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Citation: 2003TCC181
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Date: 20030401
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Dockets: 2001-3510(EI)
2001-3511(CPP)
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BETWEEN:
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OUT WEST ENTERPRISES LIMITED
(O/A AD/WISE CONSULTANTS),
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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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TARA DALY,
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Intervenor.
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REASONS FOR JUDGMENT
Rip, J.
[1] The issue in these appeals under
the Employment Insurance Act and Canada Pension
Plan is whether, during the period June 24, 1999 to July 21,
2000, Tara Daly was an employee of Out West Enterprises Limited
("Out West"), as determined by the respondent, or
an independent contractor carrying on business on her own
account, as claimed by the appellant, Out West.
[2] Out West provides consulting
advice to persons advertising in the Yellow Pages of the
telephone book. Out West carries on business under the name and
style of Ad/Wise Consultants. The sole shareholder, director and
president of Out West is Murray Wardrope who, before
1984, was sales manager of a publisher of directories.
Mr. Wardrope explained that the Yellow Pages are a monopoly
and advertising in them is expensive. There are "things
advertisers don't know" and they "buy more than
they need". Out West offers various options to a Yellow Page
advertiser to improve the effectiveness of the advertisement and
reduce costs.
[3] Out West has been in business for
19 years and Mr. Wardrope has been its only employee, he
testified. Out West engages people such as graphic designers,
telemarketers and bookkeepers to provide services. Ms. Daly
was one of these people, he said.
[4] In May 1999 Mr. Wardrope
placed an advertisement in the newspaper for a person who could
perform word processing, bookkeeping and filing duties.
Ms. Daly applied; she had, he recalled, previous
telemarketing experience. After discussions with Ms. Daly,
Mr. Wardrope hired her to work at Out West. Mr. Wardrope
testified that Ms. Daly was engaged under a contract for services
so that she could work for other persons.
[5] During the interview with
Ms. Daly, Mr. Wardrope said he explained that Out West
would pay the same "number of dollars" if the person
were an employee or an independent contractor. He explained to
Ms. Daly that if she were an employee, Out West would have
to withhold certain amounts and if she were self-employed,
she would be able to write off her expenses.
[6] Ms. Daly insisted she told
Mr. Wardrope at the time she was originally hired by
Out West that she was not comfortable with telemarketing but
that she would give it a try. She also stated that
Mr. Wardrope required that she work as an independent
contractor.
[7] Mr. Wardrope repeated on
several occasions during the trial that Ms. Daly wanted to
work for other people as well as Out West. He agreed that as long
"as it didn't interfere with her contractual duties
[with Out West], she could work elsewhere".
[8] Mr. Wardrope stated that at the
time of his interview with Ms. Daly, Out West had an
opportunity to rent 1600 square feet of space for a very low
rent, $400 per month. This space could contain approximately
eight offices. There was a lot of room, more than was necessary
for Out West. Also, he explained that many telephone calls are
made each month on behalf of Out West. These calls cost
hundreds of dollars and it would be awkward for someone to
provide these services from one's home. Ms. Daly agreed
to lease office space from Out West "for her work", he
insisted, for $300 a month. The rent included a computer,
telephone, desk and a chair, beside the space. Ms. Daly,
Mr. Wardrope stated, supplied her own software programs.
Ms. Daly began work for Out West in June.
[9] Mr. Wardrope stated that
originally all he was looking for was an office for himself and
anyone engaged by Out West would work out of their home.
However, plans changed when he was able to lease extra space.
[10] The terms of the engagement between
Ms. Daly and Out West, according to Mr. Wardrope,
were as follows: she would bill Out West for the number of
hours she worked at a figure close to minimum wage. She would
have the opportunity to earn extra money by earning a commission
equal to 3 per cent of what Out West earned from prospects
contacted by Ms. Daly.
[11] Expenses incurred by Ms. Daly on
behalf of Out West were included in her monthly invoice to
Out West and were reimbursed by Out West. Ms. Daly
debited the rent she owed to Out West from the amount she
charged Out West.
