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Citation: 2005TCC80
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Date: 20050131
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Dockets: 2004-1859(EI)
2004-1860(CPP)
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BETWEEN:
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825209 ALBERTA LTD.,
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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
Bowman, A.C.J.
[1] These appeals are from assessments
made under the Employment Insurance Act and the Canada
Pension Plan whereby the Minister of National Revenue
assessed the appellant for Canada Pension Plan contributions and
employment insurance premiums in respect of a number of
individuals whose services the appellant retained as painters
from time to time for specific jobs. The issue is whether the
individuals were engaged under contracts of service or contracts
for services or, in the phrase that is more commonly and
colloquially used, whether they were employees or independent
contractors in the years 1999, 2000, 2001 and 2002.
[2] The appellant is owned equally by
William Coles and his wife Charlene Coles. It carried
on a painting business, a construction business, a paint store
and a computer store. It has since disposed of the computer
business.
[3] We are concerned here with the
status of persons whose services the appellant engaged in the
painting business, which it carried on under the name Billy's
Construction & Painting.
[4] The part of the painting business
involved in these appeals was the painting of the interior of
hotels and motels which were being constructed throughout
British Columbia, Alberta, Saskatchewan, Manitoba and in one
case, Fort Frances in Ontario and in another,
Yellowknife.
[5] Once the appellant was engaged by
a general contractor to do the painting of the hotel that was
under construction, Mr. Coles would, in some cases, contact
local painters in the city where the work was being done and in
others he would contact painters whom he knew or who had been
recommended to him by contractors in Three Hills (where the
appellant's office was located) or elsewhere. They would then
discuss the hourly rate, the nature of the painting job to be
done and the time frame in which the job was to be done. The
appellant would sometimes transport the painters to the job site
in its van and, at least in one case that I recall from the
evidence, Mr. Coles let the painters borrow the van. If the
painters did not live in or near the city or town where the work
was being done, the appellant paid for the hotel. The painters
were free to accept or decline the engagement.
[6] The appellant supplied the paint
since, as the owner of a paint store, it could obtain better
prices. It also supplied the masking tape.
[7] The painters supplied their own
brushes, knives and other tools and usually, drop sheets. If they
owned paint sprayers they supplied them and charged a higher
hourly rate. If not, the appellant would provide a sprayer.
[8] Many of the painters had their own
proprietorships operating under a different name such as "Polymar
Man" or "Polymar Paints", "Continental Painting and Drywalling",
"Morrow Painting Services", or "Rosco & Son Paint Company".
They were free to hire helpers and in some cases they were a
husband and wife team.
[9] The painters would submit invoices
showing the hours worked and the hourly rate, usually at the end
of the job. The appellant would pay them by cheque when it got
paid. The painters were not shown on any payroll and no tax,
Canada Pension Plan or employment insurance premiums were
withheld.
[10] So far as supervision was concerned
Mr. Coles exercised very little. I appreciate that the
appropriate question is not whether the payor in fact controlled
the worker but whether it had the power to do so. (Groupe
Desmarais Pinsonneault & Avard Inc. v. Canada, 2002 FCA
144, 291 N.R. 389). Here it is difficult to see what control
Mr. Coles could have exercised. Painters are, in general, a
pretty independent lot. You show them the room or the building
you want painted, leave them alone and come back when the job is
done and if it is satisfactory you pay them. There is no
"control" (or relationship of subordination to use a phrase that
is seen sometimes in cases of this sort in which the tests in the
Quebec Civil Code are relevant, such as Vulcain Alarme Inc. v.
M.N.R., 1999 FCA). The painters were not required to keep any
particular hours so long as they got the job done within the
necessary time frame. In many cases Mr. Coles never met the
painters.
[11] The painters were free to take other
work, either during the engagement or between engagements. Many
of them were musicians who supplemented their income earned from
musical gigs by picking up odd painting jobs. There is no
continuity in their work with the appellant. If the work was
there they got it. If not, they looked elsewhere.
[12] Wiebe Door Services Ltd. v.
M.N.R., [1986] 2 C.T.C. 200 sets out what has come
to be known as the four-in-one test (control, ownership of tools,
chance of profit/risk of loss and integration). These have been
substantially confirmed by the Supreme Court of Canada in
671122 Ontario Ltd. v. Sagaz Industries Canada Inc. [2001]
4 C.T.C. 139.
[13] One must however not apply the parts of
the test slavishly or accord to any one component an importance
that overrides all of the other factors. Some factors may, in the
context of a particular case, have little or no significance.
