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Citation: 2004TCC30
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Date: 20040113
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Docket: 2003-2739(EI)
2003-2738(CPP)
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BETWEEN:
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JOHN TODMAN,
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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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AMENDED REASONS FOR JUDGMENT
Little, J.
A. FACTS:
[1] The
Appellant has been a house painter for approximately 16 years. The
Appellant operates his business under the name of Todman's Decorating.
[2] During
the period March 22, 2001 to September 10, 2002 (the "Period") the
Appellant retained Christopher Timms ("Timms") as a painter.
[3] The
Appellant testified that when he retained Timms as a painter at the beginning
of the Period he told Timms that he was retained as a sub-contractor and not as
an employee. The Appellant said that Timms had agreed to this arrangement.
[4] Christopher
Timms was called as a witness by the Respondent. Timms said that he recalls
being told by the Appellant that he was retained as a sub‑contractor.
However, Timms said that when he applied for benefits under the Employment
Insurance Act (the "EI Act") he was told by officials of
Human Resources Development Canada that in their opinion he was an
employee of the Appellant during the Period.
[5] The
Appellant also testified that since Timms was acting as a sub‑contractor
the Appellant made no deduction from the payments that he made to Timms for
Income Tax, Employment Insurance or Canada Pension Plan.
[6] During
the hearing of the appeals the Appellant agreed that during the Period he was
personally responsible for the following:
(a) the Appellant
obtained house painting contracts primarily from
E & S Developments Ltd., Benchmark Homes Ltd. and other
house builders;
(b) the Appellant
personally worked as a painter and he obtained the services of one or two
painters to assist him to carry out the painting that was required;
(c) the Appellant
determined the rate of pay received by Timms. Initially Timms was paid $15.00
per hour. During the Period this rate was gradually increased to $16.00 per
hour, later $17.00 per hour and finally $18.00 per hour. Timms said that he was
paid by cheque every two weeks;
(d) the Appellant
provided Timms with the paint brushes, rollers and the other painting equipment
and supplies that were required. The Appellant said that Timms supplied his own
clothing;
(e) the Appellant
arranged the approximate start date for the painting contracts. The Appellant
said that the work hours were 8:00 a.m.-4:30 p.m. in the winter months and 7:00
a.m.-3:30 p.m. in the summer months. The Appellant said that the starting times
were somewhat flexible but that Timms was expected to work eight hours per day from
Monday to Friday. The Appellant said and Timms agreed that sometimes Timms
worked overtime, if required;
(f) the Appellant was
responsible to the client to repaint any unacceptable painting and Timms
assisted when required to do so;
(g) the Appellant was
generally responsible for organizing which house was to be painted on a
particular day;
(h) the Appellant
stated that he did not have to monitor Timms in the carrying out of his duties
as a painter since Timms was a qualified tradesman;
(i) the Appellant
kept a record on a calendar of the number of hours that Timms worked during
each day;
(j) the Appellant
said that he is not aware of any expenses incurred by Timms in connection with
his work as a painter;
(k) the Appellant
agreed that Timms did not have any chance of profit or risk of loss in the
carrying out of his duties as a painter. However the Appellant said that under
the arrangement that he had negotiated with Timms, the rate of pay received by
Timms as a sub-contractor was more than he would have received if he were an
employee.
[7] The
Appellant said that Timms left the worksite on September 10, 2002 and
never returned.
[8] Timms
applied for employment insurance benefits under the EI Act.
[9] On
the 30th day of January, 2003 the Canada Customs and Revenue Agency (the
"CCRA") issued a Ruling that Timms was employed by the Appellant from
March 22, 2001 to September 10, 2002 under a contract of service
within the meaning of paragraph 5(1)(a) of the EI Act.
[10] On the 30th day of January, 2003 the CCRA issued a decision in which
it was stated that the Appellant employed Timms in pensionable employment for
the period March 22, 2001 to September 10, 2002 under a contract of service
within the meaning of paragraph 6(1)(a) of the Canada Pension Plan
(the "CPP").
B. ISSUES:
[11] A. Did the Appellant employ Timms during the Period within the meaning
of paragraph 5(1)(a) of the EI Act?
B. Did
the Appellant employ Timms in pensionable employment during the Period within
the meaning of paragraph 6(1)(a) of the CPP?
C. ANALYSIS:
[12] The relevant portions of the Employment Insurance Act read as
follows:
5. (1) Subject to
subsection (2), insurable employment is
(a)
employment in Canada by one or more employers, under any express or implied
contract of service or apprenticeship, written or oral, whether the earnings of
the employed person are received from the employer some other person and
whether the earnings are calculated by time or by the piece, or partly by time
and partly by the piece, or otherwise.
