Citation: 2008TCC71
Date: 20080131
Docket: 2005-2696(EI)
2005-2697(CPP)
BETWEEN:
DYNAMEX CANADA CORP.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Bowie
J.
[1] These appeals are
brought under section 103 of the Employment Insurance Act, (the Act) and
section 28 of the Canada Pension Plan,
(the Plan) from decisions of the Minister of National Revenue made under
sections 93 and 27.2 of those statutes affirming rulings of the Canada Revenue
Agency made under sections 90 and 26.1 that had determined that Gareth
Palmer was engaged by the appellant in insurable and pensionable employment
between August 13, 2003 and April 11, 2004 (the “period”). The single question
in issue in each appeal is whether the contract between the appellant and Mr.
Palmer was a contract of service, as the Agency and the Minister determined, or
whether, as the appellant asserts, it was a contract for services.
[2] The appellant
corporation is a common carrier and is engaged in a variety of business
activities, many, but not all, of which involve transportation of goods. The
particular aspect of its business with which these appeals are concerned is a
courier service that it operates in the city of Toronto and the surrounding
area. Mr. Palmer was engaged under a written contract on what is obviously a
standard form of contract used by the appellant. While that form consists of 16
pages in all, the last 7 of which are Schedules A to D, the evidence was that,
at least in some respects, the form was obsolete and the working relationship
of Dynamex and Mr. Palmer was not exactly as described therein. An example
of this is that the written contract required Mr. Palmer to convey the
registered title to his vehicle to Dynamex during the period of his employment.
That provision was inserted in the contract to meet a regulation that required
the license to operate as a courier and title to the vehicle used to be in the
same name. That regulation having been changed, the provision, although still
in the contract, was not enforced. There was also a collective agreement
between the appellant and the Teamsters Local Union 938 in force during the
period, and it too provided some of the terms of their relationship.
[3] Mr. Peter Zeppieri is
the Operations Manager of the Appellant. Mr. James Aitken is its
President. They were the only witnesses. I have no reason to doubt the accuracy
of any of the evidence they gave. The appellant has approximately 1,800 drivers
performing the courier service that it provides to its customers throughout
Canada, about 375 of them in the Toronto area, of whom Mr. Palmer was one.
These drivers are referred to by the appellant as owner‑operators, as
they all provide their own vehicle, as well as their services. They are
required to provide a reliable vehicle suitable for the goods that they
deliver, which in the case of couriers generally means an automobile. They are
required to keep the vehicle in good working order, and they are required to
pay for the maintenance, repairs, and fuel that the vehicle requires. They also
have to acquire and pay for liability insurance, and to pay any tickets for
traffic violations. The appellant maintains cargo insurance to cover the
customers’ goods that are in the vehicle. In the event of an accident that
immobilizes the driver’s vehicle, he is required to contact Dynamex
immediately to report it so that another owner‑operator may be dispatched
to take the cargo and see to its timely delivery.
[4] In addition to the
drivers, the appellant has a sales staff whose function is to arrange courier
contracts with businesses, it has dispatchers, and it has supervisory and
administrative staff. In Toronto there are two supervisors for the 375 drivers. All
these people are employees of Dynamex. There is no doubt that the customers are
the appellant’s customers in that they contract with the appellant for the
carriage of goods, they are invoiced by the appellant and they make payment to
the appellant. The appellant’s position is that it provides the services to the
customers not through employees, but through owner-operators to whom it
subcontracts the work.
