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Citation: 2005TCC600
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Date: 2005098
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Docket: 2004-785(EI)
2004-786(CPP)
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BETWEEN:
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1486781 ONTARIO LIMITED c.o.b. BRANTFORD CHRISTIAN
RADIO,
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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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MICHAEL DEAN HAJAS,
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Intervenor.
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REASONS FOR JUDGMENT
Miller J.
[1] 1486781
Ontario Limited, carrying on business as Brantford Christian Radio, appeals the
ruling of the Minister of National Revenue (the Minister) that Michael Dean
Hajas was engaged in insurable and pensionable employment pursuant to the Employment
Insurance Act and the Canada Pension Plan for the period November 1,
2001 to December 20, 2002. Mr. Hajas intervened in support of the Respondent's
position that he was an employee. The Appellant's position is that Mr. Hajas
was an independent contractor.
Facts
[2] Mr.
Anthony Schleifer testified on behalf of the Appellant. Mr. Schleifer earned
his living as a real estate appraiser; he was also a minister of the Tabernacle Church. In October 2001 Mr. Schleifer, as an
officer of the Appellant, had the Appellant successfully apply for a licence to
operate a Christian radio station. Mr. Schleifer acknowledged that he knew
nothing about running a radio station. As the station had no income at the
outset, he sought volunteers to run the station out of the Sydenham United Church in Brantford.
[3] Mr.
Hajas acknowledged he was one of the volunteers in November and December 2001. He
had considerable experience in the recording studio business, though had had a
bad experience. In November 2001, he was barely getting by when Mrs. Schleifer
offered help. It was evident that the Church became a significant part of Mr.
Hajas' life. Mrs. Schleifer introduced Mr. Hajas to Steve Burchell at Sydenham Church. Mr. Burchell, who at times appeared to fulfil the
role of station manager, was clearly impressed with Mr. Hajas' background. Mr. Burchell
suggested to Mr. Schleifer that Mr. Hajas needed around $2,500 a month to work
for the station. Mr. Hajas agreed however to an honorarium of $1,500 a month.
As Mr. Hajas indicated, the work was not about the money; he believed in the
Lord to get it done or he would never have otherwise agreed to such an amount.
[4] The
Appellant provided a computer and transmitter. Mr. Hajas brought considerable
equipment, including mikes, speakers and amplifiers to the radio station.
Mr. Schleifer estimated this equipment had a replacement cost of $40,000. Over
time, Mr. Hajas felt more equipment was needed; he sold a digital equalizer to
get sufficient money to buy some extra equipment such as a mixer and
headphones.
[5] Mr.
Hajas would record, edit and also download programs off the net onto discs,
provided by the Appellant. The Appellant had the final say in the subject
matter, though had no expertise in the actual sound product, which was clearly
Mr. Hajas' domain. Mr. Schleifer at some stage requested time sheets from
Mr. Hajas, as he wanted to see if he was getting value for his money.
[6] In
March, the Appellant acquired a building in Brantford and the station was moved from the Church. Mr. Hajas provided studio
furniture and added more equipment. Initially the recording studio was in a
room over the garage, but due to conflicts with others and with a need for more
space, Mr. Hajas moved the recording studio to the basement. He required more
space if he was to record bands for example. Mr. Hajas and his father renovated
the space, put in an alarm system and created a locked entrance directly to the
outside, for which Mr. Hajas retained the keys. Mr. Hajas believed Mr.
Schleifer had a set of keys, which Mr. Schleifer denied.
[7] Mr.
Hajas described some of the difficulties in working at the radio station: no
policies or procedures, never knew who was in charge, a sense of mistrust,
inability to attract advertising due to lack of transmission strength. He did
acknowledge he would have to meet on air deadlines. He also attended weekly
meetings for those who were involved with the station. He believed he was an
employee required to report to Mr. Burchell or the sales manager.
[8] Once
the recording studio was established, Mr. Hajas appeared to start providing
work to others: Eagle Worldwide Ministries was identified as one of his customers.
Also around this time, Mr. Schleifer and Mr. Hajas agreed to a rental
arrangement, whereby Mr. Hajas would pay 20% of his invoices to the station for
rent. No one could recall with any certainty if any payment was actually ever
made in this regard. Mr. Hajas was encouraged to seek additional work. He
relied on the trade name of Monarch Productions to do so.
[9] In
December, Mr. Hajas and the radio station parted company. Mr. Hajas believed he
was fired. Mr. Schleifer claims he advised Mr. Hajas his services were no
longer required, though he could carry on his sound studio in the basement for
others. Mr. Hajas moved out during the night taking all his equipment with him.
Analysis
[10] The issue of distinguishing an employee from an independent contractor
has received considerable judicial scrutiny, including from the Supreme Court
of Canada where Justice Major made the following statement in 671122 Ontario
Ltd. v. Sagaz Industries Canada Inc.:
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.
[11] The Federal Court of Appeal has, since Sagaz, introduced
the concept of the parties' intention as a significant factor, though following
Justice Noël's remarks in Wolf v. Canada,
perhaps more as a tie-breaking factor than a factor elevated to the status of
the control factor, which was emphasized by Justice Major and which plays a
significant role in the civil law jurisdiction of Québec. I intend to review
this case considering the factors raised by the Supreme Court of Canada, as
well as the factor of the nature of the organization itself. I do not intend to
resort to relying upon the parties' intention, because the parties' intentions
in this case are contrary to one another: Mr. Hajas intended the relationship to
be employment; the Appellant intended this relationship to be that of an
independent contractor. Their intentions are of no assistance. It is their actions,
their behaviour and the circumstances that must be analyzed to make the
distinction. In that regard, I will consider the facts as they pertain to each
of the following factors:
- control;
- ownership of equipment;
- hiring of help;
- chance of profit and risk of loss;
- freedom to work for others; and
- nature of organization.
