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Citation: 2003TCC822
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Date: 20031127
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Dockets: 1999-4430(CPP)
1999-4431(EI)
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BETWEEN:
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CENTRAL REGISTRY OF GRADUATE NURSES,
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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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CASSANDRA YORK, STACEY KWIECIEN,
LEE ANNE RAPER, MARIAN BODNARUK,
GORDON READ, SONNY SEAH AND
HAZEL NEMBHARD,
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Intervenors,
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AND
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Dockets: 1999-4442(EI)
1999-4443(CPP)
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MAIJA KUZE,
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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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Dockets: 1999-4447(EI)
1999-4449(CPP)
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KATHLEEN RILEY,
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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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Dockets: 1999-4477(EI)
1999-4478(CPP)
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GORDON READ,
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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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CENTRAL REGISTRY OF GRADUATE NURSES,
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Intervenor,
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AND
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Dockets: 1999-4828(EI)
1999-4829(CPP)
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SONNY SEAH,
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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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Dockets: 1999-4584(EI)
1999-4585(CPP)
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MARIAN BODNARUK,
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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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Dockets: 1999-4962(EI)
1999-4963(CPP)
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RUTH LAFLEUR,
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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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Dockets: 1999-4782(EI)
1999-4786(CPP)
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EVELYN A. AGOSTO,
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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
MacLatchy, D.J.
[1] These appeals were all heard on
common evidence at Toronto, Ontario on August 22, 2003.
[2] The Appellant Central Registry of
Graduate Nurses (known as CRGN) was represented by counsel, Paul
Feldman, while the Appellants Marian Bodnaruk and Maija Kuze
appeared and were unrepresented. The remaining Appellants did not
appear nor were they represented by counsel.
[3] By Notice of Assessment dated
January 13, 1998, the Appellant CRGN, the Payor, was assessed for
failure to remit employment insurance premiums and in the amounts
of $70,412.52 for 1996, $72,334.01 for 1997, $29,522.69 for 1998,
and for related penalties and interest in respect of the persons
(the Workers) listed in Appendix "A" attached to the
Reply to the Notice of Appeal and was further assessed for
failure to remit Canada Pension Plan contributions in the amounts
of $37,182.28 for 1996, $43,542.25 for 1997, $14,647.34 for 1998,
and for related penalties and interest in respect to the same
Workers, as above.
[4] The Appellant, CRGN, appealed to
the Minister of National Revenue (the "Minister") for
reconsideration of the assessments and the latter confirmed the
assessments by letter dated July 30, 1989.
[5] The following persons also
appealed in their own right:
Maija Kuze, Kathleen Riley, Gordon Read, Sonny Seah,
Marian Bodnaruk, Ruth Lafleur and Evelyn A. Agosto.
[6] Evidence was led by the Appellant
CRGN through Marian Bodnaruk who was at the material times
the Treasurer and Board of Directors Member of CRGN. It was her
duty as part of the decision-making process for the Registry to
oversee the financial affairs of the Registry. She was well
qualified for the position as she had 30 years of nursing
experience and had been a member of the CRGN for more than 14
years. Her evidence was carefully and candidly delivered and was
most helpful to this Court.
[7] The Minister relied on certain
assumptions in making his decision, most of which were
acknowledged as correct by the witness.
[8] The Appellant CRGN is a non-profit
organization with no shareholders or voting shares but has a
President, Treasurer and Secretary and a Board of Directors made
up of members who are nominated and voted on by their
co-workers. The Board of Directors and Office Manager
control the day-to-day operations and make the major business
decisions for CRGN. The Appellant CRGN provides nurses and
temporary health care professionals to hospitals and to other
private facilities (the Clients), by matching the Clients'
requests with the Workers' request for work. The
administrative staff of CRGN worked with the Workers to set up
shifts at various hospitals, 24 hours a day, 365 days per
year.
[9] The Minister believed the duties
of the Workers were determined by the Clients. The witness
explained, in detail, the process of assigning a Worker to a
Client who was prepared to accept that type of assignment. The
Workers were experienced professionals and subject to direct
orders from Doctors or the nurse in charge and they knew what
their duties entailed. The usual hospital routines were followed
by the Workers as well as were the specific directions of the
Doctor and Head Nurse involved with that particular patient.
