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Citation: 2005TCC370
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Date: 20050607
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Docket: 2004-159(EI)
2004-160(CPP)
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BETWEEN:
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SHERMAN HINES PHOTOGRAPHIC 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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and
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JANINE LEVY,
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Intervenor.
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REASONS FOR JUDGMENT
Miller J.
[1] This
is a case under the Employment Insurance Act and Canada Pension Plan
case in which the issue is the nature of the working relationship between the
Appellant, Sherman Hines Photographic Ltd. (owned by Mr. Sherman Hines) and the
Intervenor, Ms. Janine Levy. It is not unusual in such cases to hear passionate
testimony colouring the relationship one way or the other. Regrettably, this
case pitted Mr. Hines against Ms. Levy in what can best be described as an unpleasant
cat fight.
[2] It
was evident that what may have started as a positive relationship between Mr.
Hines and Ms. Levy has ended in acrimony and accusations. Memories have faded
and recollection on both sides remains primarily, if not entirely, the negative
aspects of the relationship. To determine the truth requires a scratching away
at the veneer of hostility. When I do so, I find that, while there are several
opposing descriptions of certain facts, many of them are irrelevant to those
factors to be considered in distinguishing the employee from the independent
contractor. And, indeed, there are many facts that do go to the distinction
that are not in dispute. I found both Mr. Hines' and Ms. Levy's testimonies at
times to be vague and more driven by anger than reason. Their memories have not
served them well. The stress it is causing them both is palpable. If they could
step back from the situation and realize how mutually harmful their behaviour is,
they would do the only sensible thing and immediately put away the boxing
gloves and get on with their respective lives. I hold little hope, however, that
they are capable of doing that.
Facts
[3] In
March 2001, Mr. Hines completed a listing with a local agency entitled
"Employer Job Bank Listing", in which he sought, on behalf of the
Appellant, an assistant to work part-time (four to eight hours a day) on his
photography business, at a wage of $10 an hour. On this listing, he indicated
he required computer qualifications and ability to type and handle the
telephone. The local agency went through their records and suggested Ms. Levy
would be a possible candidate. Mr. Hines had the agency contact Ms. Levy who
immediately attended at the office for an interview with Mr. Hines. After
reviewing her qualifications, Mr. Hines hired her on the spot. Ms. Levy
testified she was hired to work on organizing (sorting, pasting and shipping)
Mr. Hines' collectible stamps, and to attend to some secretarial duties, including
dealing with accounts receivable and accounts payable. Mr. Hines testified that
he advised Ms. Levy that she was being hired to bring his GST (goods and
services tax) filings up-to-date. Given the fact that Ms. Levy started working
on the stamps and did not address the GST issue until some time later, I accept
Ms. Levy's evidence of this aspect of the initial arrangement, though I also believe
Mr. Hines' summary that Ms. Levy was being groomed to be an executive
assistant. This happened almost immediately, as by the end of March, Mr. Hines'
executive assistant had left. Ms. Levy was to fill that role.
[4] Mr.
Hines testified that Ms. Levy had the choice of being an employee or an
independent contractor, and that she chose to be an independent contractor. He
advised her that she would have to look after her own source deductions.
Ms. Levy acknowledges there was discussion of source deductions, however,
she took this to mean that as part of her employment with Mr. Hines, she would
be required to handle employees' source deductions. As Ms. Levy did not make
such source deductions for the Appellant, but drew the gross amount, I find it
difficult to accept Ms. Levy's version of this understanding.
[5] Mr.
Hines set the level of pay with assurances that the hourly rate of pay would
increase to $15 an hour upon Ms. Levy assuming the executive assistant
responsibilities. Ms. Levy started to work on the day of the interview. At the
end of the day Mr. Hines asked her to stay longer. By the first full day he requested
that she go full-time. At the outset Ms. Levy would take work home. It was
initially agreed that work done at home would only be compensated at $7 an
hour, but Ms. Levy later negotiated this rate to $10 an hour. A significant
difference in their descriptions of the work done at home, or overtime
generally, is that Ms. Levy maintained it was done at Mr. Hines' requests.
