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Citation: 2003TCC373
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Date:20030607
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Dockets: 2002-685(EI)
2002-686(CPP)
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BETWEEN:
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CHRISTINE BECHER,
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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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VICTORIA MICROSYSTEMS LTD.,
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Intervenor,
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AND
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2002-687(EI)
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2002-688(CPP)
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VICTORIA MICROSYSTEMS 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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CHRISTINE BECHER,
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Intervenor.
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REASONS FOR JUDGMENT
Rowe, D.J.T.C.C.
[1] The appellant - Christine Becher
(Becher) - appealed from two decisions issued by the Minister of
National Revenue (the "Minister") on January 18, 2002
wherein assessments - dated November 14, 2000 and November 15,
2000 - issued to Victoria Microsystems Ltd. (VML) for Canada
pension plan (CPP) contributions and employment insurance (EI)
premiums in respect of certain workers - including Becher - were
confirmed on the basis Becher had been placed in employment by
VML to perform services for and under the direction and control
of a client of VML and was remunerated - by VML - for performance
of those services. The decision of the Minister was issued
pursuant to subsection 27.2(3) of the Canada Pension Plan
(the "Plan") and subsection 34(1) of
the Canada Pension Plan Regulations (CPP Regulations) and
subsection 93(3) of the Employment Insurance Act (the
"Act") and section 6(g) of the
Employment Insurance Regulations
(EI Regulations).
[2] The appellant - VML - appealed
from two decisions issued by the Minister on January 18, 2002
confirming - inter alia - certain amounts due pursuant to
assessments dated November 14, 2000 and November 15, 2000,
arising from the failure to pay CPP contributions and EI premiums
in respect of certain named workers for either the 1998 or 1999
taxation year or - in the case of some workers - for both
years.
[3] Counsel for both
appellants/intervenors and counsel for the respondent agreed all
appeals would be heard on the basis of common evidence.
[4] David Carl testified he is a
businessman residing in Victoria, British Columbia. In 1965,
he started a computer business in Victoria. He incorporated VML -
in 1975 - in order to carry on business with the appellant Becher
who - at that time - was his wife. They were equal shareholders
and both were directors of the corporation. VML entered into
contracts with entities carrying on business in the private
sector. In 1989, Carl and Becher separated and - since 1995 -
Carl has been the sole shareholder and director of VML. In 1998
and 1999 Becher provided services to VML under the name CB
Enterprises. In 1998 and/or 1999, Frank Trice and Susan Trice
worked as technical writers. During this period, VML had
contracts with Insurance Corporation of British Columbia (ICBC),
Synertech Systems Corporation (Synertech) of Vancouver, British
Columbia and Cardinal Systems Group Ltd. (Cardinal) operating in
Victoria. VML provided technical writing services to its clients
by entering into contracts with certain individuals to perform
those specialized tasks. Carl stated 1998 and 1999 were boom
years for VML because of fears arising from the phenomenon known
as Y2K in which all sorts of dire predictions had been issued in
relation to the impending arrival of January 1, 2000, a rollover
date particularly significant within the computer industry. As a
result of the demand, VML turned to retaining the services of
independent contractors. In 2000, business dropped dramatically
and following the assessments issued by Canada Customs and
Revenue Agency (CCRA) - formerly Revenue Canada - Carl
stated workers were reluctant to provide services to VML and the
corporation is now insolvent and no longer carries on business.
Carl had provided CCRA with a list of cheques paid to workers and
supplied other details as requested. He received a letter -
Exhibit A-1 - dated October 17, 2000, from Gord Hawes at CCRA
Verification and Enforcement Division advising a review had
established that no employer/employee relationship existed
between VML and certain workers - including Becher - but CCRA had
determined those workers - even though independent contractors -
had been placed into work situations under circumstances
consistent with VML having been a placement agency. As a result,
CCRA requested payment of funds in respect of
CPP contributions and EI premiums pertaining to named
workers in accordance with calculations set forth on the two
sheets attached to said letter. Carl referred to an Agreement for
Services - Exhibit A-2 - dated January 31, 1997 - entered into
between VML and ICBC in which VML agreed to provide certain
support services as outlined in appendices A to E, inclusive
attached to said agreement. Christine Becher and
Randy Prime were retained by VML to provide those services.
Carl also referred to another contract - Exhibit A-3 - dated
April 7, 1999 - between VML and Cardinal pursuant to which VML
agreed to provide certain services until March 31, 2000. Pursuant
to an agreement set forth in the form of a letter - Exhibit A-4 -
dated April 8, 1996 - VML and Synertech defined all aspects of
their business relationship as it pertained to the requirements
of a contract between Synertech and the Ministry of Health of the
Province of British Columbia. In accordance with the agreement
between VML and Synertech, VML agreed to offer the services of
Imer Shahini - as a contractor - on the basis he would work
under the general direction of the Pharmacare Systems Manager, an
employee of the provincial government. Carl also referred to a
bundle of 7 documents - Exhibit A-5 - containing
pages headed: Agreement for Support Services concerning matters
such as rates, terms and personnel assigned, scope of work, list
of items to be delivered, completion criteria and expenses. The
commencement date was December 16, 1997 and the work was to be
completed by Randy Prime and Christine Becher on June 30,
1998. An employee of ICBC - Sam van der Merwe - was named as
Project Manager and was responsible for liaison with VML. Carl
stated VML had not entered into any written contracts with any of
its subcontractors. The services provided to ICBC - initially by
Randy Prime and later by Becher - related to organizing material
for manuals and expanded into the area of testing and training of
ICBC employees. Carl stated he did not supervise Becher's work
and commented that throughout their multi-faceted relationship he
had never been able to exercise any control over her. Becher had
a background as a technical writer and in testing computer
programs. During her time as co-owner of VML, Becher had managed
the Technical Writing side of the business and was a capable
practitioner of the art of translating technical
"geek-speak" into comprehensible English for the
benefit of end users of a particular program. Carl stated VML had
access to a pool of highly-skilled individuals who could be
called upon - on relatively short notice - to assist on a project
and to provide technical writing services for different groups of
users at varying levels of sophistication in using computer
programs. Carl stated he located Frank Trice and Susan Trice
through the Technical Writers Association and contacted Susan
Trice in order to obtain her services for the Pharmacare project.
Later, Frank Trice joined her and they continued to provide the
requisite technical writing services pursuant to what Carl
understood to be an informal job-sharing arrangement. Carl
stated he met Richard Bird when Bird was employed at British
Columbia Systems Corporation (BCSC). Bird left his employment and
entered into an agreement with VML to provide his services to
Synertech. Carl stated he began receiving complaints concerning
Bird's work pattern which was based strictly on a 7-hour day.
Carl terminated Bird's services and assumed the duties formerly
carried out by him for the benefit of Synertech in connection
with a project for the Ministry of Health (Ministry), the end
user. Carl stated Randy Prime had been a school teacher in
Ontario but moved to Victoria and began working - as an employee
- for VML for approximately one year. Prime left VML and worked
as a trainer for another company for about 10 years but returned
to VML and provided his services thereafter as an independent
contractor. Prime operated a proprietorship
- Prime Consulting - and worked on some projects
but Carl decided Prime was not suitable for the ICBC project.
