Citation: 2008TCC513
Date: 20080911
Dockets: 2006-2384(EI)
2006-2386(CPP)
BETWEEN:
PANACHE FINE CABINETRY,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Webb J.
[1]
The issue in these appeals
is whether Carl Mancini was engaged by the Appellant in a contract of service
or a contract for services during the period from April 11, 2005 to November 1,
2005 for the purposes of the Employment Insurance Act (the “Act”) and the Canada Pension Plan (the “Plan”).
The Respondent had determined that Carl Mancini was an employee of the
Appellant and therefore was engaged by the Appellant in insurable employment for
the purposes of the Act and pensionable employment for the purposes of
the Plan during the above period. Carl Mancini had filed an appeal
to this Court in relation to the amount of his insurable and pensionable earnings
and the number of insurable hours but withdrew his appeal several months before
the hearing of this appeal. The appeals filed by Carl Mancini, in which the
Appellant had intervened, (2006-1031(EI) and 2006‑1032(CPP), are dealt
with separately.
[2]
The Appellant
carried on a cabinet making business and retained the services of Carl Mancini
as a cabinet maker in April 2005. Mr. Bourgeois, the President of the Appellant,
testified during the hearing and Carl Mancini also testified. Both clearly
stated that it was their mutual intention that Carl Mancini would be retained
as an independent contractor. Carl Mancini submitted periodic invoices to the
Appellant using his business name, CM Custom Woodworking. Carl Mancini charged
HST on the amounts invoiced and the Appellant paid HST.
[3]
The
question of whether an individual is an employee or an independent contractor
has been the subject of several cases. In 671122 Ontario Ltd. v.
Sagaz Industries Canada Inc., [2001] S.C.J. 61, 2001 S.C.C. 59 (“Sagaz”),
Justice Major of the Supreme Court of Canada stated as follows:
46 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, supra, 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, supra, 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.
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.
[4]
In Royal
Winnipeg Ballet v. M.N.R., 2006 FCA 87, 2006 DTC 6323, the dancers and the
ballet company had a common intention that the dancers would be hired as
independent contractors. The Federal Court of Appeal reviewed the relevant facts
of that case as determined by the factors outlined in Wiebe Door Services
Ltd. v. M.N.R., [1986] 2 C.T.C. 200, 87 DTC 5025 (“Wiebe Door”). The
Federal Court of Appeal concluded that the relevant facts in that case did not
change the intended relationship between the dancers and the Royal Winnipeg
Ballet and that the dancers were independent contractors. Justice Sharlow of
the Federal Court of Appeal made the following comments in the Royal
Winnipeg Ballet case:
65. The judge chose the following factors
as relevant to the Wiebe Door analysis (it is not suggested that he
chose the wrong factors or that there are any relevant factors that he failed
to consider):
· The indispensable element of
individual artistic expression necessarily rests with the dancers. The RWB
chooses what works will be performed, chooses the time and location of the
performances, determines where and when rehearsals will be held, assigns the
roles, provides the choreography, and directs each performance.
· The dancers have no management or
investment responsibilities with respect to their work with the RWB.
· The dancers bear little financial
risk for the work they do for the RWB for the particular season for which they
are engaged. However, their engagements with the RWB are for a single season
and they have no assurance of being engaged in the next season.
· The dancers have some chance of
profit, even within their engagement with the RWB, in that they may negotiate
for remuneration in addition to what is provided by the Canadian Ballet
Agreement. However, for the most part remuneration from the RWB is based on
seniority and there is little movement from that scale.
· The career of a dancer is
susceptible to being managed, particularly as the dancer gains experience.
Dancers engaged by the RWB have considerable freedom to accept outside
engagements, although there are significant contractual restrictions (the need
for the consent of the RWB, and the obligation to hold themselves out as being
engaged by the RWB).
· Although the dancers bear many
costs related to their engagement with the RWB and their dancing careers
generally, the RWB is obliged to provide dance shoes, costumes, tights, wigs
and certain other necessary items.
· The dancers are responsible for
keeping themselves physically fit for the roles they are assigned. However, the
RWB is obliged by contract to provide certain health related benefits and
warm-up classes.
66. The control factor in this case, as
in most cases, requires particular attention. It seems to me that while the
degree of control exercised by the RWB over the work of the dancers is
extensive, it is no more than is needed to stage a series of ballets over a
well planned season of performances. If the RWB were to stage a ballet using
guest artists in all principal roles, the RWB's control over the guest artists
would be the same as if each role were performed by a dancer engaged for the
season. If it is accepted (as it must be), that a guest artist may accept a
role with the RWB without becoming its employee, then the element of control
must be consistent with the guest artist being an independent contractor.
Therefore, the elements of control in this case cannot reasonably be considered
to be inconsistent with the parties' understanding that the dancers were
independent contractors.
67. The same can be said of all of the
factors, considered in their entirety, in the context of the nature of the
activities of the RWB and the work of the dancers engaged by the RWB. In my
view, this is a case where the common understanding of the parties as to the
nature of their legal relationship is borne out by the contractual terms and
the other relevant facts.
[5]
Since the
facts in Royal Winnipeg Ballet were not sufficient to alter the
arrangement from that which was intended by the parties, unless the relevant facts
in this case, as determined by the factors as set out in Wiebe Door and Sagaz, would
more strongly indicate an employer-employee relationship than in the case of
the Royal Winnipeg Ballet, it seems to me that Carl Mancini would be an independent
contractor since both the Appellant and Carl Mancini had a mutual intention to create
an independent contractor relationship.
