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Citation: 2003TCC757
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Date: 20031114
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Docket: 2002-2752(EI)
2002-2751(CPP)
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BETWEEN:
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TAIGA AIR SERVICES LTD.,
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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.
FACTS:
[1] The
Appellant was incorporated under the laws of the Province of Manitoba in 1991.
Mr. Tony Ursini owns all of the shares of the Appellant.
[2] The
Appellant operates a commercial helicopter charter service throughout the
Province of Manitoba and in other parts of Canada. The Appellant currently owns
two helicopters. Mr. Ursini frequently acts as a pilot of the Appellant's
helicopters. The Appellant also retains the services of other helicopter pilots
as and when required.
[3] Mr.
Alan G. Hahn (the "Worker") qualified as a helicopter pilot
approximately 29 years ago. The Worker was employed as a pilot by Midwest
Helicopters Ltd. for approximately 25 years.
[4] The
Worker provided services as a helicopter pilot to the Appellant during the
following periods:
1. From December 27, 2000 to January 5, 2001 10
Days
(Note: For Canada Pension Plan purposes
the Period
is January 1, 2001 to January 5,
2001.)
2. From October 16, 2001 to
November 15, 2001 31 Days
The periods referred to above are
hereinafter referred to as the "Periods".
(Note: The Worker became an employee of the Appellant in March
2002.)
[5] During
the above Periods the Worker was a pilot of one of the Appellant's helicopters
in Northern Manitoba.
[6] In
the 2001 year the Worker was also employed as a pilot by Canadian Helicopters
Ltd. The Worker worked for Canadian Helicopters in excess of 130 days in
the 2001 year.
[7] The
Appellant maintains that the Worker provided his services as a pilot to the
Appellant during the Periods as an independent contractor. The Worker agrees
that he was an independent contractor when he flew a helicopter owned by the
Appellant.
[8] The
Appellant and the Worker did not make any contributions to the Employment
Insurance Act and the Canada Pension Plan in respect of the services
provided by the Worker to the Appellant.
[9] The
Minister of National Revenue (the "Minister") determined that the
Worker was engaged in insurable employment within the meaning of
paragraph 5(1)(a) of the Employment Insurance Act during the
Periods referred to above.
[10] The Minister also determined that the Worker was engaged in
pensionable employment within the meaning of paragraph 6(1)(a) of the Canada
Pension Plan during the Periods referred to above.
ISSUES:
[11] (1) Was the Worker engaged in insurable employment by the Appellant
during the Periods within the meaning of paragraph 5(1)(a) of the Employment
Insurance Act?
(2) Was the Worker engaged in pensionable employment by the
Appellant during the Periods within the meaning of paragraph 6(1)(a) of
the Canada Pension Plan?
ANALYSIS:
[12] The Employment Insurance Act reads 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 or 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 Canadian Pension Plan
reads 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;
[14] The two issues of this appeal will be considered separately: First,
whether a contract of service existed, and second, whether the employment was
"casual employment" and therefore excluded employment.
Was There a Contract of Service Between the
Appellant and Worker?
[15] The first 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
he qualify for "insurable employment" and "pensionable
employment".
[16] 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.
[17] 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
[18] 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.
[19] 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".
[20] 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.
Similarly, Major,
J. 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.
[21] 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. No
deference to the Minister's determination is required.
[22] As stated above, the Wiebe Door test can be divided into four
categories:
Control
[23] 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.
[24] 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.
[25] According to the evidence provided by the President of the Appellant
and the evidence provided by the Worker, a helicopter pilot has a great deal of
autonomy when out in the field. The pilot coordinates the project based on
weather and transport conditions. Consequently, hours in the field can be quite
irregular. A significant factor to note is that it is not uncommon for pilots
to have no communication with the Appellant for days or weeks at a time. Under
these circumstances, how could it be said that the Appellant has the right
to control the manner in which the work is carried out? The Appellant
would not be able to determine the Worker's hours or what should be done on a
given day. Under these circumstances it would appear that the Appellant was not
capable of exercising control over the Worker.
[26] The facts in this appeal illustrate the limitations of the control
test. What distinguishes an independent contractor from a senior employee who
is given wide latitude to perform the job?