Carl stated Michael Haas was a student at Camosun College
and had been participating in a co-op work program in which he
worked - as an employee - for VML concerning a project for BC
Online, an agency of the provincial government. Haas had to
return to regular classes at Camosun before the work was
completed but agreed to finish his task provided VML paid him a
higher hourly rate on the basis he would be an independent
contractor. Carl agreed to the arrangement and Haas completed the
project over the course of three weeks and was paid approximately
$3,000 in fees. Carl stated he met Imer Shahini when Shahini was
delivering pizza. Shahini was a refugee from Kosovo and had some
computer skills so Carl arranged for him to work - at Synertech -
on the Pharmacare project for the Ministry. Later, Carl stated
Shahini informed him that he wanted to work for entities other
than VML. Carl stated he became aware Cardinal had been assessed
by CCRA on the basis it was a placement agency. However, in his
opinion, he regarded VML as a service provider that billed for
work done on the basis of time spent and materials expended. The
workers involved in the ICBC project submitted a timesheet to
ICBC - with a copy to VML - and this document was used as the
basis of payment to the workers. Counsel referred Carl to the
assumptions of fact set forth at paragraph 7 of the Reply to the
Notice of Appeal (Reply) filed in the VML appeal. Carl accepted
the following assumptions of fact:
(a) the Appellant
operates a business of providing computer consulting services to
governments and various other clients (the
"Clients");
(b) the Appellant
enters into contracts with the Clients on the basis of providing
them with a Worker who has the expertise required by the
Client;
(c) the Client must
approve of the Worker selected to fulfill the terms of the
Appellant's contract with the Client;
(d) the Clients pay
the Appellant for the services provided by the Workers as set out
in the contracts;
[5] With respect to the assumption -
subparagraph 7(e) - that workers charged Goods and Services Tax
(GST) to VML, Carl stated this procedure was followed only if
clients were within the private sector as opposed to provincial
ministries or agencies. The Minister - at subparagraph 7(f) -
assumed VML paid a worker - at an hourly rate - upon receipt of
an invoice. Carl stated the work was remunerated at an hourly
rate but the worker was paid only after VML had been paid by the
particular client. Carl agreed with the subsequent assumption
that workers were permitted to do some work at offices in their
own homes even though the majority of work was carried out at the
clients' premises but pointed out that clients have security
concerns which usually dictate that services are performed
entirely within the offices of the client. At subparagraph 7(h),
the Minister assumed the clients directed workers as to what work
was to be done, the manner by which it was to be performed and
the location of the work. Carl stated the clients defined the
task but VML provided the expertise necessary to achieve the
desired result. Carl commented on the assumption - subparagraph
7(i) - that clients instructed the workers as to the number of
hours per day and the days per week they were required to work
during the period set out in the relevant contract with VML. Carl
stated this assumption was incorrect in that the contracts
between VML and clients usually specified a maximum number of
hours or days allocated for the completion of the work and, while
workers attempted to match the normal business hours observed by
a client, there was no contractual obligation to do so. Carl
agreed the workers were required to provide their services
personally and had to obtain prior approval from a client before
bringing in another resource person to work on a specified
project. Carl disagreed with the assumption - at subparagraph
7(k) - that VML had any preferred call on the services of the
workers and stated that if any worker decided to leave, then he
had to find a suitable replacement to provide ongoing services to
the client. With regard to the assumption that the workers were
directed and controlled by the clients while performing services
for the clients - subparagraph 7(n) - Carl stated the
clients had some authority over a worker in terms of scheduling
and prioritizing work in connection with the establishment of
deadlines for receipt of certain work product.
[6] In cross-examination by counsel
for the respondent, David Carl agreed that VML provided people -
equipped with specialized skills - to undertake specific tasks
for others and stated he regarded the appellant corporation as a
solution provider by making consultants available to perform
technical support services. Carl was referred to a bundle of
documents - Exhibit R-1 - and to Appendix A of the contract
between VML and ICBC - dated January 31, 1997 - in which
Christine Becher is named as the person assigned to perform a
specific task - at the billing rate of $62 per hour - 7 hours per
day during the 113-day term. Carl agreed that Mark Mauger was
named in Appendix B - the following document - as the Project
Manager for ICBC. Carl stated his only contact with Mauger was in
the context of the invoicing process during which Mauger would
approve Becher's time sheet prior to her submitting it to VML for
payment. Carl agreed VML had provided certain workers to
Synertech and Cardinal in order to work on certain projects but
had made workers available to ICBC - directly - without the
intervention of another business entity. Carl stated all
contracts between VML and its clients specifically named the
person(s) who would be performing the work and it was customary
for a maximum number of hours to be inserted in the agreement but
VML billed on an hourly basis for the work actually performed.
Carl explained that a worker's time sheet was used for the
purpose of VML invoicing Synertech and - when VML received
payment - the worker would be paid the amount due. With regard to
the contract between VML and ICBC, Carl agreed the rate of
$62 per hour was charged by VML - to ICBC - but Becher was
paid - by VML - at a lower rate. Carl agreed that a client was
able to control the "big picture" issues arising in the
course of a project including the setting of certain targets and
could request the presence of a worker at certain meetings.
Workers had no ability to hire any replacement workers as that
option was the sole prerogative of VML provided, however, it
could obtain approval from the client. Carl stated that - at one
point - the workers Haas and Shahini had been employees of VML
and were paid on a regular basis and provided with computers,
Internet access, and had received a guarantee of three months
work with the assurance they would be paid for all work done even
if the client failed to pay VML. Later, Carl stated Haas and
Shahini each provided their own computer and related equipment,
paid their own office and related expenses, had no expectation of
ongoing work and no guarantee they would be paid in the event of
default by a client. When Haas worked on the BC Online project,
his work was supervised by a VML employee assigned to that
project. During 1998 and 1999, Carl stated VML operated its
business with 6 or 7 employees on regular payroll subject to
the usual deductions but also relied on subcontractors some of
whom operated through a corporation. Carl agreed after VML and
Haas had entered into the new arrangement - whereby Haas would no
longer be an employee - that Haas carried on in the same manner
as before except - as an employee - he had worked from
9:00 a.m. to 5:00 p.m. but - later - had to work around his
student schedule and made arrangements for access to the building
to accommodate his working hours. When Shahini's relationship
with VML was transformed to that of independent contractor -
while providing his services to Synertech - the work being
performed did not change and time sheets were provided to him for
the purpose of billing VML. Shahini had to return the VML
computer system he had previously used while working as a VML
employee and was required to establish his own in-home office
from which location he was free to work additional hours at his
own discretion.
[7] In re-examination, David Carl
stated he had never contemplated that VML would be regarded as a
placement agency in the sense one thinks of those
well-known entities that provide personnel on a temporary
basis to a variety of clients. Carl stated VML had not entered
into any fixed-price contracts for many years because one earlier
project had expanded to the point of unprofitability.
[8] Christine Becher testified she is
self-employed and is the intervenor in the within appeal by VML
and also an appellant in her own right. She provided services to
VML and invoiced them on a regular basis - in the name of CBE
Consulting Services - which she operated as a sole
proprietorship. She referred to a bundle of invoices - Exhibit
A-6 - issued by her to VML with regard to work done - and
expenses incurred - on the ICBC project in 1999. She started
working - in 1998 - on the ICBC project to establish a
testing team and that process required a mentor for the
designated Team Leader. Becher performed this task, assisted in
some Y2K training and also did some teaching. Becher stated the
services she provided to ICBC - in 1999 - were mainly in
connection with the Radar Photo Project as it was necessary to
ensure the application of the software to the requisite task in
that certain information had to match photographs of offending
vehicles. Becher stated she could not recall any contact
whatsoever with Mark Mauger, the individual named by ICBC as the
Project Manager for purposes of administering its contract with
VML. Instead, she worked with an ICBC employee - Sherry Bennett -
who had knowledge of traffic enforcement procedures. Becher
maintained regular contact with Carl and would seek his advice
from time to time concerning certain technical matters pertaining
to a mainframe. With respect to certain assumptions of fact
relied on by the Minister - as set forth in paragraph 4 of the
Reply applicable to her appeal - Becher stated she did not
disagree with those assumptions stated in subparagraphs (a) to
(g), inclusive, but added that even though ICBC required her to
complete a time sheet and to provide it to a named person, she
invoiced VML for her time and certain approved expenses. In
addition, she explained that - usually - she was
paid within 30 days of submitting her invoice to VML and only
performed work at home for clients if she did not require any
online access. With respect to the assumption contained in
subparagraph 4(h) that the client directed her as to the nature
and manner of work to be done, Becher stated ICBC had a general
intent concerning the work to be performed but she used her own
skills and judgment to carry it out. In order to do so, she had
24-hour access to the ICBC premises and could work hours at her
own discretion as long as it did not impair progress on the
overall project. Becher disagreed with the following assumption
in the Reply that she had been told by the client how many hours
per day and how many days per week she was required to work
during the contract period. She stated the number of hours worked
were important in the sense of comprising a total for purposes of
the contract between ICBC and VML but not with respect to when
those hours were worked or whether she worked on certain days.