[6]
With respect to the
control factor, the evidence in this particular case was that the amount of
control that the Appellant had over Carl Mancini would have been less than the
amount of the control that the Royal Winnipeg Ballet had over the ballet
dancers. In the Royal Winnipeg Ballet case, Justice Sharlow described
the degree of control that the Royal Winnipeg Ballet had over the dancers as
“extensive”. The dancers in the Royal Winnipeg Ballet case would not
have been allowed to set their own hours and were only allowed to work for
others with the consent of the Royal Winnipeg Ballet. As noted in the above
decision:
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.
[7]
Carl Mancini was able
to set his own hours of work and he was able to work for other clients and in
fact did work for other clients during the period under appeal. He could either
work at the Appellant’s premises or his own shop, although most of the time he
worked at the Appellant’s premises. Carl Mancini was retained to perform
certain tasks. He was retained to build cabinets in accordance with the
specifications dictated by the requirements of the Appellant’s customers.
[8]
In the case of Direct
Care In-Home Health Services Inc. v. M.N.R., 2005 TCC 173, Justice
Hershfield made the following comments in relation to control:
11 Analysis of this factor involves a determination of
who controls the work and how, when and where it is to be performed. If control
over work once assigned is found to reside with the worker, then this factor
points in the direction of a finding of independent contractor; if control over
performance of the worker is found to reside with the employer, then it points
towards a finding of an employer-employee relationship. However, in times
of increased specialization this test may be seen as less reliable, so more
emphasis seems to be placed on whether the service engaged is simply “results”
oriented; i.e. “here is a specific task -- you are engaged to do it”. In such
case there is no relationship of subordination which is a fundamental
requirement of an employee-employer relationship. Further, monitoring
the results, which every engagement of services may require, should not be
confused with control or subordination of a worker.
12 In the case at bar, the Worker was free to decline
an engagement for any reason, or indeed, for no reason at all. …
(emphasis added)
[9]
The arrangement with Carl
Mancini appears to be very similar to the arrangement described by Justice
Hershfield as Carl Mancini was assigned a specific task and engaged to do it.
[10]
With respect to the
ownership of equipment, the Appellant provided some of the tools that Carl
Mancini needed but Carl Mancini also supplied some tools. The estimate of Mr.
Bourgeois was that the value of the tools provided by the Appellant would be
approximately equal to the value of the tools provided by Carl Mancini. In Royal
Winnipeg Ballet the dancers bore many costs but the Royal Winnipeg Ballet
was obliged to provide dance shoes, costumes, tights, wigs and certain other
necessary items.
[11]
Mr. Bourgeois stated
that Carl Mancini had the right to hire other workers but Carl Mancini stated
that it was his understanding that he could not do so. In the Royal Winnipeg
Ballet case, there was no discussion with respect to whether or not the
dancers could hire any helpers but it would seem illogical to suggest that the
dancers could hire any person to replace them in the production.
[12]
With respect to the
degree of financial risk/opportunity for profit, Carl Mancini had little
financial risk. Mr. Bourgeois stated that Carl Mancini was a very competent and
skilled carpenter and therefore there never was any issue about Carl Mancini
having to redo work to fix any errors, which presumably would have been his
only financial risk. In the Royal Winnipeg Ballet case the dancers, as
acknowledged by the Federal Court of Appeal, had little financial risk.
[13]
With respect to the
opportunity for profit, the dancers with the Royal Winnipeg Ballet could
negotiate for additional remuneration, although most were paid in accordance
with a predetermined scale. In this case Carl Mancini was paid a set amount per
hour as agreed upon by Carl Mancini and the Appellant. In Royal Winnipeg Ballet
the dancers were allowed to accept outside engagements provided that they
had the consent of the Royal Winnipeg Ballet and provided that they held themselves
out as being engaged by the Royal Winnipeg Ballet. In this case, there were no
such restrictions imposed on Carl Mancini in accepting outside engagements and Carl
Mancini did work for other clients during the period under appeal.
[14]
In the Royal Winnipeg
Ballet case, the dancers did not have any management or investment
responsibilities with respect to their work with the Royal Winnipeg Ballet. In
this case Carl Mancini did not have any management or investment
responsibilities with respect to his work with the Appellant.
[15]
As a result, I find
that the relevant facts related to the engagement of Carl Mancini by the
Appellant as determined by the factors as set out in Wiebe Door and
Sagaz do not suggest more strongly an employer/employee
relationship than did the facts in Royal Winnipeg Ballet and since there
was a mutual intention to create an independent contractor relationship, Carl
Mancini was an independent contractor and not an employee of the Appellant
during the period under appeal.
[16]
As a result, the
appeals from the determination that Carl Mancini was engaged by the Appellant
in insurable employment within the meaning of paragraph 5(1)(a) of the Act
and pensionable employment within the meaning of paragraph 6(1)(a) of the Plan
are allowed, without costs, and the matter is referred back to the Minister of
National Revenue for reconsideration and reassessment on the basis that Carl
Mancini was an independent contractor and was not engaged by the Appellant in insurable
employment within the meaning of paragraph 5(1)(a) of the Act and
pensionable employment within the meaning of paragraph 6(1)(a) of the Plan during
the period under appeal.
Signed at Toronto, Ontario, this 11th day of September 2008.
“Wyman W. Webb”
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