[10] The Workers' hours of work were
determined by the Clients and the Workers were required to sign
in and out at the beginning and end of each shift as well as sign
in and out at each unit as assigned.
[11] The Workers were required to complete a
time sheet which included the date, the shift worked, the hours
worked, the name of the hospital as well as the section of the
hospital they worked in. This time sheet was to be signed by an
authorized person of the Client. Once the Worker was called to
work, there was no flexibility in the hours worked.
[12] The question of supervision, direction
and control of the Workers was a major area of contention. The
Minister believed and assumed the Client was in control. The
witness stated that there was no such direction, supervision or
control. Each experienced Worker would adopt and conform to the
routines set in place by the Client for each section of the
hospital. The Worker would comply with hospital routines as set
by the hospital as the patients are the responsibility of the
hospital. The witness could not envision that a Worker would not
conform or comply with hospital routine. Grudgingly, the witness
admitted non-compliance by a Worker would be a serious
situation.
[13] The Workers were hired to replace
regular employees who were off sick or to supplement regular
staff in an overload situation. The witness stated the Worker
engaged would step into the shoes of a nurse normally hired by
the hospital. CRGN covered the Workers for Workers'
Compensation.
[14] The question of CRGN's right to
terminate the Workers' services was disputed by the witness.
The witness was unable to foresee the necessity to terminate any
worker but admitted that under "extreme circumstances"
there could be termination by CRGN.
[15] The Workers performed the services on
the Clients' premises and although they provided some small
tools, most of the equipment was provided by the Clients.
[16] The Clients were charged as standard
rate by CRGN, based on a pre-established schedule,
depending on the type of services required by the Clients.
[17] The Workers were paid by CRGN based on
the amounts charged by it to the Clients, less 11% which was
retained by CRGN to cover the cost of its office salaries,
telephone, office supplies and professional fees. This
remuneration was paid to the Workers by CRGN on a bi-weekly basis
or by direct deposit into the Workers' bank account.
[18] The Workers were employed by CRGN to
perform services under the direction of the Clients. The witness
would not agree that the Clients controlled the Workers once they
were engaged to work.
[19] The Workers were remunerated by
CRGN.
[20] The witness was careful to state that
the Workers were not 'employed' by CRGN and that the
standard rate charged to a Client was set by a resolution of the
Board of Directors as was the direction to withhold 11% from the
monies paid by the Client for the service provided by the
Workers. The major argument put forward by CRGN was that the
monies received from the Client were deposited into a bank
account which was stated to be "in trust". It was
argued that the monies really belonged to each individual Worker
to the extent of the hours of service performed by that person
less the withholding charge of 11% to cover the costs of
operating the Registry. CRGN was a not for profit corporation run
by its members, for its members.
[21] The question to be answered by this
Court is whether the member nurses were engaged in insurable and
pensionable employment.
[22] Counsel for the Appellant CRGN has
submitted to this Court a well-prepared and
well-documented written argument that has been most
helpful.
[23] The Regulations under both the
Canada Pension Plan and Employment Insurance
require CRGN to have paid the Workers using the terms
"entity which pays or remunerates". The argument put
forward is that CRGN does not 'pay or remunerate' but is
merely a conduit or agent for its member nurses. The hospitals
send the monies for nursing services to CRGN which are deposited
in the bank account monitored by CRGN, in trust. The
adding of the words 'in trust' was to indicate that such
funds belonged to the member nurses who have performed the
services subject to an agreed 11% deduction to pay CRGN's
expenses. As the evidence showed, all monies received went into
this account whether stated to be in trust, or otherwise. There
was no trust agreement presented in testimony nor were any terms
of the trust specified. It was a vague entity the terms of which
were interpreted by the witness. The only monies to be
transferred to the general account were those equal to the total
of the 11% deduction for expenses at any particular time.
However, evidence was adduced that even though, in some
circumstances, a Worker could be paid out of the trust account
before the hospital had sent the money to pay for such services,
this would not be fulfilling the true meaning of a trust
account.
[24] Admittedly the members of CRGN approved
the rates for service and set the withholding 11% rate but, when
set, it was out of the hands of the members to negotiate further
and CRGN operated thenceforth as a placement agency.
[25] Both counsel for the Appellant CRGN and
the Respondent directed this Court to the case of Sheridan v.
