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Citation: 2004TCC176
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Date: 20040310
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Docket: 2003-1632(EI)
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BETWEEN:
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JOHN P. SEHOVIC,
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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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and
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THE BEER MAN INC.,
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Intervenor.
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REASONS FOR JUDGMENT
Bonner, J.
[1] The Appellant appeals from a
decision of the Minister of National Revenue (the
"Minister") that his work for the Beer Man Inc.
("Beer") during the period January 2, 2000 to November
5, 2001 was not insurable employment. The Minister found that the
contract under which the Appellant worked was not a contract of
service.
[2] The Appellant asserted that he was
employed by Beer. That must be so, he argued, because liquor
delivery services (such as that operated by Beer) are permitted
to operate in Ontario only under licence and the licencing
authority prohibits the use of drivers who are not employees of
the licensee.
[3] The issue is whether the
Appellant, in working for Beer, was employed by it in insurable
employment.
[4] Beer intervened in the appeal in
support of the Minister's decision. Jim Devlin,
Beer's owner, testified on its behalf.
[5] Beer was in the delivery business
and, during the period in question, the Appellant worked as one
of its drivers.
[6] The Minister pleaded that his
decision was based on certain findings of fact. Those findings
are, in the main, correct and they offer a useful overview. It
should be noted however that (l) and (m) are in dispute and that,
in relation to (d), the nature of the Appellant's engagement
by the Payor, Beer, is the central issue. The findings are:
a) The Payor
is a business which provides delivery and courier services for a
variety of goods including alcohol, food, small supplies and
parcels, hereinafter referred to as the "supplies";
b) The
customers, hereinafter referred to as the "customers",
call the Payor to order the supplies;
c) Once the
order for supplies is received from the customers, the Payor
dispatches delivery persons to deliver the supplies to the
customers;
d) The
Appellant was hired by the Payor to deliver the supplies to the
customers;
e) Once
dispatched by the Payor, the Appellant purchased and paid for the
supplies to be delivered to the customers, and then the Appellant
collected the monies from the customers for the supplies and for
a delivery charge;
f) The
Appellant was paid 65% of the delivery charge for delivering the
supplies;
g) The
Appellant supplied his own vehicle to make the deliveries to the
customers;
h) The
Appellant paid all the expenses relating to his vehicle including
the insurance, repairs and maintenance;
i) The
Payor provided the Appellant with a flashlight, a radio and
receipt pads, and the Payor charged the Appellant $4.00 per day
for these items;
j) The
Payor's business operated from Mondays to Fridays from 9:00
a.m. to 10:00 p.m., on Saturdays from 9:30 a.m. to
10:00 p.m., and on Sundays from 11:00 a.m. to 6:00 p.m.;
k) The
Appellant basically worked four shifts during the week;
l) The
Appellant did not have to provide the services personally for the
Payor, and the Appellant could find a substitute to replace
him;
m) The Appellant was
not supervised by the Payor;
n) The Payor
did not provide the Appellant with an office or a place to
work;
o) The Payor
did not provide the Appellant with any health or benefit
plans.
[7] Two persons testified at the
hearing of the appeal, the Appellant and Jim Devlin. Each
clearly disliked the other and, no doubt, was prepared to allow
that dislike to influence his testimony.
[8] The delivery business was
originally carried on by the Appellant under the name Arrow
Express. The Appellant sold the business to Beer (or possibly
Devlin) in 1997. A rather sketchy written outline of the sale
agreement was produced. One of its provisions was:
John Sehovic and Shauna Meyers[1] will always be offered employment with Arrow
Express (as long as there are shifts available without having to
lay off workers). This will be at a 35% to 65% pay ratio.
[9] The Appellant produced a New
Driver Information handout which he said was given to him when he
was taken on by Beer. It clearly shows that Beer reserved the
right to exercise a remarkable degree of control over the manner
in which the drivers did their work. It reads in part:
1. You
must have a $100.00 float to start each shift. It is your
responsibility to ensure you have change for a $100.00 bill at
the start of each shift.
