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Citation 2004TCC839
Date: 20050112
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Dockets: 2004-881(EI)
2004-882(CPP)
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BETWEEN:
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LINDA WILLIAMS,
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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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_______________________________________________________________
(Edited from the transcript of
Reasons for Judgment delivered orally from the Bench on November 19, 2004 at
Winnipeg, Manitoba)
REASONS FOR JUDGMENT
Campbell J.
[1] The issue in this
appeal is whether the Appellant was engaged as an employee pursuant to a
contract of services with the Housing Concerns Group of Winnipeg, (the
"payor") or as an independent contractor pursuant to a contract for
services for the period May 7, 2002 to December 31, 2002.
[2] The Reply to the
Notice of Appeal referred to the period as January 1, 2002 through to December
31, 2002. However, the Appellant confirmed that she considered herself an
employee of the payor until May 7, 2002, at which time she felt the nature of
the relationship changed, and she ceased to be an employee and became an independent
contractor.
[3] The Appellant has
appealed the Minister's ruling that she was employed as an employee for the
entire period January 1 through to December 31, 2002; the relevant period in
question now being May 7, 2002 through to December 31, 2002.
[4] The Appellant
explained the background to the establishment of the payor organization which
runs neighbourhood programs, youth employment and street safety programs.
During the first two years she acted as a volunteer talking to city residents
and organizing a volunteer council to assist in stabilizing or reclaiming, as
she called it, a particular neighbourhood in Winnipeg.
[5] Eventually the West
Broadway Neighbourhood Housing Resource Centre was established, and the
Appellant was able to obtain funding from the City. Over time it was
incorporated and given non-charitable status.
[6] Further funding was
received from Health Canada and eventually the United Way. At this time the
Appellant started working six-hour days.
[7] In 2000 funding
increased, and she stated that as a result her salary increased to $30,000.00
yearly, which allowed her to give up her part-time work with mental health
patients.
[8] Prior to May 2002
she testified that she received a work opportunity with the City of Winnipeg, doing
the same type of work as for the payor but in other neighbourhoods of the city.
At the same time as this offer the payor organization was at a critical stage
in obtaining further United Way funding. Consequently, she testified that the
board convinced her to stay on with the payor organization on a part-time
consulting basis, which allowed her to accept the City's offer to work for it
on a consulting basis.
[9] Her evidence was
that she has, since that date, incorporated her own consulting company, and has
her own business licence.
[10] She stated that the
payor had given her a computer to use at home, and that she still has
possession of this computer. She did state that at some point in time they
would deal with this computer and she would probably pay the board for it.
[11] The assumptions of
fact are stated at paragraph 8, page 3 of the Reply to the Notice of Appeal as
follows:
8. In so deciding as he did the
Minister relied on the following assumptions of fact:
(a) the Payor
operated a neighbourhood resource centre which was a non-profit charity;
(b) the Appellant
was the coordinator/executive director of the Payor;
(c) the Appellant's
duties included administration, supervision, budgeting and developing and
coordinating the centre;
(d) the Appellant
was required to follow the Payor's guidelines and bylaws;
(e) the Appellant
was required to report to the Payor's board of directors;
(f) the board of
directors of the Payor had the right to dismiss the Appellant from her duties;
(g) the Payor provided
a computer, office space and office equipment for the Appellant to use in the
performance of her duties;
(h) the Payor
provided a computer for the Appellant to use at her residence;
(i) prior to May 7,
2002, the Appellant was paid a yearly salary of $30,000;
(j) subsequent to
May 7, 2002, the Appellant earned $440.00 biweekly;
(k) the board of
directors of the Payor determined the amount of the Appellant's pay;
(l) the Appellant
was reimbursed by the Payor for travel expenses incurred in the performance of
her duties;
(m) the Appellant was
provided vacation and sick leave by the Payor;
(n) the Appellant
had to perform the services for the Payor personally;
(o) the Appellant
had no risk of loss in the performance of her duties for the Payor; and
(p) in performing
duties for the Payor, the Appellant was not in business for herself.
[12] The onus of course
is on the Appellant to overcome or demolish those assumptions. She agreed with
(a), (e), (i), (j), (n) and (o).
[13] She agreed that (b)
was correct up to May 7, 2002, but that after this date she was working in a
consulting capacity, and that another individual had been hired in May as
executive director of the payor's programs. She dealt primarily with funding
issues for the programs and services offered by the payor.