Canada (Minister of National Revenue - M.N.R.) (F.C.A.),
[1985] F.C.J. No. 230. In this case, the operator of a
for-profit nursing placement agency who received
remuneration from hospitals and who then paid the nurses
registered with her less a 10% fee argued that she was merely a
conduit for the remuneration paid by the hospitals. This argument
was rejected on two grounds: first, the operator set the fees for
the nursing services and not the nurses or the hospitals
themselves; second, that the operator withheld the 10% fee. Mr.
Justice Heald of the Federal Court of Appeal spoke for the Court
in the following manner:
The only other submission of the applicant which should be
addressed is to the effect that Regulation 12(g) does not apply
here because the nurses placed by the applicant were not
"remunerated" by the agency as the regulation requires.
Counsel submitted that, on these facts, the applicant was merely
a conduit of the remuneration paid by the hospitals. I do not
agree with this view of the matter. As stated supra, the
applicant here received all of the pay earned by the nurses from
the hospitals. Thereafter she remitted to the individual nurses
the proper amount earned by each after deducting from that
amount, her fee of 10% in most cases. The Shorter Oxford
Dictionary (3rd Ed.) defines "remunerate" and
"remuneration" as follows:
1. trans. to repay, requite, make some return for
(services etc.)
2. to reward (a person); to pay (a person) for services
rendered or work done...
Hence remuneration, reward, recompense, repayment, payment,
pay.
Volume 4 of Stroud's Judicial Dictionary (4th Ed.) states
inter alia, that "remuneration" means a quid pro quo.
[Note 1: Page 2324 - the authority for this definition is said to
be the judgement of Blackburn J. in R. v. Postmaster
General 1 Q.B.D. 663, 664.]
Based on the above definitions and ascribing to
"remunerate" its plain ordinary meaning, I conclude
that this applicant "remunerated" the nurses. She was
not a mere conduit. She remitted to the nurses the amount they
eared for their services which amount was dependent on their rate
of pay which was determined, not by the hospitals but by the
applicant. However, in 90% of the cases the remittal was not for
the total amount eared since the applicant's 10% fee was
deducted therefrom. In the remaining 10% of the cases, the full
amount earned was remitted the applicant's 10% fee was
deducted remitted to the individual nurses but subject to a
verbal promise by those nurses to pay the applicant's 10%
fee. In any event, the applicant could not be said to be a mere
conduit, whether her 10% fee was deducted before remittance
or became the subject of a debt owing to her by the nurses in
question. If her role was that of a mere conduit, she would
simply have transmitted the remuneration in toto. I think also
that a mere conduit would not have been involved in fixing the
quantum of the remuneration. I therefore reject this submission
by counsel for the applicant.
For all of the foregoing reasons, I have concluded that the
Umpire did not err in sustaining the respondent's
reassessment of the applicant for unemployment insurance
premiums. It follows, in my view, that the within section 28
application should be dismissed.
[26] This Court likens CRGN to be the
operator of a placement agency in that it received the request
for placement of persons for specific nursing services and then
referred to its registered members and from there it would place
a member, who consented, to such placement. The rate of
remuneration is set annually at a general meeting of members as
is the fee to be deducted from those members who provided
service. Once set, these rates and fees continued until changed
by the membership and were not negotiable by either the Worker or
the hospital involved. Obviously, the Registry would not set a
rate that would price themselves out of the market. It was
operating as a business with the usual competition expected in
the market place.
[27] In the case of Edmonton Nursing
Services Assn. v. Canada (Minister of National Revenue -
M.N.R.), [1991] T.C.J. No. 145, a decision of
Judge Hamlyn of this Court found a non-profit
organization set up by a group of private duty nurses to maintain
a registry of nurses and nurses aids available for private duty
nursing could be a placement agency.
[28] Judge Hamlyn's analysis of the
question before him stated as follows:
Therefore it becomes necessary to try and define, if possible,
"employment agency". It is clear from the submission
that the Appellant as a non-profit society does not carry on
business as an employment agency under the Employment Agencies
Act of Alberta, but the statute in question before the Court is a
federal statute and federal regulations thereunder. Thus in a
effort to determine the definition I have sought the assistance
of the Shorter Oxford English Dictionary.
"Agency" refers to agent, and "agent" by
definition appears to be "one who or that which acts".
And "employment" refers to "employ", and that
therein in subpart states, 1, to find work or occupation
for".
