Citation: 2008TCC210
Date: 20080411
Docket: 2007-4497(CPP)
BETWEEN:
DARYL J. BARTON,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
ROY A. FLOWERS,
Intervener.
REASONS FOR JUDGMENT
Webb J.
[1] The issue in this case is whether the Appellant was an employee or an
independent contractor in 2004 and hence whether he was engaged in pensionable
employment for the purpose of the Canada Pension Plan (the “Plan”)
in 2004.
[2] In paragraphs 4 and 5 of the Reply the Respondent stated that:
4. In conjunction with an Employer Compliance
Audit assessment of Connie Webster (the "Payor"), a ruling was
requested and it was determined that the Appellant had been engaged by the
Payor pursuant to a contract of service for the period from January 1, 2004 to
December 31, 2004 (the "period under appeal") within the meaning of
the Canada Pension Plan (the "Plan").
5. The Payor appealed to the Respondent from that assessment and
by letter dated August 22, 2007, the Respondent advised the Appellant that,
during the period under appeal, he had not been engaged pursuant to a contract
of service with the Payor within the meaning of paragraph 6(1)(a) of the Plan
and therefore, he had not been engaged in pensionable employment.
[3] The issue was identified in paragraph 8 of the Reply as:
8. He submits that the Appellant was not engaged by the Payor in
pensionable employment within the meaning of paragraph 6(1)(a) of the Plan
for the period under appeal as there was no contract of service but rather a
contract for service between the Appellant and the Payor.
[4] Therefore the issue in this case is whether the Appellant was engaged
in a contract of service in 2004, or whether the Appellant was an independent
contractor. The Appellant had been driving a taxi for some years prior to 2004.
His preference was to always drive the same vehicle. The Appellant did not own
the vehicle that he was driving as a taxi. Beginning in 2002 the vehicles that
he would be using would more often than not be owned by one of three different
persons ‑‑ Connie Webster (the “Payor”), Don Webster, or
a numbered company. In the spring of 2004 the Appellant had a meeting with Don
Webster during which Don Webster told the Appellant that the vehicle that the
Appellant was then driving was owned by the numbered company and was being
transferred to a new business. If the Appellant wished to continue to drive
this vehicle he would have to switch and become a driver for the new business.
Or, alternatively, the Appellant could remain with the existing business, and
then be assigned whatever vehicle might be available. The Appellant chose to go
with the new business and remain driving the same vehicle that be had been
driving.
[5] At the time that the Appellant switched to the new business, his
compensation arrangement changed. The arrangement with George's Taxi
(which was the business before he switched to Skycab - the new business)
was that the Appellant was entitled to retain 40% of the fares collected during
a shift and the balance would be split between the dispatcher and the owner of
the vehicle. With the new business, the amount of the fares that he could
retain increased to 50% with a guaranteed minimum of $6.25 per hour. Therefore,
if 50% of the amount collected during a shift was less than $6.25 times the number
of hours that he worked during a shift, then he had the right to be paid $6.25
per hour times the number of hours that he worked. All of the costs related to
the maintenance of the vehicles and all of the costs of fuel were borne by the
owners of the vehicles and not by the Appellant. The Appellant only worked day
shifts and during these shifts approximately 80% of the fares that he would
receive would be as a result of calls to the taxi company followed by a
notification to the Appellant by the dispatcher.
[6] In the Reply the Respondent assumed that the Payor was a sole
proprietor who operated a taxi business that provided taxi stands and taxi
dispatch services to various vehicle owners. The Respondent also assumed that
the Appellant was engaged to provide services as a taxi driver and that the
Payor maintained a pool of qualified, licensed and approved taxi drivers.
Although it is not clearly stated in the assumptions, it seems obvious from
paragraphs 4, 5 and 8 of the Reply and these assumptions that the Respondent
was making the assumption that the Payor engaged the Appellant and therefore
that there was a contract between the Payor and the Appellant.
[7] 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, 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.
