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Citation: 2004TCC529
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Date: 20040806
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Docket: 2003-3831(CPP)
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BETWEEN:
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TRI CLAD DESIGNS 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
Little J.
A. Statement of
Facts:
[1] The Appellant is a company
incorporated under the laws of the Province of Manitoba.
[2] The Appellant is engaged in the
design, construction and renovation of buildings throughout the
Province of Manitoba and Northern Ontario.
[3] Bonnie Wright (the
"Worker") is the spouse of Gordon Wright.
Gordon Wright owns one-third of the issued shares of the
Appellant.
[4] Commencing in 1993 the Worker
began to provide services to the Appellant.
[5] In a document submitted to the
Canada Revenue Agency ("CRA") the Worker described the
services and duties that she provided to the Appellant as
follows:
Duties
1. Accounting - prepare
year-end for accountant;
- accounts receivable and payable reconciliation
and control;
2. Supervision of accounting
staff;
3. Negotiated financial
contracts on behalf of the Appellant (See Exhibit R-2).
[6] The Worker testified that in
addition to the services that she provided to the Appellant she
also owned and operated a massage therapy business and she owned
and operated a mail order business.
[7] When the Appellant filed its
return under the Canada Pension Plan the Appellant
classified the Worker as self-employed for the period January 1,
1999 to December 31, 1999 (the "Period").
[8] In a decision issued by K.
Storrier of the Appeals Division of the CRA dated July 16, 2003
the following comments with respect to the Worker are found:
It has been decided to confirm the assessment in respect of
you for the following reason:
You were employed under a contract of service and, therefore,
you were an employee of Tri Clad Designs Inc.
The decision in this letter is issued in accordance with
subsection 27.2(3) of the Canada Pension Plan and is based
on paragraph 6(1)(a) of the Canada Pension Plan.
[9] The Appellant filed an appeal.
B. Issue:
[10] Was the Worker engaged in pensionable
employment by the Appellant during the Period as that term is
defined in the Canada Pension Plan?
C. Analysis and
Decision:
[11] 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 purposes of the
employer's trade or business;
[12] The issue to be decided is whether the
Worker was employed "under any express or implied contract
of service". Only if the Worker was employed under a
contract of service will she qualify for "pensionable
employment".
[13] 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 the Worker was an employee of the Appellant or an
independent contractor.
[14] An examination of what the Courts have
held to constitute a contract of service is required. The Courts
have developed a test focusing on the total relationship of the
parties with the analysis centered around four elements:
- degree of control and
supervision,
- ownership of
tools,
- chance of profit,
and
-
risk of loss.
[15] This test was propounded by the Federal
Court of Appeal in Wiebe Door Services Ltd. v. M.N.R.[1] 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.[2]
[16] 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 Ltd. v. Minister of Social Security[3]. The central
question is whether the person who has been engaged to perform
the services is performing them as a person in business on her
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[4].
[17] In Sagaz, Justice Major
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"[5].
[18] The requirement to take a holistic
approach in examining the four tests has been emphasized by the
Federal Court of Appeal on past occasions:
. . . we view the tests as being useful subordinates in
weighing all of the facts relating to the operations of the
Applicant. That is now the preferable and proper approach for the
very good reason that in a given case, and this may well be one
of them, one or more of the tests can have little or no
applicability. To formulate a decision then, the overall evidence
must be considered taking into account those of the tests which
may be applicable and giving to all the evidence the weight which
the circumstances may dictate.[6]
Similarly, Justice Major 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.[7]
[19] Before applying the facts of the
present case to the principles set out above, it should be noted
that the Minister's determination that the Worker's
employment was pursuant to a contract of service is subject to
independent review by the Tax Court[8]. No deference to the Minister's
determination is required.
[20] As stated above, the Wiebe Door
test can be divided into four categories:
Control
[21] 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 at page 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. [9]
[22] 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.
[23] The Worker testified that she could
come and go as she pleased. The Worker said that her salary was
negotiated each year and that she was paid a specified amount
bi-weekly on an annual basis.