In the absence of any other reference I have come to the
conclusion, using the plain meaning of words, than an agent is
one who acts on behalf of and employment is the action of
employment, and that the Edmonton Nursing Services Association is
an association who finds work for its members and therefore is an
employment agency within the meaning of 12(g). I cannot find the
extended meaning that the Alberta legislation apparently talks
about in terms of carrying on business to apply to this section.
They are a non-profit association but they do, for the purposes
of this section, I find, perform the services of an employment
agency.
That then brings us down to the cited case of Jean Sheridan
Accent Nurses Registry v. The Minister of National Revenue: it
was argued that this case did not apply because the Appellant
felt they were not an employment agency. I have now concluded
that the Appellant is an employment agency. The question is, does
it still apply, given the facts. I find that most of the relevant
facts in this case are identical. From page 13 of the decision
Mr. Justice Heald concludes that:
...this applicant "remunerated" the nurses. She was
not a mere conduit. She remitted to the nurses the amount they
earned for their services which amount was dependent on their
rate of pay which was determined, not by the hospitals but by the
applicant. However, in 90% of the cases the remittal was not for
the total amount earned since the applicant's 10% fee was
deducted therefrom. In the remaining 10% of the cases, the full
amount earned was remitted to the individual nurses but subject
to a verbal promise by those nurses to pay the applicant's
10% fee. In any event, the applicant could not be said to be a
mere conduit, whether her 10% fee was deducted before remittance
or became the subject of a debt owing to her by the nurses in
question. If her role was that of a mere conduit, she would
simply have transmitted the remuneration ..... I think also that
a mere conduit would not have been involved in fixing the quantum
of the remuneration.
In the base before the Court there was a fixed fee (i.e. there
was a fixed fee as set by the Association and the rates were set
by the Association, and on that basis it is identical to the
Jean Sheridan case).
I endorse Judge Hamlyn's interpretation and find that CRGN
was a placement agency.
[29] Paragraph 12(g) of the Unemployment
Insurance Act Regulations and paragraph 6(g) of the
Employment Insurance Regulations are, for all practical
purposes, identical. Paragraph 6(g) of the EI
Regulations is as follows:
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:
...
(g)
employment of a person who is placed in that employment by a
placement or employment agency to perform services for and under
the direction and control of a client of the agency, where that
person is remunerated by the agency for the performance of those
services.
[30] The Minister's argument was that
there are four elements to the provision: there must be
employment of a person; that person must have been placed in that
employment by a placement or employment agency; that person
performed services under the director and control of a client of
the agency and that person was remunerated by the Agency for the
performance of those services.
[31] I accept Judge Weisman's decision
of this Court in Isomeric Inc. (c.o.b. System Search Group) v.
Canada (Minister of National Revenue- M.N.R.), [2000] T.C.J.
No. 843, as set forth in paragraphs 10 and 11 concerning the
meaning of the word "employment":
The remaining issue was the interpretation of the word
"employment" in regulation 6(g), and it was the
argument of the appellant that "employment" required
that the person placed be an employee under a contract of service
and that Mr. Liverance was an independent contractor, in fact and
by agreement between the parties, and therefore 6(g) was
inapplicable to the situation before me.
So far as the agreement between the parties is concerned
characterizing Mr. Liverance as an independent contractor, the
law is fairly clear that that sort of an agreement is not
determinative of the issue. That was set out in Wiebe
Door, [1986] 3 F.C. 553, itself and also in a case called
Ready-Mixed Concrete v. The Minister of Pensions,
[1968] 1 All E.R. 433 in the Queen's Bench Division. I drew
counsel's attention to the case of Canada and Skyline
Cabs, 1986 Federal Court Judgments 335 Federal Court of Appeal,
in which it was held that the word "employment" in
regulation 12(e) under the Unemployment Insurance
Regulations, which is the same as regulation 6(e) under
the Employment Insurance Regulations, is not to be given a narrow
interpretation of contract of service but is to be construed in a
broader sense of activity or occupation. And the question
therefore arose that if that is the interpretation of 6(e), why
should it be any different in 6(g), the section before me?
[32] Later, in the same decision Judge
Weisman stated in paragraph 17, as follows:
So far as regulation 34(1) of the Canada Pension Plan Regulations
is concerned, it's broader in scope than is 6(g). It
requires that the person be placed by a placement or employment
agency in employment with or for the performance of services and
terms and conditions on which the services are performed
constitute a contract of service or are analogous to a contract
of service.