[5] There are essentially
two kinds of service provided by these couriers, dedicated service and on-call
service. Dedicated service consists of the courier providing service on an
ongoing basis daily to one customer, such as a bank. On‑call service
consists of providing service on an ad hoc basis to many customers
according to their immediate needs. Mr. Palmer provided dedicated services to
Mercantile Bank during the period. He also provided on-call services from time
to time. As a dedicated courier for Mercantile Bank, Mr. Palmer reported to the
bank daily and received his assignments directly from the bank. He carried out
these assignments as he saw fit, responsible only to ensure that deliveries
were made accurately and within the timeframe contracted for. He completed a
daily run sheet summarizing the deliveries made, and he turned this in to the
Bank, not to the appellant. The appellant invoiced the bank periodically for
the service, and Mr. Palmer was paid by the appellant on the basis of a
percentage of that billing. Generally the rate was 55%, but Mr. Aitken
testified that dedicated routes were posted and awarded to drivers on a
seniority basis, and that there was some opportunity for the owner-operators to
negotiate rates for these routes. On some occasions the percentage might be
either higher or lower, depending on the particular circumstances.
[6] On-call work consists
of deliveries that have been ordered by a customer on an individual basis,
generally by telephone. They are passed on by the Dynamex dispatcher to the
couriers, who may accept or reject any job offered to them. If Mr. Palmer
accepted an on-call delivery, he would go to the customer’s premises to receive
the goods and the waybill and then make the delivery. This had to be done
within the time prescribed by the customer in its order, but within that
parameter Mr. Palmer could organize the pickup and delivery as he wished within
his schedule for the day. At the end of the day, the drivers all drop their
waybills for the day at any one of three drop points that have been established
by the appellant throughout the metropolitan Toronto area. These drop boxes
are opened and the way bills removed by one of the Dynamex administrative
staff. Mr. Palmer was never required to go to the appellant’s premises at all.
Mr. Aitken testified that some on-call jobs might have to be paid at a rate
higher than that established as the norm.
[7] Mr. Palmer was
provided by the appellant with a uniform consisting of blue trousers and shirt
with a Dynamex logo on it, and a jacket in winter. Mr. Zeppieri testified that
this was done because customers wanted their couriers to be not only
respectably dressed, but also identifiable. He carried an identification card
that was provided to him by Mercantile Bank. This was provided so that he could
identify himself to the bank’s customers as its courier when making deliveries.
The card also identified him on the reverse side as a Dynamex courier. Like all
the owner‑operators, Mr. Palmer was required to have a pager and two-way
radio in order to communicate with the Dynamex dispatchers. The pagers were
leased by Dynamex, and it owned the radios, which it purchased for between
$250.00 and $300.00. Dynamex rented a radio and a pager to each courier for
$27.50 for each 15 day period, which was the interval at which Dynamex settled
accounts with the owner-operators. Some owner-operators had their own radios,
in which case they did not have to rent one.
[8] Mr. Palmer and all
the other owner-operators were required to complete a form by March 15 each
year indicating the periods of time off that they wished to take for annual
leave. Leave was then assigned to them in accordance with their requests,
operational requirements and their seniority. The owner-operators could hire a
replacement driver if they were sick, or otherwise unable to work, but any
replacement driver had to be pre-approved by the company. The reason for the
pre‑approval requirement was the company’s concern that it not be
represented in public, and with its customers, by unsuitable individuals. The
use of replacement drivers was restricted to those occasions when the
owner-operator was unable to work; otherwise the Dynamex company policy was one
driver only for each vehicle.
[10] Counsel for the
appellant referred me to some specific cases in which the facts were at least
superficially similar to those of the present case. Counsel for the respondent
bases her case largely upon two things: the decision of the Federal Court of
Appeal in Dynamex Canada Inc. v. Mamona et al, and the fact that Mr.
Palmer, and all the other Dynamex couriers in Toronto, are covered by a
collective agreement negotiated between the Teamsters Union and the appellant.
[11] The Mamona
judgment concerned several couriers working for Dynamex in Winnipeg. Mr.
