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Citation 2005TCC302
Date: 20050509
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Docket: 2004-3821(EI)
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BETWEEN:
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NEENAH PAPER COMPANY OF CANADA,
Formerly known as Kimberley-Clark Nova Scotia
Limited,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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_______________________________________________________________
(Edited from the transcript of Reasons for Judgment
delivered orally from the Bench on March 17, 2005 at Halifax,
Nova Scotia)
REASONS FOR JUDGMENT
CampbellJ.
[1] The Appellant has appealed a
determination made by the Minister that the worker, Layton
Desmond, was employed in insurable employment with the
payor/Appellant pursuant to a contract of service within the
meaning of paragraph 5(1)(a) of the Employment
Insurance Act (the "Act"). The period under
appeal is January 1, 2003 to January 16, 2004. The issue to be
decided is whether the worker was engaged in insurable employment
with the Appellant for the period under appeal, or, more simply
stated, whether the worker was an employee or an independent
contractor. The onus is on the Appellant to overcome or demolish
the assumptions of fact as they are listed at paragraph 13 of the
Respondent's Reply to the Notice of Appeal. Those assumptions
of fact are as follows:
a) the facts
admitted above;
b) the Worker
was hired by the Appellant as part of a crew of 4 for the
maintenance of the filter plant;
c) the Worker
was a filter press operator and his duties were to run the press
and carry out maintenance and repairs;
d) the Worker
has a certificate in Waste Water Treatment;
e) the
Appellant reserved the right to add extra duties as it saw
fit;
f) the
Worker was required to work on site 40 hours a week, 8 hours a
day, including weekend shifts;
g) the Worker
had to be available for emergency calls outside his normal hours
of work;
h) the Worker
had to submit time sheets to the Appellant;
i) the
Worker was paid a set weekly salary, with yearly increases;
j) the
Worker did not receive overtime pay but was allowed to take time
off for any overtime worked because of emergencies;
k) the Worker
was given 5 weeks of paid vacation each year and at least
5 days of paid sick leave;
l) the
Appellant had first call on the Worker's time;
m) the Worker had to
perform the services personally;
n) the
Appellant paid for any training the Worker required and paid a
membership fee to the Maritime Waste Water Operations Association
to have access to training at a reduced rate;
o) the Worker
was supervised in the performance of his duties and had to report
to the Appellant on a regular basis;
p) any
decisions made by the Worker were subject to the Appellant's
approval;
q) the
Appellant would bear the cost of redoing any incorrect or
incomplete work performed by the Worker;
r) all
the tools and equipment required were provided by the Appellant
including an on-site vehicle;
s) the
Appellant retained the right to terminate the Worker's
employment; and
t) the
services performed by the Worker were a necessary and integral
part of the Appellant's operation.
[2] The Appellant relied on the
evidence of both the worker and Mr. Wark, the human resources
leader for the Appellant. The Respondent called one witness,
Charlene Moore, the appeals officer.
[3] During the period under appeal the
Appellant operated a mill at Abercrombie Point in Nova Scotia for
the purpose of manufacturing bleached craft pulp. During this
period and at other times the worker was a member of a crew of
four that maintained the filter plant which is located 10 to 15
kilometres from the mill. As I understood Mr. Desmond's
evidence, the filter plant separates the by-product from the
mill. The solids, which the plant separates from the water, are
stockpiled and eventually these solids, which are the wood chips,
are trucked back to the mill to be burned. This process prevents
much of the by-product escaping into and polluting the
Northumberland Strait.
[4] Mr. Desmond is a filter press
operator. He worked at this plant between 1994 and 1996 as an
employee for the Province of Nova Scotia. It was his evidence
that when Scott Paper purchased the mill in 1996 he continued to
work at the plant but as an independent contractor. His contract
for work was introduced as Exhibit A-1 at Tab 2. It was executed
in December 2002, for the period January 1, 2003 to December 31,
2005. He stated he executed it voluntarily and that he had an
opportunity to discuss it. The contract identified the worker as
an independent contractor and not an employee of the Appellant.
His evidence was that he understood himself to be an independent
contractor. He stated that he was responsible for maintenance of
the whole plant, including taking water samples, readings, water
levels, running the filter press, repairing pumps, electrical
work and some computer work.