He denies this, claiming she always looked for more work to take home as she
needed the money. As with so many aspects of Mr. Hines' and Ms. Levy's testimonies,
the truth lies somewhere between the two. I believe Ms. Levy was overwhelmed in
those early stages and was indeed responding to Mr. Hines' needs. I also find,
however, that she fell into a habit of working long hours, without always
obtaining Mr. Hines' okay to do so. It became the work routine.
[6] In
April, Ms. Levy was doing the work of the former executive assistant. It was
necessary for Mr. Hines initially to show her how to do, what she described as
more executive-type work; for example, accounts receivable, accounts payable
and receiving orders. Ms. Levy described Mr. Hines' behaviour as domineering in
that he would stand over her to dictate correspondence and would check her
work. She often worked late in the night. She was not, in these early stages,
involved in working on the GST requirements.
[7] By
July, Ms. Levy felt she could not handle the constant overtime. The invoices
she submitted to Mr. Hines showed that she worked every day in July, including
three to five hours per day on weekends, and up to 14.5 hours per day on
weekdays. Her hourly rate had gone from $12 to $15. She testified that in
August she started looking for a new job. It is interesting to note that for
the first six weeks, Ms. Levy completed an hourly timesheet, but thereafter
submitted service invoices indicating the date, the hours worked, a brief
description of the work and the rate. These records show that it was not until
September 18, 2001, that she had a day off, and that was due to hospitalization
for surgery. It was around this time that she became involved with the task of
getting GST records in order. According to Ms. Levy, the records were a mess.
Ms. Levy took an accounting course to familiarize herself with "Simply Accounting"
for GST purposes.
[8] Ms.
Levy's testimony differs from Mr. Hines regarding the GST work, as he maintains
she was hired at the outset to work on the GST. Frankly, the timing of such
work does not bear on the nature of the relationship. What is significant, however,
was that given the volume of the work, the continuing long hours and her recent
surgery, Ms. Levy determined that she needed help. She started to look for
someone, under the auspices of a trade name she established. Mr. Hines was
away in Mongolia at the time. Mrs. Hines suggested to Ms.
Levy that she talk to a friend of hers, Sue Rubbarth. Ms. Levy hired Ms. Rubbarth,
who worked at Ms. Levy's home. Ms. Levy was prepared to pay Ms. Rubbarth from
her own income, but Mrs. Hines suggested she should be paid from the
Appellant's account.
[9] Ms.
Levy described her work as requiring considerable travelling to and from the
post office, banks and suppliers. Mr. Hines advised her that she could get
reimbursed for her gas expenses from petty cash, though there was no petty cash
at times, so Ms. Levy would submit the occasional receipt.
[10] With respect to equipment, Ms. Levy used her own computer when working
at home, though brought one of Mr. Hines' printers home. At Mr. Hines'
office, she relied upon his equipment. Supplies were provided by Mr. Hines
or acquired by Ms. Levy on the Appellant's account.
[11] The eventual parting of the ways took place in November; Ms. Levy
suggesting she resigned; Mr. Hines suggesting he fired her. Again, this does
not go to the nature of the relationship. It is a fact, however, that Ms. Levy
signed two letters, both of which state she is ceasing all contract work for
Sherman Hines Photographic Ltd.
Analysis
[12] Justice Major in 671122 Ontario Ltd. v. Sagaz Industries Canada
Inc. provided a
detailed history of the development of the common law test on the issue of
employment versus independent contractor, and concluded as follows:
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.
[13] The penultimate question to be determined is whether Ms. Levy was in
business on her own account. To answer this question it is necessary to
consider the totality of the relationship by a survey, in this case, of the
following factors:
(i) control;
(ii) ownership of equipment;
(iii) ability to hire employees;
(iv) degree of responsibility for
investment and management;
(v) degree of financial risk; and
(vi) opportunity for profit.