[12] Mr. Wardrope also said he offered
Ms. Daly a $300 monthly retainer in addition to anything
else she earned. "I didn't want to get caught where she
was busy with someone else. I wanted priority." It is not
clear from the evidence whether he offered her the retainer when
Ms. Daly was hired or later on. Mr. Wardrope stated
that he would "drop the $300" if she worked
elsewhere.
[13] Out West's telemarketing
functioned as follows: Mr. Wardrope predetermined potential
clients for Ms. Daly to call. She would telephone these
people throughout British Columbia and Alberta, introduce
Out West to them and ask if they would be willing to meet
Mr. Wardrope for a few minutes. Mr. Wardrope told
Ms. Daly who to telephone. Mr. Wardrope would then
attend at the prospective clients and attempt to sell
Out West's services. Ms. Daly testified that when
she had a very successful run of securing potential clients for
Mr. Wardrope to interview, he would tell her to "back
off"; when she had a period of difficulty in contacting
potential clients, he told her "to push for more".
[14] Mr. Wardrope said he was away from
Out West's office 250 days a year. Therefore, he could
not be present to supervise Ms. Daly. Before Ms. Daly
started work at Out West he explained to her the work she
had to do, cautioning her that the work had to be done without
any supervision. However, Mr. Wardrope kept in daily contact
by telephone with Ms. Daly.
[15] During the period in issue Ms. Daly
became a paid director of the Cowichan Valley Regional District
("CVRD"). Mr. Wardrope complained that once
appointed to the CVRD, Ms. Daly began receiving phone calls
at Out West offices with respect to CVRD matters.
[16] Initially, Mr. Wardrope stated,
Ms. Daly performed "quite well". But once she was
elected to the CVRD Council, there was a "change in the
quality of service". She said she no longer wanted to do
telemarketing.
[17] When Ms. Daly started work for
Out West, Mr. Wardrope told her to obtain a business
name and open a bank account for the business. He also showed her
how to bill Out West. Ms. Daly billed Out West
monthly under the name "TLD Services" but did not open
a business bank account; the income from Out West was
deposited into her personal bank account. Copies of several
invoices sent by Ms. Daly to Out West were filed as
exhibits by Mr. Wardrope. According to Mr. Wardrope,
Ms. Daly had access to Out West's files and therefore
she knew what commission she was entitled to and, therefore, had
the information to prepare the monthly invoices.
[18] Mr. Wardrope was aware of the work Ms.
Daly performed for CVRD from the premises Out West rented to her.
He also was knowledgeable about discussions Ms. Daly had with
other people in the office. As a result of the "diminishing
value of services" Ms. Daly was performing,
Mr. Wardrope stated he had no other option but to terminate
the relationship with Ms. Daly.
[19] Mr. Wardrope completed a
questionnaire sent to him by Canada Customs and Revenue Agency
("CCRA"). Mr. Wardrope stated that he provided
training to Ms. Daly and added that the "contractor was
expected not to deviate from the style and manner by which
Ad/Wise Consultants conducts its business, particularly as it
relates to telemarketing". Mr. Wardrope stated that the
telemarketing work is assigned by him to Ms. Daly and that
telemarketing takes place only between the hours of 9:00 a.m. and
5:00 p.m. Ms. Daly was under the impression that except for
one hour for lunch, she could not leave the office between 9:00
a.m. and 5:00 p.m. on weekdays.
[20] Mr. Wardrope indicated he could
tell how well Ms. Daly performed telemarketing by the number
of appointments she made for him with potential clients. He had
concluded that the number of appointments was lower than he
expected and dropped off. She realized that "telemarketing
was not her cup of tea".
[21] In questioning Ms. Daly, Mr.
Wardrope stated that he trained her in marketing and how to
"break the book", that is, what potential clients to
look for. According to him, he showed her how to write letters,
address envelopes and told her what to say to potential clients.
Mr. Wardrope denied he suggested the $300 retainer was a
means to "wash" the $300 rent. Mr. Wardrope tried
to avoid giving a direct answer to many questions put to him by
Ms. Daly.