[33] The wording of paragraph 6(g) of
the EI Regulations does not require the existence of a
contract of service although it would appear to be required under
section 34 of the Canada Pension Plan Regulations
"... employment with or for performance of services for a
client of the agency and the terms or conditions on which the
employment or services are performed ... constitute a contract of
service or are analogous to a contract of service...".
Whether, in this instance, there is a contract of service or some
relationship analogous to a contract of service existing between
the Worker and the hospital must be determined.
[34] Using the four-in-one test, it would
seem that the question of ownership of tools would point to the
nurses being employees and in alike fashion the only profit would
be the hours worked. There would be no sharing in the venture
itself. Further, there would be no loss to be suffered by the
Workers as, it was admitted, they would be paid whether or not
the agency had received their monies from the hospital.
[35] The question of control falls on the
side of an employee relationship as well. The hospital is
responsible for the patient's well-being and creates an
environment to care for and protect the patient. Any nurse coming
in to the system must comply with its requirements for the
benefit of the patient. Being a professional, the Worker would
understand this and would recognize the need for routines to
protect the patient and the need to follow the directions of the
Doctor for the patient and/or the orders of the Head nurse on
duty on that shift. It was clear that the hospital could dispense
with the services of a Worker if he/she would not follow those
necessary orders and routines. Whether the Worker was integrated
into the hospital's business or not should not be an issue.
It was the business of operating a hospital that is at issue. The
Worker was not caring on his/her own business but became part of
the hospitals' operation when engaged for employment.
[36] When the evidence is applied to the
recommended tests and the appropriate weight is given to each of
the tests and having regard to the overall relationship existing
between the Worker and the Client of the agency, it would appear
that the arrangement was analogous to a contract of service. To
arrive at this decision, I reviewed the various arguments put
forth by the Appellant agency and find them to fall short of
convincing me that the Workers were independent.
[37] The parties may characterize their
employment arrangement as that of independence but that is not
determinant of the relationship. The Workers may have believed
they were independent contractors but it is when the total
relationship of the work engagement is examined in light of the
evidence that the relationship can then be characterized and
determined. I find that the Workers were employed within the
broad interpretation of that term. They were placed by a
'placement agency', as identified by Justice Bonner of
this Court in Computer Action Inc. v. M.N.R., [1990]
T.C.J. No. 101. I accept his determination in that regard as well
as his interpretation of the meaning of control in circumstance
quite similar to this matter before me. It is difficult to apply
many of the tests recommended in Wiebe Door Services Ltd. v.
M.N.R., 87 DTC 5025, especially the question of control.
Nurses are highly skilled and professional persons who possess
skills far beyond the ability of the employer to direct but I
believe ultimate control existed with the client hospital even
though it was not regularly and continually exercised.
[38] For the reasons above, I am dismissing
the appeals of the Registry and those of each and every
individual Appellant and confirm the decisions made by the
Minister.
[39] The Appellant agency has also argued
that the penalties assessed against it should be vacated because
the Appellant had exercised due diligence with respect to its
liability for remitting source deductions. Since the assessments
were confirmed, the Appellant Agency has, to the best of its
ability, been compliant with such decisions and has and is
attempting to pay the assessed amounts. Should the Appellant be
assessed for making its decision not to make deductions at source
for employment insurance premiums and Canada Pension Plan
contributions based on its honest belief that it need not do so?
There does not appear to be any plan or scheme on its part, to
avoid its responsibilities in that regard. It made a decision
honestly believing that the legislative requirements did not
apply in the circumstances. The argument of a defence of due
diligence with regard to penalty assessments is controversial and
should be argued fully. The Minister had not received notice that
this defence was to be raised and argued by the Appellant and for
that reason was ill-prepared to respond to such argument. If due
diligence is to be litigated between the parties, it should be
done so on proper notice to the Respondent. It is an area ripe
for judicial guidance from a higher Court. It will not be
commented on by me, at this time. As an aside, however, it does
seem unfair to assess a penalty in circumstances such as these
where there does not appear to be malfeasance or a knowing
disregard for the legislation. The Minister should, once again,
review his decision with regard to penalties and consider whether
these circumstances warrant their imposition.
Signed at Toronto, Ontario, this 27th day of November
2003.
MacLatchy, D.J.
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