She stated there were certain scheduled meetings with ICBC
officials that required her attendance. She agreed she was
required to perform her services personally but denied that VML
had any preferred right to obtain her services, as assumed by the
Minister at subparagraph 4(k) of the Reply. During 1998, Becher
operated a gardening business which occupied some of her time and
- during the summer of 1999 - went to England for 5 months during
which period she made some business contacts while visiting her
family. Becher stated that, in the course of her professional
experience, she regarded a placement agency as an entity that is
contacted by an individual seeking assistance in finding work.
Becher utilized the business name CBE Consulting Services to
provide her services and reported her income to CCRA as
self-employment income and was assessed on that basis. She
received a letter - Exhibit A-7 - from CCRA - dated March 21,
2001 - concerning her 1999 taxation year in which she was advised
she would not be permitted to deduct certain business expenses
because CCRA considered she had been an employee of VML and would
require certain forms to be provided by that employer in order
for her work expenses to be considered eligible for deduction.
Becher stated the letter was in error as she had not received a
T4 slip from VML.
[9] In cross-examination, Christine
Becher stated she met Sherry Bennett and another ICBC employee
after she began working on the project. The user acceptance
testing was a major requirement for success of the project and
Becher stated she devoted her skills to that end in accordance
with her own judgment. She had not been part of the process by
which the contract had been formed between VML and ICBC and had
not been aware of the specific document - Exhibit A-2 - during
1999. While providing her services to the ICBC project, at the
request of another contractor engaged in a particular facet of
the undertaking, she wrote a test plan which was reviewed by
others - including Bennett - who had to be satisfied with the
services provided by Becher in her role as a consultant. Becher
agreed that the majority of her services were provided to ICBC
within the normal business hours of that corporation. In the
event she did not want to attend at ICBC premises on a certain
day, Becher stated she was not required to seek permission from
any ICBC official but - as matter of courtesy - informed certain
ICBC employees of her intended absence. Becher stated the overall
project underwent a change from a developmental phase to
operational status. Becher stated no complaints were made by ICBC
about her work but presumed any communication in that regard
would have been directed to Carl at VML.
[10] In re-examination, Becher stated that,
both before and after the 1998-1999 period, she
provided her services to different entities and after leaving VML
- in 1995 - had worked on the Pharmacare project as an
independent contractor. In 2000, she incorporated her business as
CBE Consulting Services Ltd.
[11] Counsel for the respondent called
Richard Bird to the witness stand. He testified he is a Senior
Systems Analyst and - in 1998 - provided his services
- through an arrangement with VML - with regard to a
project under the auspices of the Ministry. While working at
BCSC, he met David Carl who had been on the premises as an
outside consultant. Bird was aware of VML's mainframe consulting
business and began having discussions with Carl concerning
consulting work and - subsequently - entered into an
agreement with VML whereby Bird would provide his services at a
certain hourly rate. The work assigned to him - through VML - was
in relation to an audit done for the benefit of the Medical
Services Plan as it concerned certain billings by physicians and
this procedure required a support person to perform certain
revisions and updates and to modify the scope of the audit. All
services were performed at the premises of the Ministry between
8:00 a.m. and 4:00 p.m., Monday through Friday. An
individual - Darcy Ayres - had been provided by Cardinal to
exercise a management function with respect to the services being
provided to the Ministry and Ayres supervised - as required -
work done by Bird. Bird stated he had to attend regular meetings
and, although not ordered to perform any specific tasks, was
expected to achieve a particular result. In the event he was
unable to attend work, he would seek approval from Ayres or the
designated employee of the Ministry also involved in the audit
process. He reported his time to Ayres and also submitted an
invoice to VML. Throughout, Bird stated he was never aware which
person or entity had the right to terminate his services.
[12] In cross-examination, Richard Bird
stated he had known David Carl for years and Carl had once
co-signed a loan for him. Bird stated he had never seen any
contract between any entity and the Ministry but understood VML
had a contract with Cardinal.
[13] Susan Trice testified she is a
self-employed technical writer and had provided her skills to VML
from the end of January, 1998 until June 30, 2000. She worked
with Synertech in the course of providing services to the
Ministry. At the beginning, she had understood that VML had only
two months remaining in its contract with Synertech. As a member
of the Society for Technical Communications, she had received a
call from the secretary to inform her that David Carl of VML was
searching for a subcontractor to work on a certain project. Trice
stated she contacted Carl and also met Jaime Peschiera of
Synertech. She was aware of the broad scope of the work - and the
amount thereof remaining - as it related to technical writing and
business communications. When undertaking to provide her services
for a limited time, she hoped the contract would be renewed by
the provincial government. The contract was extended and she
reported to different people at Pharmacare - one of whom was
another independent contractor - and also to a member of
Pharmacare management. There were no regular reporting
requirements and communications were carried out on a daily or
weekly basis, as required. Various completion targets were
established by Division Heads and Managers within Pharmacare. In
addition to other duties, Trice wrote and edited Pharmacare
newsletters. In her opinion, the project was an undertaking by
Pharmacare - a division of the Ministry - and it could set
priorities. She had no regular office hours and performed most of
her work on the premises but because there were different shifts,
she was able to gain access to the building during evenings. She
recorded her hours of work and submitted them to Synertech and
- as of May 1, 1999 - also to an employee of
Pharmacare. After May 1, 1999, Frank Trice shared some of
her work and carried out certain tasks. Susan Trice invoiced VML
monthly and was paid 30 days later.
[14] In cross-examination, Susan Trice
agreed that David Carl had accepted the arrangement whereby Frank
Trice would assist her in performing work on the Pharmacare
project and the Ministry and Synertech management also approved
this new arrangement. She stated she filed her income tax return
on the basis of being a self-employed person and CCRA had
assessed her accordingly.
[15] Frank Trice testified he is a
self-employed technical writer. Between May 1, 1999 and
June 30, 2000 - pursuant to an oral contract with David Carl at
VML - he provided his services to the Pharmacare project with
regard to the production of two manuals required for a new
computerized system to be used by pharmacists throughout British
Columbia. The contract Susan Trice had been working under had
called for the delivery of 1,800 hours of services in a year.
Frank Trice stated he had experience in long-term projects and
was aware of the particular requirements inherent in such an
undertaking. In his view, it was important to "keep the client -
Pharmacare - happy". Initially, he had been in contact with Carl.
Later, he met with the Operations Manager of the Pharmacare
project but had not been introduced to anyone at Synertech. Frank
Trice stated he reported - at his own discretion - to the
Operations Manager who had the ability to establish priorities in
respect of his work. Frank Trice and Susan Trice were partners in
an entity called Trice Technical Writing and submitted one
invoice to VML in which the hours worked by each of them were set
out in detail. For the most part, Frank Trice worked at home but
would attend at the Ministry two or three times a week for part
of an afternoon when required to meet certain people. He
maintained a weekly time sheet and Synertech and the Operations
Manager each received a copy. At the end of the month, he issued
an invoice to VML in which the hours worked by himself and Susan
Trice were billed out at the same hourly rate.
[16] In cross-examination, Frank Trice
stated that Synertech and Pharmacare were interested in the end
result and not in the details by which it was achieved. He did
not consider he was ever at a risk of loss during this period and
had reported his income on the basis of being a self-employed
individual and had not been reassessed by the Minister.
[17] Counsel for the appellant submitted
that in order to determine whether VML is a placement agency, one
must take into account the two different standards established by
the relevant legislation, namely the Act and the
Plan and the respective Regulations thereunder.
