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Citation: 2006TCC507
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Date: 20060915
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Dockets: 2005-3723(CPP)
2005-3724(EI)
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BETWEEN:
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ART CITY IN ST. JAMES TOWN,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
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REASONS FOR JUDGMENT
(Delivered orally from the Bench on August 29, 2006
at Toronto, Ontario)
Hershfield
J.
[1] The
Appellant appeals a ruling under the Employment Insurance Act and the Canada Pension Plan that a Ms. Gizas (the "Worker") was an
employee of the Appellant ("Art City") providing
services under a contract of service. The period in question is March 2004
through February 2005.
[2] Art
City is a registered charity offering an after school community arts program
for children ages 6 to 15 in St. James Town, one of Toronto's poorest
neighbourhoods.
[3] The
arts program consists of professional artists, developing artists and
volunteers offering art related classes to children free of charge. Programs
are funded entirely by donations and grants. Art City is governed by a
volunteer board.
[4] Two
directors testified on behalf of the Appellant, both having been on the Board
since inception as founding members and were, as well, members of the Board at
all relevant times. The Worker and a former guest artist (Mr. Kennedy)
testified for the Respondent.
[5] One
witness for the Appellant, Ms. Martin, was chairperson of the Board at all
relevant times. She testified that the St. James Town area was one of the
poorest areas in Toronto with the highest density population in
North America. The program got children off the streets, gave them a
stimulating environment and after school snacks which may not have been the
least important aspect of the program.
[6] It
is acknowledged that the Board members relied on paid artists to develop and
operate the programs. Visits to the site by Board members were few and not
intended to serve day-to-day operations. It was acknowledged that the site
needed someone as a regular presence; someone there to see that there were
guest artists developing and deploying their programs; someone for parents to
contact; and someone to see that snacks were there for the children. In other
words, the Board wanted a responsible, on-site, figurehead responsible for the
delivery of programs and the safety and well-being of the children.
[7] Board
meetings were not regular during the relevant period, however, Art City was being managed
by the Board on a need to respond basis. Issues requiring Board input were
dealt with frequently by e-mail.
[8] One
Board member saw to payment of invoices and payment of bills. Invoices were
submitted by workers for hourly rate remuneration and for art supplies used by
the children in the programs. Supplies of the artists themselves were their own
responsibility such as a sewing machine which the Worker supplied for use in her
programs. The Worker was a creative fashion artist.
[9] Referring
back to the needed on site, regular presence, the title of "Creative
Program Director" seems to have been adopted early on. While both
Appellant's witnesses wanted to minimize the significance of the title, I am
satisfied that for all intents and purposes the title was intended by the Board
to be worn by the person at Art City who was in charge. It served the
interests of the charity if a person with such title, and the authority it
suggested, was present. Otherwise it strikes me that the operation of the art
programs would be nothing short of chaotic.
[10] When the community art program began, or at some point after, this
regular presence or face of the program was a Mr. Whitworth. He was engaged as
an independent contractor to act as Creative Program Director. He had other
work but made himself available to attend at Art City during operating hours which were 3:30
p.m. to 6:00 p.m. and otherwise be there to help arrange for visiting artists
to run their programs. Visiting or guest artists were an itinerant group who
arrived largely by word of mouth. They developed their own projects for the
children and bought the supplies needed for their programs which they invoiced
for reimbursement by Art City.
[11] In about March 2004, Mr. Whitworth left and the role of Creative
Program Director became vacant. At that time two visiting artists, the Worker
and another, were to be funded as artists in residence. An application for
funding or partial funding for these positions was made to the Toronto Arts
Council. As well, the vacancy in the position of Creative Program Director was
to be filled by one of these two resident artists.
[12] The Worker was the unanimous and enthusiastic choice of the Board to replace
Mr. Whitworth as Creative Program Director. She had energy and initiative
and the children loved her. The Appellant's evidence was that the Worker took
on this position knowing it was part of the artists in residence program and
that she knew the limitations of the program which were that funding prohibited
permanent staff salaries.
[13] The Worker denied knowing the contents of the application and
testified that although she worked on the application and authored portions,
those portions that suggested she knew she was to be funded as an artist in
residence were authored by members of the Board. Her denial, of even knowing
that the application that she worked on was being submitted to assist funding
her engagement, is hard to accept.
[14] The funding for the two artists in residence was secured by August
2004. As a guest artist for some two years, the Worker had received $10.00 per
hour. Once it was contemplated that there would be funding for two artists in
residence, she and the other artist in residence to be, started getting $15.00
per hour. Both received another raise to $18.00 per hour when the final traunch
of funding was secured from the Arts Council. While the hourly rate
compensation for both workers stayed the same, the Worker's role as Creative
Program Director afforded her greater remuneration opportunity.
