns for certain years and on May 19, 2006, filed his
return of income for 2003 – Exhibit A-7 – on the basis it was business
income and included Schedule 8 pertaining to CPP contributions on
self-employment and other earnings. Within said tax return, he filed a
Statement of Business Activities in which he claimed certain items – including
meals and entertainment in the sum of $2,760.00 - for a total business expense
of $7,497.51. With respect to his 2004 taxation year, Parks had filed a tax
return – Exhibit A-8 – on April 30, 2005 - in which he reported the sum of
$42,104.60 as business income, all of which was derived from driving for ALD.
In the Statement of Business Activities, he claimed total expenses in the sum
of $6,117.50 including the sum of $110 relating to the cost of renewing his
driver’s licence and a total of $6,007.50 representing the allowable 50%
portion of total meal expenditure. Parks identified assessments for his 2003
and 2004 taxation years issued by the Minister, copies of which were filed as
Exhibit A-9.
[12] Parks was cross-examined by counsel for the
respondent and stated he spoke to Dupuis or someone else at the ALD office
about once a week in order to discuss the trips available during the
forthcoming week such as carrying loads of cheese to Toronto
and hauling certain cargo on the return trip. Parks stated each trip took one
or more days to complete. Usually, he hauled empty cases to Brampton, Ontario and picked up a full load of dairy products for distribution to
vendors in other centres according to a fixed schedule. Parks was an
experienced driver and chose his routes accordingly but acknowledged that once
he accepted a trip or series of trips he was required to conform with the
deadlines and other requirements pertaining to delivery of his loads. In
addition to his own cell phone which he used for business purposes, the ALD
trucks were equipped with a communication device. Parks agreed the daily log
had to be completed by him and submitted to ALD and that failure to comply with
Ontario regulations could cause a problem for the
company. Parks was referred to the daily log sheets in Exhibit A-3 – and
explained the graph therein was designed so a driver could record off-duty time
other than in a sleeper or berth within the tractor, off-duty time spent in a
sleeper or berth as well as actual driving time. Another entry recorded on-duty
time spent at tasks other than driving such as loading, unloading, inspecting
the vehicle or completing necessary paperwork. Parks stated he drove full-time
for ALD in 2004 and provincial regulations permitted him to drive a maximum of
60 hours in a 7‑day period. With respect to the remuneration paid to
him by ALD, Parks stated he chose the sum of 20 cents per kilometre as a rate
that was reasonable and within the range paid by transport companies to drivers
within the industry. In 2004, Parks did not bother searching out any other work
– including construction jobs - since he had enough driving assignments from
ALD. Even though he took others along with him on some trips, Parks agreed he
had to drive the tractor personally. Although a clause in the agreement –
Exhibit A-6 – required Parks to indemnify and save harmless ALD from any and
all claims arising out of the performance of his duties, he had not taken out
any liability insurance coverage. He stated he considered himself responsible
for his load barring damage or loss due to unforeseen events. On some routes,
it required 5 or 6 stops to off-load product and he charged $10.00 for each
occurrence when he submitted an invoice to ALD.
[13] Remi-Paul Bellemare (Bellemare) testified
he resides in Orleans, Ontario and started driving for ALD in 2003.
Earlier, he had driven a truck for one of ALD’s competitors on the basis he was
an independent contractor. When he spoke with Andy Dupuis about driving for
ALD, he made it clear he wanted to be an independent contractor rather than an
employee because he preferred the freedom he believed to be inherent in that
status. After starting work with ALD, Bellemare phoned Dupuis each Sunday and
was advised of the routes available for the forthcoming week. Bellemare stated
he refused – once - to take a trip because he was too tired. He considered he
was free – at all times in 2003 and 2004 – to have driven for other companies
but had no need to do so. In his opinion, ALD had better equipment than other
transport companies. On two occasions, he allowed his father – an experienced,
duly licenced truck driver – to drive the tractor/trailer unit for part of the
trip and did not reimburse him except for buying lunch. Other times, without
prior permission from ALD management, Parks took his wife and also his uncle on
some trips. Bellemare stated if he accepted a trip or series of trips, he left
his home and drove to Perth where he picked up the truck and trailer
which were parked at a truck dealership lot. He charged ALD a flat fee in order
to cover the cost of gas while traveling to and from Perth
to pick up and drop off the truck. He left his driver’s log in the truck or in
a special box at a location in Toronto. In the course of carrying out his duties,
he did not deal with customers directly in terms of presenting invoices or
collecting payments. He owned his own safety books and some hand tools. ALD
owned the truck and trailer. Bellemare stated he was the holder of a
Z-endorsed, Class A licence, renewable every 5 years at a cost of $40 plus
a fee of $75 to pay for the requisite medical examination. He was referred to
an invoice - dated 3/04/04 – Exhibit A-10 – which he prepared and faxed from
his home to the ALD office. He charged for several trips, amounting to
$1,876.98, and added GST in the sum of $131.39. He quoted his GST number on the
invoice and received total payment of $2,008.37 in the form of a cheque from
ALD dated April 2, 04, a photocopy of which was included on the bottom of the
same sheet. According to said invoice, he made 2 trips to CTR (Trois Rivières)
– 4 to Brampton directly from Ottawa - 2 to Cornwall and a return trip from Perth
to Trois Rivières. Although not specifically itemized thereon, he also charged
an amount for gas used to travel from his home to and from Perth. Bellemare stated the invoice – Exhibit A-10 – was
typical to others that he issued every two weeks. The invoice form had not been
provided by ALD nor did Dupuis dictate the manner in which it was to be
completed. Bellemare stated he submitted GST returns for 2003 - Exhibit A-11 –
and 2004 – Exhibit A-12 - to CCRA on a quarterly basis. For those years, all
the GST reported by Bellemare was collected from ALD. Bellemare identified an
undated agreement – Exhibit A-13 – as the document he and Dupuis signed in
April, 2004. Bellemare stated he presented the concept to Dupuis who – later –
handed him with the written document entitled Independent Contractor Agreement.