Employment under section 6(g) of the Regulations
under the Act falls into the category of insurable
employment provided the worker has been providing services for
and under the "direction and control" of the client of
the agency where that worker is remunerated by the agency for the
performance of those services. Pursuant to the relevant provision
of the Regulations under the Plan, a different test
is applied in which one must consider whether the services
performed by the worker were analogous to a contract of service.
Counsel submitted the intent of section 6(g) of the EI
Regulations is clear in that the client must control the
worker and that aspect thereof would ordinarily include the right
to terminate the services being provided by that individual.
Counsel referred to the evidence pertaining to several workers
named in the assessment - issued under the Act - and pointed out
there was very little evidence of control over their work,
particularly by the end user/client of their services. Moreover,
counsel submitted the Regulations under the Act
and/or the Plan were never intended to apply to the sort
of circumstances applicable to the within appeals but are
directed towards placement or employment agencies which are
required to be licensed pursuant to provincial legislation. As an
example of the confusion surrounding the entire matter, counsel
referred to the finding by the Minister - through CCRA - that
Christine Becher had been regarded as an employee for purposes of
assessing her income tax return, yet for EI and CPP assessments,
the same Minister had decided she was self-employed and not an
employee of VML during the relevant period.
[18] Counsel for the respondent conceded the
application of section 6(g) of the
EI Regulations was the sole basis upon which the
Minister decided the named workers were engaged in insurable
employment with VML since none of the workers had provided their
services to VML pursuant to a contract of service. As a result,
the first question to be answered is whether VML is a placement
agency. If it is, the next task is to determine whether the
workers were under the direction and control of the client for
purposes of the EI Regulations and then to analyze
the evidence in order to decide whether the workers had provided
their services under circumstances which were analogous to a
contract of service for purposes of determining whether they were
engaged in pensionable employment pursuant to subsection 34(1) of
the Regulations under the Plan. Counsel referred to
the evidence relating to various workers as it concerned issues
of control, approval of work and other relevant factors and
submitted it was apparent a great deal of control and direction
had been exercised by various clients in respect of the services
provided by the relevant worker.
[19] Section 6(g) of the EI
Regulations reads 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 agency 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.
[20] The relevant CPP Regulation is
section 34 which reads:
Sec. 34. - (1) Where any individual is placed by a
placement or employment agency in 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
and the remuneration thereof is paid constitute a contract of
service or are analogous to a contract of service, the employment
or performance of services is included in pensionable employment
and the agency or the client, whichever pays the remuneration to
the individual, shall, for the purposes of maintaining records
and filing returns and paying, deducting and remitting
contributions payable by and in respect of the individual under
the Act and these Regulations, be deemed to be the employer of
the individual.
(2) For the purposes of subsection (1), "placement or
employment agency" includes any person or organization that
is engaged in the business of placing individuals in employment
or for performance of services or of securing employment for
individuals for a fee, reward or other remuneration.
[21] In the case of Vendor Surveillance
Corp. v. Canada (Minister of National Revenue - M.N.R.),
[2000] T.C.J. No. 620 (Vendor), the Honourable
Judge Lamarre, T.C.C. considered the appeal of a business
that provided its clients with a list of qualified candidates
capable of providing certain services to meet their needs within
the aerospace industry. The workers were experienced consultants
and - as noted by Judge Lamarre at paragraph 7 of her reasons -
were "able to provide the appellant's clients with
information, suggestions, recommendations and support in ensuring
that contractual obligations between a client and the third party
suppliers are met in timely fashion, and also in ensuring product
quality control". The relevant circumstances in the
Vendor case were set out in paragraphs 8 to 12, inclusive
of Judge Lamarre's reasons, as follows:
During the period at issue, Mr. Budgen was hired by the
appellant as a consultant for the above purposes. An independent
contractor's agreement between the appellant and Mr. Budgen
was drafted on October 2, 1997. According to the agreement, the
appellant wished to have Mr. Budgen available to perform
procurement quality control services at times and pursuant to
terms agreed upon by the parties. In that document, Mr. Budgen
and the appellant mutually agreed that Mr. Budgen's business
was independent of that of the appellant and its clients and that
any work performed at a client's facility was simply a
function of the nature of quality control. Mr. Budgen did not
sign that agreement but signed the addendum attached thereto
stating the terms of payment and the services to be rendered for
the purposes of the project for which Mr. Budgen was retained.
According to that addendum, Mr. Budgen was to be paid $17 an
hour. Overtime had to be pre-authorized by the client. It
was stipulated in the addendum that charges with respect to time
and expense were to be submitted to the appellant within a
certain time frame so that it could bill the client for them.
Without the time sheets, the appellant could not be paid by the
client, and neither would Mr. Budgen have been paid by the
appellant.
There was, on the other hand, a purchase order signed by the
appellant and Northrop. That purchase order authorized the
appellant to proceed with the supply of expertise and to assign
someone to perform specific work at a specific price. In
addition, the purchase order acknowledged that Northrop would pay
the appellant for the services provided.
Northrop is an American company and a major airframe
subcontractor. Northrop had subcontracted work to, among others,
two supplies (Cercast and Héroux), and required the
services of Mr. Budgen (through the appellant) at the
suppliers' place of business in Montreal in order to monitor,
review and analyze the various components of the manufacturing
process and the delivery procedures for parts ordered from those
suppliers. Mr. Budgen was acting as a quality control
inspector.
According to Mr. Budgen's testimony, his main contact with
Northrop was Mr. Louis Alfano in New York. He however spoke daily
over the telephone with Northrop's project manager in Dallas
about Cercast and sent a full written report once a week. With
respect to Héroux, he kept in touch with the project
manager in Florida on a weekly basis.
Mr. Budgen's role was to keep the client informed as to his
input and instructions regarding any changes or adjustments to
the suppliers' operations. People from Northrop only came to
Montreal three times to visit the suppliers' premises. Mr.
Budgen testified that he met those people at the airport and took
care of them during their visit. He was not reimbursed his
expenses for those services. Mr. Budgen was asked to be present
at the suppliers' place of business during the working hours
of their employees. Although the working hours started at 6:30
a.m., Mr. Budgen did not arrive before 7:00 or 8:00 o'clock
a.m. and left between 4:00 and 5:00 p.m. He worked 40 hours
a week, Monday to Friday. Although an office was provided to him
at the suppliers' place of business, he did 25 per cent of
his work (all the paperwork) at home. Nobody really checked his
hours worked and he reported his hours on a time sheet using the
honour system.
[22] Judge Lamarre noted that " placement
agency" was not defined in the Act and also referred to
the definition found at section 34 of the Regulations
under the Plan. At paragraphs 19 and 20 of her judgment,
she stated:
The next question to be determined is whether Mr. Budgen worked
under the direction and control of the appellant's client
Northrop. It is not contested here that Mr. Budgen received his
remuneraiton from the appellant.
Counsel for the respondent referred to the case of Hennick v.
Canada, [1995] F.C.J. No. 294, in which Desjardins J. of the
Federal Court of Appeal made the point that what is relevant is
not so much the actual exercise of control as the right to
exercise control. In Ms. Hennick's particular case,
Desjardins J. said that while Ms. Hennick's contract with the
payer did not specify how she was to teach, there were parameters
she had to meet with regard to time which clearly constituted
control.
[23] In the within appeals, all workers were
remunerated by VML.
[24] In Computer Action Inc. v. M.N.
R., [1990] T.C.J. No. 101, the Honourable Judge
Bonner, T.C.C. considered an appeal by a business that had been
assessed as a placement or employment agency pursuant to section
12(g) of the Regulations made under the Act.