[5] In respect to the assumptions in
the Reply to the Notice of Appeal, Mr. Desmond disagreed
with or clarified 15 of the 19 assumptions relied on by the
Minister of National Revenue (the "Minister"). Desmond
agreed with assumptions (c), (l), (m) and (n). He clarified
assumption (b), stating that he was not hired by the Appellant
but that he signed a contract to work as an independent
contractor for the Appellant. He does not have a certificate in
waste water treatment as alleged in assumption (d). He disagreed
with (e), as he did not believe there could be any other services
that the Appellant could add to the services listed in Appendix
"A" of the contract. He added that he has never been
asked to do anything additional. He flatly disagreed with (f),
stating that he worked flexible hours. His usual daily hours
would be 8:00 a.m. till 3:00 or 4:00 p.m., but he testified
he could show up for work at different times and that no one
dictated when he would report for work or leave the plant. Every
weekend one of the crew of four had to attend the plant to pick
up samples and complete readings. This took approximately one
hour on each Saturday and Sunday and Desmond stated he could do
this any time on each of these weekend days. Desmond also
disagreed with (g), explaining that an emergency call was made to
one of four individuals on a list and if someone was not
available or did not respond they called the next person on that
list. He was, in fact, third on this list. He disagreed with (h),
as he stated that time sheets were not kept even though they were
referred to in Appendix "A" to the contract. He stated
that he did not punch a time clock, nor did he submit his hours
to the Appellant. Desmond disagreed with the wording in (i), as
he stated that he received a weekly pay and not a salary. On
cross-examination he clarified that he felt "salary"
meant payment plus benefits and he did not receive benefits.
Paragraph 6 of the contract referred to "compensation
for all services" and to the term "some". In
respect to assumption (j) Desmond agreed partially with this
assumption, but again clarified that if he worked one or two
hours of overtime then he could take an entire day off. He
explained that it had to be within reason but that it was up to
himself what time he took off. He also stated that he took
Fridays off when this happened and that he could choose which day
of the week he would take off from work. He disagreed with (k).
Paragraph 8 of the contract allowed Desmond to be absent from his
work for five weeks for personal reasons. He stated this was not
for vacation time and that the basis of entitlement was simply
the provision of his services. Desmond also disagreed with the
wording of assumption (o) in that it referred to duties performed
for the Appellant while the term "services" was used in
the contract, and as well the appendix to the contract. He went
on to explain that he was not supervised and there was no one
there to tell him what to do. A company representative,
Joe Van Buskirk, sometimes came by the site for 15 minutes
to half an hour but this did not occur every day. In fact, in
2003, on cross-examination, he stated that it was only once per
week. This individual became involved with bug tours at the
harbour and was at the site more often, however he did not give
Desmond orders or instructions, and if he did try to give orders,
Desmond stated he would simply walk away from him or just ignore
him. He stated that his primary connection to this individual was
for ordering parts when he needed them at the plant. He went on
to state that he did not report in any way to the Appellant. He
disagreed with (p) because he said he made decisions without the
Appellant's approval, although he might inform them. He
clarified (r) by explaining that the crew shared the equipment
and tools which consisted of motors, pumps, a five-tonne
truck and the filter press, which would be too large to take back
and forth to the work-site. With respect to assumption (s),
Desmond disagreed with its reference that he was employed and
stated that the Appellant had the right to terminate his work but
that he also had the same right of termination. And regarding the
last assumption, (t), he stated that the mill could operate
without the plant but that the plant was integral only in respect
to helping the environment.
[6] The worker also completed a
questionnaire and returned it to Canada Revenue Agency
("CRA"), which was at Tab 1 of Exhibit A-1. In respect
to 5(a) of the questionnaire, he wrote that he was paid by
"salary" but testified that it was a "weekly
sum" that he was paid and this word or term was not
contained within the body of the questionnaire as a choice,
although the term "salary" was. Therefore he chose
"salary" when answering the question. In respect of
Question 7 where he answered that the hours of operation of
the business was 24 hours per day, he clarified that he was
referring to the mill, not the plant. Some of his answers,
particularly to Questions 8 and 12, were different from his
testimony but he testified that he did not "know why I put
it down that way but it's wrong".
[7] On cross-examination Respondent
counsel took Desmond through each of the services listed in
Appendix "A" to the contract. He testified that he
filled in daily log sheets for monitoring various items but that
these records were filed away and not submitted to the Appellant.
He said he simply answered the phone by saying "Hello"
without a business greeting or any reference to the Appellant. He
explained that if a problem was encountered, for example a pH
balance problem, he simply called a number to report it but that
the plant crew did not take initiative to fix the problem, as it
generally originated with the mill and not with the plant. He
admitted that he did not know what the BOD or SS levels should be
or how much of these products could be sent into the harbour. He
also testified that if he was sick he called the plant and simply
informed one of the members of his crew. He also stated that he
struck the agreement on his overtime and time off with a company
representative, Joe Van Buskirk, but that it was nothing formal
and simply referred to in casual conversation.
