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Citation: 2003TCC761
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Date: 20031027
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Dockets: 2003-1668(EI)
2003-1669(CPP)
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BETWEEN:
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FIRST CHOICE COMMUNICATIONS INC.,
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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
Rowe, D.J.
[1] The
appellant, First Choice Communications Inc. (Communications) appeals from two
decisions – both dated February 26, 2003 - wherein the Minister of National
Revenue (the "Minister") decided the employment of Oluwakemi Adeoye
(Adeoye or worker) with Communications during the period from February 1 to
February 28, 2002, constituted both insurable and pensionable employment
pursuant to the relevant provisions of the Employment Insurance Act (the
"Act") and the Canada Pension Plan (the "Plan")
because she had been employed pursuant to a contract of service.
[2] Counsel
for the respondent and Mr. Robert Rieveley, agent for the appellant, agreed
both appeals would be heard together.
[3] Robert Rieveley (Rieveley) testified that he resides
in Vancouver, British Columbia, has a designation as a Chartered
Accountant and serves as the Chief Executive Officer (CEO) of Communications.
He is also a director of the appellant corporation which carries on a
communications service business that answers telephone calls, sends and
receives faxes and e-mail on behalf of clients, responds to inquiries
concerning advertisements broadcast on television and undertakes advertising
campaigns for specific clients. In the within appeals, CHQM - a radio station
- contracted with the appellant to undertake a promotion whereby members of the
public are contacted - by workers hired by Communications - in order to obtain
information concerning listening patterns/preferences and to entice them into
choosing CHQM as their favourite station. Rieveley stated this sort of
promotional activity generally takes place within a two/three-week period.
Communications secures the necessary personnel for these promotions by
advertising in newspapers. Rieveley stated it is highly unusual for
Communications to re-hire any worker since most people worked only for the two
or three weeks required to finish a specific project. Rieveley stated Adeoye
and Communications had entered into a written contract – Exhibit A-1 – in which
both parties had agreed she would provide her services on the basis she was an
independent contractor. The hourly rate was $10 and Adeoye was to be paid –
bi-weekly – in accordance with invoices submitted at least two days before
either the 15th or the last day of the month. Rieveley stated Communications'
business hours were between 9:00 a.m. and 5:00 p.m. and, although each worker
was expected to complete 300 calls per working day, some were able to make as
many as 600 while others only did 200. He stated there was a system for payment
of bonuses to the worker making the most calls in a certain period and for
obtaining the highest number of sign‑ups whereby people responding to the
call agreed to participate in ongoing promotions requiring them to listen – frequently
- to that particular radio station. The promotional work was carried out by as
many as 20 workers in office space that had been leased by the appellant. Each
worker was provided with a desk and chair located within a small space –
separated by a divider – and a computer, telephone and headphones. In order to
complete a call, a worker had to dial 9 and then the number. Each telephone
number had to be dialled by hand. Rieveley stated Communications was concerned
– primarily - with obtaining results and most workers put in a full day. The
client – CHQM – provided Communications with a script for workers to follow
when making a call but they were not supervised or instructed otherwise how to
carry out their tasks. Rieveley stated some workers were consistently able to
produce the desired results by making a large number of calls each day. No
workers were required to incur any work-related expenses. Rieveley stated
Adeoye worked only 15 days during the relevant period and stated she was at
liberty to hire someone to perform the tasks pursuant to her contract with
Communications. There was no training period prior to commencing work. Rieveley
stated it was too much trouble to sign workers up for a regular payroll when
they worked for only two or three weeks. He stated only two workers had ever
been hired to work on any subsequent promotion undertaken by Communications on
behalf of another client. At the outset, applicants were informed the work
would not last more than three weeks. Rieveley stated certain assumptions of
fact relied on by the Minister in the Reply to the Notice of Appeal (Reply) -
filed in appeal 2002-1668(EI) - were incorrect. From a written argument he had
prepared, he read out certain points he wished to be taken into account by way
of rebutting said assumptions, including the content of various terms within
the written contract between the appellant and the worker. Rieveley agreed the
worker was required to perform her task within the parameters of the contract
but noted she was free to take lunch breaks, coffee breaks and other brief
absences from her desk. Although there were
a certain number of businesses and individuals required to be contacted in
order to fulfil her end of the bargain, the most important factor ‑ in
his view – was Adeoye's skill in carrying out the task in accordance with the
prepared script supplied by CHQM. Rieveley agreed that – in accordance with
standard practice within the industry - the worker had been assigned a work
name – Sandra – so she could be identified in the event there was a problem -
arising from a telephone contact - during the course of the promotional
activity. Rieveley stated there were three regular employees of Communications,
one responsible for the operation of computers and two others: Stevin Ditty
(Ditty) - President of Communications - and another person - Chantal – who
undertook limited supervision of workers and were on the premises and available
for consultation by the workers. He stated Adeoye's work was subject to random
audit, pursuant to paragraph 8 of the contract (Exhibit A-1). In Rieveley's
opinion, since Adeoye was paid at the rate of $10 per hour only for the hours
she chose to work, she was able to increase her income by working the full day
and could earn bonuses based on performance. In his view, the appellant's
practice of hiring workers, on the basis they were providing their services as
independent contractors, was suited to the special business activity in which
particular campaigns or surveys were completed within a short period.