The current provision is section 6(g) but the slight
change in wording from its predecessor is not material in respect
of any analysis relevant to the within appeals. With respect to
the issue whether that appellant was a placement or employment
agency, Judge Bonner - at page 5 of his judgment - stated:
Counsel for the Appellant submitted that the Appellant was not a
placement or employment agency within the meaning of section
12(g). He argued that the Appellant provided a marketing service
for consultants. I do not find the argument persuasive. The term
"placement agency" is not defined in the Regulations
and must be given its ordinary meaning read in context, VIZ, an
organization engaged in matching requests for work with requests
for workers. It was argued as well that the appellant differed
from a normal employment or placement agency in respect of the
arrangement as to fees. In my view, nothing in the language of
regulation 12(g) ties the meaning of the term "placement
agency" to the presence or absence of any particular type of
arrangement for the remuneration of the agency as suggested at
one point by counsel for the Appellant.
Next it was argued that the consultants were not remunerated by
the Appellant for the performance of their services. I can see no
force in that argument. The evidence is clear. The consultants in
point of fact invoiced the Appellant for services performed and
were paid by the Appellant even when the client had not yet paid
the Appellant. It is difficult to see how the consultants could
have looked in the clients for payment in light of
paragraph 3 of the consultant contract which prohibited
disclosure to the client of the consultant's rate of pay.
Further on that point I will observe that there did not exist
between consultant and client any privity of contract upon which
a claim by a consultant for his hourly rate could be founded.
[25] The above decision was relied upon by
the Honourable Judge Watson, T.C.C. in arriving at the same
conclusion in the case of Silverside Computer Systems Inc. v.
Canada (Minister of National Revenue - M.N.R.), [1997]
T.C.J. No. 38. At paragraph 14 of his reasons, Judge Watson
concluded the worker in that appeal "was hired by the
Appellant because of his skills and qualifications in order to
perform services for the Appellant's client that was in need of
those skills and in fact was an organization 'engaged in
matching requests for work with requests for workers'".
In Silverside, all workers providing services to clients
were independent contractors.
[26] With respect to the first issue to be
determined - whether VML is a placement or employment agency for
purposes of the EI Regulations - and within the
meaning of section 34 of the CPP Regulations - one must
consider the evidence as it applies to the named workers. David
Carl, sole shareholder of VML, admitted the following assumptions
of the Minister - as set forth in subparagraphs 7(a) to
7 (d), inclusive of the Reply - were correct. Although set
out earlier in these reasons, for the purpose of zeroing in on
this particular issue, they are restated, as follows:
(a) the Appellant
operates a business of providing computer consulting services to
governments and various other clients (the
"Clients");
(b) the Appellant
enters into contracts with the Clients on the basis of providing
them with a Worker who has the expertise required by the
Client;
(c) the Client must
approve of the Worker selected to fulfill the terms of the
Appellant's contract with the Client;
(d) the Clients pay
the Appellant for the services provided by the Workers as set out
in the contracts;
[27] A perusal of the contract - Exhibit A-2
- between VML and ICBC makes it clear VML was supplying support
services in relation to the contractual obligation to perform
certain tasks in connection with the installation and use of data
processing products. At paragraph 1 of said agreement, there is
reference - at line A - to "[R]ates, Term and Personnel
Assigned".
[28] The letter - Exhibit A-4 - between VML
and Synertech which was utilized by both corporations to define
their business relationship sets forth various aspects of their
agreement including recognition that Synertech "agrees to
offer the services of Imer Shahini under Contract Number 97/040
issued by the Ministry of Health, for the period starting April
1st 1996 and ending June 30th , 1996". Thereafter, there was
reference in said letter to terms of the agreement between VML
and Synertech being extended to conform with any subsequent
renewals of the contract between Synertech and the Ministry. The
letter confirmed that VML "agrees to provide the services of
Imer Shahini for a minimum of 7.5 hours each day, five days
a week, excepting holidays. The schedule of vacation times will
be determined by the parties. Provision will be made for up to
three weeks vacation per year". The letter went on to state
that from time to time, the proposed schedule may be revised by
the three parties involved, the Ministry, VML and Synertech.
[29] The services provided to ICBC by Randy
Prime and Christine Becher were documented in Exhibit A-5,
comprised of various Appendices A to F, including 3 sheets
described as Appendix D. All appendices were part of and subject
to the agreement - Exhibit A-2 - dated January 31, 1997 - between
VML and ICBC. Either Randy Prime or Christine Becher is defined
as the personnel assigned to the specific tasks within an overall
project being undertaken by ICBC.
[30] The terms of the contract - Exhibit A-3
- between Cardinal and VML are somewhat different. That agreement
- dated April 7, 1999 - covering the period from April 1, 1999 to
March 31, 2000, inclusive, does not call for the placement or
provision of any particular individual named therein or any
person(s) to be provided later. Instead, it is a contract between
VML and Cardinal wherein VML agrees to provide its services at a
certain hourly rate to perform tasks in connection with the
services Cardinal had contracted to provide to the Ministry of
Health. Pursuant to clause 11 of the contract between VML and
Cardinal, VML had to obtain the written consent of Cardinal
before it could subcontract any of its obligations or assign any
right accruing thereunder. In clause 24 of said agreement, VML -
named therein as the Contractor - warranted that it would pay and
discharge all wages, salaries, etc. incurred in providing the
contracted services and that no employee of the Ministry -
referred to as the Client - would receive anything of value as a
result of said agreement. Although the contract referred to an
attached Schedule "B", that document was not attached
to the document filed as Exhibit A-3. The worker - Richard Bird -
testified he had been working as a systems analyst for the
provincial government but had left that employment in order to
provide his services to VML for the specific purpose of working
on a medical audit for the Ministry that was being carried out by
Cardinal pursuant to a contract with the provincial government.
However, he provided his services in 1998, prior to the term
provided for in Exhibit A-3.
[31] The workers - Imer Shahini and Michael
Haas - had been employees of VML but later each transformed his
status into that of independent contractor. Shahini carried on
working on a project managed by Synertech and Haas completed the
task at BC Online - an agency of the provincial government - that
he had worked on earlier as a co-op student while an ordinary
employee of VML.
[32] The services of Susan Trice had been
retained by Carl - on behalf of VML - as a result of Trice having
received a call from the secretary of her professional
association to advise that Carl was searching for a
subcontractor. Susan Trice contacted Carl and it was apparent her
services were required in connection with a specific project
being undertaken by Synertech in relation to the Pharmacare
project and VML was carrying out a contractual obligation to
Synertech by making her specialized services available. Later,
Frank Trice began to provide his technical skills to the same
project with the concurrence of Carl and Jaime Peschiera, on
behalf of Synertech.
[33] Taking into account the evidence as it
pertains to each of the workers named in the assessment, it is
clear that while there are some differences in the circumstances
applicable to each individual, the appellant - VML - in each
instance was responsible for the placement of those persons in a
situation where they performed certain services in return for
which they received remuneration from VML. The only effect of the
requirement that a person must not operate an employment or
talent agency unless licensed under the Employment Standards
Act, RSBC Chap. 113, is to subject a person - such as VML -
to prosecution for having failed to obtain the appropriate
permission. It does not - however - mean that a failure to obtain
the license prevents one from conducting business in a manner
consistent with an employment or placement agency within the
provisions of the EI and CPP Regulations
relevant to the within appeals. An unlicensed dog is still a
dog.
[34] There was a specific purpose inherent
in Parliament having created categories of insurable and
pensionable employment for workers who - by application of
ordinary standards - would not satisfy the usual test of
employment. In the case of Sheridan v. M.N.R. 57 N.R. 69,
the Federal Court of Appeal held that the former EI
Regulation 12(g) sets out its own conditions for
defining "insurable employment" and there is no need to
search for other conditions in the enabling provision of the
legislation. In that case, the effect was to include - into
insurable employment - nurses who were referred to employment by
a placement agency. The Federal Court of Appeal had decided
earlier in Canada (A.G.) v. SkylineCabs (1982) Ltd., 70
N.R. 210 that even though taxi drivers and bus drivers were
self-employed, they were included - by regulation - into the
national insurance scheme and recognized that the word "
employment " has a broader meaning for purposes of the
Regulations and was capable of including an activity or
occupation.