At what point does an employer lose the ability to control a worker and yet
retain the right to control the worker? The assignment of work is not enough;
as stated in the Wolf decision, where the consultant knew what was
expected of him, he was at liberty to accomplish it and: "[t]he fact that
an assignment was given to him does not establish a link of
subordination."
Similarly, the limitations of the control test was recognized by Major, J. in Sagaz:
A principal inadequacy is its apparent dependence on
the exact terms in which the task in question is contracted for: where the
contract contains detailed specifications and conditions, which would be the
normal expectation in a contract with an independent contractor, the control
may even be greater than where it is to be exercised by direction on the job,
as would be the normal expectation in a contract with a servant, but a literal
application of the test might find the actual control to be less. In addition,
the test has broken down completely in relation to highly skilled and
professional workers, who possess skills far beyond the ability of their
employers to direct.
[27] I have concluded that the control test has limited value in this
situation.
Ownership of Tools
[28] In the present case, both parties agree that the Appellant supplied
the helicopters to its pilots. The Appellant also maintained and serviced them.
This fact may not work against the Appellant because it is not reasonable for
the Worker to own a helicopter.
However, other cases have held that where the alleged employer owned a major
piece of equipment, it favoured an employment relationship. Thus, it is not clear how important
the Appellant supplying the helicopter is to the overall determination.
[29] It should be noted that the Worker paid for his other equipment such
as helmet, flight suit, and seasonal clothing.
Chance for Profit
[30] 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.
[31] In the present case, it is agreed that the Worker was paid based on
the daily rate. The Appellant claims that the Worker named his price whereas
the Minister claims the Worker was paid $250 per day, which is what every pilot
was paid by the Appellant. In Precision Gutters the following comment is
found:
... In my view, the ability to
negotiate the terms of a contract entails a chance of profit and risk of loss
in the same way that allowing an individual the right to accept or decline to
take a job entails a chance of profit and risk of loss.
The evidence was that the Worker and the Appellant negotiated the daily
rate for the Periods in question.
[32] An important factor to be noted in this situation is the ability of
the Worker to turn down offers made by the Appellant. Thus, the Worker was in a
position to seek other more profitable offers that were made by other
helicopter charter operators.
[33] It should also be noted that the Worker had such a wide discretion on
how to perform his job. In other words, the harder he worked the greater the
opportunity to take on more work for longer periods of time and earn more
money. However this point is limited somewhat by legislation prohibiting the
number of flying hours, but still the potential is there. For example, in Precision
Gutters, the Court stated: "[t]he installers were not given any set
time for performance of the contract and hence efficient performance might well
lead to more profits."
Risk of Loss
[34] With respect to risk of loss, the Minister alleges that the Worker did
not have to pay for any of his personal or living expenses. The Appellant
reimbursed the Worker for these expenses and then, according to the Appellant,
billed the customer for that amount. However, it should be noted that the
Worker was not covered under the Appellant's liability insurance. This is an
important point because if the helicopter had crashed the Worker might be found
to have a personal financial liability. In addition, the Worker had no
guarantee of work from the Appellant from one contract to the next.
[35] It should also be noted that in Wolf Desjardins, J.A. expanded
the notion of risk to factors beyond financial risk:
In consideration for a higher pay,
the appellant, in the case at bar, took all the risks of the activities he was
engaging in. He was not provided health insurance benefits nor a pension plan
by Canadair. He had no job security, no union protection, no educational
courses he could attend, no hope for promotion. The profit and the risk factors
were his.
Integration
[36] This is a difficult test to apply and its value is questionable. Nevertheless, in Canada v.
Rouselle et al., Hugessen, J. made the following comments on the
integration test:
[25] The judge did not mention the factor of
"integration" as such. Clearly in light of the case law cited above,
it was not essential for him to speak of it. However, if he had considered it
it is apparent that, from the employees' standpoint, the latter were not in any
way integrated into the employer's business.
[26] Their comings and goings, their hours and
even their weeks of work were not in any way integrated into or coordinated
with the operations of the company paying them. Although their work was done
for the company's business, it was not an integral part of it but purely
incidental to it.
In other words, the question is:
The observations of Lord
Wright, of Denning L.J., and of the judges of the Supreme Court in the U.S.A.
suggest that the fundamental test to be applied is this: "Is the person
who has engaged himself to perform these services performing them as a person
in business on his own account?"