Communications has been operating since 2001, and he was somewhat surprised to
receive the Minister's decisions concerning the working relationship with
Adeoye. He agreed Adeoye had to attend at Communications' office in order to
begin work at 9:00 a.m., but stated she was free to leave before 4:00 p.m.
provided she had completed 300 calls, although any early departure may have
limited her opportunity to earn bonuses.
[4] In
cross-examination, Robert Rieveley agreed there was no mention of bonuses in the
contract – Exhibit A-1 – but had understood that cash prizes were awarded each
day to workers achieving certain goals. He stated 14 other workers had been
hired the same day as Adeoye.
[5] Cheryl Rieveley
testified she is in charge of accounts payable at Communications and is aware
daily cash bonuses were payable to some workers. In her view, it was an
oversight - in drafting the contract - not to have mentioned the method by
which workers could earn bonuses.
[6] In
cross-examination, Cheryl Rieveley stated she had completed the Questionnaire –
Exhibit R-1 – on behalf of Communications and agreed Adeoye had to perform –
personally - the services described in the written contract – Exhibit A-1 - and
acknowledged the worker had to attend – daily - at the appellant's office. She
agreed the contract entered into by Communications and CHQM was result‑based
in that the amount of revenue earned was linked to the number of calls
completed by its workers.
[7] Oluwakemi (Kemi)
Adeoye testified she resides in Burnaby, British Columbia and is employed
as an Administrative Secretary. Via the Internet, she became aware of the
appellant's advertisement in which interested parties were invited to telephone
a certain number. Adeoye called Communications and, in the course of the
conversation, was requested to attend at the office for an interview. She
completed the interview and - the same day - received a call from
Communications offering her work. Within the appellant's office, Adeoye stated
it appeared as though Ditty - and an individual she knew only as Chantal - were
in charge. Adeoye started work at 9:00 a.m. on February 4, 2002. She was
provided with a list of telephone numbers and assigned the working name,
Sandra. During the course of her work, Adeoye entered certain details - such as
name, age, address and gender - into the computer while speaking with any
persons who had responded to her call. Persons contacted in this manner were
informed the call was being made on behalf of CHQM. Adeoye stated a script was provided
to her and Ditty informed her – and other workers – they were to adhere to said
script and could not improvise. She started work at 9:00 a.m. - each morning –
following Chantal's instruction to the workers that they could begin making
telephone calls to the numbers on their assigned list. At 5:00 p.m., although
workers involved in placing calls left the office, Ditty and Chantal remained.