[8] In recent decisions of the Federal Court of
Appeal the issue of the intent of the parties has been addressed. In the recent
decision of the Federal Court of Appeal in Combined Insurance Co. of America
v. M.N.R., 2007 FCA 60, Nadon J.A. of the Federal Court of Appeal
stated as follows:
35. In my view, the following principles emerge
from these decisions:
1. The relevant facts,
including the parties’ intent regarding the nature of their contractual
relationship, must be looked at in the light of the factors in Wiebe Door,
supra, and in the light of any factor which may prove to be relevant in the
particular circumstances of the case;
2. There is no predetermined way of applying
the relevant factors and their importance will depend on the circumstances and
the particular facts of the case.
Although as a general rule the control test is of special
importance, the tests developed in Wiebe Door and Sagaz, supra,
will nevertheless be useful in determining the real nature of his contract.
[9] In Lang v. the Minister of
National Revenue 2007 TCC 547, Chief Justice Bowman made the following
comments:
33 With
respect to the factor of intent I would make a couple more observations. The
first is that the Supreme Court of Canada has not expressed a view on the role
of intent. In Sagaz, it was not mentioned as a factor. The second is
that if the intent of the parties is a factor it must be an intent that is
shared by both parties. If there is no meeting of the minds and the parties are
not ad idem, intent can not be a factor.
[10] The Payor did not testify in this case. The only witness was the
Appellant. In this case it is obvious that there is no common intent between
the Payor and the Appellant with respect to the issue of whether the Appellant
was an employee or an independent contractor and therefore intent is not a
factor in this case.
Level of Control
[11] The assumptions in the Reply included the following:
(i) the Payor, in cooperation with the Owners
and the drivers, assigned each of the drivers their individual shift schedule;
(j) the Payor, in conjunction with Owners and
drivers, assigned drivers to vehicles during each shift;
…
(z) the Appellant was required to follow the
Payor’s procedures and rules;
[12] The Appellant only worked day shifts. He would receive directions from
the dispatcher to pick up passengers. His hours of work were determined by the
Payor, although he would have some input. As noted he only worked day shifts,
which was his choice. The level of control would suggest an employer/employee
relationship.
Ownership of Equipment
[13] The Appellant did not own or have any interest in the vehicle that he
was driving as a taxi. He indicated that for all but a few days in 2004 he was
driving a vehicle that was owned by the Payor, Don Webster or a numbered
company. The factor as stated by the Supreme Court of Canada is “whether the worker provides his or
her own equipment”. If the worker does not provide his or her own equipment and
the equipment is provided directly or indirectly by another person (regardless
of whether that other person actually owns the equipment or has some other
contractual arrangement that allows that person to provide the equipment), this
would suggest that the worker is an employee of that person. Whether the
vehicle was owned by the Payor, Don Webster or the numbered company is
irrelevant. The Appellant was not a shareholder, a director or an officer of
the numbered company. The vehicle was provided to the Appellant by the person
who engaged the Appellant either as the owner of the vehicle or as a result of
some agreement between that person and the owner of the vehicle. It is clear
that the Appellant did not provide any of his own equipment and therefore this
factor suggests that the Appellant was an employee
rather than an independent contractor.
Hiring of Helpers
[14] In the Reply the Respondent assumed that “the Appellant was not
permitted to hire another driver to drive the vehicle for him”. The Appellant
confirmed this and this suggests that the Appellant was an employee.
Degree of Financial Risk Taken by
the Appellant
[15] At the beginning of 2004, the Appellant was entitled to 40% of the
fares that he collected. When he started driving for Skycab in 2004, the
Appellant received a guaranteed minimum of $6.25 per hour. The Appellant did
not incur any costs in relation to the ownership, operation or maintenance of
the vehicles. As a result the Appellant had very little financial risk and even
less financial risk after he started driving for Skycab. This suggests that the
Appellant was an employee.
Degree of Responsibility for Investment and Management
[16] The Appellant did not have any responsibility for investment and
management of the business and therefore this factor suggests that the
Appellant was an employee.
