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Citation: 2004TCC615
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Date: 20040909
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Docket: 2003-4137(EI)
2003-4138(CPP)
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BETWEEN:
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1022239 ONTARIO INC.,
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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
Woods J.
[1] These are appeals by 1022239
Ontario Ltd. from decisions of the Minister of National Revenue
that John Swift was engaged by the corporation as a taxi driver
in insurable and pensionable employment during the period January
20, 2002 to May 11, 2002.
[2] There are two questions to be
determined:
(a)
Was Mr. Swift employed by 1022239 Ontario Ltd. within the common
law meaning of "employment"? The answer to this question will be
determinative of whether Mr. Swift was engaged in pensionable
employment for purposes of the Canada Pension Plan but not
necessarily insurable employment for purposes of the
Employment Insurance Act.
(b)
Was Mr. Swift engaged in insurable employment for purposes of the
Employment Insurance Act under the extended test in
paragraph 6(e) of the regulations?
[3] 1022239 Ontario operates a taxi
business with over 30 vehicles in Sault Ste. Marie, Ontario. The
general manager, Hugh Irwin, testified on the corporation's
behalf. Although Mr. Irwin seemed to have a good general
knowledge of the facts and background relevant to these appeals,
the owner of the corporation was likely more knowledgeable but
unfortunately had died shortly before the hearing.
[4] Mr. Swift provided evidence for
the Crown. Although he was a credible witness, Mr. Swift had
limited knowledge of the general practices and procedures of the
corporation because he only drove a taxi for 1022239 Ontario for
five months while he was out of work as a stevedore, his main
occupation.
[5] The taxi business operated by
1022239 Ontario was assisted by two related corporations. One
corporation provided the dispatch service and owned all the
assets used in the business, including the vehicles that it
leased to 1022239 Ontario for a flat fee. The other corporation
employed mechanics who serviced the vehicles.
[6] 1022239 Ontario contracted with
drivers under verbal agreements and regarded them as independent
contractors, except for employment insurance purposes where it
accepted that the drivers had insurable employment under the
extended test in paragraph 6(e) of the regulations.
For purposes of these appeals, however, the corporation
challenged the applicability of the regulation.
Employment at common law
[7] There are no bright line tests for
determining whether a person is an employee or independent
contractor and each case is determined on its own particular
facts. The general principles to be applied are described by
Major J. in the leading case, Sagaz Industries Canada Inc. v.
671122 Ontario Limited, [2001] 2 S.C.R. 983:
[47] ... 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.
[8] In terms of whether Mr. Swift was
an employee at common law, the essential question is whether he
was carrying on business on his own account. The Crown submitted
that in order to make a finding that Mr. Swift carried on
business on his own account it would have to be determined that
he operated a taxi business. It was suggested that this
determination would largely be influenced by whether the
passengers were customers of Mr. Swift or 1022239 Ontario.
Counsel submitted that the activity of driving could not
constitute a business because it was merely a skill, not a
business. I disagree with this. In my view an individual can
carry on a business on his own account if the business consists
only of driving a taxi. What is relevant in this determination
are the usual factors such as control, ownership of tools,
opportunity for profit and risk of loss. In this case, Mr. Swift
could be carrying on his own business of driving taxis, with
1022239 Ontario being in effect his only customer.
[9] On the facts of this particular
case, the control factor is in my view the most important
consideration and I agree with 1022239 Ontario that this factor
weighs strongly in favour of self-employment. The drivers
who worked for 1022239 Ontario, including Mr. Swift, were free to
determine when they worked, subject only to legal constraints
that imposed a daily 12-hour limit. The corporation provided a
sign up sheet that drivers could sign in advance but they did not
need to give advance notice. Although the sign up sheet was
organized by shifts, drivers were free to work for periods
shorter than a full shift. Mr. Swift worked a regular night shift
but he admitted that this was his own choice. He also testified
that he would not leave work early or take time out while driving
without checking with the dispatcher to make sure that there was
another driver available. He admitted, however, that this was
ultimately his own decision - his sense of responsibility caused
him to ensure that the public would be properly serviced.
[10] With respect to the driving itself, the
corporation also exercised virtually no control, except to ensure
that applicable laws were satisfied. The corporation's hiring
practices were also consistent with this. Mr. Irwin testified
that he would generally hire anyone with a clean driving record,
accordingly there was no attempt to hire the most qualified
drivers. Training for new drivers was limited to how to use the
meter and radio. Fares were referred to the drivers by
dispatchers on a priority basis depending on how long a driver
had been waiting in a particular area but drivers were free to
reject passengers. Furthermore, drivers were not instructed where
to drive and were encouraged to pick up passengers on their
own.