[14] If, after such a review, it is not sufficiently clear what
relationship truly existed, then I will rely on the approach of Justice Noël in
Wolf v. Canada,
whereby he suggested that it is appropriate to look to the intention of the
parties; that is, what was their deal, in determining the true nature of the
relationship.
(i) Control
[15] Mr. Hines suggested that Ms. Levy was controlled by greed; Ms. Levy
suggested she was controlled by the unreasonable demands of Mr. Hines. There
may have been elements of both, but nothing so conclusive as to weigh the
scales one way or the other.
[16] I will examine four areas of control: determination of pay; hours worked;
ability to work elsewhere; and amount of supervision.
[17] Mr. Hines established the rate of pay for Ms. Levy at the outset, with
assurances of an increase to $15 an hour after three months, if she had by then
become the executive assistant. She did become executive assistant and the pay
was duly increased. This suggests the Appellant was in control with little
ability for negotiation. Yet, there are two aspects that work against the
implication of employment. First, once Ms. Levy realized she would be working
from home, she negotiated an increased rate for work done at home from $7 to
$10. From a review of her invoices, it appears she was also able to increase
her remuneration such that every hour was charged out at $15, notwithstanding
whether or not at home. It appears Ms. Levy did some successful negotiating.
The other fact I note is that the huge number of hours were not compensated at
any different rate, which leads me to conclude that, while Ms. Levy was able to
obtain a certain rate regardless of where the work was performed, she was not
entitled, as an employee might be, to extra pay for overtime. I conclude
control of remuneration is a neutral factor.
[18] The hours of work by Ms. Levy were indeed extraordinary. She claims
they were required by Mr. Hines; he claims they were mainly at Ms. Levy's own
initiative, as she needed the money. As I alluded to earlier, I find some truth
to both explanations, though neither are entirely accurate. I believe
Mr. Hines was a demanding individual to work for, in any capacity. I find
he did make requests of Ms. Levy to perform certain functions, some that would
require longer hours. However, I do not find that he requested Ms. Levy work every
one of those additional hours. I see the situation as one in which Ms. Levy
figured out early in the relationship that there was a lot of work she could
do, and although there were some early requests by Mr. Hines, I find that as
time passed she simply took it upon herself to do as much as possible. This was
especially so as Mr. Hines was away a third of the time that they worked
together. I do not attribute Ms. Levy's actions so much to greed as to
diligence, but I do find, on balance, that she controlled those hours more so
than Mr. Hines.
[19] Was Ms. Levy able to work elsewhere? Contractually she was, but
practically she believed she had more work to do than hours available, so it
was unrealistic to expect her to work for others.
[20] Regarding the amount of supervision, I assess the evidence as painting
a picture of Mr. Hines being demanding, yet cognizant of his business
limitations, specifically regarding recordkeeping and GST. In the early stages
of Ms. Levy's work, Mr. Hines did show her how to handle aspects of the work. She
did not thereafter need constant supervision. With respect to the GST project,
I find Ms. Levy was very much left to her own devices.
[21] Two factors suggest to me that Mr. Hines was not as controlling as
Ms. Levy suggests. First, he was away on business a great deal. Ms. Levy
was left to run the office. Ms. Levy testified that at such times, control over
her work was exerted by Mrs. Hines. I heard little evidence to support that
contention. Second, Ms. Levy worked considerable hours outside the normal 9:00
a.m. to 5:00 p.m. working day, both at the office and at home. There was no
suggestion Mr. Hines monitored Ms. Levy's work at these times outside regular
office hours.
[22] As Justice Major stated in Sagaz, control is always a
significant factor. There are elements of control by Mr. Hines, yet, equally,
there are elements of independence by Ms. Levy. It is a close call, and while I
lean towards finding insufficient control to justify employment, I need to put
this in context of the rest of the working environment.
(ii) Ownership of equipment
[23] Most equipment and supplies were provided by the Appellant, even to
the point of supplying Ms. Levy with a printer for use at home. Ms. Levy used
her own computer when she worked from home. I accept that the Appellant also
paid for Ms. Levy's gas expenses. On balance, these factors point to
employment.