Bellemare stated he considered the agreement merely confirmed and ratified the
existing relationship between him and ALD. He stated the decision of the
Minister is incorrect in that he did not drive for ALD until December 15, 2004.
Instead, at the end of October, 2004, he severed his relationship and accepted
a driving job – as an employee – with an Ottawa
company that did not involve out-of-town trips. In his new position, he has to
wear a uniform, reports every day to the office and receives his pay every two
weeks – by automatic deposit – less source deductions. In preparing his own
income tax returns for the 2003 and 2004 taxation years using certain tax
preparation software, he did not report revenue earned from ALD as business
income but as “other employment income” on the relevant line in those returns.
Later, he had discussions with certain officials at CCRA to explain the
situation and provided details of his working relationship with ALD. Later, he
received notices – Exhibit A-14 – for reassessments of those taxation years
based on his assertion he had earned the reported income as a self-employed
person in the context of business income. During his discussions with CCRA
officials, he had disclosed the ruling by the Minister that he had been an
employee of ALD during the relevant period.
[14] In cross-examination, Bellemare agreed that
once he accepted a particular trip, he had to abide by the delivery schedule.
He stated Dupuis was aware his father was a duly qualified truck driver and
although he thought he could have hired another driver to complete a route – if
necessary – that situation never arose and there had been no need to discuss
that subject with Dupuis. He agreed that a publication – Trucking News –
contained information concerning rates paid per kilometre to drivers. In the
course of submitting invoices to ALD, Bellemare used the round number of $200
for an Ottawa -Toronto return trip plus a $25 delivery charge.
Bellemare stated the $200 amount had a reference to the distance driven and
thought it was based on a rate of approximately 25 cents per kilometre. At the
outset, he had been informed by Dupuis of the geographical locations he would
be visiting in the course of his duties and – using the per kilometre rate -
calculated sums to be expressed as round numbers when submitting an invoice for
driving between various places. In the beginning, Bellemare advised Dupuis he
would charge a fee of $15 for every trip from Ottawa
to Perth – about 100 kilometres – to pick up a
truck and to return home after completing the trip. Bellemare stated he
thought the status of employee while providing his services to ALD might have
left him “trapped” in the event ALD lost the contract with its major – or
perhaps, only - client, Saputo.
[15] In re-direct examination, Bellemare stated
he knew an audit of ALD had been performed by CCRA in 2004 but is certain he
signed the agreement ‑ Exhibit A-13 – before he stopped working
for ALD at the end of October, 2004.
[16] André Dupuis testified he is a businessman
residing in Perth, Ontario. He and his wife – Wendy – own
and control ALD. Prior to 2003 and 2004, the business operated 4 trucks that
hauled milk, juice and cheese for Saputo. In 2003, ALD had 5 drivers and in
2004 operated with 4 drivers - as independent contractors – plus two others – not Parks
and Bellemare – who had the status of employee. Dupuis identified a T-4 Summary
for 2004 – Exhibit A-15 – in which 5 employees were named, including himself
and Wendy. Dupuis stated that in his experience over many years, he had better
results from hiring drivers as independent contractors rather than as employees
even though the independent drivers could refuse trips and thereby dictate the
days they wanted to work. In the past, employees had left their jobs without
warning and sometimes abused equipment. In his opinion, it was not possible to
take remedial action against an employee whereas an independent contractor
could be pursued for damage caused by negligence in the performance of
contractual duties. In terms of discipline, an employee had to be dealt with in
a particular manner whereas work could be withheld from an independent
contractor in the event performance was not satisfactory. Dupuis stated he did
not know why Parks and Bellemare were chosen for purposes of the ruling issued
subsequent to the CCRA audit since other drivers were operating under
independent contractor status and had performed their work in the same manner.
