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Citation: 2005TCC178
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Date: 20050304
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Docket: 2004-4055(EI)
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2004-4057(CPP)
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BETWEEN:
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DHL EXPRESS (CANADA) 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
Miller J.
[1] DHL Express (Canada) Ltd. appeals
the decision of the Minister of National Revenue that Mr. Ken
Hiles was engaged in insurable employment pursuant to the
Employment Insurance Act and pensionable employment
pursuant to the Canada Pension Plan for the period
commencing January 1, 2002 to July 8, 2004. DHL contends Mr.
Hiles was an independent contractor under contract for services
with DHL. I agree with DHL's position.
[2] Mr. Hiles did not intervene, nor
did he testify. The evidence was presented by two employees of
DHL; Mr. Munro, a general manger in charge of the Nanaimo region,
and Ms. Parisienne, a general manager involved with the
negotiation of the collective agreement with the Union.
[3] Mr. Hiles was a delivery driver.
He first entered an agreement with DHL's predecessor, Loomis,
in 1994. For the period commencing January 2002, Mr. Hiles
was bound by the terms of a collective agreement between Canadian
Automobile Worker's Union and DHL, and also pursuant to his
own contract with DHL. Before reviewing the actual working
relationship between DHL and Mr. Hiles, it is helpful to review
some of the terms of these agreements.
[4] The collective agreement
distinguishes between employees and independent contractors, as
there is a section in the agreement called "Owner
Operators" and also one called "Hourly Section".
Schedule "A" of the agreement sets a remuneration
schedule in terms of minimum rates for drivers. There are four
main areas of remuneration with the following minimum rates for
2002:
(i) an amount for a first
waybill stop - minimum $1.55;
(ii) an amount for multiple waybills
stops at the same location - minimum $.59;
(iii) an amount based on weight - minimum
$.01 per pound;
(iv) an amount to recognize the extent of
driving necessary (no minimum); and
(v) an amount for sorting.
[5] Mr. Hiles negotiated his own
remuneration package which is set out in Schedule "A"
to his own agreement. He negotiated rates above the minimums by
receiving $1.79 for a first waybill stop, $.79 for multiple
waybill stops at the same location, $.01 per pound based on
weight, $100 a day to recognize the extent of driving time and
$5.75 in connection with sorting at the warehouse.
[6] It is important to appreciate that
DHL establishes what they call "routes", or designated
areas for a driver. Mr. Hiles had Route 105, the Shawnigan Mill
Bay Route on Vancouver Island. The route would be considered a
rural route. Some routes, for example, urban routes, may be more
profitable than others. The collective agreement provides a
minimum bi-weekly guaranteed amount, which varied depending on
the route. The evidence was that Mr. Hiles always exceeded this
minimum.
[7] The specifications for services to
be provided by Mr. Hiles are covered in Schedule "B" to
his own agreement, which is also Schedule "B" to the
collective agreement. The following highlights some of the
requirements: to pick up and deliver assigned packages, to report
daily, to maintain his vehicle, drive safely, to scan packages
using a company scanner, to provide replacement drivers for
vehicle, when necessary, to wear clean uniforms, etc.
[8] The following provisions are found
in the body of the collective agreement:
1.02
(b) Owner Operator:
Is an employee of the Company as defined by the Labour Code of
Canada, Part 1, Chapter L-2, Section 3.1, and includes the
"contractor" Owner Operators covered by Appendix C of
this Collective Agreement.
2.01
The Union recognizes, except to the extent Management Rights
have been abridged or modified by specific term and conditions in
this Agreement, that it is the exclusive function of the Company
to: Hire, classify, promote, demote, lay-off, suspend, discharge
or otherwise discipline Owner Operators for just cause.
6.07
(a) It is
appreciated from time to time that a substitute driver may be
used to perform the scheduled route as per this agreement.
However, this replacement will only be used for holiday relief,
sickness or an emergency situation. Additionally, the relief
driver may be used in the case where the Owner Operator is under
a license suspension not exceeding twelve (12) months, provided
the Owner Operator rides with the relief driver in a vehicle as a
"Swamper" for the entire period.