[8] The Appellant's second
witness, Mr. Wark, testified that the mill employed 250 employees
who are unionized and approximately 75 salaried staff. They
receive a full benefit package, including life insurance,
pension, medical/dental, short-term and long-term disability,
vacation and some minor items such as bereavement pay and jury
duty. Most of these were non-contributing benefits by
employees except for the pension. He explained that the Appellant
also engaged independent contractors who did not receive any
benefits. The witness stated that he was aware that Desmond was
an independent contractor. Independent contractors were paid 25
to 30 percent more per hour than employees were paid. As human
resource leader, he had access to salary studies for comparable
jobs of employees. The base hourly rate of the independent
contractor is then grossed up.
[9] On cross-examination Mr. Wark
testified that the contract with Desmond was a contract to
operate the plant and for services to operate the treatment
facility in an ongoing basis. He viewed the Appendix
"A" to the contract as containing an articulation of
the broad functions or services required in operating the
treatment plant. Workers' Compensation was paid by the
Appellant because he felt that under that Act the
Appellant might be obliged to pay this even with respect to
independent contractors. With respect to paragraph 8 of the
contract, which was "time off for personal reasons", he
stated that because the services required more than one contract
worker and no one could work an entire 52 weeks per year
without time off, it was simply a fairness issue that the
Appellant felt it was the right thing to do with these
independent contractors.
[10] The appeals officer, Charlene Moore,
reviewed Exhibit R-1, her report on the appeal determination. She
also forwarded the questionnaire to Desmond for completion, as
well as the employer. She reviewed the Wiebe Door Services
Ltd. v. M.N.R., 87 DTC 5025 four fold test which she employed
in her analysis to arrive at her conclusion that Desmond was not
self-employed but an employee of the Appellant.
Analysis:
[11] I have no reason to reject any of Mr.
Desmond's evidence. He presented himself as an honest,
straightforward individual and I accept what he told me as
credible. He disagreed with the majority of the Respondent's
assumptions and provided plausible explanations as to why he did
disagree. Many of the assumptions are just clearly incorrect,
including such basic assumption as (d) where the Respondent
relied on the statement that the worker has a certificate of
waste water treatment when he does not and also assumption (h)
which stated the worker had to submit time sheets to the
Appellant when he did not. The worker clearly considered himself
an independent contractor in 2003 and executed an agreement in
December 2002 to reflect such a work relationship with the
Appellant. He considered his work extended to the very broad
spectrum of operating the entire plant with the other three
crewmembers. He was able to explain the full gamut of his
services, and they certainly extended beyond operation of the
press together with repairs as contended in assumption (c). His
services ensured the overall safe and efficient operation of the
plant as contemplated in paragraph 5 of his contract. According
to both Desmond and Wark, Appendix "A" was simply the
detailed breakdown of the services which would be essential to
accomplish this. Although paragraph 5 referred to other services
that the Appellant could direct Desmond to complete from time to
time, Wark's evidence on cross-examination was that the
Appellant might have to add or delete services as dictated by
environmental and safety regulations and rules that change
through time and ultimately are imposed on the Appellant.
Paragraph 5 concludes by referring to the Appellant changing
the times for performance of these services but only "after
prior consultation with Desmond". This is not the usual
clause that one would expect to find in an employment
relationship of employee and employer. Here for simple time
changes of services, the Appellant had to first consult Desmond.
It is clear from the worker's evidence that his hours were
flexible. There were no time sheets. He came to work and left
according to his own schedule. If he worked overtime he tracked
it himself and decided which day of the week he would take off. I
do believe that the worker felt he had to be available for
emergency calls. If he was ill or simply not available, however,
he knew there were several others on the list that could be
called. In fact, this worker was, I believe, third down on the
list. Neither Desmond nor Wark characterized the time off for
personal reasons as vacation and the contract does not label it
in that manner. The evidence of two witnesses plus the contract
itself certainly overcomes assumption (k) which refers to
vacation time. The worker clearly was not supervised. The only
contact person was a company representative who was on the site,
before he started his bug tours, maybe 15 minutes to half an hour
per week in 2003. He was little more than the conduit through
which the worker relayed his request for equipment parts. This
request was never questioned, nor apparently refused. In fact,
Van Buskirk had absolutely no control over the worker, who
stated that he simply disregarded or did not listen to Van
Buskirk when he tried to give instructions. I believe Desmond
referred to it as Van Buskirk - and I quote - "speaking his
mind" rather than something akin to orders or instructions.
