|
Citation: 2004TCC196
|
|
Date: 20040304
|
|
Docket: 2003-2094(EI)
2003-2095(CPP)
|
|
BETWEEN:
|
|
DAVE LIVINGSTONE TRUCKING LTD.,
|
|
Appellant,
|
|
and
|
|
|
|
THE MINISTER OF NATIONAL REVENUE,
|
|
Respondent.
|
REASONS FOR JUDGMENT
Mogan J.
[1] The Appellant carries on business
as a long-distance trucking broker for Sameday Right-O-Way (a
division of Day & Ross Inc.). The Appellant and Sameday
Right-O-Way ("Sameday") entered into a Linehaul Broker
Agreement dated March 3, 1997 under which the Appellant agreed to
provide certain equipment for the exclusive service of Sameday,
and to provide a sufficient number of individuals to operate the
equipment. Three particular individuals: Jim Bird, Steve
Collins and Michael Livingstone were engaged by the Appellant to
operate the equipment in question. The issue in this appeal is
whether those three individuals were engaged in insurable
employment within the meaning of the Employment Insurance
Act or were independent contractors.
[2] At the beginning of the hearing,
counsel stated that they had agreed to some basic facts. To
expedite the hearing, counsel for the Respondent read the basic
facts into the record and counsel for the Appellant confirmed his
agreement. The agreed facts may be summarized as follows:
1. The
individuals provided by the Appellant operated the equipment with
Standard Operating Procedures and Dispatch Rules.
2. The
Appellant was incorporated on June 7, 1999. David Livingstone
owns 98% of the Appellant's issued voting shares and his son
Michael Livingstone owns the remaining 2%.
3. The
Appellant is the beneficial owner of the trucks (sometimes
referred to as "tractors" or "cabs" used to
pull trailers loaded with cargo) but the trucks are registered in
the names of the Appellant and Day & Ross so that Day &
Ross ("D & R") can obtain the insurance and
licence.
4. The
Appellant hires workers to drive the trucks as long distance
transport drivers. The workers provide their own boots and
gloves, and pay for their own meals and cell phones.
5. Under the
Linehaul Broker Agreement (Exhibit 1), all drivers provided by
the Appellant must be an "Approved Employee" by D &
R.
6. The
Appellant pays all operating expenses and all maintenance of the
trucks including fuel, oil, insurance and licence. The cost of
fuel and oil is financed by D & R through a credit card
provided to the driver. D & R pays the credit card
amounts for a particular trip and then deducts those amounts from
the fees payable to the Appellant. Similarly, D & R finances
the cost of insurance and licence and then deducts that cost from
amounts owing to the Appellant.
7. The drivers
are responsible for keeping the trucks washed and clean.
8. The drivers
report to D & R who set the hours of work, the deadlines and
priorities; and who determine the hiring and firing of drivers,
to which the Appellant must comply.
9. The rate of
pay is negotiated between the Appellant and the driver. Having
regard to the three drivers who are the subject of this appeal,
Michael was paid a flat rate of $155 per day. Steve Collins was
paid a flat rate of $140 per day. And Jim Bird was paid by the
route. His typical route - which he drove most often, almost
exclusively - was from Toronto to Edmonton for which he was paid
$850 per route.
10. D & R provided a
load and run schedule with which the drivers had to comply. The
drivers could negotiate among themselves and with the Appellant
as to which route each driver would take so long as the
destination was reached within the time frame set by D & R.
The drivers' hours and days of work were influenced by the
needs of D & R.
11. If a worker refused
too many trips, the Appellant would be forced by D & R
to finds a more reliable worker.
12. The drivers could use
the Appellant's trucks only for services to D & R.
13. Each driver was
required to provide dispatch reports and log sheets to
D & R.
14. The drivers were paid
by cheque by the Appellant on the 1st and 15th day of each
month.
l5. The agreement
between the Appellant and D & R provided for a flat
rate of $900 per working day for linehaul trips, with wait time
included in that flat rate. D & R recovered the cost of
insurance at a rate of 5.1 cents per mile.
16. Uniforms were supposed
to be purchased and maintained by the Appellant but, in practice,
the uniform policy was never enforced; and the drivers did not
wear uniforms.
17. D & R purchased
the plates for each tractor and then recovered the cost of the
plates over 24 pay periods by deducting 1/24 of the cost from
amounts owing to the Appellant.
18. The Appellant was
responsible for workers' compensation.
19. D & R had an
insurance plan to which all drivers were required to contribute.
D & R also had a medical and dental plan which was optional;
a driver could join and pay in if he chose.