Aiken testify to that they had formerly worked for a firm called Zipper Courier
which had been acquired by Dynamex, and that at the time to which the decision
pertained, their terms of employment were not the terms on which Dynamex
couriers elsewhere worked. More important, the decision in question originated
with an inspector who had concluded for the purposes of Part III of the Canada
Labour Code
(the Code) that Mamona and the other couriers were employees of
Dynamex, and so were entitled to vacation pay under the labour standards
provisions found in Part III. This decision was affirmed by a referee under the
Code, and the referee's decision in turn was affirmed by the Federal
Court Trial Division and the Federal Court of Appeal following judicial review
under section 18.1 of the Federal Courts Act. The decisions of the
Federal Court and the Federal Court of Appeal were concerned almost entirely
with the principles governing judicial review, although the Federal Court of
Appeal did find that the referee's decision met a test of reasonableness. What
is more significant for present purposes, however, is that, upon a request made
by one of the couriers for a ruling, the Canada Revenue Agency determined that
the employment of the couriers was not insurable employment under the Act. This ruling does not appear
to have been appealed to the Minister or beyond. The Mamona decision is therefore
of no assistance to the respondent in the present case.
“dependent contractor” means
(a) the owner, purchaser or lessee
of a vehicle used for hauling, other than on rails or tracks, livestock,
liquids, goods, merchandise or other materials, who is a party to a contract,
oral or in writing, under the terms of which they are
(i) required to provide the vehicle by
means of which they perform the contract and to operate the vehicle in
accordance with the contract, and
(ii) entitled to retain for their own use
from time to time any sum of money that remains after the cost of their
performance of the contract is deducted from the amount they are paid, in
accordance with the contract, for that performance,
(b) a fisher who, pursuant to an
arrangement to which the fisher is a party, is entitled to a percentage or
other part of the proceeds of a joint fishing venture in which the fisher
participates with other persons, and
(c) any other person who, whether
or not employed under a contract of employment, performs work or services for
another person on such terms and conditions that they are, in relation to that
other person, in a position of economic dependence on, and under an obligation
to perform duties for, that other person;
“employee”
means any person employed by an employer and includes a dependent contractor
and a private constable, but does not include a person who performs management
functions or is employed in a confidential capacity in matters relating to industrial
relations;
“employer” means
(a) any person who employs one or
more employees, and
(b) in respect of a dependent
contractor, such person as, in the opinion of the Board, has a relationship
with the dependent contractor to such extent that the arrangement that governs
the performance of services by the dependent contractor for that person can be
the subject of collective bargaining;
The
collective agreement refers throughout to the courier drivers as “owner‑operators”,
as Mr. Zeppieri and Mr. Aitken were careful to do throughout their evidence.
The intention of the parties as to their relationship is made clear by Articles
1.01 and 1.04:
1.01
The Company does hereby recognize the Union as the sole and
exclusive bargaining agent for all Dependant Contractors contracted by the
Company at all Company operations save and except supervisors, those above the
rank of supervisor, office staff, sales staff, dispatcher and tracer.
The term
“Dependant Contractor” shall mean all “Owner/Operators”
…
1.04 The company and the Owner-Operators consider their
relationship to be that of Owner/Dependant Contractor and not employer/employee
and nothing herein shall be read as expressing a contrary intent.
….
Mr.
Palmer’s personal contract contains essentially the same provisions:
1.01 The term “Dependant Contractor shall mean all
“Owner-Operators. Any Owner-Operator as a condition of their engagement, are
subject to this contract, the terms of which may expand but not conflict with
the terms of the collective agreement …
1.02
The Company and the Owner-Operator consider their relationship to
be that of Owner/Dependant Contractor and not employer/employee and nothing
herein shall be read as expressing a contrary intent.
[13] Not only does the
existence of a collective agreement not assist the respondent, these terms are
fatal to the respondent’s case, unless they are shown to be inconsistent with
the application of the common law to the facts of the case.