(b) The Owner
Operator assumes all liability for insurance and Workers'
Compensation for any person operating their vehicle in relation
to this clause.
(c) The Owner
Operator must secure approval from the company of his replacement
prior to assuming the contractual duties.
8.01
The Company will pay for new uniforms when such new uniforms
are necessary and will maintain and clean such uniforms (jackets
and trousers). The Owner Operators will be expected to keep same
in good appearance at all times. All such uniforms will be
returned to the Company at the time of, or upon termination of
the business agreement.
10.01
When Owner Operators are required to attend training programs
or mandatory meetings, the Owner Operator be paid the equivalent
of the hourly driver rate if held during their normal work day or
1.5 times the hourly rate training hours or mandatory meetings in
excess of the normal working day. If a relief driver is used, the
Company will pay for the relief driver.
[9] In fact, what did Mr. Hiles
provide in his relationship with DHL? Firstly, he provided his
own one-ton truck, a truck of his choice, and he ensured that it
was painted the company colours, though DHL paid to have the
company decal put on the truck. Mr. Hiles attended to all costs
of repair and maintenance for the truck, as well as buying
appropriate insurance. DHL required a certain size of vehicle for
Route 105, given the nature of the deliveries in that area. DHL
also required a minimum liability coverage. Mr. Hiles provide his
own cell phone and all necessary office-like supplies. DHL
provided all invoice forms, pagers, scanner, uniforms and $110.00
per year towards steel-toed boots.
[10] Mr. Hiles also was responsible for
providing a relief or replacement driver if he could not, or did
not, care to drive. There was considerable testimony respecting
the replacement driver. Notwithstanding the provision in the
collective agreement allowing up to 30 days per year for a
replacement drive, Mr. Munro's evidence was that no
records were kept or monitoring done as to how often a
replacement driver was used. It was up to Mr. Hiles who he hired.
Again, notwithstanding the requirement in the contract that the
driver must provide a driver's abstract and R.C.M.P.
clearance to DHL for any replacement drivers, Mr. Hiles relied
upon at least two replacement drivers, his wife and
Carolyn Dares, who did not submit those documents to DHL for
some considerable period of time after they had been driving for
Mr. Hiles. Also, notwithstanding provisions in the collective
agreement as to minimums to be paid to replacement drivers, Mr.
Munro indicated that he did not feel it was DHL's concern. It
was between Mr. Hiles and his drivers, and if they weren't
satisfied, then Mr. Munro suggested they contact the Union. It
was also up to Mr. Hiles to train these drivers, although DHL
provided dangerous goods training. Mr. Hiles used his
replacement drivers on many occasions during the period in
question.
[11] Mr. Hiles would start his day in time
to make the pre-9:00 a.m. deliveries. He would go to the
warehouse where two labourers would load up his van. He would
organize that load to accommodate the priority of his deliveries.
He would then spend the morning making the deliveries, by
whatever route he deemed most expedient. He could take whatever
breaks he wanted. Deliveries would be conducted in the morning
and Mr. Hiles would go home for lunch. He, or a replacement
driver, would then conduct the pickups in the afternoon, return
to the warehouse to unload and sort by 5:30 or 6:00 p.m. to
ensure that the freight made the necessary connections. Mr. Munro
suggested that Mr. Hiles would normally be finished by 4:15 or
4:30 p.m.
[12] With respect to the area covered by Mr.
Hiles, Route 105, it would be up to him how he handled it. For
example, he determined not to service a remote part of the area
other than by dropping off at a local gas station, and having
customers pick up or drop off from there. He would then only
receive one payment of $1.79 plus $.79 for each of the other
deliveries as opposed to $1.79 for each delivery if he delivered
directly to the customer.