[15] In about July 2004, having served as Creative Program Director for
some three months, the Worker made up an agenda for the Board. That agenda
includes her proposal to have a one-year written contract as Creative Program
Director. The proposal asks for $22.00 per hour and indicates that there is no
vacation pay and no benefits in the arrangement. This underlines to me that she
understood not only the nature of the existing arrangement which afforded no
benefits but it also reflects that she was not proposing to change the nature
of the arrangement in respect of the written contract that she was proposing.
Her testimony to the contrary is suspect.
[16] The Appellant's witnesses acknowledged that the Worker wanted a
written contract which the Board was considering at a meeting in January 2005. While
a written contract was never entered into, the testimony of Ms. Martin was
clear and categorical. The Board did not understand nor would the Board
consider that the contract, if entered into in writing, would be anything other
than a contract for services. That is, the Worker would continue to be retained
as an independent contractor. The proposal as seen by the Board was for a one-year
term written contract with an hourly rate increase without benefits.
[17] This, in general at least, sets the stage for a legal analysis and the
recitation of further particulars that that analysis requires.
[18] The evidence confirms that the Worker, as Creative Program Director, had
more contact with the Board than she would have had as an artist in residence.
There is no dispute that the Worker did administrative work. For example, she
assisted in the preparation of grant applications and turned over invoices of
guest artists to the Board for payment if they were not taken to the Board
directly by the guest artists. Indeed this is how most invoices were handled.
However, the Worker did not approve invoices and there is no evidence to
suggest that she approved the acquisition of supplies that guest artists billed
the Appellant. As well, she did detailed weekly activity reports soon after
taking the title of Creative Program Director. This, however, was not required.
According to the Worker's testimony, they were not even read. Still, some form
of reporting was essential for the Board to be informed and make decisions.
Reports were a service to which her hourly rate was applied but much of what
she did was a result of her initiative and enthusiasm. When the reports began
to lapse and ceased altogether after several months, there was no recourse
although less detailed reporting continued by e-mail correspondence. The
freedom afforded the Worker is reflected in these events.
[19] The Worker, as Creative Program Director, was expected to be at the
Appellant's site during operating hours but she was free to get a replacement
who would invoice their services separately. It was expected that any
replacement would be suitable and known to the Board. While one exhibit
relating to the termination of the services of the Worker referred to her
having replaced herself with a replacement who was not approved by the Board,
Ms. Martin explained that it was really less formal than approval of the Board per
se. The Worker was expected and was indeed required to act responsibly in
choosing a replacement, and in the case of a person not known to the Board, the
responsible thing for the Worker to do would be to advise the Board. If the
replacement person was not known to the Board further information would have
been expected. Art City was, after all, dealing with young children. As will be
noted, it was the Worker's asserted failure in this regard that caused her
termination.
[20] In addition to a responsible figurehead present at the studio, I note
that there were as many as 15 artists engaged in projects with the children
during the subject period. Some coordination was necessary and it is only
reasonable to conclude that it was the Worker as the Creative Program Director
who fulfilled such responsibility. On the other hand, her efforts to promote
the art programs was largely a result of her own initiative. She expanded the
programs and enrolment. She was entrepreneurial in this regard. As well, she
was entrepreneurial in her search for funding for the Appellant. Indeed, one
such application seems to have been another reason for the Board's ultimate dissatisfaction
with her – nonetheless it is an example of her professional initiative and
entrepreneurial spirit.
[21] I turn now briefly to the circumstances surrounding the Worker's termination.
This termination was felt to be required due to the Worker not acting
responsibly. She is said to have gotten a replacement on one occasion who
brought a Pit Bull to the studio. Although the Worker denied the
allegations, she did admit she never notified the Board of her planned absence
which was planned two weeks before it occurred. That she did not see the need
to ask for permission underlines her own perception and understanding which was
that in practise there was little actual control asserted over her decisions to
take time off. Her version of the story, which I accept, was that she did leave
the studio with someone known to the Board and that was sufficient. A series of
regrettable circumstances led to the presence of the dog. Still, the Worker acted
on the basis that she did not need permission per se to replace herself.
She just needed to act responsibly in her selection, and she believed she had.
[22] As stated, the Board had other concerns such as the Worker being over‑zealous
in terms of the acquittal of her role. The Worker was an independent, strong
minded contractor who viewed the lack of supervision as freedom to expand her
role.