[14] The principles
governing cases of this type are well-established. They were conveniently
summarized in the Federal Court of Appeal's decision in Wiebe Door v M.N.R. The Supreme Court of Canada
has recently reaffirmed them in 671122 Ontario Ltd. v. Sagaz Industries Inc. My task is to consider the
facts of this case in light of those principles, having regard in particular to
the factors enumerated in those cases, but bearing in mind that those factors
are not exhaustive, and that the weight to be given to each may vary from case
to case depending on the circumstances.
[15] The appellant had the
right to exert some control over Mr. Palmer in relation to certain aspects of
his work. This related to such matters as his dress and appearance, and other
matters as to which his conduct might reflect poorly on the appellant in its
relations with its customers. He was required, of course, to maintain schedules
and to deliver reports to the Bank and way bills to the appellant’s drop boxes,
but again these were operational requirements. He was free, within the
parameters of the contractual obligations of Dynamex to its customers, to
perform the work as he saw fit, to arrange his deliveries in the order that
suited him, and to hire a substitute driver when he was unavailable, so long as
the driver was pre-approved by Dynamex. In my view, the control factor favours
the conclusion sought by the appellant.
[16] Ownership of the
tools also favours the view that Mr. Palmer was engaged under a contract for
services. The vehicle was the major piece of equipment used in his work, and he
had to supply that. Dynamex invested some capital in radio equipment, but it
was much less than the drivers’ investment in the vehicles, and it recovered
that investment through the monthly rental payments that the drivers were, for
the most part, required to make.
[17] There are a number of
ways in which Mr. Palmer, and the other owner‑operators, were able to increase
their net incomes, both by increasing their revenues and by controlling their
expenses. The choice of an economical vehicle rather than a gas guzzler, and
careful operation and maintenance to minimize fuel consumption and repairs
could significantly reduce their expenses. Efficient organization of the route
for deliveries could do the same. In Mr. Palmer’s case, he had the opportunity
to accept on-call work that could be efficiently integrated into his Mercantile
Bank delivery route. Mr. Aitken’s evidence was that the drivers also had at
least some opportunity to negotiate commission rates on some of the work. All
these factors provided the drivers with an opportunity to affect their
profitability by their conduct – certainly one of the hallmarks of
entrepreneurship.
[18] The contract also
carried with it the risk for Mr. Palmer of significant loss. Traffic fines,
damage to his vehicle and the potential for liability to others for damage
caused in the course of the work were all potential sources of loss. Some of
these risks were quite significant, and some he could insure against. Indeed,
he was required to insure against liability to third parties. But the potential
for unforeseen losses is always a hazard in those cases where the worker
provides the vehicle at his own expense.
[19] All these factors are
indicative, in varying degrees, of a contract for services. Mr. Palmer’s
business was necessarily integrated into that of the appellant, as will always
be the case with a dependant contractor, but that is not inconsistent with the
contract being for services rather than a contract of service. Counsel for the
appellant referred me to a number of decisions of this Court in cases involving
the same issues in respect of couriers,
as well as to the decision of the British Columbia Supreme Court in Tajarobi
v. Corporate Couriers Ltd,
and that of the New Brunswick Court of Queen’s Bench in Erb v. Expert
Delivery Ltd.
In all these cases the facts were very similar to the facts of the present
case; in all of them the couriers, usually owner-drivers, were found to be
contractors rather than employees.
It does not appear that any of these decisions were appealed. It is difficult
to understand the reluctance of the Minister of National Revenue, and of the
Attorney General, to either accept these judgments of this Court as settling
the question insofar as it applies to dependant contractors, or else appeal
them to the Federal Court of Appeal.
[20] The appeals are allowed,
and the decisions of the Minister made under section 93 of the Act and
section 27.2 of the Plan are varied to provide that during the period
Mr. Palmer was not engaged by the appellant in insurable employment under the Act,
or in pensionable employment under the Plan. In view of the number of
previous decisions of this Court that have reached the same result in similar
circumstances, I regret that I am unable to make a substantial award of costs
to the appellant.
Signed at Ottawa, Canada, this 31st
day of January, 2008.
“E.A. Bowie”
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