2. We have
T-shirts or sweatshirts that are mandatory. If you wish to wear a
hat on the job, it must be one of ours. You cannot substitute the
hat for the shirt. The shirt is a must each day you are scheduled
to work. You may wear any pants or shorts you like. The only
exceptions are cutoffs, ripped or stained pants or shirts. You
are expected to come to work looking respectable as you are a
representative of this company.
3. You must
radio in or phone to say you are ready to go no more than
20 but no less than 10 minutes before your shift. By ready
to go we mean you have your uniform, float and have filled-up
[sic] your vehicle.
4. If the
dispatcher tells you to do your deliveries in a certain order, do
them that way. We do this for a reason. Usually one order is
older than another. If we don't specify, then do the closest
order first.
5. You are
allowed to have a passenger in the vehicle during your shift.
They are not allowed to pick things up for you, deliver
items for you, or speak on the radio. The only time they are
permitted to use the radio is if your out of the vehicle and we
call for you.
6.
Absolutely no foul language is to be used on the air.
7. Personal
errands may be done during your shift if we do not have a
delivery for you at the moment and if it will take a few minutes.
If you think an errand will see you being out of reach for more
than five minutes, do it on your days off.
8. Things you
will need to keep in your vehicle are a pen, paper, a map (Map
Art maps are the best to get), and if you wish, a calculator.
9. No matter
how long you've lived here, you need a map. There will always
be streets you will have to look-up [sic]. Try to find
streets on the map first, but if you can't the dispatcher
will help. Trying to find it yourself will be faster and you will
remember where it is the next time if you look it up.
10. When you first start,
you will be told the delivery charge. If your [sic] not
sure, ask the dispatcher.
11. If for any reason you
can't work your scheduled shift, its [sic] up to you
to get it covered. The dispatcher must be informed in advance of
all schedule changes.
12. If you wish to step
out during your shift you must radio in first and wait for the
dispatcher to answer. If you are gone for more than five minutes,
we need a phone number to reach you at.
13. Radio in when we tell
you to get an order, to acknowledge it. Radio in when you've
picked-up [sic] the order. Radio in when your [sic]
done ALL the orders you were given. Whenever you radio in, listen
first to ensure no one else is talking.
14. If you think the
dispatcher erred and skipped you for an order, speak up then. If
that is the case they will correct it. This happens from time to
time and is not intentional.
Radio operation and care
•
You are responsible for the radio while it is in your care. Treat
it as if it were your own as they cost about $1000 per unit.
•
Do not place drinks near the radio.
•
If any of the equipment is damaged DO NOT attempt to repair it.
Bring it in to the office to be fixed.
•
Disconnect the power cord and antenna if you are removing the
radio from your vehicle.
•
Do not hang your mic from the rearview mirror, it will damage the
wires.
•
Put the antenna cord through a door or window not being used so
the cord will not get damaged.
•
You have the option of mounting the radio in your vehicle. If you
choose not to your equipment is to be returned on your days off.
We prefer that you do mount it as there is less where
[sic] and tear if you do. If you do mount it, you are not
required to bring it in on your days Off.
[10] The next page of the handout offers
some insight into the basis of the intervenor's view that the
Appellant was self-employed. It reads:
WORKMAN'S COMPENSATION BOARD
Note that because at the end of your shift you pay us (as opposed
to being paid by us), you are considered self-employed. As such,
you are NOT entitled to receive compensation benefits should you
be hurt on the job. Each driver is required to complete a simple
form stating that you know you are NOT entitled to these benefits
through us. This form will stay on file (no one will receive a
copy) unless or until you try to apply for benefits.
You can make arrangements to pay into workman's comp, EI,
CPP, income tax, etc., but doing so is your own
responsibility!