[13] As Mr. Hiles drove his route, he
completed a Route Sheet, giving details of time of delivery,
pickup, addresses, weight, etc. At the end of the day, he would
rely on this information to complete the invoice to DHL. It was
evident that many of the invoices were started by Mr. Hiles, but
completed by a replacement driver, suggesting that Mr. Hiles did
the morning run and someone else did the afternoon run. It was
also necessary for Mr. Hiles to rely on the DHL scanner to scan
every delivery, or he would not be paid, unless he manually
obtained signoff.
[14] With respect to marketing, Mr. Munro
emphasized that the delivery business is extremely competitive,
and that marketing was best carried out by the driver providing
exemplary service. So, for example, as Mr. Hiles derived
considerable work from Shawnigan Drugs, he would make their
deliveries and pick up priorities. Drivers might also provide
small gifts to their customers.
[15] With respect to payment, many customers
would deal directly with DHL, though some drivers would have to
handle cash or cheques. If a customer did not pay, it would was
not up to Mr. Hiles to seek collection.
Analysis
[16] Several courier company cases have gone
through the Courts over the years. Three deal specifically with
the status of couriers who have specific geographical areas such
as Mr. Hiles (Tiger Courier Inc. v. M.N.R., [2001] T.C.J.
No. 123 (Q.L.), Livreur Plus Inc. v. M.N.R., [2004] F.C.J.
No.267 (Q.L.), and Greyhound Canada Transportation Corp. v.
Lefler and Kummer, [1999] C.L.A.D. No. 155 (Q.L.), although
the Greyhound matter was a decision of a Referee in a labour
arbitration.). The starting point for analysis of this issue is
the oft-quoted comment from Justice Major in the decision of
671122 Ontario Limited v. Sagaz Industries Canada
Inc., [2001] 2 S.C.R. 983, where he stated:
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.
[17] This moves Courts towards a more
flexible approach in balancing all significant factors in
grappling with the question whether Mr. Hiles was in business on
his own account. And it is a fine balancing act - what may weigh
heavily in one case may barely tip the scales in another. The
facts must be weighed in the context of the view of the overall
working arrangement. This is not a science no matter how
mechanically at times the analysis must appear to the
participants.
[18] What are the factors then that in this
case will assist in determining if Mr. Hiles was in business
on his own account: - control - ownership of equipment - use of
replacement drivers - financial risk - responsibility for
investment and management - opportunity for profit - behaviour as
a business person - impact of collective bargaining
agreement.
[19]
Control
Certainly, DHL had some requirements of its drivers: packages had
to be delivered by 9:00 a.m., vehicles had to be a certain size,
insurance had to be beyond certain minimums ... yet, are these
factors of control that go to the very status of the working
relationship? Could a contractor, but not an employee for
example, ignore the schedule requirements? No. The Federal Court
of Appeal addressed this concern in Livreur Plus Inc. as
follows:
"A contractor who hires the services of subcontractors to
perform all or part of the duties it has undertaken to perform
for its customers in accordance with a schedule will identify and
define what they have to do and ensure that they are available to
do it ... .
The Court should not confuse control over the result or quality
of the work with control over its performance by the worker
responsible for doing it. ... It is indeed rare for a person to
give out work and not to ensure that the work is performed in
accordance with his or her requirements and at the locations
agreed upon. ...
The subcontract often assumes a rigid stance dictated by the
general contractor's obligation: a person has to take it or
leave it. However, its nature is not thereby altered ... .
A subcontractor is not a person who is free from all of the
strain, working as he likes, doing as he pleases, without the
slightest concern for his fellow contractors and third parties.
He is not a dilettante with a cavalier, or even disrespectful,
whimsical or irresponsible attitude. He works within a defined
framework but does so independently and outside of the business
of the general contractor."
[20] Control, for purposes of determining
whether Mr. Hiles was in business, goes to Mr. Hiles' freedom
to organize how he actually performs the work. In that regard,
there was little, if any, supervision. Mr. Hiles rarely saw a
manager. He picked up at the warehouse in the morning in time to
meet his 9:00 a.m. deliveries. He organized the packing of his
van to accommodate his preferred itinerary, an itinerary he would
choose based on his priorities. For example, he would ensure
Shawnigan Drugs was always serviced on a timely basis, as he
derived considerable work from that source. He could take breaks
when he pleased, go home for lunch and get someone else to do the
pickups in the afternoon. Yes, he had to scan each package, but
that is not so much a controlling feature of management over
employees, but a controlling feature warranted by the nature of
the work, not the status of the contract. I conclude Mr. Hiles
had a great deal of control over how he performed his
obligations; a level certainly more consistent with being in
business on his own account.