Dupuis stated Saputo was the only client of ALD and there was no written
contract with that company nor any guarantee of ongoing work. With respect to
the issue of driver’s logs, Dupuis stated the logs must be submitted to the
appropriate government department within a timely manner or the drivers may
lose their licence and ALD could be fined and subjected to demerit points which
– if enough are accumulated – could lead to cancellation of an operating
licence by the Minister of Transport. Dupuis stated time is a critical factor
concerning delivery of products from Brampton to the Saputo facility in Ottawa. There was no need for a driver to report to the ALD
office and once Dupuis was told by Parks he was taking a 5-week holiday and
would not be available to drive any trips. Dupuis characterized that as an
announcement – based on courtesy - by an independent contractor rather than a
request to take time off that one would expect from an employee. Parks and
Bellemare and other independent drivers did not need to attend any ALD staff
meetings. ALD owned one tractor and leased 5 others. The tractors can cost
up to $150,000 and the trailers – mostly leased - were valued between $70,000
and $90,000 but ALD owned some less expensive trailers. Dupuis stated he drives
a truck and has worked in that capacity since 1991 when he bought a truck and
thereafter delivered dairy products for a company before starting – in 1998 -
to haul for Saputo. Dupuis stated it is common within the trucking industry for
drivers to be hired as independent contractors and that had been the basis upon
which Bellemare had provided services to another trucking company before
starting to drive for ALD. No training was provided to either Parks or
Bellemare. The written agreement with Parks – Exhibit A-6 – and with Bellemare
– Exhibit A-13 – were both signed sometime in 2004 after the CCRA audit. Dupuis
stated he considered Parks and Bellemare were free to drive for other transport
companies hauling various products and in the event one or both had left on
short notice, he had a back-up plan whereby Saputo could have provided drivers
for a short term until replacements were found. Dupuis was referred to the ALD
financial statement – Exhibit A-16 – for the year ended December 31, 2004. It
also contained comparative figures for 2003 in a separate column. In 2003,
under the heading “ Subcontractors”, ALD paid the sum of $177,078 to drivers
and in 2004, the expense noted under that category was $221,684. Dupuis stated
this expense was incurred in respect of the services of 5 drivers. The
financial statement showed an expense in the sum of $207,333 for “Wages and
Benefits” incurred in respect of a total of 5 employees including 2 drivers,
himself, his wife and his son. ALD had purchased jackets for all drivers with
the company logo on the front. Currently, Saputo provides the jackets. Dupuis
pointed out the net profit of ALD is relatively small and that the trucking
business provided employment for himself – as a driver in 2003 and 2004 - and
for his wife and their son. The drivers who held the status of employees in
2003 and 2004 were paid every 2 weeks and were entitled to vacation pay. Source
deductions were made from their cheques and they were paid without the need to
submit any invoices. Dupuis identified three Notices of Assessment – Exhibit
A-17 - issued by CCRA to ALD with respect to amounts owing for various items
including EI premiums and CPP contributions for employees.
[17] In cross-examination by counsel for the
respondent, Dupuis stated he scheduled the loads on the basis of supplying the
needs of Saputo as it required a trucking company to transport products from
Brampton to Ottawa several times each week as well as to haul loads to Trois
Rivières on a regular basis. Dupuis explained that in the course of making the
necessary trips, Parks would be away from Ottawa
for several days within a week. A list of trips or runs was prepared for Parks
and for Bellemare and in the event one or other could not make a trip there
were other drivers who could have been contracted to fill in. Dupuis stated
that Parks is his brother-in-law and has been driving for ALD – on and off -
for 15 years. Other independent contractor drivers have been with the
company for 8 years and 6 years. Dupuis noted that group of drivers seemed
to “enjoy the freedom” resulting from that status as opposed to being an
employee. Parks preferred to charge on a per kilometre basis while Bellemare
invoiced a flat rate for trips which was based – mainly – on the total distance
driven between various points within a certain period. Dupuis agreed drivers
did not have the right to hire someone to drive a route for them without
obtaining permission from ALD but all drivers could bring a friend or relative
on a trip. Dupuis stated Parks left Ottawa on Sunday,
returned on Wednesday, left that night on another trip, and returned Saturday
morning. Each truck was equipped with a combination telephone walkie‑talkie.