[11] Finally the handout sets out specific
instructions to the drivers regarding the delivery of
alcohol:
Alcohol Deliveries
We do not serve minors!! It is company policy as
well as the policy of the LCBO that we ID everyone
that looks under 25. If you ever serve a minor you will be
fired, no questions asked. As well we will do everything in our
power to see that you are prosecuted to the fullest extent of the
law. If you have even the slightest doubt about someone's
age, ask for ID.
The correct way to do a delivery is as follows:
When you get to the door, set the alcohol down beside you. Ask
for the money and hand the customer the liquor pad for them to
sign. Once you have the money and the liquor pad back, ask for ID
if you deem it necessary. If they present valid ID, write the
number (i.e. Drivers license #) in your liquor pad and give them
their change and alcohol. If they do not have ID, give them back
their money MINUS the delivery charge. This is the only way you
will get paid! Take the alcohol and leave. The alcohol is
returnable, you are not "stuck" with it. Everyone MUST
sign the liquor pad every time you deliver. The person receiving
the alcohol is the one that must sign. No signature, no booze,
NO EXCEPTIONS!!!!!! It is your responsibility to ensure
the customer signs their real name, not "Mickey mouse"
or "john doe". There is a print line on the pad for you
or them to print the name if the signature is illegible. Every
pad is gone through page-by-page when it is brought in. If we
find illegible signatures or fake names you must go back and
correct the problem. It is much better to do it right the first
time. Acceptable forms of ID are covered in the training video
you must watch if hired government issued[2] photo I.D. We accept empties for
any delivery we do. You are required to take empties at all
times. The only time you may refuse them is if your vehicle is so
full you can't fit more, or if it's an apartment
building, there are more than you can carry, and the customer
will not assist bringing them to the lobby. If the customer is
willing to help you must take the empties. You give the customers
$2/case, $1/twelve pack, $ .50/ six pack. The rest is yours for
taking them.
[12] The Appellant testified that following
the 1997 sale of the business, he commenced to work for Devlin as
a dispatcher. Later he started to work as a driver. Apparently,
he understood at the time that he was engaged that he would be
considered to be an independent contractor. The Appellant
testified that as a driver for Beer: (a) he owned the vehicle
used to make deliveries; (b) he obtained his own automobile
insurance; (c) he carried a float of $200.00 of his own money for
use in paying for goods ordered by customers; (d) he reported to
Beer's office at the beginning of each shift and, as well,
for purposes of cashing out, at the end of each shift; (e) he
bore the risk of loss of the delivery charge in cases where the
customer did not accept delivery and, as well, he bore the risk
of loss if goods carried by him were stolen; (f) at the end of
each shift he paid a "radio charge", the amount of
which varied with the number of calls taken by him during the
shift; (g) on one occasion Ms. Meyer drove in his place; (h) he
filed income tax returns for the 2000 and 2001 taxation years on
the basis that he was self-employed because he "didn't
want to rock the boat".
[13] The evidence of Jim Devlin was of
little assistance. It consisted for the most part of anecdotes
which he apparently thought would support a conclusion that
Beer's drivers were independent contractors. Devlin attempted
to dismiss the new driver handout as a guideline which he
prepared for himself alone. He said that it was never given out
to anyone. It seems unlikely that Devlin would have gone to the
trouble to prepare a document of this sort if he did not intend
to hand it out to new drivers. The evidence as a whole persuades
me that, whether the document was handed out or not, the terms
set out in it formed the basis of the relationship between Beer
and its drivers.
[14] Beer's drivers selected the
schedules which they wished to work from a list posted by Beer
from time to time.
[15] Devlin claimed that the drivers were
allowed to engage substitutes to drive for them. I am not
convinced the drivers had an unrestricted right to do any such
thing. For one thing, Beer's operations were regulated by a
provincial body which insisted that drivers view a training video
prepared by that body. Moreover, it would seem to be impractical
to impose a uniform clothing code on substitute drivers selected
at random. I am inclined to conclude that substitution was
permitted only within the existing pool of Beer's drivers
subject to the requirements of paragraph 11 of the new driver
information sheet.
