Citation: 2008TCC607
Date: 20081119
Dockets: 2008-357(EI)
2008-358(CPP)
BETWEEN:
G. G. PAINTING LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Sheridan, J.
[1] The issue in
this appeal is whether three house painters[1] were working for the Appellant, G.G. Painting Ltd.,
as employees or independent contractors.
[2] The Minister’s
position is that the workers were engaged in insurable[2] and pensionable[3]
employment under a contract of service. The Respondent called as witnesses the Rulings
Officer, Linda Flores, and one of the workers, Katherine Stephens. Ms.
Stephens was the only one of the workers to testify but I accept her evidence
as common to all the workers in this appeal.
[3] The Minister’s decision
was based on the following assumptions of fact:
a)
the facts admitted in paragraph one and two, above;
b)
during the Periods, the nature of the Appellant’s business was a
painting contractor;
c)
the Appellant operated the business under the name G. G. Painting Ltd.;
d)
Guy Gagnon controlled the day-to-day operations of the Appellant and
made all the major business decisions of the Appellant;
e)
the Appellant contracted with its client to perform the painting
services (the “Painting Services”);
f)
the Workers performed the Painting Services for the Appellant’s clients;
g)
the main duty of the Workers was to paint;
h)
the Workers’ related duties included sanding, scraping and cleaning up
the worksite;
i)
the Appellant purchased the paint, materials, supplies, tools and equipment
used to fulfill the contracts for the clients;
j)
the Appellant was responsible for any costs of repairs, maintenance and
insurance on the tools and equipment;
k)
the Workers were not responsible for any of the Appellant’s operating
expenses;
l)
the Appellant instructed the Workers on what Painting Services needed to
be performed;
m)
the Appellant instructed the Workers on where the Painting Services
would be performed;
n)
the Appellant required the Workers to perform the Painting Services
personally and the Workers could not hire assistants or subcontractors;
o)
the Workers were paid between $10.00 to $16.00 per hour, depending upon
experience;
p)
the Appellant set the Workers’ rates of pay;
q)
the Appellant’s days of operations were weekdays and weekend;
r)
the Workers performed the Painting Services on weekdays and weekends
based on deadlines and priorities set by the Appellant;
s)
the Appellant determined the Workers’ hours of work;
t)
the Workers’ hours of work were recorded on timesheets;
u)
the Workers were not financially liable if they did not fulfill the
obligations of the Appellant’s contracts with its clients;
v)
the Appellant was responsible for resolving client complaints about the
Painting Services;
w)
the Appellant provided the client with a guarantee on the Painting
Services performed;
x)
the Workers did not advertise their Painting Services and did not market
themselves as being in business on their own;
y)
the Workers did not operate their own businesses in respect of the
Painting Services;
z)
the Appellant paid Workers’ Compensation Board premiums on behalf of all
of the Workers;
aa)
the Appellant provided the Workers with business T-shirts;
bb)
the Workers were trained by the Appellant;
cc)
the Appellant maintained the right to terminate the Workers’ services;
dd)
the Workers had no capital investment in a business;
ee)
the Workers were not in a position to realize a profit or loss from the
Appellant’s business;
ff)
the Workers were paid weekly by cheque;
gg)
the Workers were not hired by the Appellant under a written contract;
and
hh)
during the Periods, the Workers performed the Painting Services as
employees of the Appellant under a contract of service.
[4] Counsel for the Respondent presented a thorough review of the jurisprudence
establishing the tests for the determination of whether a worker is an employee
or an independent contractor; in particular, Wiebe Door Services Ltd. v.
Minister of National Revenue,
671122 Ontario Ltd. v. Sagaz Industries Canada Inc. and The Royal Winnipeg
Ballet v. Canada (Minister of National Revenue). Briefly summarized, in making this determination, the
Court must consider the degree of control the payor exercises over the worker;
the ownership of tools; the chance for profit and risk of loss; and the degree
to which the worker is integrated into the business of the payor. In
circumstances where the 671122 Ontario Ltd. v. Sagaz analysis does not
produce a conclusive answer, the Court may consider the intention of the
parties, provided that intention is consistent with their conduct[7].
[5] The Appellant was
represented by its principal, Guy Gagnon, who also testified at the hearing. As
is often the case in appeals of this nature, it is not so much the facts that
are in dispute as how they ought to be interpreted. However, the Appellant
specifically disputes the facts assumed in paragraphs 8(p), (s), (t), (z) and
(gg).
[6] Before
incorporating G.G. Painting Ltd. in 1988, Mr. Gagnon had himself been a house painter.