Opportunity for Profit
[17] The Appellant worked only during the day shifts when approximately 80%
of the fares that he received were as a result of calls to the dispatcher. For
several of the days he received the minimum hourly rate amount. While there
would be some opportunity for profit as the Appellant could search for
additional passengers when he did not have a passenger, he only had the vehicle
for a fixed period of time. As a result this factor does not strongly indicate
that he was an independent contractor and in my opinion does not overcome the
other factors which suggest that the Appellant was an employee.
Conclusion
[18] As a result, the application of the factors as set out by the Supreme
Court of Canada in Sagaz, in my opinion, leads to a conclusion that
the Appellant was an employee.
[19] Counsel for the Respondent argued that the taxi business and taxi
drivers are treated differently from other groups. In particular, he referred
to the case of Yellow Cab Company v. M.N.R., 2002 FCA 294,
215 D.L.R. (4th) 413. However that case dealt with the provisions of
subsection 6(e) of the Employment Insurance Regulations (the “EI
Regulations”) and whether that paragraph applied to the lease-operators and
the owner-operator. That paragraph provides that:
6.
Employment in any of the following employments, unless it is
excluded from insurable employment by any provision of these Regulations, is included
in insurable employment: ...
(e)
employment of a person as a driver of a taxi, commercial bus,
school bus or any other vehicle that is used by a business or public authority
for carrying passengers, where the person is not the owner of more than 50 per
cent of the vehicle or the owner or operator of the business or operator of the
public authority;
[20] In Canada (Attorney General) v. Skyline Cabs (1982) Ltd., [1986] F.C.J. No. 335, the Federal Court of Appeal dealt
with the interpretation of subsection 12(e) of the Unemployment Insurance
Regulations. This subsection provided that:
12.
Employment in any of the following employments, unless it is
excepted employment under section 3(2) of the Act or excepted from insurable employment
by any other provision of these Regulations is included in insurable
employment:
(e)
Employment of a person as a driver of the taxi, commercial bus,
school bus or any other vehicle that is used by a business or public authority
for carrying passengers where that person is not the owner of the vehicle or
the proprietor or operator of the business or public authority....
[21] Justice MacGuigan on behalf of the Federal Court of Appeal stated, in
relation to subsection 12(e) of the Unemployment Insurance Regulations
that:
The sole issue before the Tax Court was as to the application of
subsection 12(e) of the Regulations, and in the light of the Supreme Court of
Canada decisions in The Queen v. Scheer Ltd , [1974] S.C.R. 1046 and Martin
Service Station v. Minister of National Revenue, [1977] 2 S.C.R. 996, in my
view it must be taken as settled law that the word "employment" in
that subsection is not to be understood in the narrower sense of a contract of
service, the sense in which it was interpreted by the Tax Court, but in the
broader sense of 'activity' or 'occupation'.
[22] As a result a taxi driver who
does not meet the criteria set out in the second half of paragraph 6(e) of the EI
Regulations but who might otherwise be an independent contractor is still
deemed to be in insurable employment for the purposes of the EI Regulations and
the Employment Insurance Act. However
this provision is only applicable for the purposes of the EI Regulations
and the Employment Insurance Act. It is not applicable for the purposes
of the Plan and the Yellow Cab Company case dealt with this provision.
[23] As well it should be noted that the Yellow Cab Company case
dealt with the issue of whether the lease-operators and owner-operator were
owners or operators of their own business. The Appellant is neither a
lease-operator nor an owner‑operator. He is a driver. The Federal Court
of Appeal applied the decision of the Supreme Court of Canada in Sagaz. This confirms that this decision of the Supreme Court of Canada
applies to individuals involved in the taxi business.
[24] The Federal Court of Appeal in the Yellow Cab Company case also
stated that:
29. More importantly, however, I note that the lease-operators actually
did delegate some their driving duties and, when they did, the lease-operators
remitted CPP income tax, and CPP and Employment Insurance premiums on behalf of
the drivers. The Respondent does not dispute that the lease-operators were the
employers of the hired drivers as evidenced by the fact that the Respondent did
not assess Yellow Cab for the revenues generated when the lease operators
employed drivers.
