Citation: 2007TCC528
Date: 20071009
Dockets: 2006-2975(CPP)
2006-2976(EI)
BETWEEN:
R. WAYNE AND ELAINE COZART,
Appellants,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
DENNIS FOULSTON,
Intervenor.
REASONS FOR JUDGMENT
Sheridan, J.
[1] The Appellants, Wayne and Elaine Cozart, are appealing
the determination of the Minister of National Revenue that Dwayne Cozart,
Kelvin Olson and Dennis Foulston
were working as employees and that their work was pensionable
and insurable. Mr. Foulston intervened in their appeal and shared
the Cozarts' view that he, like Dwayne and Kelvin, had been working as an
independent contractor. Dwayne and Kelvin did not intervene nor were they present
at the hearing.
[2] Mr. and Mrs.
Cozart testified at the hearing and were forthright in the presentation of
their evidence and entirely credible. Mr. Foulston also testified; I found his
evidence equally persuasive.
[3] During the
relevant periods, the Cozarts farmed near Brownlee, Saskatchewan where they also operated a long-haul
trucking business. The business had originally been their son Dwayne's. They
came reluctantly to the enterprise after Dwayne ran into financial difficulties
and they took over his obligations under the lease of the truck tractor unit.
[4] The Cozarts had
an agreement with Schneider's Trucking Ltd. in Regina. Pursuant to that
agreement, the Cozarts provided drivers and the truck tractor to pull loads
assigned by Schneider's on trailers leased to them by that company. Schneider's
(through its dispatcher) communicated directly with the drivers to assign loads
for pickup and to give instructions as to the schedules, trips, time frames and
destinations. The drivers kept logs and bills of lading and remitted time sheet
reports to Schneider's and the Cozarts. Mrs. Cozart, the partnership's
bookkeeper, paid the drivers based on their time sheet reports.
[5] This was the
general context in which Mr. Foulston, Kelvin and Dwayne were working. Counsel
for the Respondent submitted that the appeals must be decided on an "all
or nothing" basis; that is to say, that if one driver was found to be an
employee (or an independent contractor), they all ought to be. I do not think
this is so. Even where the same "payor" is involved, the
determination of the status of each worker must be considered according to the
evidence of the relationship of each individual worker with the payor.
[6] Both counsel
referred to the four-fold test for the determination of whether a worker is an
employee or an independent contractor. The test was developed in Wiebe Door
Services Ltd. v. Canada (Minister of National Revenue) and applied
by the Supreme Court of Canada in 671121 Ontario Ltd. v. Sagaz Industries
Canada Inc.:
[47] Although
there is no universal test to determine whether a person is an employee or an independent
contractor, I agree with MacGuigan J.A. that a persuasive approach to the issue
is that taken by Cooke J. in Market Investigations, supra. The central
question is whether the person who has been engaged to perform the services is
performing them as a person in business on his own account. In making this
determination, the level of control the employer has over the worker's
activities will always be a factor. However, other factors to consider include
whether the worker provides his or her own equipment, whether the worker hires
his or her own helpers, the degree of financial risk taken by the worker, the
degree of responsibility for investment and management held by the worker, and
the worker's opportunity for profit in the performance of his or her tasks.
[48] It bears
repeating that the above factors constitute a non-exhaustive list, and there is
no set formula as to their application. The relative weight of each will depend
on the particular facts and circumstances of the case.
[7] Counsel for the
Respondent referred the Court to Andres (c.o.b. L. Andres Transport) v. Canada
(Minister of National Revenue)
in which Porter, J. cited a passage
from Charbonneau v. Canada. In that case, Décary, J.A. set out the approach to
be followed in the application of these tests:
The tests laid down by this Court … are not the ingredients of a
magic formula. They are guidelines which it will generally be useful to
consider, but not to the point of jeopardizing the ultimate objective of the
exercise, which is to determine the overall relationship between the parties.