[14] She agreed with (c)
to the extent it described her work duties prior to May 2002. After this
date she stated that she performed no supervisory tasks and was engaged
strictly in consulting on fundraising activities for the centre.
[15] Her response
concerning assumption (d) was not completely clear. She stated that it was
certainly true up to May 2002, but only to some extent thereafter. She stated
one could not really get away from the policies and the way the centre was run,
and that everyone at the centre followed the policies.
[16] In respect to
assumption (f) she stated that the board had no set policies on staffing and
dismissal. However she believed the board probably could officially dismiss
her.
[17] She disagreed with
(g) because after May 2002 other staff was using the office space, the computer
and equipment. Although she thought she could use these, she stated she did
not.
[18] She agreed that she
had a computer at home supplied by the payor, as stated in (h), but that she
would arrange to pay for it at some point in time.
[19] She disagreed with
(k) because she stated her pay was determined by the funding she was able to
bring through the doors of the centre.
[20] She disagreed with
(l) because she never travelled for the centre.
[21] She disagreed with
(m) because after May 2002 she stated she and the board dealt with sick leave
when it arose and, further, that she received vacation time only up to May
2002.
[22] On cross-examination
she stated she and the centre had no written agreement, and that she was always
paid bi-weekly. She did state that the board determined her rate of pay, in
consultation with her, depending on the funding. She did not invoice the
centre, nor did she charge GST to the centre.
[23] Also on
cross-examination she stated that since May 2002 she consulted with staff to
ensure funding was being properly spent and budgeted. She stated that she
attended the centre at least once per week, sometimes more often.
[24] She stated she rarely
incurred expenses, but if she did pick up some item, for example, from Staples,
she would be reimbursed by the centre.
[25] She stated that she
attended the monthly board meetings to report on funding. She confirmed that
she did not carry liability insurance.
[26] The Appellant called
one additional witness, Lina Johnston, president of the board for the centre.
She confirmed that the Appellant among other things was doing all of the
fundraising for the centre, and that in May 2002 they did not want to lose her
to the City.
[27] She stated that she
was present during the board meeting where the Appellant told them she was
accepting consulting work with the City and would be unable to provide the same
number of hours to the centre.
[28] She stated that the
board agreed they required her input on funding on a part-time contractual
basis. She confirmed that the Appellant reports to the board at its monthly
meeting on program funding, as she had done prior to May 2002.
[29] She stated that the
individual employed in May 2002 as executive director provided written reports
but did not personally attend the meetings. She also stated that she thought
the board would have the right to dismiss the Appellant.
[30] She confirmed the
Appellant worked primarily from her home, had no set hours, attended at the
centre one to two times per week, and that she had no office space or equipment
available for her use at the centre.
ANALYSIS:
[31] To determine the
issue in this appeal one must have regard to the four-step test described in
the case of Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025, and earlier
in the case of Montreal v. Montreal Locomotive Works Ltd. et al., [1947]
1 D.L.R. 161.
[32] The four-steps are
degree or absence of control exercised by the employer; ownership of tools;
chance of profit; and risk of loss.
[33] Subsequent case law
seems to suggest that the integration of the worker into the employer's
business is a test that can be used in addition to the four-step test to assist
in determining the overall relationship between the parties. However, it seems
to have been relegated to a far less important role than the other four factors
and in the end the central question to be asked in these appeals is whether the
taxpayer, who was engaged to perform the service, is performing it as an
individual in business on his own account, or as an individual performing a
service in the capacity of an employee. So I must make this determination by
examining the facts with reference to the aforesaid tests.
[34] In respect to the control factor, as
Respondent counsel rightly pointed out, it is not the actual control, but the
right to control, that is important. Respondent counsel referred me to two
items which she felt placed this factor in the payor's domain, and those were
that the Appellant was integral to the centre, and she had to report in person
to the board, much as she had done before May 2002, unlike the individual hired
as executive director to take over her responsibilities (except fundraising) in
May 2002.
[35] However, there were other factors under the
control test which favoured the Appellant's position. According to the
Appellant, and confirmed by Ms. Johnston, she had no set hours, and the
hours she did keep were completely at her discretion. She worked sporadically
one to two times per week at the centre.
[36] There was no direct evidence, but it
appeared the Appellant conducted her fundraising activities with very little,
if any supervision, except for the monthly reports to the board. This likely
arose because the Appellant was involved with the centre from its inception,
developing the contacts respecting the funding and the grants necessary for the
centre's survival.
