Dockets: 2007-4142(EI)
2007-4143(CPP)
BETWEEN:
VEGREVILLE HOTEL & INN LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
HAMID BARADARAN
Intervenor,
and
SHIVA KHODABAKHSH
Intervenor.
____________________________________________________________________
Appeal
heard on September 2, 2008 at Edmonton, Alberta
By: The Honourable
Justice Judith Woods
Appearances:
|
Agent for the Appellant:
|
Hamid
Rahmanian
|
|
Counsel for the Respondent:
|
Valerie Meier
|
|
For the
Intervenors:
|
Hamid Baradaran
|
____________________________________________________________________
JUDGMENT
The
appeals with respect to decisions of the Minister of National Revenue made
under the Employment Insurance Act and the Canada Pension Plan
are allowed, and the decisions are varied on the basis that Hamid
Baradaran and Shiva Khodabakhsh were not engaged in insurable or
pensionable employment with the appellant for the period from March 1, 2006 to
October 28, 2006.
Signed at Edmonton, Alberta this 9th day of September 2008.
“J. Woods”
Citation: 2008TCC503
Date: 20080909
Dockets: 2007-4142(EI)
2007-4143(CPP)
BETWEEN:
VEGREVILLE HOTEL & INN LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
HAMID BARADARAN,
Intervenor,
and
SHIVA KHODABAKHSH,
Intervenor.
REASONS FOR JUDGMENT
(Delivered orally from the Bench on September 5, 2008)
Woods J.
[1] These are reasons delivered orally concerning
decisions of the Minister of National Revenue under the Employment Insurance
Act and the Canada Pension Plan. As I indicated at the conclusion of
the hearing of the appeal, I will include a copy of these reasons with the
judgment that will be mailed to the parties.
[2] The issue to be decided is whether the intervenors,
Hamid Baradaran and Shiva Khodabakhsh, were engaged by Vegreville Hotel &
Inn Ltd. as employees or independent contractors when they worked for this
company from March 1, 2006 to October 28, 2006. The decisions that are being
appealed concluded that the intervenors were employees.
[3] At the hearing, Vegreville Hotel & Inn Ltd. was
represented by its owner, Hamid Rahmanian. The intervenors, who are husband and
wife, were represented by the husband, Mr. Baradaran.
[4] The essential issue to be determined is whether the
intervenors had their own business when they contracted to work for Vegreville
Hotel & Inn Ltd. or whether the relationship was one of employment.
[5] For the reasons that follow, I have concluded that the
relationship was more consistent with an independent contractor relationship
than employment.
[6] The owner of Vegreville Hotel and Inn Ltd., Mr.
Rahmanian, operates several businesses, including at least one other hotel. The
intervenors were initially hired by Mr. Rahmanian as employees of another hotel
when they emigrated to Canada from Iran. They had been introduced to Mr. Rahmanian by a
relative. This relationship was clearly one of employment and the intervenors
were paid on an hourly basis.
[7] After a period of time, Mr. Baradaran wanted a
position with more responsibility. By all accounts Mr. Baradaran and his wife
were very capable workers and Mr. Rahmanian offered them positions at the
Vegreville Hotel which he had just acquired.
[8] A contract governing the relationship was negotiated
and a written contract was prepared without the assistance of a lawyer.
Although the contract does not specifically refer to Mr. Baradaran and his wife
as managers, that effectively is what their role was.
[9] There is a dispute between the parties as to whether
this arrangement was intended to be employment or not. Mr. Rahmanian vehemently
maintains that it was not intended to be employment and Mr. Baradaran testified
that he thought it was something he called “contract-based employment.”
[10] If Mr. Baradaran had thought that the arrangement was
one of employment, he had no basis to conclude this. There is nothing in the
written contract to indicate this and certainly Mr. Rahmanian would not have
given Mr. Baradaran this impression.
[11] Even if Mr. Baradaran had put his mind to the legal
nicety of whether this was an employment relationship or not when the contract
was signed, and if he had thought it was employment, then this changed after a
short period. At no time were source deductions taken from the intervenors pay,
they registered for GST purposes and they registered a business name, HRH
Contractors. I conclude that both parties accepted that the relationship was
one of independent contractor and not employment.
[12] This is a very important factor in this case.
[13] It is not necessarily the end of the matter, though,
because if the arrangement did not reflect a true independent contractor
relationship, it will be considered employment.
[14] For this purpose it is helpful to have regard to the
usual factors of control, ownership of tools and possibility of profit and
loss.
[15] As for tools, there were not many tools required by
the intervenors except for an automobile, and this was supplied by the
intervenors themselves. The auto was used regularly for business purposes,
mainly to pick up food and other supplies. According to the evidence, some of
the gas for the automobile was charged to Vegreville Hotel & Inn Ltd. but
the written contract was silent on this and the parties did not negotiate it
one way or the other. I do not view the supply of the automobile as an
important factor in this case, but to the extent that it is relevant, it is
favourable to a finding of independent contractor.
[16] As for the potential of profit or loss, the written
contract had two provisions that were relevant. First, it provided that the
intervenors were entitled to some of the profits as a bonus. I find that this
is a neutral factor because it is common in many work situations whether there
is employment or not.
[17] The contract also indicated that the intervenors would
be responsible for labour costs if their duties were performed by third
parties. This is very much an entrepreneurial-type arrangement and is strongly
in favour of an independent contractor relationship.
[18] I note that Mr. Rahmanian’s sons took over some of the
intervenors’ duties when they took some time off. The contract requires that
the intervenors pay for the sons’ labour costs in this case. This was not done,
but the intervenors did compensate for this cost by a reduction in the fees
paid to them. The arrangement is consistent with the general intent of the
written contract and I do not think that it is a significant factor. I would
also add that this was an isolated event.
[19] I turn now to the factor of control and whether
Vegreville Hotel & Inn Ltd. had the ability to dictate how the work was
performed by the intervenors. In this regard, the testimony of Mr. Baradaran
and Mr. Rahmanian did differ, with Mr. Baradaran suggesting that Mr.
Rahmanian had the ability to dictate how the hotel was run and Mr. Rahmanian
basically saying that he generally did not interfere. To the extent that the
testimony differed, I generally prefer the testimony of Mr. Baradaran to that
of Mr. Rahmanian. Mr. Baradaran seemed to have more first hand knowledge and a
better recollection of events than Mr. Rahmanian.
[20] Regardless of whose testimony is more accurate,
though, I do not think that Vegreville Hotel & Inn Ltd. had the general
ability to dictate how the work was done, except to the extent that this was
necessary to protect the hotel’s investment. To the extent that the Vegreville
Hotel kept control of financial or security matters, I do not think this
changes the nature of the relationship between the parties. In other respects,
there were some isolated incidents where Mr. Rahmanian did exercise more
control than he was entitled to under the contract, but I accept his evidence
that he only rarely intervened. I do not think that isolated incidents tell the
true picture. My impression from the evidence as a whole is that the
intervenors had the authority to run the hotel the way they saw fit, with the
exception of financial matters.
[21] For all these reasons, I find that the relationship is
more consistent with an independent contractor relationship than employment.
[22] The appeals will be allowed, and the decisions of the
Minister will be varied on the basis that Hamid Baradaran and Shiva Khodabakhsh
were not engaged in insurable or pensionable employment with Vegreville Hotel
& Inn Ltd.
Signed at Edmonton, Alberta this 9th
day of September 2008.
“J. Woods”
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