During the day, the workers received two 15-minute breaks and one 30‑minute
break – when announced by Chantal - who also recorded the time of Adeoye's
arrival and departure and the number of hours worked. Adeoye stated all workers
involved in the CHQM promotion were laid off on February 22, 2002. At that
point, she had worked 15 days. Adeoye was paid in accordance with the
hours recorded on two time sheets – Exhibit R-2 – and two attached invoices,
one in the sum of $542.50 ‑ representing 54.25 hours of work at $10
per hour - and another in the sum of $470, pertaining to 47 hours of work. On
February 4, 2002 – her first day at work – Adeoye had informed the interviewer
she had an upcoming medical appointment and, as a result, worked only 5.25
hours on February 6. Prior to beginning work, she was handed a sheet – Exhibit
R-3 – printed on Communications' letterhead, setting out the code of conduct to
be observed by workers. In said sheet, Adeoye pointed to a section dealing with
dress codes – including a description of what constituted proper and/or
inappropriate business wear - and to references therein to workers as "employees".
She stated all workers were in the same room and each used a desk, chair,
computer and telephone provided by the appellant. In her opinion, she was
required to perform her services personally. Each day, she would bring up – on
her computer - a list of telephone numbers - whether residential, commercial or
institutional – and begin dialling them in sequence. The nature of the
promotion was such that in order to win a contest, participants were required
to listen to CHQM at a particular time during the day and, if their name was
announced on air, they could win a prize. Information gathered during the
telephone conversation was entered into the computer by Adeoye. Once all the
numbers on the list had been called, she would inform Chantal and another batch
of numbers was assigned. With regard to the matter of bonuses being paid to
workers, Adeoye stated there were bonuses – paid every two weeks – in three
categories, namely, to the worker who made the most calls, obtained the most
"sign-ups" or accumulated the highest number of
"new names". Adeoye identified the Questionnaire – Exhibit R-4 –
she had completed.
[8] In
cross-examination, Kemi Adeoye agreed with Robert Rieveley's suggestion that
workers arriving late were not fired even though work was supposed to begin at
9:00 a.m. each morning. She stated she telephoned numbers assigned to churches,
schools, private residences, government offices and commercial establishments.
Adeoye stated she had not won any of the bonuses as only one winner was permitted
within each category. Most workers – including her – made more than 500 calls
per day but because the software used by Communications tracked only completed
calls – defined by Communications as a call answered by someone at the called
number - those unanswered numbers had to be redialled by the relevant worker.
Adeoye stated she wore a telephone headset and estimated that a completed call
- followed by a swift rejection – might occupy only 5 seconds but the
conversation with a willing participant could occupy one minute. In order to
call numbers within the Greater Vancouver area, workers had to dial 9, then the
604 area code, followed by the full 7-digit number. Adeoye stated she made long‑distance
calls to telephone numbers in British Columbia and that activity represented
approximately 10% of her total contacts.
[9] Robert Rieveley
testified – in rebuttal – that workers could arrive later in the morning as
long as they were able to get the job done. He stated he could not explain why
the sheet – Exhibit R-3 – dealing with the subject matter of personal
appearance and demeanour - had been handed out to the workers. He stated he had
not been at Communications' office while the work was being carried out during
the relevant period.
[10] In the course of his
summation, Robert Rieveley, agent for the appellant, urged the Court to accept
the written contract between Communications and Adeoye as being determinative
of her working status. He submitted the worker had been engaged to perform a
single mission over a short term and was free to obtain results as she chose,
provided her performance adhered to the terms of their contract.
[11] Counsel for the
respondent submitted the evidence conformed to the requirements of current
jurisprudence in that all the indicia of working status favoured the conclusion
Adeoye had been an employee and not a person providing services as a person in
business on her own account.
[12] The
Supreme Court of Canada - in a recent decision - 671122 Ontario Ltd. v.
Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983 – (Sagaz) dealt
with a case of vicarious liability and in the course of examining a variety of
relevant issues, the Court was also required to consider what constitutes an
independent contractor. The judgment of the Court was delivered by Major, J.
who reviewed the development of the jurisprudence in the context of the
significance of the difference between an employee and an independent
contractor as it affected the issue of vicarious liability. After referring to
the reasons of MacGuigan, J.A. in Wiebe Door Services Ltd. v. M.N.R.,
[1986] 2 C.T.C. 200 and the reference therein to the organization test of Lord
Denning - and to the synthesis of Cooke, J. in Market Investigations, Ltd.