20. The agreement between
the Appellant and D & R keeps the Appellant's trucks
running on a steady basis. A regular driver could arrange for a
substitute driver but the substitute had to be approved by D
& R. The regular driver could negotiate a separate rate of
pay with his substitute driver different from the rate
established as between the regular driver and the Appellant.
21. A driver could work
for some third party but the Appellant had first call on the
driver's time.
22. Each driver was
required to provide a log sheet to the Appellant in order to be
paid.
[3] The above 22 items are the facts
agreed to by counsel at the hearing. Exhibit 1 is the Linehaul
Broker Agreement dated March 3, 1997 between the Appellant
(referred to as the "Contractor") and Sameday
Right-O-Way (a division of Day & Ross Inc.) (referred to as D
& R.). The following portions of Exhibit 1 are particularly
relevant:
1.
Definitions:
In this Agreement the following terms have the following
definitions:
(a)
"Approved Employee" means an employee of Contractor who
has been approved by D & R to operate Equipment.
(b) ...
(c)
"Dispatch Rules" means those rules established by D
& R for the orderly dispatch of linehaul equipment.
(d)
...
(f)
Standard Operating Procedures" ("SOP") means the
policies and procedures contained in the D & R Standard
Operating Procedures Manual and Drivers' Handbook.
...
3.
Employees
(a) Contractor
will present to D & R all applications by persons applying
for employment as Approved Employees and D & R agrees to
approve those applications which meet the standards set out in
SOP.
(b) All Approved
Employees are employees of Contractor and not D & R
and therefore Contractor is responsible for the payment of wages
and the withholding of contributions with respect to and payment
on behalf of Approved Employees under Unemployment
Insurance Act, Canada Pension Act [sic], Income Tax Act,
Workers' Compensation Actor any other applicable
statute.
(c) Contractor
shall permit only Approved Employees to operate
Equipment.
(d) Contractor
shall train and familiarize all Approved Employees with SOP and
Dispatch Rules and shall ensure that all Approved Employees
operate Equipment in accordance with SOP and Dispatch Rules.
Contractor will ensure attendance of an Approved Employee at any
training program scheduled by D & R for that Approved
Employee and to distribute materials to Approved Employees as
provided by D & R.
(e)
...
(f) If an
Approved Employee materially or repeatedly breaches SOP or
Dispatch Rules, D & R shall be entitled in its discretion to
suspend or terminate its approval of that Approved Employee.
Contractor shall be solely responsible for implementing such
suspension or termination. ...
[4] David Livingstone, the controlling
shareholder of the Appellant, testified at the hearing. He
confirmed the facts as agreed between counsel. He has owned his
own trucking business since 1982. He signed the Linehaul Broker
Agreement (Exhibit 1). Each driver was required to submit a
Dispatch Sheet showing the trips (origin, destination, etc.) he
had taken in a particular half month from 1st to the 15th or from
16th to last month day. Exhibit A-1 is the Dispatch Sheet for
Steve Collins from April 16 to 30 (no year indicated) showing his
trips from Port Hope to Toronto and other cities in southern
Ontario west of Port Hope. The Dispatch Sheet was important
because each driver was paid in accordance with the trips he had
done in the half month he was reporting.
[5] Each driver was required to keep a
log and file it with D & R every seven days. The Appellant
provided no training for any driver. If a load was delivered
late, D & R could impose a penalty on the Appellant which
would be passed on to the driver if the lateness was the
driver's fault. D & R is the Appellant's only client.
D & R provides forms for the drivers to fill out; and the
Appellant's drivers know the D & R rules. Mr. Livingstone
expected each driver to give him two weeks' notice of any
planned vacation so that he could find a replacement. The
Appellant issued paycheques to the drivers for their respective
gross amounts without any source deductions.
Analysis
[6] For many years, the decision of
the Federal Court of Appeal in Wiebe Door Services Ltd. v.
M.N.R., 87 DTC 5025 was the best guide in distinguishing
independent contractor from employee. More recently, the Supreme
Court of Canada in671122 Ontario Ltd. v. Sagaz
Industries Canada Inc., [2001] 2 S.C.R. 983, affirmed
Wiebe Door and restated the standard tests as follows at
paragraphs 47 and 48:
47 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.
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.
[7] The basic tests are control,
ownership of tools, opportunity for profit/risk of loss, and
integration. The first test, control, points strongly toward
employment. The drivers were required to attend each morning at
Port Hope to be assigned their routes, cargo destinations, and in
some cases a deadline for the delivery of certain cargo. In the
case of Jim Bird, his route was usually Port Hope to Edmonton and
return - a trip of six or seven days - and so he would not report
to Port Hope each day. In accordance with Exhibit 1, the drivers
were required to follow Standard Operating Procedures and the
Dispatch Rules. The drivers were clearly under the control of the
Appellant and D & R.