Each must be assigned such significance in the overall context as
the facts of the case require. For example, both
MacGuigan J.A. in Wiebe and Major J. in
Sagaz found that it could be difficult to apply the
integration test. I have yet to see the integration test used as
a stand-alone determinative test (except perhaps in the
decision of the Tax Court in Wiebe Door which was reversed
in the Federal Court of Appeal). What must be looked at
ultimately is the overall composite picture.
[14] I have mentioned above the four
components in the Wiebe Door test. Wiebe Door
is still good law but other factors seem to be emerging. For
example, in Poulin v. M.N.R., 2003 FCA 50, the
Federal Court of Appeal appears to have attenuated, in some
measure, the concept of control and to have placed somewhat
greater emphasis on the intention of the parties. The following
passages from the judgment of Létourneau J.A. are
illustrative of the way the law is developing in this area:
[12] With respect, I think the
legal nature of the relationship between the applicant and the
three workers providing services to him has been misunderstood.
This misunderstanding stems from a misapplication of some of the
tests in the Wiebe Door Services Ltd. case, supra,
and a failure to pay sufficient attention to the intention of the
parties in the determination of the overall relationship they
have to each other: 671122
Ontario Ltd. v. Sagaz Industries Canada Inc., [2001]
2 S.C.R. 983, at paragraphs 46 and 47. I will begin
my remarks with the test of control and the subordinate
relationship cited by the Tax Court of Canada.
(a) existence of
control and a relationship of subordination
[13] The issue under this test
is whether, based on the evidence as a whole, there is control on
the one hand, i.e. the applicant, and subordination on the other,
the workers: Wolf v. Her Majesty the Queen, A-563-00,
Neutral Citation 2002 FCA 96, March 15, 2002, para. 117
(per Décary J.A.). Technically, the two notions
define an important element in the contract of employment, as
opposed to the contract for services. Article 2085 of the
Civil Code of Québec, which determines the
applicable law in this case since the contract must be
interpreted in accordance with the laws of the province of Quebec
(see Federal Law - Civil Law Harmonization Act No. 1, S.C.
2001, c. 4), states:
Art. 2085
A contract of employment is a contract by which a person, the
employee, undertakes for a limited period to do work for
remuneration, according to the instructions and under the
direction or control of another person, the employer.
[14] Conversely, the contract
for services or of enterprise does not involve any relationship
of subordination in respect of performance and the provider of
services is free to choose the means of performing the contract:
article 2099 of the Civil Code of Québec. The
provider who operates a business or simply provides some services
does so on his own account.
[15]
What must be retained from these definitions of the two contracts
is that the notion of control is important to the legal
determination of the nature of the relationship between the
parties. However, this notion of control is not always conclusive
in itself, notwithstanding the importance it must be given. As
our colleague, Madam Justice Desjardins, said in Wolf,
supra, at paragraph 76, "While the control test is the
traditional civil law criterion of employment, it is often
inadequate because of the increased specialization of the
workforce": see also Wiebe Door Services Ltd., supra,
at pages 558-59, where our colleague, Mr. Justice MacGuigan,
states that the test has broken down completely in relation to
highly skilled and professional workers, who possess skills far
beyond the ability of their employers to direct.
[16] Furthermore, the notion of
control is not necessarily lacking in the contract for service.
It is generally apparent, albeit to varying degrees, as it is
somewhat in the contract of employment, and sometimes to a
surprising extent without necessarily distorting its nature as a
contract of enterprise. For example, control in regard to the
premises in general and the specific places in which the work is
to be performed is exercised over general contractors and their
subcontractors. The latter are also given specific instructions
as to the materials and the drawings and specifications with
which they must comply. Often the times and work schedules of
some in relation to others are also controlled and determined to
ensure the effective and harmonious operation of the construction
site. The work performed by contract for services is also subject
to some performance, productivity and quality controls.
. . . . .
[28] This leads me to examine
the intention of the parties, in order to determine the overall
relationship that they wished to maintain between themselves.
(d) intention of the
parties
[29] There is not, in this case,
as is often the case in similar matters, any written agreement;
this obviously makes the search for intention more difficult but
not necessarily impossible.
. . . . .