[16] The leading case on the distinction
between a contract for services and a contract of service
(employment) is 671122 Ontario Ltd. v. Sagaz Industries Canada
Inc., 2001 SCC 59. There, Major, J. reviewed the tests which
have been applied in the case law including the control test, the
four-factor test[3]
and the organization or integration test. He found that there is
no single conclusive test of universal application and emphasized
that "what must always occur is a search for the total
relationship between the parties". He found that a
persuasive approach was that adopted by Cooke, J. in Market
Investigations Ltd. v. Minister of Social Security, [1968] 3
All. E.R. 732. At paragraphs 47 and 48, 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.
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.
[17] It is also helpful when considering
cases of this sort to refer to the following passage from the
reasons for judgment of Jackett, P. in Alexander v.
M.N.R., 70 DTC 6006 at 6011:
...On the one hand, a contract of service is a contract under
which one party, the servant or employee, agrees, for either a
period of time or indefinitely, and either full time or part
time, to work for the other party, the master or the employer. On
the other hand, a contract for services is a contract under which
the one party agrees that certain specified work will be done for
the other. A contract of service does not normally envisage the
accomplishment of a specified amount of work but does normally
contemplate the servant putting his personal services at the
disposal of the master during some period of time. A contract for
services does normally envisage the accomplishment of a specified
job or task and normally does not require that the contractor do
anything personally.
[18] In applying the tests it will be noted
first that Beer had the right to exercise control over almost all
aspects of the manner in which the drivers did their work. The
handout is clear on that point.
[19] Next it will be noted that drivers did
not have, to any meaningful degree, the right to employ
substitutes to do their work for them. Drivers were not in a
position analogous to a businessman such as an electrical
contractor, plumber or contractor who is typically entitled to
employ any suitably skilled person to do the work which the
businessman has undertaken.
[20] Turning to investment, chance of profit
and degree of financial risk, it must be noted that the Appellant
was obliged to supply, insure and operate his own vehicle all at
his own expense and risk. Drivers were also obliged to pay the
daily rental fee charged by Beer. All of these cost elements were
significant and to some extent amenable to control by the driver.
Those financial elements of the arrangement point toward the
existence of a contract for services.
[21] On the other hand however, I observe
that it was not the Appellant but rather Beer which had the right
to fix the delivery fee charged by it to its customers. The
Appellant's percentage share of the fee was fixed once and
for all, it would seem, by the 1997 agreement. Thus Beer
controlled a major element of the Appellant's revenue stream.
The Appellant's only recourse, if he wished to increase his
revenue stream, was to drive more.
[22] I am inclined to the view that
indications arising from the financial elements of the
arrangement point in opposing directions and balance each other
out.
[23] Typically, an independent contractor is
expected to own or supply and use the tools which he requires to
perform the task which he has contracted to do. Here, as noted
already, the Appellant supplied the vehicle and furnished the
radio under the rental arrangement with Beer.
[24] In my opinion, when the arrangement is
viewed as a whole it is apparent that the Appellant worked for
Beer under a contract of service. The central obligation was to
pick up and deliver goods for Beer's clients. This work was
required to be performed by the Appellant personally. The
Appellant was subject to an overwhelming degree of control by
Beer with regard to the manner of performance of his duties. The
tools and financial elements tests point only faintly to a
contract for services and, when seen in the context of the entire
arrangement, are overridden. The focus of the contract was the
provision of the Appellant's time and labour. He was not in
the business of selling results in the form of a multitude of
individual deliveries. He was Beer's employee.
[25] The appeal will therefore be allowed
and the Minister's decision vacated.
Signed at Calgary, Alberta, this 10th day of March 2004.
Bonner, J.
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