[8] The second test, tools, also
points toward employment. The basic equipment was the trucks
which were owned beneficially by the Appellant. The trailers were
owned by D & R. The drivers provided their own personal
property like boots and gloves but, effectively, the only
important equipment and tools were provided by either the
Appellant or D & R.
[9] The drivers were paid by the
Appellant twice each month: on the 1st and 15th days. The
Appellant paid all of the operating costs of the trucks, and D
& R maintained the trailers. If specific cargo was delivered
late, if the lateness was the driver's fault and if D & R
imposed a penalty which was passed down through the Appellant to
the driver, then the driver was at risk to absorb a penalty but
it was his only risk. The driver did not have any running
expenses like advertising, stationery, rent, business telephone
or invoicing. The driver's Dispatch Sheet (Exhibit A-1) was
all he had to submit to the Appellant in order to be paid. The
driver was paid a flat rate according to the trips on his log or
Dispatch Sheet. He had no opportunity for profit or risk of loss
in a business sense.
[10] Under the fourth and last test,
integration, the Courts have suggested that the following
question be asked from the workers' perspective: Whose
business is it? In the circumstances of this case, the answer is
simple because the drivers had no business. They had no customers
or clients. They had no revenue or expenses in a business sense.
They were always paid twice each month by the same person, the
Appellant.
[11] Counsel for the Appellant relied on the
decision of the Federal Court of Appeal in Wolf v. The
Queen, 2002 DTC 6853. I am not inclined to follow the
decision in Wolf for the following reasons. Mr. Wolf was a
mechanical engineer specializing in aerospace. He had held a
number of consulting contracts with aerospace companies before he
agreed in 1990 to provide his services to Bombardier/Canadair.
The drivers in this appeal do not possess the high professional
skills of Mr. Wolf; nor do they have a track record of consulting
in circumstances where their advice is sought. They provide the
basic skill of driving a large truck/tractor hauling a trailer.
In Wolf, the factors indicating employment or independent
contractor were evenly balanced and it was an appropriate case
for letting the parties determine the character of their
relationship. This is what the Federal Court of Appeal meant by
"contractual intent". All three appellate justices
delivered concurring reasons in Wolf. Noël J.A.
stated at page 6870, paragraph 122:
[122] ... In my view, this is a case where the
characterization which the parties have placed on their
relationship ought to be given great weight. I acknowledge that
the manner in which parties choose to describe their relationship
is not usually determinative particularly where the applicable
legal tests point in the other direction. But in a close case
such as the present one, where the relevant factors point in
both directions with equal force, the parties'
contractual intent, and in particular their mutual understanding
of the relationship cannot be
disregarded.
(emphasis added)
The factors in this appeal do not point in both directions
with equal force.
[12] The Appellant relied on the decision of
this Court in Doering v. M.N.R. (Court File No.
2001-1934(EI)) a decision of Beaubier J. dated February 27, 2003.
I would distinguish that case because Charles Doering owned his
own truck/tractor while the payor provided the trailer. Mr.
Doering had a real risk of loss and provided the basic equipment
and tools. And finally, the Appellant cited the decisions of this
Court and the Federal Court of Appeal in Comeau's Sea
Foods Ltd. v. M.N.R. (F.C.A. December 19, 2002). The facts in
this case are unusual because 146 workers engaged in Comeau's
vessels were held to be independent contractors. The four tests
from Wiebe Door pointed in both directions but the trial
judge (O'Connor J.) was particularly impressed by the fact
that Comeau's, by sharing the proceeds of the catch, was
sharing the proceeds of the business with the crew as a
co-venturer. The Federal Court of Appeal affirmed Judge
O'Connor. In this appeal, there was no sharing of proceeds
between the Appellant and the drivers of the trucks. The drivers
were paid a flat rate per trip.
[13] After applying the common law tests
from Wiebe Door and Sagaz, if I were in any
doubt as to the outcome of this appeal (I hasten to state that I
am not in doubt), I would still dismiss the appeal relying on the
documents and agreed facts. In Exhibit 3 entitled "Contract
for Services", the second recital states that the driver
("Subcontractor") is an independent contractor but that
recital is in conflict with the type of controls which each
driver, as an agent of the Appellant, accepts from D & R
under the Linehaul Broker Agreement (Exhibit 1). Also, the agreed
facts stated in paragraph 2 above point strongly toward each
driver being an employee and not an independent contractor. The
appeal is dismissed.
Signed at Ottawa, Canada, this 4th day of March, 2004.
Mogan J.
Email this Content