v. Minister of Social Security, [1968] 3 All E.R. 732 - Major, J. at
paragraphs 45 to 48, inclusive, of his judgment stated:
Finally, there is a test that has emerged
that relates to the enterprise itself. Flannigan, ... ("Enterprise
control: The servant‑independent contractor distinction" (1987), 37
U.T.L.J. 25, at p. 29) sets out the "enterprise test" at p. 30 which
provides that the employer should be vicariously liable because (1) he controls
the activities of the worker; (2) he is in a position to reduce the risk of
loss; (3) he benefits from the activities of the worker; (4) the true cost of a
product or service ought to be borne by the enterprise offering it. According
to Flannigan, each justification deals with regulating the risk-taking of the
employer and, as such, control is always the critical element because the
ability to control the enterprise is what enables the employer to take risks.
An "enterprise risk test" also emerged in La Forest J.'s dissent on
cross-appeal in London Drugs where he stated at p. 339 that "[v]icarious
liability has the broader function of transferring to the enterprise itself the
risks created by the activity performed by its agents".
In my opinion, there is no one conclusive
test which can be universally applied to determine whether a person is an
employee or an independent contractor. Lord Denning stated in
Stevenson Jordan, ... ([1952] 1 The Times L.R. 101) that it may be
impossible to give a precise definition of the distinction (p. 111) and,
similarly, Fleming observed that "no single test seems to yield an invariably
clear and acceptable answer to the many variables of ever changing employment
relations..." (p. 416) Further, I agree with MacGuigan J.A. in Wiebe
Door, at p. 563, citing Atiyah, ...(Vicarious Liability in the Law of Torts.
London: Butterworths, 1967) at p. 38, that what must always occur is a search
for the total relationship of the parties:
[I]t is exceedingly doubtful whether the
search for a formula in the nature of a single test for identifying a contract
of service any longer serves a useful purpose... The most that can profitably
be done is to examine all the possible factors which have been referred to in
these cases as bearing on the nature of the relationship between the parties
concerned. Clearly not all of these factors will be relevant in all cases, or
have the same weight in all cases. Equally clearly no magic formula can be
propounded for determining which factors should, in any given case, be treated
as the determining ones.
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.
[13] I will examine
the facts in relation to the indicia set forth in the judgment of Major J. in Sagaz.
Level
of control:
[14] Prior to
examining this factor – and others – pertaining to the working relationship at
issue, I make the point that Robert Rieveley – certainly - and
Cheryl Rieveley – probably - were not present at the Communications'
office while the work was being carried out during the relevant period. The
testimony of Adeoye discloses the workers were told when to start, when to take
a break and that they had to adhere to certain codes of dress and conduct in
accordance with instructions contained in the sheet – Exhibit R-3 – handed to
them by Ditty and/or Chantal, the on-site Communications' employees who
exercised management/supervisory functions. The workers were instructed to
follow a script that had been prepared by CHQM and were instructed not to
deviate therefrom during the course of any telephone solicitation. Adeoye was
provided – via the computer situated on her desk – with a list of numbers to
call and when that supply had been exhausted, more numbers were provided. The
workers – including Adeoye – were placed in one room and functioned under the
supervision of employees of the appellant. Calls were monitored in order to
assure performance levels were maintained and their work terminated when either
Ditty or Chantal instructed them to put down their phones and headsets. Chantal
also recorded Adeoye's time of arrival and departure.
Provision of equipment and/or helpers:
[15] The workers were
not required to provide any equipment. The entire office, including furniture,
computers, telephones and related equipment, was leased/owned by the appellant.
Cheryl Rieveley agreed Adeoye's services had to be performed personally during
the short period covered by the written contract.
Degree of financial risk and
responsibility for investment and management:
[16] Adeoye did not
incur any financial risk arising from the performance of the required tasks
relevant to the working relationship. She provided her services for a total of
15 working days within a three-week period. The nature of the undertaking
governed the duration of the engagement and Communications utilized its own
staff members in order to supervise all workers engaged in the short-term
project.
