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Citation: 2003TCC750
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Date: 20031027
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Docket: 2003-1078(EI)
2003-1079(CPP)
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BETWEEN:
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PARK AVENUE SPECIALTIES 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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and
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SUSAN PASAY,
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Intervenor.
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REASONS FOR JUDGMENT
McArthur,
J.
[1] These
appeals are from decisions of the Minister of National Revenue
("Minister") under the Employment Insurance Act ("Act")
and the Canada Pension Plan ("Plan"). The issue is
whether Susan Pasay was employed in insurable employment by the Appellant under
a contract of service or was she engaged under a contract for services
(paragraph 5(1)(a) of the Act).
[2] Before
commencing, the Appellant's counsel adjournment request was denied. The
principal of the Appellant (Don) who had been notified of the date of the
hearing, was in Montreal attending a trade show or conference. Apparently, he
had forgotten about the appeal. The Minister's counsel advised that she had
been just notified an hour before of the Appellant's request and opposed the
granting of an adjournment. The Appellant had been notified of the day and time
of these proceedings by notice dated August 6, 2003. Appeals are held at
considerable expense to the taxpayer and the Court cannot adjourn at whim or
forgetfulness of the taxpayer. The Appellant had almost two months notice and
its appeals were the only ones scheduled for October 3, 2003.
[3] The
Appellant was represented by legal counsel and Tracey Manning, Administrative
Assistant to the Appellant, testified on its behalf. The worker, Susan Pasay,
gave evidence on behalf of the Minister. The position of the Appellant, briefly
stated, is that Susan Pasay had 17 years experience in the sales business
as carried on by the Appellant. She was engaged by the Appellant because she
took with her several hundred clients she had established over the years. She
set her own hours and had her own customers. She was very aware of pricing and
set her own prices for the goods sold and, was personally liable for accounting
mistakes or losses.
[4] The
Respondent's position that Susan Pasay was employed in insurable and
pensionable employment was based on the following findings of assumptions of
fact:
(a) the Appellant was in the business
of selling promotional items;
(b) the Worker was hired as a sales
person;
(c) the Worker performed her services
at the Appellant's premises and in the field;
(d) the Worker did not bid for work;
(e) the Worker was paid by
commissions;
(f) the Worker's wage was based on 50%
of the profit from sales;
(g) the Appellant set the product
prices;
(h) the Worker had some flexibility on
the prices based on the client and the volume of the order;
(i) the Worker also received bonuses;
(j) the Appellant also made RRSP
payments for the Worker;
(k) the Appellant collected the sales
and controlled the payments to the Worker;
(l) the Worker was eligible for
advances on her commissions;
(m) the Appellant maintained the right
to control the Worker;
(n) the Appellant had the right to
monitor and direct the Worker's work;
(o) the Worker represented the
Appellant while in the field;
(p) the Worker attended sales meetings;
(q) the Worker could not perform
similar services for the Appellant's competitors;
(r) the Worker was required to perform
the services personally and could not replace herself;
(s) the Appellant provided the Worker
with a furnished office and support staff;
(t) the Appellant provided the Worker
with a leased vehicle;
(u) the Worker incurred fuel and
maintenance expenses for the vehicle;
(v) the Appellant paid for the Worker
to attend a trade show in Toronto;
(w) the Appellant provided the Worker
with jackets and shirts with the Appellant's logo;
(x) the Appellant provided the product
and any sales supplies;
(y) the Worker temporarily hired
someone to assist her with administrative work, and
(z) the Worker was employed under a
contract of service with the Appellant.
[5] There
was no serious challenge to (a) through to (f) inclusive, (h), (i), (j), (k),
(p), (q), (s), (t), (u), (v), (x), and (y). I note that (d) is not clear, there
was no evidence with respect to (l) and (r) and (z) is the issue.
[6] The
disputed assumptions apart from (z) are:
(g) the Appellant set the product
prices;
(l) the Worker was eligible for
advances on her commissions;
(m) the Appellant maintained the right
to control the Worker;
(n) the Appellant had the right to
monitor and direct the Worker's work;
(o) the Worker represented the
Appellant while in the field;
[7] The
facts as agreed to and as I find them, include the following:
[8] The
Appellant is and was in the business of selling promotional items such as pens,
mugs, T-shirts and the like in Edmonton and area. Susan Pasay had been selling
similar items in the same area for some 17 years.