[18] Counsel for the appellant submitted the
evidence demonstrated clearly the intention of Parks, Bellemare and Dupuis – on
behalf of ALD – was that the working relationship would be that of independent
contractor rather than employee. Counsel pointed to a lack of control over the
manner and method of providing the driving services and noted the only form of
reporting was the requirement that a driver’s daily log be maintained in order
to comply with provincial and/or federal regulations. The drivers incurred
expenses in the course of carrying out their task, owned their own tools and
safety equipment and had the right to choose whether to take a particular trip
or series of trips. Counsel submitted the parties intention to structure the
working relationship was confirmed by the manner in which they conducted their
affairs throughout the relevant period. In her view, the fact Parks performed
other services for ALD during 2003 – and earlier – as a contractor/renovator on
the basis he was operating his own business, was significant in that it
corroborated the existence of an intention between him and Dupuis that there
was never an employer-employee relationship existing between Parks and ALD no
matter what services were provided by Parks.
[19] Counsel for the respondent submitted it was
obvious the main tools – tractor and trailer – were expensive pieces of
equipment and were owned or leased by ALD. He conceded the drivers wanted to be
accorded the status of independent contractors but when one applies the tests
referred to in the relevant jurisprudence, it becomes apparent each was
functioning in a manner completely consistent with a worker who is an employee.
Although there was no control in the usual, supervisory sense, there were
deadlines that had to be met and the trips – once assigned – were specific and
had to be carried out personally by the named driver. Counsel acknowledged that
a driver could refuse work but that was not done in order to generate more
revenue by driving for a competitor of ALD and overall there was no opportunity
for profit by hiring someone to drive the trip at a cheaper rate nor was there
any risk of loss nor any need to manage helpers. In counsel’s view of the
evidence, there was little to support a finding that the drivers were operating
a business and the only conclusion to be drawn is that both Parks and Bellemare
were truck drivers who provided ALD with their skills, each pursuant to a
contract of service.
[20] 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. M.N.R.,
[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:
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".
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.
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.
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.
[21] I will examine the facts in relation to the indicia
set forth in the judgment of Major, J. in Sagaz.
Level of control:
[22] The only reporting requirement imposed on Parks and Bellemare was to
comply with relevant government regulations pertaining to their hours of work
while carrying out their duties as truck drivers. Because they were
transporting perishable goods, they were subject to delivery deadlines.
Otherwise, they were free to decide which route to take and when to schedule
stops to meals, rest periods or to perform vehicle inspections. They were not
required to accept any particular trips and Bellemare once informed Dupuis he
would not be available to drive for a 5-week period because he was taking a
holiday outside Canada. Once a driver agreed to drive a trip or series of
trips during a specified period – usually a week – he was usually no longer in
contact with ADL until those routes had been completed and the tractor-trailer
unit had been returned to the storage location. Parks and Bellemare were free
to accept or refuse certain trips and telephoned each week - on their own
initiative - to find out which routes were available. Both drivers were duly
qualified, licenced and experienced and did not need any training. They could
bring friends or family members along with them without having to obtain
permission from ADL management.
Provision of equipment and/or helpers
[23] The most important equipment was the tractor and trailer units which
were either owned or leased by ALD. Without those expensive vehicle
combinations, the Saputo product could not be carried from point to point. The
drivers provided safety equipment such as vests and shoes and owned small hand
tools. Parks had his own cell phone which he stated was for business reasons -
although there was no example of such use provided in the course of his
testimony - even though each tractor was equipped with a telephone/walkie-talkie
device to communicate from truck to truck, to the ADL office or otherwise as
required. The evidence disclosed that ALD and Parks and Bellemare understood
the driving service had to be performed personally. Neither of them nor any
other drivers operating as independent contractors had the right to subcontract
their routes to other drivers who may have been willing to drive those trips
for a rate per kilometre less than that paid by ALD and then pocket the
difference.
Degree of financial risk and responsibility for
investment and management
[24] The only risk incurred by Parks and Bellemare was that by choosing to
operate under a perceived status of independent contractor rather than
employee, they were not eligible for certain compensation such as vacation pay
or to severance pay and other entitlements established pursuant to provincial
labour standards in the event their work ended. Parks invoiced ALD according to
a set amount per kilometre plus a $10 charge for each delivery and Bellemare
opted to send a statement for each period in which he charged a flat fee for
traveling between certain points together with a delivery charge and the sum of
$15 to cover the cost of traveling to and from his home to Perth to pick up his
tractor unit. There was no financial risk except as imposed by the paragraph in
their written Independent Contractor Agreement with ALD wherein they agreed to
indemnify and save harmless ALD from any and all claims arising out of the
performance of their duties. Parks and Bellemare also understood the
availability of trips depended on ALD retaining its relationship with Saputo,
its only client during the relevant period. Further, each driver was offered
driving assignments on a weekly basis so there was no guarantee of ongoing work
beyond that period. Neither Parks nor Bellemare was required to participate in
any aspect of management nor were they fixed with any responsibility with
respect to their services other than to maintain a proper driver’s licence and
to comply with the requirement to complete and submit a daily log. They did not
deal directly with any customers and merely picked up product, drove it to a
location, and assisted – sometimes – with loading or unloading and returned the
tractor-trailer unit to the assigned parking location.