Opportunity
for profit in the performance of tasks:
[17] The remuneration
paid to Adeoye was $10 per hour - not $8 - as assumed by the Minister in the
Reply. She was paid that rate for each hour worked. She was not paid for those
hours she was absent - due to a medical appointment – from Communications'
office. The so-called system of daily cash bonuses seemed to exist mostly
inside Rieveley's head as he was not present during the relevant period. There
were no daily payments; instead, Adeoye stated bonuses – in each of three
categories – were paid only at the end of the second week of the promotional
campaign. Each worker was required to make a minimum of 300 calls per day. A
typical workday consisting of 7 hours or 420 minutes – after taking into
account one hour for breaks - was the amount of time available for workers to
make 300 to 500 or more calls. Adeoye testified that dialling a number and not
obtaining a response would occupy 5 seconds of her time. When a person answered
her call, the elapsed time thereafter could range from 5-10 seconds – in the
case of a quick rejection – or perhaps occupy at least one minute if the person
responding was interested in participating in the promotion and then provided
various bits of personal information which were then entered into the computer
by Adeoye. One does not have to be adept at higher mathematics to discern there
is little room for efficient management of time on the part of the worker in
order to maximize earnings.
[18] In the
case of Minister of National Revenue v. Emily Standing, [1992] F.C.J.
No. 890 Stone, J.A. stated:
...There is no foundation in the case law
for the proposition that such a relationship may exist merely because the
parties choose to describe it to be so regardless of the surrounding
circumstances when weighed in the light of the Wiebe Door test ...
[19] Robert Rieveley –
agent of the appellant – submitted Adeoye was in the same category as a
carpenter who had been hired – pursuant to a written contract - to complete a
specific project within the period of time estimated for its completion. The
actual conduct of the parties during the period of the working relationship
relevant to the within appeals is not supportive of the appellant's assertion
that Adeoye was an independent contractor. By way of comparison, I suspect that
instructing an independent contractor such as a carpenter or plumber precisely
when to pick up/lay down tools or take coffee/lunch breaks - while demanding
compliance with strict, specific codes of dress and comportment not specified
in said contract - would constitute a faux pas of prodigious proportion,
destined to provoke an abrupt response on the part of the service provider,
including ‑ probably - the judicious application of one or more
personal hand tools common to those trades.
[20] In a recent decision of the Federal Court of
Appeal - Precision Gutters Ltd. v. Canada (Minister of National Revenue –
M.N.R.), [2002] F.C.J. No. 771 - the Court heard the appeal by a company
that negotiated contracts with the customer and then hired installers to
perform the work. In arriving at the conclusion that the gutter installers were
independent contractors – and not employees – Sexton J.A. found there were two
businesses operating, one on the part of Precision Gutters and the other on the
part of the installers. One business concerned the manufacture of the gutters
and the other arose from the physical installation. Sexton J.A. did not deal
with the elaborate operational infrastructure of Precision Gutters since that
was considered to have been a separate business whose breadth and level of
responsibility and financial connection with the end user was distinct from the
business aspect of the installation process - in the narrow sense - as it applied
to the installers.
[21] I return to the central question - as
referred to by Major J. in Sagaz, supra - which is to determine whether
Adeoye provided her services to Communications on the basis she was in business
on her own account. What business did she have? She responded to an
on-line advertisement by the appellant and – following an interview – was hired
to work during a short-term advertising/marketing campaign. Clearly, she was a
person providing a service within the context of an employee/employer
relationship. From the perspective of Adeoye and, examining the relevant
indicia on an objective basis, it is apparent there was only one business
operating and it belonged to the appellant.
[22] I understand the concern expressed by
Rieveley that the current Employment Insurance regime - whereby every hour of
employment is insurable – is cumbersome in terms of requiring payors to adhere
to ordinary payroll requirements which are not suited to certain types of
business where people are hired only for short periods in order to carry out a
specific, one-time project. However, in revising the governing legislation,
Parliament eliminated the requirement to work a minimum number of hours during
a defined period in order to be insurable under the Act.
[23] The decisions issued by the Minister are
correct and are confirmed.
[24] The appeals are hereby dismissed.
Signed at Vancouver, British Columbia, this 27th day
of October 2003.
Rowe,
D.J.
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