He always worked as a sub-contractor, a practice he said was typical of the
painting business. Intending to engage workers for his own company on that
footing, he took steps to find out how to structure the Appellant’s
relationship with its workers accordingly. He first sought information on what distinguished
an employee from an independent contractor. He had his lawyer draft a standard
form contract[8] designed for sub-contractors that he could use in the
business. He contacted WorkSafeBC as to the circumstances in which premiums
were payable for sub-contractors and based on the information provided[9], caused the Appellant to pay the premiums for the
three workers in question. Further, in the relevant years, the Appellant duly
reported the amounts it paid to the workers for their labour services by filing
a Form T5018 “Summary of Contract Payments”[10], a form prescribed by the Income Tax Act to
report the earnings of sub-contractors, for Katherine Stephens, Benjamin Kohlman
and Michel Émond.
[7] It
was the discovery of their T5018 forms that triggered Ms. Flores’ further investigations
into the workers’ status. She interviewed Katherine Stephens and Benjamin Kohlman
as well as Rosamartha Gonzalez, the Appellant’s bookkeeper. She also had them
complete the department’s standard questionnaires, essentially a checklist of
the tests established in the jurisprudence. She reviewed the contracts signed
by Katherine Stephens and Benjamin Kohlman. Based on this information, she
concluded that the workers were engaged under a contract of service and were
employees.
[8] In my view, the evidence points in a different direction.
For the reasons set out below, I am satisfied that the Appellant has met the burden
of proving that the workers were engaged as independent contractors.
[9] Mr.
Gagnon’s practice when hiring workers for the Appellant was to have them
complete the company’s standard form contract. It specifically identifies the
worker as the “sub-contractor”. It sets out the worker’s name, address, social
insurance and driver’s licence number along with the address of the first job
site and the rate of pay. The preamble of the contract reads as follows:
WHEREAS:
A.
GG has contracted with a property owner to provide painting services at [civic address of house to be painted] (the “Property”).
B.
GG wishes to hire the Sub-contractor as a sub-contractor to complete some
or all of those painting services at the Property.
C.
The Sub-contractor wishes to be hired as a sub-contractor to provide
his/her painting services to GG.
Paragraph 3 of the contract states that:
3. The Sub-contractor agrees that (s)he is not an employee or
partner of GG. When not acting as a sub-contractor for GG, the
Sub-contractor is free to pursue painting opportunities with persons other than
GG, provided that those opportunities do not detract from his/her obligations
to GG as outlined in this Contract. As such, GG will is responsible to make the
usual payroll deductions which the law requires an employer to make. The
Sub-contractor alone will be responsible to remit his/her own income tax and
other remittances to the relevant governmental authorities.
[10] I
accept the Respondent’s submission that how the parties label their
relationship is not determinative of its true nature. However, in my view, the evidence of the existence of a
payor/sub-contractor relationship between the Appellant and the workers goes
beyond mere labeling.
[11] Katherine
Stephens was a 17-year-old student when she signed her agreement with the
Appellant. Like Mr. Gagnon and Ms. Flores, she was credible in the presentation
of her evidence. Because school was her priority, she was interested in work
that she could fit easily into her academic timetable. Mr. Gagnon testified that it was
the Appellant’s practice to negotiate the
rate of pay with each worker, depending on his or her experience and the amount
they wanted to be paid. Consistent with this is Exhibit A-2 which shows a
variation in the rates paid to the workers: Benjamin Kohlman was paid $9 per
hour; Ms. Stephens started at a rate of $10 per hour. She accepted that amount because
it was better than what she had been paid in other jobs. Though her work
experience was understandably limited, she had been an “employee” in the fast
food industry and was candid in her evidence that in comparison, working for the
Appellant was an attractive alternative. As her skills improved and she began
to receive compliments from Mr. Gagnon on her work, Ms. Stephens took it
upon herself to negotiate increases in the hourly rate they had originally
agreed upon.
[12] Ms.
Stephens testified that she had complete control over the number of hours she
worked; on the rare occasion when she was sick or did not want to work, she
simply notified Mr. Gagnon that she would not be available. She described
Mr. Gagnon as being “pretty easy” about her hours, an appraisal that lends
support to his contention that the workers, as sub-contractors, were the
masters of their own destiny: free to work or not; free to perform services for
the Appellant or others, as they chose.