The issue is always, once it has been determined that there is a genuine
contract, whether there is a relationship of subordination between the parties
such that there is a contract of employment … or, whether there is …, such a
degree of autonomy that there is a contract … for services. … In other words,
we must not pay so much attention to the trees that we lose sight of the
forest. … The parts must give way to the whole. [Emphasis added.]
[8] In addition to
the consideration of control, ownership of tools, chance of profit and risk of
loss and the degree of integration, the Court may also take into account the
intentions of the parties.
[9] To succeed in
their appeals, the Cozarts (and in his intervention, Mr. Foulston) bear
the onus of showing the assumptions upon which the Minister based his decisions
are incorrect. The Minister's assumptions are largely, if not entirely, based
on Mrs. Cozart's brief written responses to the questions in the
department's standard form questionnaires. While useful for eliciting a rough sketch of the facts, such forms
rarely provide the same quality or quantity of information as a hearing. In the
present case, the evidence of Mr. and Mrs. Cozart and Mr. Foulston provided a
much fuller picture of the context in which the workers provided their
services. I am satisfied that they have met their onus of proving that the
workers were engaged as independent contractors. The evidence in respect of each
worker's relationship with the Cozarts is dealt with separately below.
Dennis Foulston
[10] Mr. Foulston is a
farmer and neighbour of the Cozarts. He worked for only four months, from
January to April of 2004. At that time of the year, things were slow on the
farm. Having heard that the Cozarts' son Dwayne was unable to work because of a
broken shoulder, Mr. Foulston approached the Cozarts about working until he had
to start seeding in the spring. He wanted to work as a
"subcontractor" because he did not want to be bothered with
deductions and other paperwork for such a short period. This suited the Cozarts
who, until the Minister's determination, had always believed they were
contracting with their drivers as independent contractors. They offered a rate
of 30 cents per mile, duly accepted by Mr. Foulston.
[11] Having
had prior experience in trucking, and already in possession of the requisite Class
1A licence, Mr. Foulston did not need, and was not offered, any training.
As he said, after their discussions, he "jumped in the truck" and
headed off with the load already waiting at the Cozarts' farm.
[12] From then on,
except for the odd neighbourly call from the Cozarts to see how things were
going, Mr. Foulston had no contact with them regarding his work. They did not
tell him how to do his job or monitor his performance. He received his assignments
and instructions directly from Schneider's.
[13] Mr. Foulston set his
own hours, subject only to externally imposed industry regulations limiting a
driver to a maximum of 13 hours per day and 70 hours per week. He was
responsible for the payment of any tickets, fines or similar costs that were
attributable to his own conduct. Mr. Foulston worked as much as he could
during the short period he was with the Cozarts to maximize his earnings. While
he could have hired a replacement worker (assuming that person had the
necessary industry certification), that would have defeated the purpose of
taking the job. Mr. Foulston's time sheet reports effectively served as his invoices. It was based on these documents
that Mrs. Cozart calculated the amount due to Mr. Foulston from the amounts
they received from Schneider's. She made no government deductions from these
payments. Mr. Foulston was not entitled to holiday or sick pay or other benefits.
Mr. Foulston reported his income as self-employed.
[14] As for the
ownership of tools, this factor is of limited application in the present case. The
Cozarts provided the truck tractor unit. Schneider's provided the trailers. To
the extent that other tools were necessary, Mr. Foulston provided his own small
tools in case of a breakdown. He was also responsible for buying the Class 1A
licence required for truckers. Beyond that, all he needed to do the job was his
own skill and judgment, which in today's economy are increasingly the primary
tools of the independent contractor.
[15] I agree with
counsel for the Respondent that "chance of profit" and "risk of
loss" factors are also of limited applicability on the present facts. It
must be remembered that no one factor takes precedence over the other. It is
the entire context that matters.
[16] On this last point, counsel for the Respondent argued that because Mr. Foulston had no
business name or licence, and was not a GST registrant, he must have been an
employee. Such details, however, must not be allowed, in the words of Justice Décary,
to "jeopardiz[e] the ultimate objective of the exercise" of
determining "the overall relationship" between the parties. Mr. Foulston's
primary work was as a farmer; given the short term of his contract with the
Cozarts, it would not have made sense to obtain a business name or licence.