[35] I am satisfied that - during 1998 and
1999 - VML acted as a placement or employment agency in respect
of the named workers.
[36] The next issue to be decided - for
purposes of determining the question of insurable employment
pursuant to the provisions of the EI Regulations -
is whether some or all of the workers were under the direction
and control of the relevant client of VML, now found to have been
a placement agency.
[37] In the Vendor, supra, case,
Judge Lamarre considered aspects of control in relation to the
particular worker and at paragraphs 26 and 27 of her judgment
commented:
In the present case, I have to determine whether
Mr. Budgen was under the direction and control of Northrop.
The facts on which Ms. Bienvenue of Revenue Canada relied to
conclude that Mr. Budgen was under such control are the
following: Mr. Budgen had to file time sheets; he gave daily
reports; overtime had to be approved; he received instructions
from a supervisor in New York; and he had to accompany people
from Northrop when they visited Montreal.
The evidence revealed that Mr. Budgen did not receive
instructions from a supervisor in New York. Rather, he made daily
calls to someone at Northrop in Dallas to keep them informed of
the different problems faced by the suppliers. Northrop did not
indicate to Mr. Budgen on a daily basis the work to be done. It
was rather Mr. Budgen who kept them informed of his input and
instructions regarding any changes or adjustments to the
suppliers' operations. Mr. Budgen was not subject to any
control with respect to his hours worked. He filed a time sheet
using the honour system and was paid on the basis of the time
sheet. The fact that overtime had to be approved was part of the
contractual arrangement. Mr. Budgen agreed to being paid on the
basis of a 40-hour week for the work that had to be done. This is
not in my view necessarily indicative of an employer-employee
relationship as he could and did in fact work more than 40 hours
per week without additional remuneration. Furthermore, Mr. Budgen
could work at home at his own convenience without Northrop being
informed of this fact. It is obvious that he did not have to work
during the business hours of Northrop, which was located in
Dallas and in Florida. Although he was told that it was
preferable that he be present at the suppliers' place of
business during the working hours of their employees, nobody
checked to see that he was. He was in a sense free to organize
his schedule to suit himself.
[38] In the Computer Action,
supra, case, with respect to the issue of direction and
control exercised in respect to a worker by a client of the
employment or placement agency, Judge Bonner - at page 5 of his
judgment - stated:
Finally it was argued that the consultants were not placed by
the Appellant to perform services "for and under the
direction and control" of the clients of the Appellant. Here
of course the services were not performed for anyone other than
the client. The question of control is more complex. Not
surprisingly there was no evidence tending to show that control
was in fact exercised by the clients over the manner in which the
consultants performed their work. However, in my view, section
12(g) of the Regulations looks to the existence of the right of
control and not to the exercise of such right. Nothing in the
evidence suggests that the clients did not, under the
arrangements in place, possess the right to direct and control
the manner in which the work was to be done. It might of course
be unrealistic to expect such right to be exercised particularly
by a client who is not "computer literate". As McGuigan
J. noted in Weibe Doors Services Ltd. v. M.N.R. 87 D.T.C.
5025 at 5028:
...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.
But, I reiterate, the test is not whether the right is or is
likely to be exercised but rather whether it exists. The onus is
on the Appellant to establish that the determination under appeal
was wrong. The onus has not been discharged. The appeal therefore
fails.
[39] In Silverside, supra, after
having found the appellant to have been a placement agency, Judge
Watson turned to the issue of direction and control and
- at paragraphs 15 -18, inclusive of his judgment,
commented as follows:
The only question remaining is whether the Worker was performing
services "under the direction and control of a client"
of the Appellant.
In the written agreement between the Appellant and the Worker, he
was hired to perform all services for Pitney Bowes, one of
the Appellant's clients, "in a competent, efficient and
effective manner" so that Pitney Bowes would be
satisfied; Pitney Bowes was "responsible for designating the
nature of the services to be performed" by him; anytime
Pitney Bowes was not satisfied, his employment with the Appellant
would be terminated. The Appellant did not train the Worker or
supervise his work at Pitney Bowes but was told to, in
effect, please the client.
As far as Pitney Bowes was concerned, it had a need for a highly
skilled computer operator and the Worker was found to have the
necessary qualifications. Its manager told the Worker what to do,
where to work, provided him with office space and necessary tools
and checked on the results of his work both as to form and
content. Although, in its agreement with the Appellant, it was
stated that the Worker had "the sole and absolute discretion
as to the manner in which services are to be performed", its
manager had, where necessary, the right to review, edit and
control the quantity and quality of the work done, since at any
time it was not satisfied, the agreement could be terminated or
its manager could refuse to sign the Worker's time-sheet. The
Worker was not one of its employees; but was in a
"subordinate position".
From the Worker's point of view, he was sent to perform the
services for which he was qualified to the Appellant's
client, Pitney Bowes. He was told what to do, where to work,
and what was expected from him by Pitney Bowes; he had to have
his time-sheet signed by Pitney Bowes' manager in order
to be paid, he had to notify Pitney Bowes if he was absent from
his work place, he had to work during the Pitney Bowes office
hours and he had to be available to work overtime. He was aware
that he could be terminated if Pitney Bowes was not satisfied
with his services, but apparently was not told that he had
"the sole and absolute discretion as to the manner in
which" his services were to be performed. He first had to
obtain the signature of the Pitney Bowes manager before
submitting his time-sheet to the Appellant for payment.
[40] Now, I will deal with the evidence as
it pertains to specific workers with respect to the issue of
direction and control exercised by a particular VML client. All
parties agreed each VML client had the right to establish
priorities, change direction of the work and revise goals.
Christine Becher:
[41] Becher provided her services to ICBC
pursuant to an oral contract between herself and VML and in order
to satisfy the contractual obligations of VML resulting from
having entered into an agreement with ICBC - Exhibit A-2 - to
supply certain personnel to perform defined tasks in order to
achieve certain stated goals. The services provided by Becher
were detailed further in the bundle of documents - Exhibit A-5 -
and Appendix A thereof makes it clear Becher was to work
"under the direction of the Project Manager, Sam van der
Merwe", in relation to certain deliverables identified in
Appendix C. The services of Becher were to be provided during the
period from December 16, 1997 to June 30, 1998 but she continued
to work at ICBC until the end of 1999 and billed VML for her
services as illustrated in the bundle of invoices filed as
Exhibit A-6. Becher testified she was able to work at her home
only under circumstances not requiring access online. She was
required to liaise on a regular basis with Sherry Bennett - an
employee of ICBC - and the majority of Becher's hours were
devoted to the needs of ICBC in order that VML could fulfill its
contractual obligation. When the project changed from a
developmental phase into operational status, the role previously
carried out by Bennett was assumed by another employee of ICBC.
Becher had to complete a time sheet which was handed to a
specific ICBC employee. Although Becher had 24-hour access to the
client's premises, she understood her presence was required at
certain meetings scheduled by ICBC employees and any flexibility
in her own work schedule had to be subject to the needs of ICBC
so as not to impair progress on the specific project undertaken.
While not requiring specific permission to be absent on a
particular working day, Becher stated she informed ICBC employees
of her intention to be elsewhere purely as a matter of
professional courtesy. In providing services to ICBC, Becher
testified she was able to use her own skills and judgment but was
responsible to accomplish certain tasks - described as
deliverables - under the direction of Mark Mauger, the ICBC
employee named as the Project Manager. Carl testified he had
little contact with Mauger except with respect to the process of
invoicing for hours worked by the consultants and stated Mauger
had to approve Becher's time sheets. Clearly, while not an
employee of ICBC, per se, she was in a subordinate
position and had to conform - to a high degree - with the inner
workings of that client on an almost daily basis in order to
achieve the goals enumerated in the ongoing contracts between
ICBC and VML.