Opportunity for profit in the performance of tasks
[25] The only way in
which Parks and Bellemare could earn more money was to drive more kilometres or
to load or unload more often in the course of trips so they could invoice more delivery
charges which were remunerated at a flat rate. Since they paid their own meals,
accommodation and other related expenses while on the road, they could exert
some control in that regard by choosing to sleep in the tractor berth rather
than in a motel and by bringing their own food to reduce the cost of eating in
restaurants. Other work-related costs were insignificant and there was no
chance their gross revenue would be exceeded by expenses. The cost of operating
the tractor-trailer units was borne exclusively by ALD and neither Parks nor
Bellemare had taken out any insurance coverage with respect to the potential
liability imposed by one of the conditions of their written agreement with ALD.
[26] In the case of Minister of National Revenue v. Emily Standing,
[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 ...
[27] In Wolf v.
Canada, [2002] DTC 6853, the Federal Court of Appeal – post ‑ Sagaz
– considered the income tax appeal of a mechanical engineer specializing within
the aerospace industry. The question arose whether that appellant was an
employee of Canadair or an independent contractor. Analysis of the various
factors to be taken into account in deciding this issue was based upon the
relevant articles of the Civil Code of Québec in addition to the applicable
jurisprudence up to and including the decision of the Supreme Court of Canada
in Sagaz, supra.
[28] Prior to concluding that the engineer’s relationship with Canadair had
been that of an independent contractor, Desjardins, J.A. - at paragraph 93 of
her reasons for judgment – stated:
Both
Canadair's work and the appellant's work were integrated in the sense that they
were directed to the same operation and pursued the same goal, namely the
certification of the aircraft. Considering, however, the fact that the
integration factor is to be considered from the perspective of the employee, it
is clear that this integration was an incomplete one. The appellant was at
Canadair to provide a temporary helping hand in a limited field of expertise,
namely his own. In answering the question 'whose business is it?' from that
angle, the appellant's business stands independently. Once Canadair's project
was completed, the appellant was, so to speak, ejected from his job. He had to
seek other work in the market place. He could not stay at Canadair unless
another project was under way.
[29] Décary, J.A. – concurring in the result – commented at paragraph 115 of
his reasons:
As a
starting point, I would like to quote the very first paragraph of an article
written by Alain Gaucher (A Worker's Status as Employee or Independent
Contractor, 1999 Conference Report of Proceedings of the 51st Tax Conference of
the Canadian Tax Foundation, p. 33.1):
In an ever-changing Canadian economy, the legal relevance
of a worker's status as independent contractor or employee continues to be
important. The issues relating to employment status will only increase in
importance as employers continue to move toward hiring practices that favour
independent contractors and a greater number of individuals enter or re-enter
the work force as independent contractors.
[30] At paragraphs 117 to 120, inclusive, Décary, J.A. continued as follows:
The test,
therefore, is whether, looking at the total relationship of the parties, there
is control on the one hand and subordination on the other. I say, with great
respect, that the courts, in their propensity to create artificial legal
categories, have sometimes overlooked the very factor which is the essence of a
contractual relationship, i.e the intention of the parties. Article 1425 of the
Civil Code of Quebec establishes the principle that ' [t] he common intention
of the parties rather than the adherence to the literal meaning of the words
shall be sought in interpreting a contract'. Article 1426 C.C.Q. goes on to say
that ' [i] n interpreting a contract, the nature of the 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'.
We are
dealing here with a type of worker who chooses to offer his services as an
independent contractor rather than as an employee and with a type of enterprise
that chooses to hire independent contractors rather than employees. The worker
deliberately sacrifices security for freedom ('the pay was much better, the job
security was not there, there were no benefits involved as an employee
receives, such as medical benefits, pension, things of that nature...' Mr.
Wolf's testimony, Appeal Book, vol. 2, p. 24). The hiring company deliberately
uses independent contractors for a given work at a given time ('it involves
better pay with less job security because consultants are used to fill in gaps
when local employment or the workload is unusually high, or the company does
not want to hire additional employees and then lay them off. They'll hire
consultants because they can just terminate the contract at any time, and
there's no liabilities involved', ibid., p. 26). The hiring company does not,
in its day-to-day operations, treat its consultants the same way it treats its
employees (see para. 68 of Madam Justice Desjardins's reasons). The whole
working relationship begins and continues on the basis that there is no control
and no subordination.