Control
[12] The elements of control that suggest an employment arrangement are:
- the radio station had the final
say on the content of the product that hit the air waves;
- work was to be performed at the radio station premises;
- the imposition of deadlines;
- the requirement of time sheets;
- the requirement that Mr. Hajas attend meetings; and
- reporting to the station manager.
The elements of control that suggest an independent contractor arrangement
are:
- Mr. Hajas controlled access to
the sound studio after establishing his studio in the basement of the new
building;
- Mr. Hajas was in complete
control of how he produced the sound product as Mr. Schleifer acknowledged he
had no technical expertise.
[13] Control of content and imposition of deadlines are the types of
control that a radio station might exert over its workers whether they are
employees or independent contractors. Especially with a radio station with an
agenda to provide Christian broadcasting, it would be most unlikely the sound
producer or editor would or should have any say in content.
[14] Prior to the move to the basement of the new building, Mr. Hajas had
to work in close proximity with others on the radio station's premises.
Thereafter, however, my impression is that he controlled the operation of the
sound studio in the basement.
[15] On balance, I tip the control factor just slightly towards employment
prior to establishing the basement sound studio, but thereafter I find
Mr. Hajas had control more akin to that of an independent contractor.
Ownership of equipment
[16] Mr. Schleifer acknowledged that the radio station had very little in
the way of technical equipment for the purposes of sound recording and
production. It did provide however, the premises, as well as a computer and some
of the sound equipment. Mr. Hajas provided the bulk of the sound
production equipment; equipment with a replacement value of $40,000.
[17] Upon moving into the basement he added further equipment, bought
studio furniture, renovated the space with outdoor access and added an alarm
system.
[18] I find that the ownership of equipment certainly points to an
independent contractor arrangement, once that Mr. Hajas was operating in the
basement sound studio. Even prior to that this factor slightly favours the independent
contractor position though is not determinative.
Hiring of Help
[19] Mr. Schleifer believed Mr. Hajas could hire help, though Mr. Hajas did
not think he could. Mr. Hajas did occasionally have a volunteer assist him.
This factor is not conclusive.
Chance of Profit/Risk of Loss
[20] Mr. Hajas paid his own expenses. He bought his own equipment. Later in
the year he entered an arrangement to pay rent. He did face some risk of loss.
On the flip-side, his remuneration from the Appellant was set. Any chance of maximizing
profit was not from the arrangement with the radio station. It would have to be
sought elsewhere. Notwithstanding Mr. Hajas' great faith, I believe he saw the
light in this regard and moved towards the operation of an independent sound
studio. The risk of loss in these circumstances points to an independent
contractor, while the lack of chance of profit with the station suggests
employment. Again, I find there was greater risk after the establishment of the
basement sound studio.
Ability to work for others
[21] I find that Mr. Hajas was always able to work for others under the
arrangement he had with the radio station, but it was not until after a few months
with the station that he truly appreciated the possibilities of doing so. In
this regard, he had the freedom of an independent contractor.
Nature of the organization
[22] I raise this as a factor as it does have some influence on determining
what sort of arrangement existed. The Appellant is, in effect, a Christian-based
radio station, steered by men of faith with no knowledge of how to run a radio
station and little resources. They used "volunteers". They have no
policies, procedures or frankly, business acumen in the operation of a radio
station. They need a sound producer/editor and mercifully someone with excellent
experience, his own equipment and a good deal of faith falls into their lap.
The perfect package. They get him for a song - $1,500 a month. They do not
consider him an employee – they do not make any source deductions. Unlikely
they considered at all Mr. Hajas' status other than a devout Christian, with
talent and equipment. Under the auspices of such an "organization", is
Mr. Hajas to be considered an employee on payroll? The organization was loose,
and, not surprisingly, the arrangement with Mr. Hajas was loose. In this light,
I have some difficulty slotting Mr. Hajas into any formal contract, be it of
service or for services. The nature of the beast suggests to me that he was
retained in a flexible contract, one that perhaps could, and did, undergo a transition.
[23] Before summarizing these findings, I should point out that the Respondent
and Mr. Hajas conceded that for the last three months of the period in
question, Mr. Hajas was indeed in business on his own account and the radio
station was a customer. Mr. Hajas described his relationship with the station
as going from a volunteer in November and December 2001 to an employee from
January to September, and then to an independent contractor thereafter.
[24] I have no difficulty agreeing with Mr. Hajas' and the Respondent's
view of the last three months of Mr. Hajas' relationship with the radio
station. During that period he was an independent contractor. But what about
prior to that? As I have indicated, the looseness of the arrangement invites a
movement from one form of legal relationship to another. While somewhat unusual,
I am inclined to agree with Mr. Hajas that what may have started with the
trappings of an employment deal, ultimately shifted to that of an independent
contractor. There were sufficient factors in the first few months, that weighed
in employment's favour, but the balance shifted to independent contractor when
Mr. Hajas established the basement sound studio. The Respondent and Mr. Hajas
put that shifting of the balance in October. The evidence was that the station
acquired the building in March, and there was a proud opening in June. My
understanding of the evidence was that Mr. Hajas established the sound studio
and started relying on his own trade name earlier than October, likely closer
to the grand opening. I find that Mr. Hajas was an employee for the period from
November 2001 to and including June 2002, and was an independent contractor
from July 2002 to December 20, 2002.
[25] I refer the matter back to the Minister for reconsideration and
reassessment on that basis.
Signed at Ottawa, Canada, this 8th day of September, 2005.
Miller
J.
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