Further, in the short time he worked as a driver, it is unlikely that he earned
the threshold amount necessary to trigger GST registration.
[17] Having considered
the overall relationship between Mr. Foulston and the Cozarts and, in light of
their clear intention that he work as an independent contractor, I am satisfied
that the evidence shows a degree of autonomy consistent with Mr. Foulston's
having worked under a contract for services as an independent contractor.
Kelvin Olson
[18] Many of the above
findings apply equally to Kelvin Olson. Like Mr. Foulston, he was not
supervised or trained by the Cozarts; he received his instructions from
Schneider's; he controlled his own hours; submitted his invoices for payment;
received no benefits and had no deductions taken from his payments. In
addition, Kelvin had a written agreement with the Cozarts. Paragraph 2 of the written agreement supports the
Cozarts' evidence that it was always intended that Kelvin work as an
independent contractor:
The Owners
[Wayne and Elaine Cozart and Dwayne Cozart] and the Contractor [Kelvin Olson]
(hereinafter "The Parties") agree and confirm this Agreement as an
independent contract for services rendered, and not an exclusive contract of
service between the Parties. The Parties acknowledge and confirm that
responsibility for deductions in consideration of Canada Customs and Revenue
Agency, Canada Pension Plan, Employment Insurance, and any other benefits
regularly payable under a contract of service do not form part of this
independent contract services Agreement.
[19] Notwithstanding this
written agreement, Kelvin (whose last day with the Cozarts was December 31,
2004) reported his income for 2004 as employment income. Agreeing to one thing
and doing another seems to have been a bit of a habit with Kelvin. For example,
contrary to what was expected of him, when he had the Cozarts' truck in his
possession, he often used it for his personal transport. In addition to wrongly
increasing the Cozarts' fuel and maintenance costs, this practice also resulted
in inflated invoices as the calculation of his earnings was mileage-based. Counsel
for the Respondent argued, quite rightly, that Kelvin's bad behaviour was not relevant
to the determination of his status as a worker. I include my findings with
regard to his conduct only for its effect in diminishing the significance of
Kelvin's having filed his 2004 income tax return as an employee. Overall, I am
satisfied that the Cozarts adduced sufficient evidence to show that Kelvin Olson
was working as an independent contractor during the period in question.
Dwayne Cozart
[20] Having determined that Dwayne was working under a contract of service,
the Minister exercised his discretion under subsection 5(3) to determine that
Dwayne and the Mr. and Mrs. Cozart would have entered a substantially similar
contract of employment if they had been dealing with each other at arm's length.
While I agree with the
Minister's discretionary conclusion, I do not believe that the evidence shows
the contract to have been one of employment.
[21] The Cozarts' trucking business was originally Dwayne's. Whether any formal arrangements
were made defining their respective roles in the new business was not clear at
the hearing. I am satisfied, however, that Dwayne originally set himself as a
self-employed person and that he continued in that capacity after his parents
took over the business. An injury and other problems in 2004 kept him from
working for some period. When he returned in 2005, even though he carried on in
the same fashion as before, the Cozarts' accountant advised Mrs. Cozart to make
payroll deductions and to issue a T-4 for Dwayne who then reported his income
as employment income. There was no evidence at the hearing as to what the
accountant's reasoning may have been. I accept, however, the Cozarts'
unchallenged evidence that it was always intended that Dwayne, like Mr. Foulston
and Kelvin, would work as an independent contractor. Taken as a whole, the
evidence satisfies me that Dwayne was working as an independent contractor
during the relevant period.
[22] The appeals are
allowed and the decision of the Minister of National Revenue is vacated on the
basis that the work performed by Dennis Foulston, Kelvin Olson and Dwayne
Cozart during the periods under appeal was not pensionable or insurable.
Signed at Ottawa,
Canada, this 9th day of October, 2007.
"G. A. Sheridan"
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