[9] The
Appellant operated substantial premises that included several support staff
employees not involved in direct sales. It maintained a commercial building
that included a showroom for the customers, offices, office equipment and
supplies for the sales people and support staff. During the relevant period
there were five to seven sales people, two of whom received a fixed salary and
the remainder earned commissions only. Susan Pasay's commission was 50 per cent
of the profit from her sales. Because she had annual sales over $250,000 and
$400,000, the Appellant paid her expenses to a Toronto trade show and paid for
the lease and insurance on a vehicle it provided for her. She paid the fuel and
maintenance. Susan Pasay was free to come and go as she wished. Most of her
sales were made at the customer's premises and in the smaller municipalities
outside of Edmonton. She needed no directions with respect to the art of
selling and to whom she sold to. She brought a valuable asset with her when
engaged by the Appellant, a substantial list of customers she had cultivated
over the years. Obviously, she was self-motivated. The more she sold the more
commission she made. While the Appellant had little control over her day-to-day
sales activities, it did provide substantial support and assistance in addition
to the vehicle and a trip. At no cost to her, a showroom of products was made
available for her clients. A receptionist was available to answer her
customers' calls and questions. She was provided with her own private office,
sales aids such as brochures and up-to-date office equipment, at no cost. This
was in addition to her fully equipped office at home. Her sales orders were
reviewed by Don, the owner of the Appellant, daily and she met with him to
discuss her business situation, a few times yearly. She had the advantage of
attending sales meetings and seminars. She could obtain the support of her
colleagues during her absence. Sample products were provided without charge to
her. She was given a jacket, vest and T-shirt with the Appellant's logo. She
hired at her expense clerical help during a six-month period when she was
extremely busy. When filing income tax returns, she deducted expenses such as
home office and car maintenance in the manner of an independent contractor. She
paid for her own mistakes in her order forms. She was a goods and services tax
("GST") registrant and charged the Appellant GST in her order forms.
[10] Susan Pasay had some latitude with respect to the price she charged as
long as she maintained approximately 40 per cent profit ratio overall. She
might sell some products at a 50 per cent markup and others at a 30 per cent
markup. She had substantial work autonomy in that she sold where, when and how
she wanted. The Appellant had control over her commissions, what products she
sold and the office building. The oral evidence provided on behalf of both
parties was substantially truthful. Both witnesses were cautious when answering
and weighed their response in favour of their own positions.
THE TESTS AND
THE FACTS
[11] The present case is difficult because the
principal of the Appellant did not give evidence and the relationship between
the Appellant and Susan Pasay was governed by a loosely defined oral agreement.
[12] The thrust of the Appellant's case is that Susan Pasay was not
controlled by the Appellant, she brought her own customers, she risked profit
or loss because she priced the product and paid for her mistakes and she owned
much of her own equipment in that she operated out of her home. The only
deduction from her net commissions was with respect to a voluntary Registered
Retirement Savings Plan. The Appellant matched her contributions up to $100
monthly. When she left the Appellant, she kept many of her clients.
[13] In 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001]
2 S.C.R. 983, Major J. reviewed some cases dealing with the distinction between
a contract of service and a contract for services. At page 1005 he stated:
¶ 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.
[14] I will now deal with the above tests and the present facts. Susan
Pasay was a highly experienced salesperson. She needed no direction. While the
Appellant did review her orders and encouraged her to attend sales meetings,
for the most part she was free to complete her work, when, how and where, she
decided. This favours the Appellant's position. The Respondent's position is
supported by the facts that: she could not work for a competitor of the
Appellant; she had to promote its products exclusively; she used its letterhead
logo, salesroom and products. This test is inconclusive.
[15] Ownership and use of tools required by Susan Pasay to carry out her
work is inconclusive. The Appellant provided a building, showroom, office,
equipment, support staff, products, sales aids and a car. This supports an
employee relationship. She had an office in her home and she hired an assistant
to help with her sales. This supports an independent contractor relationship
yet the helper was not involved in direct sales.
[16] She was a commercial salesperson and was paid on a set commission.
This did not involve a substantial risk.
[17] My conclusion that she was an employee of the Appellant is arrived at
with considerable hesitation and deliberation. Obviously, it is close to the
line.
[18] After applying the facts and tests, the question boils down to, was
Susan Pasay working on her own account or for the Appellant?
- The answer is more consistent with her working for the Appellant;
- the Appellant hired her and could fire her;
- she promoted and sold the Appellant's product;
- she used the Appellant's extensive support system;
- she was paid according to the Appellant's profit splitting formula;
- she presented herself
to her customers, as an employee of the Appellant;
- she could not have
carried on as successfully without the Appellant's resources; and
- originally the
Appellant and Susan Pasay had considered themselves in an independent contractor
relationship but that is not the determining factor. The manner in which they
viewed themselves will prevail unless they can be shown to be mistaken by the
true nature of their relationship.
After considering the total relationship, I find that their relationship was
more one of employer and employee than independent contractor.
[19] Susan Pasay was engaged in insurable employment within the meaning of
paragraph 5(1)(a) of the Act as she was engaged under a contract
of service with the Appellant for the period January 1, 2001 to April 10, 2002.
[20] The appeals are dismissed.
Signed at Ottawa, Canada, this 27th day of
October 2003.
McArthur,
J.
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