[13] At
the job site, Ms. Stephens was her own boss: within the framework of client
specifications, she managed the tasks for which she was responsible: scraping,
sanding, setting up tarps and ladders, cleaning brushes and painting. Contrary
to the assumptions in paragraphs 8(l), (m) and (r), the Appellant and the
workers were equally subject to perform their respective roles according to the
clients’ requirements: i.e., the nature of the work to be done and its location.
That it passed on such practical information to the workers is not an indicator
of the Appellant’s “control” over them.
[14] While
the assumption that the workers’ hours were recorded on timesheets[12] is technically correct, the inference of control
drawn from it is not. Ms. Stephens also kept track of her hours, sometimes
recording them on her cell phone. She did not present Mr. Gagnon with a formal
invoice: their arrangement was that she would review the hours recorded by Mr.
Gagnon against her own tallies; if any discrepancies were discovered, she would
discuss the matter with him and they would arrive at a mutually agreed amount.
It is evident from Mr. Gagnon’s and Ms. Stephens’ testimony that the
Appellant relied on the services of independent individuals who for various
reasons, were attracted by the control over their own hours and lack of
long-term commitment. For example, Ms. Stephens testified that although she was
working for the Appellant during much of the same period as the other two
workers, she had no clear recollection of them; she “barely knew anyone’s name,
certainly not last names” and there were always “lots of people coming and
going”. This is consistent with the workers having made their own agreements to
provide labour services to the Appellant on their own terms at individual job
sites. In these circumstances, it would be unreasonable to expect the workers to
issue formal invoices. By the same token, the fact that the workers did not
have business cards and did not advertise their services is of little
significance.
[15] In
his submissions, counsel for the Respondent described Ms. Stephens as “young and
unsophisticated”; she struck me, however, as a very bright young woman with the
self-discipline to balance her studies and her work. She kept a close eye on
the money she was owed for her services and had the confidence to renegotiate
her rate of pay commensurate with her improving performance. I am satisfied
that she understood and agreed with Mr. Gagnon, on behalf of the Appellant,
that she was working as an independent contractor.
[16] The assumption in
paragraph 8(d) that Mr. Gagnon controlled the business of the Appellant is
hardly surprising as he was the directing mind of the company; his control over
that operation however, is not determinative of whether the Appellant
exercised control over Ms. Stephens and the other workers. Similarly, regarding
paragraph 8(cc), I infer from Ms. Stephens’ evidence that she could work when
and if she chose that she was equally entitled to terminate her contract with
the Appellant at any time. Finally, the assumption in paragraph 8(bb) deals
with training; to the minimal extent training occurred, there is no question it
was the Appellant who provided it. This fact, however, does not outweigh the
effect of the other evidence militating against a finding that the Appellant
was in control of the workers. As for the payment of Workers’ Compensation
premiums[13], Exhibit A-1 shows that in certain
circumstances, a payor is required to pay premiums for its independent or
sub-contractors. Thus, the fact that the Appellant paid the premiums for the
workers is not determinative of the matter.
[17] Finally, the
Minister assumed that “the Workers were not hired … under a written contract”[14]. While not challenging the validity of the
Appellant’s contracts with Katherine Stephens and Benjamin Kohlman, the
Rulings Officer disregarded them because, she said, they were not “for the
period”[15]. Exhibit A-2 shows that the contracts of Katherine
Stephens and Benjamin Kohlman were signed in July 2004 and June 2004,
respectively, dates that are indeed outside the period during which the work in
question was performed. This fact, however, does not lead inexorably to the
conclusion that the workers were employees. A finding that a worker was engaged
under a contract for services does not hinge on the existence of a written
contract. The evidence of Ms. Stephens and Mr. Gagnon gives me no reason
to doubt that it was implicitly agreed that the original written agreement, verbally
modified as required from time to time, would be continually renewed with each
new project until it was ultimately terminated by one or the other of them. In
the context of the Appellant’s and the workers’ respective business operations,
proceeding on this basis was entirely reasonable.
[18] The oft-cited 671122
Ontario Ltd. v. Sagaz Industries Canada Inc. makes clear that not every factor
will be applicable in every case and that no one factor has any more weight
than another. In the circumstances of the present case, the ownership of tools
does not come into it. I accept the Respondent’s submission that the workers
had little chance of profit/risk of loss; however, I am satisfied that the
preponderance of the evidence supports the conclusion that the workers were not
controlled by the Appellant; nor were they integrated into its business. They
were independent contractors and accordingly, were not engaged in insurable or
pensionable employment. The appeal is allowed.
Signed at Ottawa, Canada,
this 19th day of November, 2008.
“G.A. Sheridan”
Email this Content