Desmond's evidence is uncontradicted that he made decisions
in consultation with his crewmembers, who were also independent
contractors but certainly without any reference to input from the
Appellant. The right to terminate on notice belonged equally to
the Appellant and to the worker.
[12] With respect to the inconsistencies
between the worker's oral testimony and some of the responses
contained in the questionnaire, I believe the worker had
difficulty completing a rather lengthy questionnaire. He has
grade nine education, and while I am not taking anything away
from this witness because of this, I believe it is just logical
and reasonable to conclude that he could not complete it with the
same care and understanding as someone with more schooling.
However, he gave his evidence competently before this Court and I
accept his evidence that some of his questionnaire replies were
simply wrong as he either did not think about the answers or he
chose some of the suggested answers which were contained in the
questionnaire's wording.
[13] The case of Wiebe Door sets out
a four fold test as the basis upon which such appeals are to be
decided. One of the key elements in deciding if an individual is
an employee or an independent contractor is supervision or
control. The work relationship here is not a typical one but
clearly there was little, if any, potential for supervision of
the worker in his operation of the plant. The parties freely
contracted in an open market to set out the list of services in
the appendix to the contract. The worker agreed to be paid an
amount over a period of ime to operate the plant and agreed to
complete the services outlined. He was free of interference or
control by the Appellant. The only individual who had any contact
with the worker was Joe Van Buskirk, who in the end was simply a
liaison person who ordered equipment parts pursuant to the
worker's direction. Van Buskirk had absolutely no
control or potential for control beyond this. If he tried to give
advice, the worker walked away, ignoring him. Desmond kept no
time sheets, he dictated his own hours, he decided when he would
complete the services required to operate the plant efficiently,
within the guidelines of Appendix "A" and he decided
which day he would take off if he worked overtime. He kept logs
of the testings, but these records were simply filed and never
given to the Appellant. The evidence does not even hint that the
Appellant may have ever reviewed these logs. There is no evidence
the worker ever reported to the Appellant in any manner or that
the Appellant expected him to do so. Even the evidence, on such a
basic task as answering the phone, is indicative that the
Appellant had no presence in the operation of the plant as the
worker merely said "Hello" without identifying it as
part of the Appellant's business operations. The element of
control strongly favours the relationship as one of independent
contractor and not employee.
[14] The next factor, ownership of tools, is
a neutral factor here. The smaller tools were shared by the crew.
The larger tools, such as the press, are simply something that
would have to be stationary on the site in any event.
[15] The worker here was exposed to a huge
risk factor. According to Wark's evidence, the mill's
employees and staff were entitled to comprehensive benefit
packages down to the fine details of jury duty compensation. The
worker had absolutely none of these, and of course that is a loss
factor that the percentage of grossing up could not completely
compensate. In addition, he had no job security beyond the time
limit specified in his contract. The evidence of both the worker
and Wark, including the contents of the contract, do not indicate
that the five-week period was considered vacation but was
given to the worker by a fair and reasonable employer who
recognized that even the independent contractor required time
away from his work. Overall the worker assumed financial risks
for higher pay than the mill employees and staff received but
enjoyed the advantage of flexible hours and days off together
with a work environment where, as the worker put it - "there
was no one bossing us around". These factors clearly point
again to an independent contractor relationship.
[16] The mill and the plant are interrelated
only to the extent the mill had to comply with environmental
regulations. The mill operated independently from the plant. It
was a necessary adjunct to the mill but it is clear that the
Appellant intended that the operation of the plant be contracted
out and that the worker was fully aware that he entered this
contract as an independent contractor and not as an employee. The
integration test is not as significant a factor as the other
elements, and in any event, should be viewed from the perspective
of the worker. From the worker's perspective, he contracted
to provide his expertise and experience to operate the plant
within the guidelines of the contract. At the conclusion of the
contract he was free to negotiate again with the Appellant or
look elsewhere for work.
[17] The majority of these factors point to
an independent contractor relationship. In addition, I am
supported in my conclusions by the contract between the parties.
I believe this contract was entered into fairly. The intention of
the parties was clear. The evidence of the worker and the
Appellant's representative substantiate this. They had a
mutual understanding of their working relationship that was
properly and legally committed to writing. Unless there is clear
evidence of a sham or an intent to achieve some unlawful benefit,
or unless one party has been clearly disadvantaged in its
bargaining position, I do not believe the courts should lightly
interfere with taxpayers who choose to legitimately arrange their
affairs to achieve some lawful end result. The oral evidence here
clearly supports the contractual relationship outlined in the
contract and I allow the appeal on the basis that the worker is
an independent contractor and not an employee.
Signed at Ottawa, Canada, this 9th day of May 2005.
Campbell J
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