Taxpayers
may arrange their affairs in such a lawful way as they wish. No one has
suggested that Mr. Wolf or Canadair or Kirk‑Mayer are not what they say
they are or have arranged their affairs in such a way as to deceive the taxing
authorities or anybody else. When a contract is genuinely entered into as a
contract for services and is performed as such, the common intention of the
parties is clear and that should be the end of the search. Should that not be
enough, suffice it to add, in the case at bar, that the circumstances in which
the contract was formed, the interpretation already given to it by the parties
and usage in the aeronautic industry all lead to the conclusion that Mr. Wolf
is in no position of subordination and that Canadair is in no position of
control. The 'central question' was defined by Major, J. in Sagaz as being
'whether the person who has been engaged to perform the services is performing
them as a person in business on his own account'. Clearly, in my view, Mr. Wolf
is performing his professional services as a person in business on his own
account.
In our day
and age, when a worker decides to keep his freedom to come in and out of a
contract almost at will, when the hiring person wants to have no liability
towards a worker other than the price of work and when the terms of the
contract and its performance reflect those intentions, the contract should
generally be characterized as a contract for services. If specific factors have
to be identified, I would name lack of job security, disregard for
employee-type benefits, freedom of choice and mobility concerns.
[31] In his brief judgment - also concurring in the result - Noël, J.A.
considered the matter of intention of the parties and his reasons are
reproduced below:
I too would
allow the appeal. In my view, this is a case where the characterization which
the parties have placed on their relationship ought to be given great weight. I
acknowledge that the manner in which parties choose to describe their
relationship is not usually determinative particularly where the applicable
legal tests point in the other direction. But in a close case such as the
present one, where the relevant factors point in both directions with equal
force, the parties' contractual intent, and in particular their mutual
understanding of the relationship cannot be disregarded.
My
assessment of the applicable legal tests to the facts of this case is
essentially the same as that of my colleagues. I view their assessment of the
control test, the integration test and the ownership of tool tests as not being
conclusive either way. With respect to financial risk, I respectfully agree
with my colleagues that the appellant in consideration for a higher pay gave up
many of the benefits which usually accrue to an employee including job
security. However, I also agree with the Tax Court Judge that the appellant was
paid for hours worked regardless of the results achieved and that in that sense
he bore no more risk than an ordinary employee. My assessment of the total
relationship of the parties yields no clear result which is why I believe
regard must be had to how the parties viewed their relationship.
This is not
a case where the parties labelled their relationship in a certain way with a
view of achieving a tax benefit. No sham or window dressing of any sort is
suggested. It follows that the manner in which the parties viewed their
agreement must prevail unless they can be shown to have been mistaken as to the
true nature of their relationship. In this respect, the evidence when assessed
in the light of the relevant legal tests is at best neutral. As the parties
considered that they were engaged in an independent contractor relationship and
as they acted in a manner that was consistent with this relationship, I do not
believe that it was open to the Tax Court Judge to disregard their
understanding (Compare Montreal v. Montreal Locomotive Works
Ltd., [1947] 1 D.L.R. 161 at 170).
[32] After Wolf,
life became even more exciting with the release of the judgment of the Federal
Court of Appeal in The Royal Winnipeg Ballet v. The Minister of National Revenue 2006 DTC 6323. (RWB) The issue
therein 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 60-65, 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, whishes 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.
[33] Sharlow, J.A.
referred to the factors considered by the Tax Court of Canada. At paragraph 65
and following, she stated:
[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.
[34] 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.
[35] 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.
[36] 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.
[37] In the within
appeals – as in RWB – there was no disagreement between Dupuis – on
behalf of the appellant corporation – and Parks or Bellemare as to their
intention. Parks had driven truck on and off for ALD for many years and had
never been an employee. Also, he had done construction work for ALD and in the
context of his own business and charged for his labour and for materials.
Bellemare had driven a truck previously - as an independent contractor - for a
competitor of ALD and wanted to retain that status. There is no hint of any
sham or artifice or revisionism inherent in the evidence of Dupuis, Parks or
Bellemare. According to all parties, the written agreements that were signed at
some point later on in the working relationship, merely ratified and confirmed
the terms of the arrangement that had been in place. The CCRA audit prompted
the parties to sign said agreement but there was no pressure exerted by Dupuis
to do so and in fact it was Bellemare who suggested to Dupuis that ALD have an
independent contractor agreement drafted and offered to drivers for their
acceptance.
[38] Justice Miller –
Tax Court of Canada – heard an appeal subsequent to RWB. In the case of Vida
Wellness Corporation DBA Vida Wellness Spa v. M.N.R., T.C.J. 534, 2005-1677(EI),
(Vida) 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 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.
[39] After
referring to the relevant jurisprudence including Wolf, Sagaz, RWB,
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.
[40] 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.
[41] 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.
[42] 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.