[11] Other factors also illustrate that
little control was exercised over the drivers. There was no
monitoring of drivers and accordingly drivers were free to attend
to personal business during their shifts. The corporation also
made drivers responsible for losses incurred through the fault of
the driver - for example, drivers were generally responsible for
theft and damage to vehicles not covered by insurance. Mr.
Swift testified that he did not recall anyone advising him that
he was responsible for damage in the event of an accident though
he did admit that he thought he might be responsible if he was
charged by the police for causing an accident. It is clear from
Mr. Irwin's testimony that this was corporate policy and that the
corporation had a practice of collecting damages from
drivers. Looking at the relationship as a whole, it is
clear that very little control was exercised over the
drivers.
[12] As for the other factors referred to in
Sagaz Industries, opportunity for profit, risk of loss and
ownership of tools, I find that these factors are not significant
in this case and in any event are neutral, not pointing either to
employment or self-employment. Mr. Swift had an opportunity for
profit since he earned 30 percent of the fares but both
counsel suggested that this was not a significant factor,
presumably because earning a commission is common in both types
of relationships. As for risk of loss, it is clear that Mr. Swift
bore some of the risk for losses - again this is a neutral factor
because employees often bear some risk of loss, especially if
they handle cash. Finally as to ownership of tools, this factor
is not significant because the tools employed by a driver are
minimal. Mr. Swift purchased his own maps, clipboard and pen. In
my view it is not significant that Mr. Swift did not own the
vehicle because he was engaged as a driver only.
[13] For these reasons, I conclude that Mr.
Swift was not an employee of 1022239 Ontario at common law.
This is sufficient to allow the appeal with respect to
pensionable employment but it is not dispositive of the appeal
with respect to employment insurance.
Insurable employment under regulation 6(e)
[14] Paragraph 6(e) of the Employment
Insurance Regulations provides:
6. Employment in any of the following employments,
unless it is excluded from insurable employment by any provision
of these Regulations, is included in insurable employment:
...
(e) employment of a person as a driver of a taxi,
commercial bus, school bus or any other vehicle that is used by a
business or public authority for carrying passengers, where the
person is not the owner of more than 50 per cent of the vehicle
or the owner or operator of the business or the operator of the
public authority;
[15] 1022239 Ontario submits that the
regulation does not apply because Mr. Swift owns or operates the
business. It suggests that this position is supported by the
decision of Yellow Cab Company Ltd. v. M.N.R., 2002 FCA
294 (F.C.A.).
[16] In argument, counsel for 1022239
Ontario admitted that the facts in Yellow Cab were
stronger because Yellow Cab did not share any of the revenues
earned by the drivers. In my view, this difference is sufficient
to distinguish the Yellow Cab case. Regulation 6(e)
is clearly intended to provide the benefits of employment
insurance to taxi drivers unless they act in an "owner" capacity.
In my view, Mr. Swift was simply a driver and did not carry on a
taxi business.
[17] In his testimony Mr. Irwin referred to
the relationship as a lease but counsel did not provide any legal
argument to support this. In my view, the relationship was much
more than that of lessor and lessee. The corporation earned 70
percent of the fares, maintained the vehicles, paid for gas,
advertised under the name 7500 Taxi and entered into arrangements
with major corporations representing about 40 percent of the
business. Mr. Irwin admitted that the 40 percent of the business
represented by corporate accounts were customers belonging to the
corporation and not the drivers. Although Mr. Irwin suggested
that the other customers were customers of the driver, no
explanation was given as to why this would be the case. I would
have thought that when a customer calls a taxi service to be
picked up, some sort of contractual arrangement is established
with the taxi company.
[18] In my view the decision in Yellow
Cab should not be extended to the facts in this case where
Mr. Swift's role is simply that of driver. The effect of
extending Yellow Cab would be to deprive Mr. Swift of
employment insurance benefits that were intended by the
legislation.
[19] For these reasons, the appeal under the
Canada Pension Plan is allowed and the appeal under the
Employment Insurance Act is dismissed. There will be no
order as to costs.
Signed at Toronto, Ontario 9th day of September, 2004
J.M. Woods J.
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