[37] The Appellant, in her direct evidence,
stated that the ultimate responsibility of what she was doing in fundraising
was left up to her because it was a volunteer board operating a centre that was
controlled and motivated by its own neighbourhood residents.
[38] She also stated that to some extent she had
input into her rate of pay, because inevitably it was dependent on the funding
she was able to bring to the centre.
[39] She also felt she had ultimate control with
the work hours, and she stated in cross-examination, that she did not discuss
her hours with the centre after May 2002. So if she took two weeks off,
she would simply advise them she would not be there for that period. However,
she stated she would not request the centre for the two-week period.
[40] She stated she would get her work done at
times other than during this two‑week period.
[41] I believe on the control issue, when we
look at the whole picture, the Appellant's role clearly changed in May 2002
from that of coordinator, executive director and fundraiser, to one of
fundraiser only for the programs at the centre.
[42] She now dictated her own hours, the days
and times when she would go to the centre to work; potentially had input into
her rate of pay; did not have to ask for time off; did not receive vacation
time after May 2002, and worked with little to no supervision.
[43] Although there are the several factors
which the Respondent referred me, which point to control with the payor, there
are many more factors here which point to the Appellant having the ultimate
right to control many of the conditions of her work activities for the board.
[44] In the end, I do not consider the fact that
she continued to report to the board after May 2002 by attending the meetings
personally a particularly weighty factor in the control test in these
circumstances. There may have been any number of reasons this occurred while
her replacement was permitted to give a written report. The board may have
simply continued a longstanding procedure that was comfortable to both the
board and the Appellant, or they may have simply had the Appellant attend
personally to respond to queries, as she was at the centre so little after May
2002, while her replacement was at the centre on a regular basis. I am
speculating here in any event, but I simply do not consider this factor extremely
important when viewed against the totality of the other factors.
[45] The next factor is the ownership of tools.
[46] The only equipment here was a computer
which the centre owned and the Appellant kept at her home. She was not required
to return it in May 2002. There was no indication she would return it, the
Respondent argued.
[47] I do not believe the evidence supports this
statement. Both the Appellant and Ms. Johnston stated that at some point
they would deal with the computer in terms of the Appellant purchasing it.
[48] Although this computer is clearly owned by
the centre, the payor, it was not clear from the evidence how central it was to
the Appellant's work activities. She did testify that working with computers
was not a large part of her job. I believe she concluded that statement by
saying, I work with people.
[49] The computer, as a tool, may have had some
place in her activities, although the evidence was simply silent as to whether
it was essential to her work in obtaining the funding and the grants, and
overseeing the implementation of the resulting programs.
[50] In addition, Ms. Johnston confirmed that
the centre's office space was very small, and that the centre, after May 2002,
did not offer the Appellant a personal work space with office equipment.
[51] I would, therefore, place less importance
on the tools and equipment factor than I would on some of the other factors in
the test.
[52] The third factor is chance of profit.
[53] She received a bi-weekly salary that was
not dependent on hours worked. She had no employees or assistants.
[54] Although she stated she could provide a
substitute, it does not appear this issue ever arose or was directly addressed
by the board or the Appellant.
[55] Although the Respondent argued that the
Appellant could not make extra money even if she got extra funding, that was
not her evidence. The Appellant stated that the board determined her pay, in
consultation with the Appellant, depending on the fundraising activities. I
believe this links her rate of pay directly to her success or failure in the
fundraising. This implies she could negotiate a higher rate of pay if she
obtained greater funding.
[56] This factor also bears on her risk of loss,
the fourth factor. If she loses the funding and the grants, this impacts
directly upon her pay, so her work activities and fundraising are directly
linked to her chance of profit, as well as to her potential for risk of loss.
[57] Although she is reimbursed for any
out-of-pocket expenses, that certainly may apply just as readily to an
independent contractor situation as to an employee, but in any event, it
appeared this occurred infrequently if at all. She also testified that she
never incurred any travel expenses.
[58] Because there is clearly a risk of loss as
well as a chance of profit, these point to the Appellant being an independent
contractor. This is particularly so in these circumstances because of the
unique position the Appellant held in an organization which appears, from the
evidence, was 100 percent funded through bodies such as the United Way or
Health Canada.
[59] Based on the application of the four-step
test, I conclude that there are more factors pointing in the direction of the
Appellant being an independent contractor after May 2002, and that she
therefore was in business on her own account.
[60] The appeals respecting both the insurable
and the pensionable employment are therefore allowed without costs.
Signed at Ottawa, Canada, this 12th day of
January 2005.
Campbell
J
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