[25] Therefore clearly taxi drivers can be employees. There is no reason to
suggest that the principles as set out by the Supreme Court of Canada in Sagaz should not be applied
in this case.
[26] The issue of whether the Appellant was an employee or an independent
contractor of a previous taxi business was the subject of a decision of the New Brunswick
labor and employment board. E. McGinley, Q.C., Chairperson of the Board noted that the
Appellant was employee and not an independent contractor. The arrangement
between the Appellant and Trius Taxi (F’ton) Ltd., as summarized in the reasons
for decision of the Board, were substantially similar to the current arrangements
with respect to the Appellant.
[27] Counsel for the Respondent, in his argument, suggested that the issue
was whether the correct person had been identified as the “employer”. However
there is nothing in the Reply to suggest that this is the issue and, as noted
above, the Payor was identified as the person who was carrying on the business
as a sole proprietor. It is too late for counsel for the Respondent to raise
this issue during argument after all of the evidence has been presented.
[28] In Pollock v. The Queen,
[1994] 1 C.T.C. 3, 94 DTC 6050, Hugessen J.A., on behalf of the Federal
Court of Appeal, made the following comments:
Where, however, the Minister has pleaded no assumptions, or where
some or all of the pleaded assumptions have been successfully rebutted, it
remains open to the Minister, as defendant, to establish the correctness of his
assessment if he can. In undertaking this task, the Minister bears the ordinary
burden of any party to a lawsuit, namely to prove the facts which support his
position unless those facts have already been put in evidence by his opponent.
This is settled law.
[29] In Loewen 2004 FCA 146, Sharlow
J.A., on behalf of the Federal Court of Appeal, made the following comments:
11 The constraints on the Minister that
apply to the pleading of assumptions do not preclude the Crown from asserting,
elsewhere in the reply, factual allegations and legal arguments that are not
consistent with the basis of the assessment. If the Crown alleges a fact
that is not among the facts assumed by the Minister, the onus of proof lies
with the Crown. This is well explained in Schultz v. R. (1995), [1996]
1 F.C. 423, [1996] 2 C.T.C. 127, 95 D.T.C. 5657 (Fed. C.A.) (leave to appeal refused, [1996]
S.C.C.A. No. 4 (S.C.C.)).
(emphasis added)
[30] Leave to appeal the decision of the Federal
Court of Appeal in Loewen to the Supreme Court of Canada was refused
(338 N.R. 195 (note)).
[31] The Respondent did not lead any evidence
with respect to the issue of whether the Payor was the correct employer or
whether there was no contract between the Payor and the Appellant. Since the
issue as stated in the Reply clearly states that the Respondent is taking the
position that there was a contract for service between the Payor and the
Appellant, the Respondent cannot, at the conclusion of the hearing, take the
position that there was no such contract when no evidence on this point was
introduced and no request to amend the Reply had been made.
[32] The Appellant stated that his arrangement changed in 2004 when he
switched from driving for George’s Taxi to driving for Skycab. Presumably this
resulted in a change in the Appellant’s employer. However the only parties to
this appeal are the Appellant and the Respondent. Roy A. Flowers filed a Notice
of Intervention but he did not appear at the hearing nor was there any
explanation of his connection to this matter. The only issue is whether the
Appellant was engaged in pensionable employment in 2004. The issue of the
amount of the employer’s contribution that would be payable by the Payor in
respect of the Appellant pursuant to section 9 of the Plan is not the
issue in this case. The Payor is not a party to this appeal. The amount of the
contribution payable by each employer of the Appellant in 2004 will have to be
the subject of a separate proceeding.
[33] The appeal is allowed and the matter is referred back to the Minister
of National Revenue for reconsideration and assessment on the basis that the
Appellant was engaged in pensionable employment for the purposes of the Plan
during the period under appeal.
Signed at Halifax, Nova Scotia, this 11th day of April 2008.
“Wyman W. Webb”
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