(iii) Hiring employees
[24] Ms. Levy sought help. She did so by looking to hire someone to be paid
from her own earnings. She established a trade name, as the employment agency
she dealt with required a business name. Mr. Hines was away at the time.
Mrs. Hines recommended a friend and Ms. Levy hired her. Mrs. Hines
suggested that the Appellant should pay for the worker's services, which
ultimately it did. Ms. Levy's actions in this regard are those of someone in
business for herself. Notwithstanding the assistant was ultimately paid by the
Appellant, the circumstances of the hiring, and certainly Ms. Levy's
understanding of what she contractually could do, point to an independent
contractor relationship.
(iv) Degree of responsibility for investment and management
[25] Although the circumstances of this case are such that this is not a
major consideration, there are a couple of points to note. First, what was Ms.
Levy's investment? First, and foremost it was an astonishing investment in
time. An investment I suggest goes beyond one created by any normal sense of
fidelity to an employer. Further, Ms. Levy invested in her own training by
taking a course dealing with a computer application for GST purposes. These
indicate she was in business on her own account.
(v) Degree of financial risk
[26] There was some risk assumed by Ms. Levy, but not a great deal. For
example, she used her own vehicle to carry out various corporate obligations
such as banking. There was no suggestion the Appellant carried any insurance
for her. She also believed she had to pay for assistance from her own pocket,
but ultimately with respect to the one person she hired, she did not bear that
cost. Generally, there was not a degree of financial risk one would associate
with an independent contractor.
(vi) Chance of profit
[27] This is a trickier issue. Was Ms. Levy's ability to work extensive
hours, beyond what one would normally expect in an employment relationship,
indicative of a person in business maximizing revenue? Many employees have
opportunities to work overtime. Often such work will be paid at a premium, and
often, for that reason, it may be closely monitored by the employer. A contract
worker, paid on an hourly basis, increases revenue by satisfying the payor that
greater hours are required to complete the work. Such hours are not normally
compensated at a rate different from the contract rate. Does the paid‑by-the-hour-contract
worker have greater opportunity than the paid-by-the-hour employee to increase
income? Yes, if the contract worker controls the hours. So I come full circle
back to the question of control. I find that Ms. Levy was able to work
unlimited hours to maximize profits. Yet, I also conclude, given Mr. Hines'
ambivalence regarding one form of arrangement over another, that she could have
likely worked the same hours as an employee. This factor is neutral.
[28] This analysis has not lead me to a clear conclusion. I find, therefore,
this is an appropriate case to fall back on Justice Noël's approach cited
earlier; that is, look at what the parties intended.
[29] Ms. Levy maintained at trial that she believed she was an employee.
She cannot explain, however, the inconsistency between that belief and the lack
of source deductions from her cheques. She also claims that upon being retained
by Mr. Hines, source deductions were discussed, and that she believed he meant
she was to look after source deductions for herself and others as part of her
corporate responsibilities, and not that she personally was responsible for the
source deductions. I do not find this explanation credible, as she would have
appreciated immediately after her very first cheque, that she was receiving a
gross, not a net amount. No one was making source deductions. I add to this
fact, Ms. Levy's belief that she could hire her own employees, work elsewhere
if time permitted, and I conclude that she and Mr. Hines intended, and indeed
agreed upon, an independent contractor arrangement. This is also evident in the
form of termination notice Ms. Levy provided to Mr. Hines. It was not written
in terms of termination of employment, but ending of the contract work.
[30] While there are some factors that suggest employment, they are not
sufficient to tip the balance in that direction, specifically in light of the
agreement of the parties.
[31] I allow the Appellant's appeal and refer the matter back to the
Minister on the basis that Ms. Levy was not engaged in insurable or pensionable
employment. I want to be clear to Mr. Hines that this finding is by the
narrowest of margins, and he is not to read this interpretation as any
endorsement of his version of events over Ms. Levy's.
Signed at Ottawa, Canada, this 7th day of June, 2005.
Miller
J.
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