[21] Ownership of
Equipment
I place considerable weight on this factor. Someone in the
business of making deliveries requires one vital piece of
equipment - a delivery vehicle. Mr. Hiles purchased, serviced and
insured that major capital asset. But, argued the Respondent, DHL
supplied the company decals to put on the vehicle, supplied the
scanner and supplied a uniform. The supply of a uniform does
smack more of an employment arrangement, but the scanner does
not, as it was unique to DHL. It would serve no useful purpose to
Mr. Hiles other than in his working arrangement with DHL; not
owning it is not a significant factor.
[22] While DHL told Mr. Hiles what size
vehicle would be required for this particular route, it did not
identify a brand, or whether the vehicle need be new or
second-hand. The fact remains that Mr. Hiles, not DHL, bought the
van. Mr. Hiles also supplied his own cell phone, pens,
clipboard and such miscellany. I find Mr. Hiles' ownership of
equipment heavily favours an individual carrying on his own
business.
[23] Use of replacement
drivers The
Appellant's counsel went to some length to establish the
regularity with which Mr. Hiles relied upon replacement drivers.
It is unnecessary for me to find precisely the number of times
that Mr. Hiles used replacement drivers. It is enough that I
find he used such drivers often. He did so without first
consulting DHL management. He also did so at a rate of pay
negotiated between himself and the drivers. The Respondent
pointed out that the collective bargaining agreement established
a minimum amount to be paid replacement drivers. However, when
asked, Mr. Munro, speaking for DHL management, acknowledged that
as far as he was concerned, replacement drivers' pay was a
matter between Mr. Hiles and his drivers.
[24] Similarly, the collective bargaining
agreement placed a maximum on the number of days a replacement
driver could be used (although this restriction was recently
removed from the collective bargaining agreement), and also
established requirements to be met prior to an owner-operator
hiring drivers. Again, DHL management confirmed that these
restrictions were not rigorously followed. The fact was
replacement drivers were used in excess of any alleged maximum
and also without acceding to the company's requirements.
While these latter issues might suggest some element of control,
they do not override the reality that Mr. Hiles hired, paid
and did some training of his own drivers. This is a strong
indicator that Mr. Hiles was in business on his own account. A
similar finding was made in the Greyhound case, although
that was in the context of an arbitration pursuant to the Canada
Labour Code, where drivers were likewise restricted under the
terms of the collective agreement to a limited number of
days.
[25] Financial
Risk Mr. Hiles,
like other owner-operators, enjoyed the benefit of a floor on the
potential remuneration from DHL. However, he never had to rely on
that guaranteed minimum - he always earned above the base. This
does not eliminate financial risk altogether. Risk is not an all
or nothing concept. This does give the owner-operator a guaranty
of how little can be earned. It is for the owner-operator to
decide whether the activity is even worthwhile given such a
minimum guarantee. There is more to financial risk than just
providing the worker a guaranteed minimum. There is the
ever-present risk of an accident, a significant risk, given the
amount of time spent by Mr. Hiles behind the wheel of his van.
That risk was assumed entirely by Mr. Hiles. He also bore the
responsibility of all maintenance and repair costs. If any costs
resulted from any infraction of laws by Mr. Hiles, again such
costs were likewise his responsibility. On balance, Mr. Hiles was
exposed to financial risk normally connected with that of a
person in business.
[26] Responsibility for investment and
management
Investment in acquiring and maintaining a $30.000 to $40,000 van
is a major outlay. Managing employees and managing the servicing
of customers to retain that competitive edge likewise represents
a degree of management of a person in business.