[22] In filing her 1999 income tax return,
Ms. Daly claimed business expenses for rent and gasoline.
She reported income from sales commissions and a retainer. She
also claimed business expenses in her 2000 income tax return.
[23] Mr. Wardrope produced a copy of a
decision of this Court in an appeal by Out West from a
determination of the Minister that a person had been employed in
insurable employment during 1992-1993.[1] Rowe D.J. found that the person was
engaged by Out West as an independent contractor. Deputy Judge
Rowe found that Out West had "very little control over the
activities" of the individual and the individual provided
his own office and tools, was paid only a commission and incurred
"substantial travel expenses" for which he was not
reimbursed. In short, the individual had a substantial risk of
loss.
[24] This is not the case in the appeal at
bar. First of all, Ms. Daly was trained to do her job by
Mr. Wardrope and she was expected "not to deviate from
the style and manner" in which Out West conducted its
business. She had to perform her telemarketing services during
specific hours as determined by Out West and was told who to
communicate with in telemarketing for Out West.
[25] Mr. Wardrope repeated several
times in his testimony that under a contract for services
Ms. Daly would be able to seek other work. But he
discouraged her from doing so, paying her a "retainer"
of $300 per month only to work for Out West.
[26] Had Ms. Daly the freedom to work
as an independent contractor, Mr. Wardrope would not have
complained that her work with the CVRD was taking time away from
the work with Out West.
[27] I also agree with Ms. Daly's
suggestion that the $300 retainer paid to her by Out West
was a "wash", a means to compensate her for the
"rent" of the office and equipment. Ms. Daly's
net billings, as produced, were as follows:
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Month
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Amount
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June 30, 1999
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$262.50
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July 31, 1999
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$601.58
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August 31, 1999
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$601.58
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September 30, 1999
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$702.49
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October 31, 1999
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$898.45
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November 30, 1999
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$943.25
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December 31, 1999
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$651.18
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January 31, 2000
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$850.07
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February 29, 2000
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$519.06
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March 31, 2000
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$880.62
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April 30, 2000
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$450.19
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May 31, 2000
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$871.19
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June 30, 2000
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$1,030.46
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July 31, 2000
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$770.54 (plus amount of $1,030.46 unpaid
for June 30)
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[28] If Ms. Daly had to pay rent
without receiving a retainer, her monthly income would be
approximately one-third to more than one-half her income. This
would not be the result of an independent contractor's risk
in carrying on a business but a result of low pay. In the
questionnaire the CCRA sent to Out West, Mr. Wardrope
informed the CCRA that expenses incurred on behalf of Out West
were reimbursed. Ms. Daly's degree of risk of loss was
minimal and is not a significant factor in arriving at my
decision.
[29] I rely on the reasons for judgment of
the Supreme Court of Canada in Sagaz Industries Canada Inc. et
al. v. 671122 Ontario Limited,[2] and Wiebe Door
Services Ltd. v. M.N.R., a decision of the Federal Court of
Appeal.[3]
Major J. stated that in considering whether a person was an
employee or an independent contractor, the central question is
whether the person was performing services as a person in
business on her own account. Factors to be considered include the
level of control the employer had over the worker's
activities, whether the worker provided her own equipment,
whether the worker hired her own helpers, the degree of financial
risk undertaken by the worker, the degree of responsibility for
investment and management held by the worker and the worker's
opportunity for profit.[4] It is on the totality of the evidence that a judge
made a decision.[5]
[30] Ms. Daly was carrying on no
business on her own account. Mr. Wardrope was always
controlling her activities, whether he was at the office or on
the road. Ms. Daly had to work within the instructions given
to her. I do not believe that Mr. Wardrope ever really considered
Ms. Daly as other than an employee. He knew - and made sure
he knew - what she was doing and when she was doing it. She did
not have any discretion to act on her own even to a limited
degree as an independent contractor would have.
[31] The appeals are dismissed.
Signed at Ottawa, Canada this 1st day of April 2003.
J.T.C.C.
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