[43] In an earlier decision of mine – F.G. Lister Transportation Inc. v. Canada
(Minister of National Revenue – M.N.R.),
[1998] T.C.J. No. 558, 96-2163(UI), I heard the appeal of the employer that
claimed its long-haul drivers were independent contractors. No driver testified
and the evidence of intention came solely from the Vice-President and
Controller who was familiar with the day-to-day operations of the company. In
paragraphs 12-14 of that judgment, I commented as follows:
[12]
It is clear the business was that of the appellant, a transportation company
which was a wholly-owned subsidiary of a parent-corporation engaged in the
business of selling and distributing produce. While the appellant had local
drivers who functioned on the basis of being employees, the long-haul drivers
were treated differently without any apparent reason to have done so other than
the method by which their services were engaged - a trip-by-trip basis - and
the system of payment per kilometre rather than on an hourly basis. The local
drivers probably could have undertaken the long-hauls but they may not have
held the proper licences or qualifications to operate the larger units in various
jurisdictions. In that sense, the appellant had made a distinction between the
two types of drivers and, as a result, the long-haul drivers named in the
decision issued by the Minister were persons who were providing a service
integral to the appellant. There is no evidence, at all, that any driver - or
the appellant - ever acted in a manner consistent with a driver being in
business as an independent contractor.
[13]
I now find myself in the position of being required to point out the
differences in the facts in the within appeal and those in two other decisions
issued by me in which I held the drivers were independent contractors. In the
case of Lee (c.o.b. D & A Transport) v. M.N.R. [1995] T.C.J.
No. 426 I held the driver of a long-haul transport truck to have been an
independent contractor. In that case, the driver had registered his business
for purposes of the Goods and Services Tax, maintained a business bank account
and had filed income tax returns on the basis of being self-employed. In Lee,
the appellant had earlier been an employee of the payor and had agreed to alter
the working relationship and there was clear evidence he could have hired
another driver to work for him on long-hauls thereby generating a profit. As
well, in Lee, it came down to choosing between two versions of
circumstances surrounding a working relationship and the choice did not favour
the worker. I also held the tools of the trade were the personal skills of the
driver as a qualified person capable of hauling a loaded trailer over long
distances. That finding was in the context of the driver operating a business
under the trade name, Rick's Driving Services, having a bank account under that
name and otherwise doing business with third parties on that basis. Income tax
returns had been filed on the basis the worker was a self-employed person.
[14]
In another decision of mine, Metro Towing Ltd. v. M.N.R. [1991] T.C.J. No.
717, I found a tow-truck driver to have been an independent contractor. In that
case, while there was a high degree of control over the worker, he had leased
the vehicle and all of the equipment needed to carry out his task and bore all
of the costs, including insurance, relating thereto. That driver also had a
substantial risk of loss arising from the operation of that vehicle in the
event he was not able to generate sufficient gross revenues which fluctuated on
a monthly basis, as did, to a lesser extent, his costs of operation. In that
case, like Lee, supra, the worker had earlier been on the regular
payroll and had decided to enter into a new arrangement whereby he was the
lessor of a truck and certain equipment and would be entitled to receive 30% of
gross towing revenue arising from jobs which were dispatched by Metro Towing
Ltd. The evidence in the Metro Towing Ltd. appeal disclosed that other
tow-truck drivers operated through a limited company or a partnership
arrangement.
[44] There are other decisions – some of them mine – that held truck drivers
were employees despite efforts of the payor to have them characterized as
independent contractors – operating a business on their own account - in the
course of providing the service of driving. However, the facts in each case are
extremely important and it does not require much variation in order to arrive
at a different result, although the distinction may not be apparent even to
those who toil in this often murky field of jurisprudence.
[45] The difference in philosophy with respect to the matter of intention of
the parties was put into sharp focus by Evans, J.A. in the course of his
dissenting reasons in RWB as expressed in paragraphs 96-105, inclusive,
as follows:
[96] Because
the more recent cases from this Court discussed in the reasons of Sharlow, J.A.
all place some reliance on the Civil Code, I cannot regard them as
elevating the significance traditionally attached by the common law of contract
to the parties' understanding of the legal nature of their contract. When the
scope of federal legislation refers to a private law concept, which is not
defined in the statute, the bijural nature of our federation leaves open the
possibility that the statute may be applied differently in Quebec from common
law Canada: Interpretation Act, R.S.C. 1985, c. I-21, section 8.1; see
also, for example, 9041‑6868 Québec Inc. v. Canada (Ministre du Revenu
national), 2005 CAF 334 at para. 6.
[97] I do not
know to what extent the Civil Code differs from the common law in the
manner in which contracts are to be characterized, or whether any of those
cases would have been decided differently on the basis of the common law
approach as I have described it.
[98] When a
dispute arises over the proper legal character of a contract, there are good
reasons to attach little if any weight to the parties' understanding of it, or
to their objective in entering into the contract. First, it is difficult to
understand on what basis the parties' view of their contract's legal
characterization is relevant, or how it should be weighed with the objective Wiebe
Door/Sagaz factors. It is one thing to draw an inference about the legal
nature of a contract based on, for example, the factors of control, and risk of
loss and opportunity for profit. It is quite another to draw an inference from
the parties' view of the legal nature of their contract, which is the ultimate
question that the court must decide. It is not a legal characteristic of a
contract for the supply of services that the parties intended to enter that
kind of contract.