[31] As for the workers, there is no indication whatever
that they considered the applicant to be their employer. The Tax
Court of Canada noted that these workers were not opposed to
having their employment declared insurable employment, inferring
from this that they considered themselves employees. But the
three workers testified at the hearing of the assessment appeal
filed by the applicant and none of them stated that he or she
considered themselves employees of the applicant. Equally
significant, perhaps, and indicative of their intention at the
time when the agreement was entered into with the applicant, is
the fact that these three workers never complained to the
Minister about the insurability of their job and never asked that
it be declared an insurable employment: they considered
themselves self-employed workers and thought that it was in that
capacity that they had dealt with the applicant.
[15] It must of course be acknowledged that
some of the cases referred to above depended upon a specific
provision in the Quebec Civil Code. Nonetheless, the principles
enunciated in them are instructive in cases arising in common law
provinces. The question of intention was also discussed in
Wolf v. Canada, 2002 DTC 6853 by Nöel J.A.
He states at page 6870:
[122] I too would allow the appeal. In my
view, this is a case where the characterization which the parties
have placed on their relationship ought to be given great weight.
I acknowledge that the manner in which parties choose to describe
their relationship is not usually determinative particularly
where the applicable legal tests point in the other direction.
But in a close case such as the present one, where the relevant
factors point in both directions with equal force, the
parties' contractual intent, and in particular their mutual
understanding of the relationship cannot be disregarded.
[16] So far as intention in concerned it is
obvious that Mr. Coles did not intend the painters to be
employees. He saw them as independent contractors and nothing in
his dealings with them was inconsistent with that intention.
Indeed, the one witness called by the respondent,
Mr. Martin Zinger, was looking for any kind of work he
could get. He took on a painting job with the appellant. He
supplied his own tools and invoiced the appellant and was paid
when the job was done. He stated that he saw himself as a
subcontractor or self-employed, and never considered himself an
employee. He felt free to take other jobs and between engagements
he looked for other work. From Mr. Coles' testimony,
Mr. Zinger was typical of all of the painters. Indeed,
Mr. Coles stated that since the ruling that is in issue here
he has had difficulty in finding painters because no one wants to
be an employee.
[17] The test relating to chance of profit
or risk of loss is connected with the question whether the worker
is in business on his own. This was mentioned in Sagaz at
paragraph 44 where the Supreme Court of Canada cited the
passage in Wiebe Door which quoted the judgment of
Cooke J. in Market Investigations v. Minister of Social
Security, [1968] 3 All E.R. 732. The passage
reads:
[44] According to MacGuigan J.A., the best synthesis found in
the authorities is that of Cooke J. in Market Investigations
v. Minister of Social Security, [1968] 3 All E.R. 732 (Eng.
Q.B.), at pp. 737-38 (followed by the Privy Council in
Sang v. Chi-Keung, [1990] 2 A.C. 374 (Hong Kong
P.C.), per Lord Griffiths, at p. 382):
The observations of LORD WRIGHT, of DENNING L.J. and of
the judges of the Supreme Court in the U.S.A. suggest that the
fundamental test to be applied is this: "Is the person who has
engaged himself to perform these services performing them as a
person in business on his own account?" If the answer to that
question is "yes", then the contract is a contract for services.
If the answer is "no" then the contract is a contract of service.
No exhaustive list has been compiled and perhaps no exhaustive
list can be compiled of considerations which are relevant in
determining that question, nor can strict rules be laid down as
to the relative weight which the various considerations should
carry in particular cases. The most that can be said is that
control will no doubt always have to be considered, although it
can no longer be regarded as the sole determining factor; and
that factors, which may be of importance, are such matters as
whether the man performing the services provides his own
equipment, whether he hires his own helpers, what degree of
financial risk he takes, what degree of responsibility for
investment and management he has, and whether and how far he has
an opportunity of profiting from sound management in the
performance of his task. [Emphasis added.]
[18] Clearly the painters have the chance of
profit and the risk of loss. They negotiate the terms of the
engagement, including the hourly rate and the time frame. If
the work did not materialize they were not paid and indeed if the
appellant did not get paid neither did the painters. Whether they
got work from the appellant depended on their being called by
Mr. Coles. They were free to accept a job or reject it.
Mr. Coles as well could call a particular painter or not as
he saw fit.