[23] This is not to suggest that the Board played no role. I accept the
Worker's evidence that the Board oversaw the organizational structure, made
decisions affecting operations and oversaw the budget. That does not make the
Worker a subordinate. She was a professional artist running an art studio for
the Board with a mandate that was to get artists to engage the children in a
safe environment, give them healthy snacks and help raise money. She discussed
her role when she was retained as Creative Program Director, given all the
information to run the studio and given the keys.
[24] The Worker knew at the outset that she had discretion as to hours of
work, except for some 3.5 hours per day, including setup time and closing time.
Even then, if she got a suitable replacement, there was no restriction on her
being absent. While she denied being aware that she could take on other
projects she was an artist endeavouring to do so. During her engagement as
Creative Program Director she applied for and received a grant to do an art
project for children in the schools during her engagement with the Appellant
and was, as well, preparing for an exhibition of her works. She knew she was at
liberty to do these things. That she made her work at Art City a priority and deferred
implementing these projects does not change the fact that she knew she was free
to do otherwise. Such programs were clearly not intended to be put off
indefinitely even if her engagement with Art City had continued.
[25] Given these circumstances, I turn now to look at the tests applied in
determining whether or not there is a contract of service versus a contract for
services.
Control
[26] I do not see how it can be asserted that there was much in the way of
control over the Worker's activities. Subject to replacing herself, as she was
permitted to do, she was required to be on site only 3.5 hours per day or 35 hours
every two weeks. Nonetheless she billed between 60 and 99 hours for each two-week
interval during the subject period. This reflects the freedom she was given to
set her own work routines largely according to her own motivation.
[27] Clearly her engagement contemplated more than 35 hours every two weeks.
There were administrative responsibilities that would require more time. However,
there was no control over how or to what extent she carried out the
administrative role. She set her own administrative agenda without
interference. As well, in effect, she had a home office where she used her own
computer and internet resources at her cost to carry out this aspect of her
engagement. From her home office she stayed in touch with the Board, as one
would stay in touch with a client, and carried out research and related work to
assist in her task of raising funds for Art City, as one would do
for a client. However her office was also used to carry on other business. That
is, she used her home office facilities to pursue projects both involving and not
involving Art City.
[28] In regard to her role as an artist assisting in the deployment of
programs and working her own programs into the various projects, as Mr. Kennedy
spoke of, she was her own boss. This was not a subordinate role.
[29] I acknowledge that as the face of Art City and sole operations person she resembled
any number of "employed" administrators who report only to boards of
directors but more often they do not have such flexible arrangements as are
present here. Further, as an artist it might be said that the lack of control
over her work should not be a factor. As pointed out in Wolf v. R. ("Wolf"), many
professionals who know more than the persons engaging them, and as a result are
not subject to supervision, can still be employees. But those situations may not
afford the flexibility present here.
[30] I do not see how control favours a finding of employment in these
circumstances. Indeed as a sole factor, if it were that, I think the evidence
as a whole warrants a finding that the Worker is an independent contractor.
Tools
[31] As noted, the administrative work that was being done by the Worker
was being done at home on her computer. She also made her sewing machine
available to assist in the deployment of programs. Mr. Kennedy's testimony
casts doubt on the Worker’s evidence that it was not used while she was the Creative
Program Director. Still, that part of the test that looks to utilization of
tools is not determinative in this case. The ownership of the computer and its
use is more material to the application of other tests.
Opportunity for Profit/Risk of Loss
[32] While it is true that an hourly wage is often reflective of a contract
of service, same is not always the case. In this case the Worker had considerable
flexibility in terms of the hours that she could work. That is an opportunity
for profit. Subject to budget limitations of which she was aware, she profited
by her entrepreneurial efforts.
[33] As to risk of loss, I note that when, as part of their engagement, a worker
is looking for funding that could impact on that worker's being paid, there is
a risk of loss that also reflects an entrepreneurial element. She was a knowing
partner in this regard. Loosing the Appellant as a source of income could
result in a modest loss considering ongoing home office costs. As well, there
is a potential liability as a person in charge of children. Such liability
might be considerable although that might beg the question of her engagement
status.
[34] On balance I do not see how these factors favour a finding of
employment in these circumstances. Indeed as a sole factor, if it were that, I
think the evidence as a whole warrants a finding that the Worker is an
independent contractor.
Integration
[35] What some refer to as the fourth test is the integration test. It is
relatively clear to me that the services of someone acting in the role of the Creative
Program Director would be an integral and necessary part of the employer's
business. However, applying the test in this way has been rejected by the
courts. The
approach now being applied is to ask the question "whose business is it or
does the worker have a business".