[99]
Secondly, the parties' view of the legal nature of their contract is inevitably
self-serving. Parties generally care primarily about their ultimate objective
and only secondarily, if at all, about the legal means of achieving it.
Suppose, for example, that their objective was to be exempt from EI premiums.
The legal means of achieving this is by entering into a contract for the supply
of services. Whether they succeed depends on whether the terms of their
contract and their conduct are more consistent with the indicia of a contract
for the supply of services than of employment. To the extent that they have
thought about it, parties will want to enter into the kind of contract that in
law will enable them to attain their ultimate objective.
[100]
Similarly, the law attaches little or no weight to the fact that the parties'
conduct is consistent with the legal consequences of having entered into
a contract for the supply of services. These consequences may include the
payor's exemption from having to deduct and pay EI premiums and CPP
contributions, and the service provider's obligation to register for and to
charge GST. These are the legal consequences of a contract for the supply of
services, not proof of its existence. The fact that the parties may intend
these consequences does not assist in determining whether they have adopted the
legal means of achieving them, namely, entering into a contract which has the
characteristics of a contract for the supply of services, rather than of
employment.
[101] Third,
parties to contracts for the performance of work (to use a neutral term) are
often not in equal bargaining positions. To attribute appreciable weight to a
statement in the contractual document signed by the parties that the contract
is one for the supply of services may disadvantage the more vulnerable party, who
may subsequently say, for example, that she intented the relationship to be one
of employment so that she would be covered by EI.
[102] In the
face of a clear provision in a signed contract that it is a contract for the
supply of services, not a contract of employment, it may be difficult for such
a party to deny that, on an objective analysis, this provision embodied the
parties' common intention, at least in the absence of misrepresentation or
duress. In other words, the vulnerable party is not only bound by the terms of
the contract, but her contractual status and, consequently, her statutory
rights, may also be prejudiced by the stronger party's legal characterization
of the contract.
[103] Fourth,
the legal characterization of a contract may have an impact on third parties,
such as the victim of a tort committed by a service provider in the course of
performing the contract or, as in this case, Revenue Canada. Not to base legal
characterization squarely on the terms of the contract, interpreted contextually,
may jeopardise those interests, and undermine non-voluntary protective
statutory programs, such as EI and CPP.
[104] I am
concerned also about the impact on other dancers with the RWB of a finding
about the contractual status of the dancers in this case. If the understanding
of the dancers is significant to the decision, could the result be different in
the case of another dancer with the RWB who denied entering into his contract
on the understanding that it was a contract for the supply of services? It
seems odd that essentially the same contract could be characterized differently
on this basis.
[105] In my
opinion, the only significant role of the parties' stated intention or
understanding about the legal nature of their contract is as part of the
interpretative context in which the court views the contract in order to
resolve ambiguities and fill in silences in its terms.
[46] As I read the majority decisions in RWB, it seems to me the
element of intention has been elevated to the status of supernova. The
consequent, exploding mass is currently capable of illuminating to a novel
intensity those factors traditionally considered more or less as equals when
determining the issue of employee vs. independent contractor. Now, each indicia
has to be examined in order to determine whether there are matters of substance
such as deception, coercion or other circumstances creating clouds of
uncertainty within the working relationship that – as a combined force – are
sufficient to block those intense beams emitted by the glorious sun of mutual
intention through which the parties purported to characterize their status.
Even as one accepts the admonition inherent in the RWB decision not to
be blinded by the glare, one must admit it has the effect of compelling an
examination of the relevant factors in a different light. In the course of
considering those customary indicia, I consider the control factor – formerly
an equal – now to be more equal than the others. Within the context of a poker
hand, sometimes certain factors were aces and sometimes they were deuces but
there was never any question of assigning to any one of them a rank above the
others. In my opinion, the control factor has been granted supremacy and is now
the trump card where the intent of the parties is not in doubt in the course of
determining the true nature of the working relationship.
[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.
[50] The appeals (2006-149(EI)) and 2006-150(EI)) are hereby allowed and the
decisions of the Minister – both dated October 14, 2005 - are varied to find
that neither David Parks nor Remi-Paul Bellemare was in insurable nor
pensionable employment with ALD Enterprises Inc. during any part of the
relevant period stated in said decisions because neither was employed pursuant
to a contract of service.
[51] The appeal – 2006-151(CPP) is allowed and the relevant decision is
varied to find that David Parks was not an employee of ALD Enterprises Inc.
during the period from January 1, 2003 to December 17, 2004, because he was not
engaged under a contract of service.
Signed at Sidney,
British Columbia, this 12th day of February
2007.
"D.W. Rowe"
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