[19] What is the overall picture that
emerges? Clearly we have a number of independent contractors in
business for themselves working at times for the appellant when
it had a hotel job, otherwise looking for work and working for
anyone else who was prepared to offer them work.
[20] This case is in my view at least as
strong as or possibly even stronger than that of Precision
Gutters Ltd. v. M.N.R., 2002 FCA 207, where the Federal Court
of Appeal reversed a decision of this court and held that
installers of eaves troughs were independent contractors. The
following passages are illustrative:
[3] Precision's business consists of manufacturing
and installing eaves troughing (gutters). Precision pays
installers to perform the installation work and the dispute is
whether those installers are employees or independent
contractors.
[4] Precision would negotiate contracts with customers
and then hire installers to perform the work. There was no
guarantee of ongoing work for the installer. Precision had no
right to the exclusive services of any of the installers and they
worked for other gutter installation companies without informing
Precision. As a result, an installer might refuse a job on the
basis that the distance was too great and the gross revenue was
not sufficient to make it worthwhile.
[5] Installers could work alone but more often worked in
pairs. Furthermore, installers could have a helper. Precision
would offer an amount for each contract and the installers would
negotiate amongst themselves for the proper allocation of payment
and the installers would pay their own helpers. Thus Precision
would sometimes issue a cheque to only one person who would then
pay the rest of the crew. Sometimes Precision would issue
multiple cheques to each crew members based on the advice of the
crew members. In order to get paid, the installer would have to
render an invoice to Precision.
[6] Contracts were paid based on a per-foot amount.
Around 70-80% of the time, installers would accept the
contract amount offered by Precision. Around 20-30% of the time,
installers would negotiate with Precision over the contract
amount.
[7] Precision owns five gutter-roll forming machines
that are capable of forming the material into the required shape.
Some installers own their own gutter rollers. Others use
Precision's machines. The installers own their own tools
(typically having a value of around $2,000). Precision provides
the aluminum gutters used for installation.
[8] Typically one installer would pick up the gutter
roller and the rest of the crew would go directly to the job
site. Precision would notify installers of work opportunities by
posting notices at the business premises of the main material
supplier.
[9] Installers did not work under any deadlines,
although jobs typically lasted no more than two days. The work
was not supervised and work was not inspected.
The resemblance to this case is obvious. I do not propose to
quote any further from this case except for paragraph 30
which reads:
[30] What the Tax Court Judge has failed to appreciate
is that there may well have been in the instant case two
businesses, one on the part of Precision and a second business on
the part of the installers. The question is not "whose
business is it" but rather "is the person who has
engaged himself to perform the services performing then as a
person in business for his own account". To pose the
question in the form set out by the Tax Court Judge is to perhaps
imply that there is only one business. Clearly there can be, and
in this case, there were, two businesses - manufacturing gutters
and installing them.
[21] It is clear that on all of the tests in
Wiebe Door, as discussed in Precision Gutters, as
well as the recent test of intent in Poulin, the painters
were independent contractors. I see no reason to list them by
name. Counsel suggested that since not all of them were listed by
name in the notice of objection this court lacked jurisdiction to
deal with any painters whose names did not appear in the notice
of objection. With respect, I disagree.
[22] On an appeal to this court the court
has the power to look at the assessment as a whole. It would be
deplorable if an unrepresented litigant in the informal procedure
were to lose all or a portion of its case because its notice of
objection did not list everyone in respect of whom the assessment
was issued. The Employment Insurance Act and the Canada
Pension Plan does not require that type of specificity in a
notice of objection any more than the Income Tax Act
requires specificity in a notice of objection (except for large
corporations).
[23] There is another group of workers who
worked in the computer store or the paint store. They were paid
an hourly rate and worked under the constant and direct
supervision of the store manager. It was not seriously argued
that they were not employees. I find that they were
employees.
[24] There was one final person, an artist
by the name of Martin who turned up, to use Mr. Coles'
terminology, "higher than a kite". Mr. Coles paid him $50 to
go away. I doubt that he fell within either category. Although he
was obviously independent, perhaps unduly so, he was scarcely a
contractor. He was, rather, merely a free spirit of short
passage.
[25] The appeals are allowed and the
assessments are referred back to the Minister of National Revenue
for reconsideration and reassessment in accordance with these
reasons.
Signed at Ottawa, Canada, this 31st day of January
2005.
Bowman, A.C.J.
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