[36] This test also suggests an independent contractor relationship. While the
Worker did not have many of the trappings of a business, she had one. While
modest and perhaps not even seen as one, she had a home office which was more
than the worker had in my decision in Direct Care In-Home Health Services Inc. v. Canada (Minister of National Revenue). In that case I referred to D&J Driveway
Inc. v. Canada (Minister of National Revenue) as authority for the proposition that
having a business does not depend on such trappings. Although the Worker in the
case at bar did not have a registered business or a listed number in the phone
book or the like, she was promoting her own business and had office facilities
to do that. She was using her home office to fund herself and promote her
business on projects both involving and not involving the Appellant. She had
income from that activity beyond the income paid by the Appellant – she
received a personal grant during the subject period from her efforts during the
subject period. The fact that the Worker did not expand this business to
include carrying out other projects during the subject period was her choice. Choosing
to limit one's activity to, or focusing one's time on, one contract, does not
distract from the finding there is a business. The flexibility in her hours,
her ability to replace herself and the absence of any non-competition type
restrictions confirm her freedom in this regard.
Intention
[37] While the intention test has only recently found its way into the
authorities, its presence and relevance is now very clear. In Royal Winnipeg Ballet v. Canada (Minister of National Revenue), the Federal Court of Appeal recently
held that intentions cannot be ignored and may be a determinative factor. One
way to apply the intention test would be to say that if the intentions of the
parties reflect a mutual understanding as to the nature of the relationship and
the performance of the contract and other relevant circumstances serve to
confirm the understanding, or at least are not inconsistent with such
understanding, then the nature of the relationship should be governed by such
mutual intentions.
[38] Here there is no written contract and the Worker asserts that there
was no mutuality of intention. I do not agree. Objectively speaking the
evidence suggests to me that she most assuredly accepted her engagement on the
basis that she was not being engaged as an employee. She was not being dictated
to by a heavy handed employer seeking to leverage profit from a worker by not
providing benefits. She was a partner in this sense helping to keep this
non-profit organization alive. That is the way she approached the engagement.
[39] Ms. Martin testified adamantly that the Worker never asked for a
withholding of taxes or other source deductions until after she was terminated
in February 2005. Only after being terminated did the Worker apply for benefits
and seek an employment record from the Appellant. This suggests a change in the
Worker's perception of her status. During the subject period, she would know
employees would get paid vacation time and holiday pay. She may be young but she is not naïve.
She had a conversation with one of the directors and was told she could
register as a business. She would have known there was no budget that permitted
the Appellant to provide benefits especially given her hourly rate increase
demands which strike me, in some part at least, as compensatory for not having
benefits. She had talks with Mr. Whitworth where he told her he was unhappy not
getting benefits yet she took over his work. Objectively it seems unlikely the
Worker did not intend to work within the criterion set out by the Appellant.
[40] In a case such as this, that may well be sufficient to warrant a
finding of mutuality of intent. She freely accepted the limitations of the
engagement in a cooperative spirit. She accepted no vacation pay, no benefits
and the like. She had no job security which is often the plight of independent
contractors and she sought to have that changed by requesting a term
contract. As stated in Wolf, if specific factors must be identified, job
security, benefits, and freedom of choice and mobility would be on the list. In
the case at bar I agree with Appellant's counsel – on balance and viewed as a whole
these factors weigh in favour of a finding that the Worker in this case is an
independent contractor.
[41] At the end of day I am of the view that the Worker, angry with her
termination, sought to recharacterize the nature of her engagement after it was
terminated. Charitable organizations such as this live from day-to-day on
shoestring budgets. Workers who are intimately aware of the financial
limitations on the party paying them may have little ground to assert after the
fact that they did not understand and accept that they could not be engaged at an
agreed hourly rate without the common understanding that the engagement was not
one of employment. This is not to suggest that all non-profit organizations can
seek to abuse workers by claiming that a lack of funds to pay benefits, and a
worker's acceptance of that, is a basis to avoid categorizing the workers as
employees. To the contrary, such organizations should no doubt strive to fund
benefits and embrace their workers in social assistance networks where, at law,
they are meant to apply. This Court must satisfy itself then, on a review of all
factors, that there is more than circumstantially imposed mutual consent. I
have done that and, applying the traditional tests to the facts of this case, I
have found that they too point to a finding that the Worker was an independent contractor
during the subject period.
[42] Accordingly the appeals are allowed.
Signed at Ottawa,
Canada, this 15th day of September 2006.
Hershfield
J.
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