[42] Taking into account the relevant
factors with respect to the aspect of direction and control, I am
satisfied that Becher was - at all times material - subject to
the direction and control of ICBC within the ordinary meaning of
that compound term relevant to the determination of this
issue.
Randy Prime:
[43] The evidence, with respect to this
worker, was provided by David Carl who testified Becher had been
brought into the picture in order to replace Prime who had been
providing his services to ICBC in respect of a certain project.
At that point, Becher took over the job of assembling material
for a working manual to be used by ICBC employees. Becher later
provided other services required by the expansion of her role
within the ICBC project. With respect to the services provided by
Prime, Carl identified Derek Prout - an employee of ICBC - as the
designated Project Manager. There was no other evidence supplied
by VML in respect to this worker. Taking the facts assumed by the
Minister, together with the concession by VML that ICBC - as the
client - had the right to establish priorities, change direction
of the work and revise goals, and taking into account the
language of the overriding contract - Exhibit A-2 - between VML
and ICBC - concerning the provision of services by certain
persons supplied by VML, there is no reason to dispute the
finding by the Minister that Prime was under the direction and
control of ICBC when he provided his services for the
benefit of that corporation.
Richard Bird:
[44] This worker had been a public servant
for the Province of British Columbia. He left that employment in
order to provide his specialized skills to VML under an agreement
whereby he performed his tasks as an independent contractor and
billed his services at a specified hourly rate. Bird testified he
took direction from Ayres - a designate of Cardinal - in relation
to the audit project being undertaken for the Ministry. Bird's
services were performed - on site - between 8:00 a.m. and
5:00 p.m., Monday through Friday. Certain requests were
forthcoming from Ministry officials and Bird stated he had to
attend meetings on a regular basis. In the event he was unable to
work on a certain day, he notified a Cardinal employee - usually
Ayres - but also sought approval from an official at the
Ministry. Bird handed in his time sheet to Ayres and also
submitted an invoice to VML based on that time sheet. It is
apparent Bird - particularly from his perspective as a former
public employee - became submerged into the daily routine and
schedule of the Ministry. He took direction from a designated
official and otherwise observed regular office hours and followed
office protocol in obtaining permission to be absent from work.
Taking into account all the evidence relevant to the
determination of this point, I find Bird was under the direction
and control of the Ministry since it was the client receiving the
benefit of his services pursuant to the business arrangement
between VML and Cardinal.
Imer Shahini:
[45] Carl testified Shahini had been a
regular employee of VML while providing his services to Synertech
in relation to a particular project. During this period, VML had
supplied Shahini with a computer and Internet access. Later,
Shahini agreed to transform his relationship with VML into that
of independent contractor but continued to provide his services
to Synertech for the benefit of a project undertaken by the
Ministry. The contract - Exhibit A-4 - between VML and Synertech
deals with the provision of the services of Shahini to the
specified project and makes it clear this individual was required
to satisfy the requirements of the Ministry as specified in the
contract with Synertech. Carl testified that under the new
arrangement, Shahini had to purchase his own computer and
establish his own in-home office in order to work additional
hours if he chose. However, the basic work did not change and
Shahini continued to provide time sheets to Synertech and these
were submitted - by Synertech - to the Ministry for approval and
payment. A term of the contract between VML and Synertech
required VML to comply with all the terms and conditions
established by the Ministry including the specific work performed
by Shahini during the relevant period. In the first paragraph of
the letter - Exhibit A-4 - VML and Synertech agree that they are
"entering into an agreement to propose the services of Imer
Shahini as a contractor who will work under the general direction
of the Pharmacare Systems Manager". In my opinion, that is a
clear acknowledgment the Ministry had the right to exercise
direction and - implicitly - control over Shahini, the named
worker.
Susan Trice:
[46] Susan Trice was a technical writer
accepted by Synertech as an individual sufficiently skilled to
work on the Pharmacare project. She stated she reported to
various employees of Pharmacare and - from time to time - dealt
directly with a member of Pharmacare management on an as-needed
basis. Completion targets had been established by certain
Division Managers and Trice wrote and edited newsletters
published and distributed by Pharmacare. Trice stated that, while
there were no set working hours, she performed most of her work
on the premises and, even if she decided to work during an
evening, was able to access the building along with Ministry
employees working the regular late shift. She recorded her time
and submitted a sheet to Synertech and - as of May 1, 1999 - also
provided a copy to the relevant member of Pharmacare management.
Taking these various factors into account, I find Susan Trice was
under the direction and control of the managers of the Pharmacare
project within the overall Ministry.
Frank Trice:
[47] This individual entered the picture by
sharing the job performed by his wife, Susan Trice. Prior to this
occurring, Susan Trice had to obtain the approval of Carl - at
VML - as well as the manager of Synertech and the management of
the Pharmacare project. Frank Trice provided his services in
relation to certain manuals being prepared by Pharmacare and was
aware that a total of 1,800 hours per year had been established
under the contract pertinent to the provision of services by
Susan Trice. Frank Trice testified he had no contact with any
person at Synertech and was able to choose when to report to the
Project Manager of Pharmacare and agreed this official had the
right to establish priorities in relation to his work. He stated
it was always understood that he and his wife - operating as
partners under the name of Trice Technical Writing - had to
"keep the client - Pharmacare - happy". Although he did
most of his work from home, he still attended scheduled meetings
- two or three times per week for part of an afternoon - at the
Ministry premises in order to hold discussions with a designated
employee in respect to some aspect of the ongoing project. He
maintained weekly time sheets and provided a copy to Pharmacare
and to Synertech.
[48] I am satisfied that Frank Trice was
under the direction and control of the Project Manager at
Pharmacare as well as other officials of the Ministry as
designated from time to time for a particular purpose within the
context of the overall project.
Michael Haas:
[49] Haas had been a regular employee of VML
while working there as part of his co-op student program through
Camosun College. When he had to return to regular classes, he and
Carl entered into an arrangement whereby Haas would work varying
hours in order to accommodate his student schedule. At this
point, Haas agreed his further services would be provided -
through VML - to BC Online on the basis he was now an independent
contractor. Carl testified Haas carried on in the same manner as
when he had been an employee except he had to gain access to the
building after ordinary business hours. With respect to the
particular tasks undertaken by Haas for VML - both as an employee
and later as an independent contractor - Carl stated another VML
employee was present at the BC Online premises in order to
supervise work being performed by Haas. There was no evidence
adduced that any employee or official of the provincial
government had any contact whatsoever with Haas in connection
with the provision of his services. This leaves VML in the
position where it was exercising direction and control over Haas
even after he began providing his services within the context of
his new-found entrepreneurial spirit. If the designated employee
of VML was the person providing the direction and control, then I
suggest it is a stretch to find Haas was under the direction and
control of the provincial government - through BC Online -
because the point of the relevant provision in the
Regulations under the Act is that the client must
be the one discharging this supervisory role - in a direct sense
- in order to conform with the ordinary meaning of the wording
"for and under the direction and control of a client of the
agency". If VML is the agency and the provincial government
is the client - but the only control over the worker is that
exercised by VML as part of its subcontracting arrangement with
Haas - then it would be completely illogical to find the worker
was under the requisite direction and control of the client, the
very ingredient required to constitute insurable employment
pursuant to the EI Regulations. Otherwise, VML
would be the placement agency and also an agent of its own client
for purposes of discharging the supervisory function pertaining
to the work. I doubt the intent of the provision is to permit the
direction and control of the worker to be carried out in this
manner. I prefer to leave any clarification on this point to the
lawmakers and do not intend to muddy the waters further by
thrashing around in this part of the pond.
[50] I find Michael Haas was not engaged in
insurable employment - in 1998 - with respect to the provision of
his services to the provincial government.