. . .
(2) Insurable employment
does not include
(a)
employment of a casual nature other than for the purpose of the employer's
trade or business;
[13] The relevant portions of the Canada Pension Plan read as
follows:
6. (1) Pensionable employment
is
(a)
employment in Canada that is not excepted employment;
. . .
(2) Excepted employment
is
. . .
(b)
employment of a casual nature otherwise than for the purpose of the employer's
trade or business;
Was There a
Contract of Service Between the Appellant and Timms?
[14] We must decide whether Timms was employed "under any
express or implied contract of service". Only if the worker was employed
under a contract of service will he qualify for "insurable
employment" and "pensionable employment".
[15] What constitutes a "contract of service" has been considered
by the Courts many times, often in the context of distinguishing the
relationship from a "contract for service". In other words, the Court
must determine if Timms was an employee of the Appellant or an independent
contractor.
[16] Canadian courts have developed a test focusing on the total
relationship of the parties with the analysis centred around four elements:
- degree of control and supervision;
- ownership of tools;
- chance of profit; and
- risk of loss.
[17] This test was propounded by the Federal Court of Appeal in Wiebe
Door Services Ltd. v. M.N.R.
and accepted and expanded by subsequent cases. The Supreme Court of Canada
recently had a chance to revisit the issue in 671122 Ontario Ltd. v.
Sagaz Industries Canada Inc.
Speaking for the Court, Major, J. stated:
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.
[18] Accordingly, Major, J. considered the central question to be
determined is "whether the person who has been engaged to perform the
services is performing them as a person in business on his own account or is
performing them in the capacity of an employee".
[19] Major, J. also stated in Sagaz:
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. . . .
[20] Before applying the facts of the present case to the principles set
out above, it should be noted that the Minister's determination that Timms'
relationship was pursuant to a contract of service is subject to independent
review by the Tax Court. No
reference to the Minister's determination is required.
[21] As stated above, the Wiebe Door test can be divided into four
categories:
Control:
[22] Mr. Justice MacGuigan said in Wiebe Door:
The traditional common-law
criterion of the employment relationship has been the control test, as set down
by Baron Bramwell in R. v. Walker (1858), 27 L.J.M.C. 207, 208:
It seems to me that the
difference between the relations of master and servant and of principal and
agent is this: A principal has the right to direct what the agent has to do;
but a master has not only that right, but also the right to say how it is to be
done.
[23] In other words, the key aspect of "control" is the
employer's ability to control the manner in which the employee carries
out his or her work; thus the focus is not on the control that the employer in
fact exercised over the employee. Examples of this ability include the power to
determine the working hours, defining the services to be provided and deciding
what work is to be done on a given day.
[24] In this situation it is very clear that the Appellant controlled the
manner in which Timms carried out his work. The Appellant determined the
working hours, the services to be provided and decided what work was to be done
on a given day.
Ownership of Tools:
[25] As noted above, the Appellant supplied all of the tools required to do
the house painting.
Chance for Profit or Risk of Loss:
[26] In an employee/employer relationship it is the employer who bears the
burden of profit or loss; the employee does not assume a financial risk as he
receives the same wage no matter what the employer's financial situation.
[27] In this situation Timms received an hourly wage and did not stand to
profit or suffer a loss with respect to the painting contracts.
[28] During the hearing the Appellant stressed that he had told Timms that
Timms would be a sub-contractor and not an employee and he understood that
Timms had accepted that arrangement.
[29] The question of whether an individual was an employee was also present
in the case of Standing v. M.N.R.
In the Standing case the parties agreed that Mrs. Standing was an
employee. In dealing with this issue Mr. Justice Stone of the Federal Court of
Appeal said:
There is no foundation in the case
law for the proposition that such a relationship may exist merely because the
parties choose to describe it to be so regardless of the surrounding
circumstances when weighed in the light of the Wiebe Door test.
[30] A similar question was before the Federal Court of Appeal in Nametco
Holdings Ltd. v. M.N.R. In
Nametco Mr. Justice Strayer said:
First, it is long recognized by
this Court that how the parties label their relationship is not determinative.
CONCLUSION:
[31] Based on the above tests I have concluded that Timms was an employee
of the Appellant during the Period for the purposes of the Employment
Insurance Act and the Canada Pension Plan.
[32] The appeals are dismissed, without costs.
Signed at Vancouver, British Columbia, this
15th day of January 2004.
Little,
J.
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