[24] Various documents that were filed with
the Court put into question portions of the Worker's
testimony. I cite the following:
Counsel for the Respondent filed a list of invoices (see
Exhibit R-4). These invoices purport to have been issued by
the Worker's business - "BW Accounting Services" -
to the Appellant for the 1999 Period. An invoice was issued every
two weeks commencing on January 16, 1999. Each invoices (25 in
number) was in the amount of $1,760.00 or a total of $44,000.00
for the 1999 year. However, there were no cheques issued by the
Appellant relating specifically to the individual invoices (See
Exhibit R-3).
[25] Counsel for the Respondent also filed
Exhibit R-5 which consists of copies of 33 cheques payable to the
Worker by the Appellant during various dates in 1999.
[26] The details contained in the cheques do
not coincide with the testimony of the Worker nor to the invoices
contained in Exhibit R-4.
[27] I refer to the following:
(a) Cheque No. 002999 (page
3800-6) payable to the Worker in the amount of $2,700.00 and
dated January 20, 1999 states that the cheque covers a period of
135 hours at a rate of $20.00 per hour for a total of
$2,700.00. The cheque also refers to vacation pay accrued in the
amount of $320.00;
(b) Cheque No. 002812 (page 3800-7)
payable to the Worker in the amount of $1,350.00 and dated
February 3, 1999 states that the cheque covers a period of
67.50 hours at a rate of $20.00 per hour for a total of
$1,350.00 plus vacation pay accrued of $160.00 plus banked hours
accrued of $250.00;
(c) Cheque No. 003057 (page 3800-13)
payable to the Worker in the amount of $1,000.00 dated 05/10/99
and signed by the Worker refers to vacation pay;
(d) Cheque No. 003109 (page 3800-16)
payable to the Worker in the amount of $5,000.00 dated 06/22/99
and signed by the Worker contains the following statement:
Some banked hours
Some vacation pay
(e) Cheque No. 003199
(page 3800-21) payable to the Worker in the amount of $1,552.61
dated 08/10/99 contains the following statement:
vacation pay paid
(f) Cheque No. 003293
(page 3800-28) payable to the Worker in the amount of $820.00 and
dated 10/06/99 contains the following statement:
$320.00 vacation pay
$500.00 banked hours
(g) Cheque No. 003338 (page
3800-31) payable to the Worker in the amount of $2,950.00 and
dated 12/07/99 contains the following statement
$1,350.00 regular pay
$1,600.00 billed vacation pay and booked hours
(h) There were also a number of
other inconsistencies in the cheques issued to the Worker by the
Appellant.
[28] In my opinion the reference to
"Vacation Pay" in the cheques in Exhibit R-3
is indicative that a Worker is an employee and not an independent
contractor.
[29] I am not convinced by the Worker's
testimony that the Worker satisfies the control test. In other
words, I believe that the cheques that were issued to the Worker
indicate that the Worker was an employee of the Appellant.
Ownership of Tools
[30] The Worker said that she owned her own
laptop computer which she used in connection with the services
provided to the Appellant. However, the Worker admitted that when
she was at the Appellant's place of business she used the
Appellant's computer, the Appellant's computer network,
an office plus other assets and equipment owned by the
Appellant.
[31] I find that the Worker does not satisfy
this test.
Chance for Profit and Risk of Loss
[32] The Worker testified that she was paid
a set amount every two weeks. The Worker said that she negotiated
her salary at the beginning of the year. The Worker had no
investment in the Appellant's business and therefore she
could not realize a profit if the Appellant's business was
successful.
[33] I find that the Worker does not satisfy
this test.
Integration
[34] As noted above the Worker said that she
provided accounting services for the Appellant. The Worker had no
other customers for whom she provided office administration or
accounting advice.
[35] In Exhibit R-2 the Worker said:
I am the only one with financial expertize. (i.e. at the
Appellant's business)
[36] Based on the testimony of the Worker I
believe that the Worker's activities for the Appellant were
an integral part of the Appellant's business.
[37] For the reasons outlined above I find
that the Worker was engaged in pensionable employment by the
Appellant as that term is defined in the Canada Pension
Plan. The appeal is dismissed, without costs.
Signed at Vancouver, British Columbia, this 6th day of August
2004.
Little J.
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