[51] The next issue to be decided is whether
the workers were engaged in pensionable employment under the
Plan by virtue of section 34 of the Regulations
thereunder. I have decided VML was a placement or employment
agency and that finding is applicable to this stage of the
analysis concerning the CPP appeals particularly taking into
account the wording of subsection 34(2) of the applicable
Regulations. On the evidence, it is clear that the
business of VML was to place skilled workers into a situation
where they could utilize their talents in return for payment from
VML. In return, VML - by securing employment for these
individuals (in the sense they could employ their skills) - was
able to make a profit from the direct efforts of the workers who
had been placed at the disposal of a client. VML earned its
remuneration by retaining the difference between the hourly rate
charged to the client for the services of a worker and the lesser
amount paid to that worker for those services.
[52] Subsection 34(1) of the CPP
Regulation includes a worker into the category of pensionable
employment if the "terms or conditions on which the
employment or services are performed and the remuneration thereof
is paid constitute a contract of service or are analogous to a
contract of service".
[53] One must keep in mind that the
relationship under examination is not the one between any worker
and VML since in every case the Minister had decided none were
employees of VML because no worker had been providing services
pursuant to a contract of service to VML or to any its clients.
Instead, the question to be answered is whether any of the
workers provided services to a VML client under circumstances
that were "analogous" to a contract of service in the
sense of being "partially similar or parallel to", in
accordance with the definition found in The Canadian Oxford
Paperback Dictionary, Oxford University Press, 2000.
[54] The Supreme Court of Canada - in a
recent decision - 671122 Ontario Ltd. v. Sagaz Industries
Canada Inc., [2001] S.C.C. 59; 274 N.R. 366 - (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.
[55] I will examine the facts in relation to
the indicia set forth in the judgment of Major J. in Sagaz
in the course of considering whether the workers had provided
services under circumstances analogous to a contract of
service.
Level of control
[56] I have already discussed this factor in
the context of finding that VML was a placement agency due to the
circumstances relating to the performance of services by workers
under the direction and control of the clients when the workers
were being remunerated by VML for those services. Certainly,
there were degrees of control exercised in relation to various
workers but overall there was still a significant amount of
direction provided by the clients including adherence to regular
office hours, reporting to a designated official, abiding by
reporting requirements and internal policy, and meeting deadlines
in accordance with priorities established by the client from time
to time. Each worker included in the assessment - issued by the
Minister under the Plan - possessed a particular skill and
ability to work in the environment in which they were placed by
VML with the concurrence of the client - directly - or through
the intervention of Synertech and/or Cardinal depending on the
circumstances. In my view of the evidence, there was little to
distinguish any of the workers - except Michael Haas - from any
other highly-skilled person having the status of employee within
the premises of the client where the majority of the work was
being performed. Any differences in this aspect are not
sufficiently significant to constitute a marked departure from
the norm applicable to this field of expertise. Some of the
workers may not have had a clear understanding as to which entity
had the right to terminate their services but all understood
their function was to provide their services in a manner capable
of satisfying the particular client named in a specific contract
by which VML had obligated itself.
Provision of equipment and/or helpers
[57] It is clear that Prime and Becher -
while providing their services to ICBC - did not provide any
particular equipment or tools in order to complete their tasks.
Becher testified she was able to do some work from her home but
only when Internet access was not required. The worker - Richard
Bird - occupied a space within the premises of the Ministry and
observed regular office hours. Imer Shahini carried on as before
when he had been an employee of VML and even though he
established an in-home office and purchased his own computer,
there was no ability on his part to hire any helper without
obtaining approval from VML and the client. Susan Trice worked at
the Pharmacare/Ministry premises and the majority of her work was
done there. Frank Trice was permitted to share the work which
Susan Trice had committed herself to perform pursuant to her
contract with VML and this arrangement required the approval of
Ministry officials. Frank Trice did some work from home but also
utilized the space, facilities and equipment of the client.
Michael Haas continued to work at BC Online in the same manner as
when he had been a co-op student and an employee of VML except he
could choose working hours to fit his student schedule.
The only thing he had to provide was himself in order to
finish off the work he had been doing before he had to return to
attending classes at Camosun College.
Degree of financial risk and responsibility for investment
and management
[58] On the evidence, I cannot find any
worker had any degree of financial risk. No worker was required
to make any investment in order to provide services to a client.
As discussed earlier in another context, each worker was subject
to direction and control of the client in varying degrees and no
worker exercised a managerial function in the sense that term is
utilized in a business setting.
Opportunity for profit in the performance of tasks
[59] All workers were paid at an hourly rate
and expenses - if applicable - were reimbursed by the client via
VML. Some workers were subject to a maximum amount of hours that
could be devoted to the project. Carl testified he only entered
into contracts - on behalf of VML - that were based on an hourly
rate in order to avoid incurring a loss. In turn, none of the
workers was able to gain any extra money from the skillful
management of his or her own tasks since the working hours were
to some extent circumscribed by the contractual arrangements
entered into by VML and the particular client and the workers
were paid in accordance with time sheets based on actual hours
worked. No worker was able to hire another person to perform the
tasks at a lesser rate, thereby gaining a profit from the
difference. That opportunity was within the domain of VML and -
to a large extent - that spread in hourly rates constituted the
means by which that corporation earned its revenue. Workers could
not deal directly with the client in order to negotiate a higher
payment or benefits and were prohibited from doing so by reason
of their agreement with VML and/or an intermediary such as
Synertech or Cardinal. There was no privity of contract between
any worker and the client and no client had any obligation to
ensure the workers received remuneration for their services other
than by ensuring the invoices submitted to them by VML were paid.
In the event these appeals had involved a determination whether
the workers had provided their services to ICBC, the Ministry, or
any other client pursuant to a contract of service rather
than a contract for services, there is not much evidence
to support the proposition that any of them had been providing
services as a person in business on his or her own account. It is
the relationship between the relevant worker and the particular
client that is under examination since it is conceded by the
Minister that no contract of service ever existed - during the
relevant period - between any worker and VML.
[60] Taking into account the evidence and
applying it to the principles expounded in Sagaz, supra, I
conclude that each worker - whether during 1998 or 1999 - was
providing his or her services to a client of VML under terms and
conditions and overall circumstances that were analogous to a
contract of service and the remuneration - in each case - was
paid by VML.
[61] It was not necessary to decide the
following point in order to dispose of the within appeals but
there is a strong likelihood in those instances where a worker
was assigned to provide services to Cardinal and/or Synertech as
opposed to being placed directly with a client - such as ICBC or
BC Online - that while VML would still be an employment or
placement agency for purposes of the EI and CPP
Regulations, respectively, the client would be either
Cardinal or Synertech. When these companies placed certain
workers with the Ministry, they - in turn - could be regarded as
placement agencies within the meaning of the relevant
Regulations pertaining to insurable and pensionable
employment.
[62] The VML appeal - 2002-687(EI) - from
the Minister's decision dated January 18, 2002 - confirming an
earlier assessment issued pursuant to the Act - is allowed
and the decision is varied to find:
that Michael Haas was not under the direction and control of
the client - the Province of British Columbia and/or its agency
BC Online - and, therefore, was not engaged in insurable
employment within the meaning of section 6(g) of the
Employment Insurance Regulations.
[63] The appeal by Christine Becher -
2002-685(EI) - from said assessment is hereby dismissed and the
decision of the Minister is confirmed.
[64] The VML appeal - 2002-688(CPP) - is
hereby dismissed and the decision of the Minister is
confirmed.
[65] The appeal by Christine Becher -
2002-686(CPP) - is hereby dismissed and the decision of the
Minister is confirmed.
[66] One would hope that Gord Hawes - from
CCRA - who determined Becher was not an employee of VML during
1998 and 1999 (Exhibit A-1) would find the time to have a chat
with G. Kanelles - also of CCRA - who decided Becher was an
employee of VML and, by letter (Exhibit A-7) dated March 21,
2001, requested that Becher obtain the appropriate T2200 form
(applicable to an employee) from VML so she could claim certain
expenses related to her work.
Signed at Victoria, British Columbia, this 7th day of June
2003
D.J.T.C.C.
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