[27] Opportunity for
profit While there is a
guaranteed minimum mentioned earlier, the maximum an
owner-operator could earn had more to do with the
owner-operator's own initiatives, his management of priority
of customers, his management of his itinerary and determining
whether certain pickups and deliveries were worthwhile, his use
of drivers, his negotiation of his rates, his efficient
scheduling of maintenance and his overall control of his costs.
Mr. Hiles' profitability depended to the greatest extent
on his own management, marketing and financial skills - skills of
an entrepreneur.
[28] Behaviour as a
businessperson
Mr. Hiles' own actions in carrying out the contract with DHL
confirms that this is a contract for services. He paid WCB for
himself and assumed responsibility to pay WCB for his drivers. He
carried his own insurance. He hired employees. He marketed. And,
perhaps most telling, was the example given of how Mr. Hiles
dealt primarily with a customer problem. He acted like a
businessperson.
[29] Collective Bargaining
Agreement The
Respondent argues that the collective bargaining agreement
reflects an employment relationship between the owner-operators
and DHL. In support the Respondent points to the very existence
of the Union, and all that entails (union committees, restriction
on union activities, mandatory union membership). The Respondent
also relies on the following examples of employment-like
provisions:
- exclusive function
of management to hire, classify, demote, promote, suspend
...;
- grievance
procedures;
- seniority
provisions;
- leaves of absence
(bereavement, maternity, paternity and medical);
- requirement to
wear protective footwear;
- provision of
uniforms;
- requirement to
attend training or mandatory meetings;
- requirement to use
scanners;
- Schedule
"B" specification for services which covers such items
as:
- prepare and submit
accurate reports;
- load and
unload;
- be clean;
- drive safely;
- no drugs or
alcohol;
- keep vehicle
secure;
- take no
unauthorized passengers.
[30] These provisions, which do have an
employment flavour to them, must be viewed in the context of how
the collective bargaining agreement came to be. The Canada Labour
Code defines an employee to include a dependent contractor, and
defines a dependent contractor as:
"(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,
. . .
(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."
[31] So, for purposes of Part I of the
Canada Labour Code, an employee includes a dependent contractor.
Dependent contractors therefore bargain collectively and belong
to a Union and will consequently be subject to the type of
collective bargaining agreement now before me. Does that however
make the dependent contractor an employee for EI
purposes?
[32] The very concept of a dependent
contractor denotes an economic dependence, yet it does not
necessarily denote submission to the control of the
"employer". The term is a hybrid which recognizes space
along the continuum of employee to independent contractor
somewhere in the middle. For EI purposes, should the
emphasis be on dependent or contractor? With respect to Mr.
Hiles, I believe the weight is heavier on contractor than
dependent.
[33] Once it is recognized that this hybrid
category of dependent contractor falls under the ambit of the
Canada Labour Code and therefore can be subject to a collective
bargaining agreement, it is not surprising to see the very sort
of provisions in such an agreement that the Respondent contends
are the indicia of employment. The agreement is spawned by labour
legislation. And, yes, there are provisions which go to DHL's
control, though many of them are no more indicative of employment
than independent contractor; for example, the requirement to use
the company's scanner, the requirement to submit reports, to
drive safely, to secure the vehicle. Regardless of the nature of
the relationship, DHL would, and should, establish such
guidelines. There do though remain indicia in the collective
bargaining agreement that one would not expect in a true
independent contractor relationship; for example, seniority
provisions, leaves of absence, restriction to take no
unauthorized passengers. This makes this situation a close call.
The written agreements evidencing the relationship confirm a
relationship of a dependent contractor, someone who for the
purposes of the Canada Labour Code is an employee. I find,
however, balancing these documents against the reality of what
Mr. Hiles did for DHL, and considering the control and economic
factors discussed earlier, that in this case "dependent
contractor", for employment insurance purposes, is closer to
an independent contractor than an employee. Mr. Hiles performed
the services pursuant to a contract for services in business on
his own account. The appeal is allowed.
Signed at Ottawa, Canada, this 4th day of March, 2005.
Miller J.
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