[37] In the case, the Worker worked for the
Appellant only 41 days over, approximately, a one-year period. I do not believe
that it could be said that the Worker could be considered to be an
"integral part" of the Appellant's operation in the Periods.
Contractual Intent
[38] In Wolf, Nöel, J.A. made the
following remarks concerning the role that contractual intent plays in the
classification of an employee:
... 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.
[39] In the present case, the Worker and the
President of the Appellant both testified that they believed that the Worker
was an independent contractor.
If the Worker was an Employee, was His Work Excluded
Employment?
[40] The Appellant maintains that if the Worker
was an employee, he did not engage in insurable employment because the Worker
was engaged in excluded employment – specifically, casual employment.
[41] To constitute casual employment, two
separate conditions must be met. These conditions have been explained as
follows:
... it can readily be
concluded that casual employment within the meaning of this provision can only
be employment which exhibits no continuity, regularity or periodic recurrence,
and that employment may be casual even though the services rendered are
connected with the employee's trade (it is not the occupation which is in
question), and may not be casual even though it is unconnected with the
employer's professional activity or business (the two conditions stand
independently of each other).
[42] While duration of employment is a factor in
determining casual employment, much more important, in my view, are the factors
of predictability and reliability.
The Court in Roussy explained that casual employment has the
characteristic of being "ephemeral" or "transitory", i.e.,
unpredictable and unreliable.
The Court asked the question of whether it is impossible to determine the
regularity of the employment. On the facts of Roussy, the Court found
there was no casual employment because, despite only working 38 days, the
employee worked under the direction of the employer's agent five days per week,
8 - 9 hours a day at $8.00 per hour. The job was the framing of a house. Thus,
his employment "was definite, specific, and precise".
[43] Additionally, whether the employment is
casual depends on the contractual relationship by the two parties. This relationship
is determined by considering all the facts. The Court in Bélanger
described it as such:
What is involved is the
employment, and employment results from a contractual relationship between two
parties: there is no reason to think that the nature of an employment should be
determined by reference to one of the two parties only, the employer or the
employee. It is the meaning which the two contracting parties give to their
contractual relationship which make the employment something stable, which can
continue to exist or at least be renewed at regular intervals, and on which the
employee can rely, or on the other hand something ephemeral, transitory, merely
casual. It is only by considering all the circumstances surrounding the
establishment, continuation and termination of the contractual relationship
that it will be possible to decide on the meaning which the parties give to
their relationship. Some constants may exist. Thus, I think that in the event
of a misunderstanding between the parties as to the nature of their
relationship, it is the employee's impression which should prevail, provided it
is based on objective evidence, as in the case he was really relying on the
employment and to this extent merits the protection which the system can offer.
It is also clear that the most telling objective evidence will be from the
employer and its present and future needs, for it is the employer who created
the employment and only he could define it. Apart from these few constants,
however, everything depends on weighing the circumstances and on the
conclusions drawn from the evidence. The process may at time be very
cumbersome, but it must be gone through in all cases, and I know of no formula
which can simplify it.
[44] In the present case, the Worker was a helicopter
pilot for the Appellant for a total of 41 days over three different periods
throughout the course of the year, of which two periods are in question. The
issue is whether the Worker's time with the Appellant was ephemeral or
transitory. The Worker was with the Appellant very irregularly. For example,
the first period of employment was December to January and the second period
was not until October to November. Additionally, since the Worker provided
services on a regular basis for another employer during the year, presumably he
would only be available to work for the Appellant when he was not working for
the other employer. Thus, it seems that in this situation there was no way to
determine the regularity of the employment. Furthermore, as noted above, both
the Worker and the Appellant considered it to be casual employment since the
Appellant did not make any employee deductions for the Worker and the Worker
claims that he considered himself an independent contractor.
Conclusion
[45] I have concluded that the Worker was not an
employee of the Appellant in the Periods referred to above. This, like many
cases, is a borderline call. On balance, what tips the scale in my opinion is
that the Worker provided his services to the Appellant for a very short duration
of time when he was available, and, so it would seem, the understanding of the
parties was that an independent contractor status had been established. This
result seems to be consistent with the Federal Court of Appeal's recent
decisions in Precision Gutters and Wolf where a more liberal
approach to permitting parties to define their own relationships was taken.
[46] The appeals are allowed, without costs.
Signed at Ottawa, Canada, this 14th day of
November 2003.
Little,
J.
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