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Citation: 2003TCC721
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Date: 20031015
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Docket: 2002-2008(EI)
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BETWEEN:
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GTW HOLDINGS COMPANY LTD.,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
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____________________________________________________________________
REASONS FOR JUDGMENT
Beaubier,
J.
[1] This
appeal was heard at Regina, Saskatchewan, on October 3, 2003. Thurston Lindo
was the only witness.
[2] At
issue is an assessment of Employment Insurance premiums for all of 1999 for
Thurston Lindo, Greg Olenick and Wanda Silzer and for 2000 until September 18,
for them and for Melissa Erickson and Michelle Hugel.
[3] Paragraphs
6 to 9 inclusive of the Reply to the Notice of Appeal reads as follows:
6. In response to the
appeal, the Minister:
(a) confirmed the
assessment for the 1999 year as Thurston Lindo, Greg Olenick, and Wanda Silzer
were employed under a contract of service,
(b) varied the
assessment for the 2000 year by reducing employment insurance premiums assessed
by $1,076.15 as Thurston Lindo and Greg Olenick controlled more than 40% of the
voting shares of the Appellant during the period September 19, 2000 to December
31, 2000,
(c) otherwise
confirmed the assessment for the 2000 year as Thurston Lindo, Greg Olenick,
Wanda Silzer, Melissa Erickson, and Michelle Hugel were employed under a
contract of service,
(d) varied the
assessment for the 2001 year by reducing employment insurance premiums assessed
by $1,474.97 as Thurston Lindo and Greg Olenick controlled more than 40% of the
voting shares of the Appellant, and
(e) otherwise
confirmed the assessment for the 2001 year as Melissa Erickson was employed
under a contract of service.
7. In so assessing as he
did with respect to Thurston Lindo, Greg Olenick, Wanda Silzer (collectively
hereinafter "the Workers"), the Minister relied on the following
assumptions of fact:
(a) the Appellant
owns and operates a hairdressing business;
(b) the Appellant
was incorporated in 1998;
(c) the business
license was in the Appellant's name;
(d) the Workers
were the directors of the Appellant's corporation;
(e) the Workers
were hired as hairdressers and their duties included hair services, answering
the telephone, and reception duties;
(f) monies were
placed in the Appellant's central till;
(g) the Workers
were paid weekly by cheque;
(h) the Appellant
paid the Workers;
(i) the Workers
reported to the directors of the Appellant;
(j) the Workers
were required to complete reports;
(k) walk-ins were
handled by whoever was available;
(l) the Appellant
provided the tools and equipment required including a full furnished work
location, a central till, and cleaning equipment;
(m) the Workers
provided their own handle tools;
(n) the Workers
paid a weekly chair rental fee to the Appellant;
(o) the Appellant
paid the operating expenses including rent, utilities, insurance, and
maintenance;
(p) the Appellant
provided the supplies including towels, coffee, stationary, laundry soap,
paint, light bulbs, and cleaning products;
(q) the Workers,
as directors, were required to function in a manner consistent with the best
interests of the Appellant;
(r) the Workers
were employed under a contract of service by the Appellant;
(s) the Workers
were not the owners or operates (SIC) of the business, this was the Appellant's
business;
(t) wages paid
by the Appellant to the Workers, for the period January 1, 1999 to September
18, 2000, are detailed as follows:
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1999
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1/1/00 to 18/9/00
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Thurston Lindo
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$45,193.80
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$28,507.96
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Greg Olenick
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$40,059.75
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$30,808.96
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Wanda Silzer
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$11,141.18
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$ 8,029.45
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B. ISSUES TO BE DECIDED
8. The issue to be decided is whether the
Workers were engaged under a contract of service with the Appellant for the
period January 1, 1999 to September 18, 2000.
9. If the Court finds that the Workers were
not employed under a contract of service with the Appellant, which is not
admitted but denied, the alternative issue to be decided is whether the Workers
were in insurable employment pursuant to paragraph 6(d) of the Employment
Insurance Regulations.
[4] The
following assumptions of fact were not refuted by the evidence: 7(b), (c), (d),
(f), (m), (n), and (o).
[5] Respecting
the remaining assumptions:
7(a) The essence of the
Appellant's evidence is that each hairdresser owns his or her own
"chair". There is no evidence as to whether the Appellant actually
owned the chair from which each hairdresser operated except Mr. Lindo's
statements. Therefore the Court finds that the chairs were owned by the
individual hairdressers. They each owned all of their tools and inventory of
lotions, etc. which they used in their work and sold to their clients. They
each paid the Appellant $150 per week rent which was used by the Appellant to
pay the rent, electricity, business license and water. The business license was
owned by the Appellant, not the individual hairdressers.
7(e) Whoever was free
answered the phone. There was no walk-in business. Each hairdresser had his or
her own customers who made appointments.
7(g), (h) Each hairdresser paid any
receipts into a central cash box and kept a copy of each receipt. At the end of
each week $150 was taken for the Appellant's rent and the hairdresser kept the
rest of his or her receipts. There is no evidence as to whether this was done
by cheque, but Mr. Lindo's testimony appeared to indicate that the money
was simply distributed among them. The Appellant did not make a profit and was
not intended to.
7(i), (j) The Workers did not
report to anyone.
7(k) Is true, but there were
none to speak of. The Appellant's location was not conducive to walk-in
business. Messrs. Lindo and Olenick had worked elsewhere together before 1998
and "ATM", the first name initials of the founders, was set up when
they took their customers and went on their own.
7(l) The Appellant only provided the
work location, cleaning equipment and central till.
7(p) These were paid for out of the
$150 per hairdresser per week.
7(q) The Workers never acted
as "directors". Rather, they acted as, and considered themselves,
individual entrepreneurs.
7(r), (s), (t) Are the subject of the
dispute.
[6] The
issue between the parties centres on paragraph 6(d) of the Employment
Insurance Regulations which reads:
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:
…
(d) employment of a
person in a barbering or hairdressing establishment, where the person
(i) provides any of the
services that are normally provided in such an establishment, and
(ii) is not the owner or
operator of the establishment;
[7] In
part, Appellant's counsel's argument centred on whether each "chair"
constituted an "establishment".
[8] Black's
Law Dictionary (Seventh Edition) defines an "establishment" as:
An institution or place of
business.
And a "business" is defined as:
A commercial enterprise carried on
for profit; a particular occupation or employment habitually engaged in for
livelihood or gain.
[9] As
a result, an establishment, like a business, can be identified on the basis of
a profit motive. I have already noted at paragraph [5] that the Appellant
corporation did not earn a profit, and did not intend to.
[10] In Fleming v. American Stores Co., D.C. Pa., 42 F. Supp. 511,
521, (a US case) the court noted that:
Because a unit of an enterprise is
a component or necessary part of that enterprise, it does not follow that it
should be so regarded as part and parcel of the whole enterprise as to lose its
individual and separate identity as an "establishment".
[11] An establishment, therefore, is not always the simple sum of various
related units or parts. In some cases, several establishments can exist within
a single enterprise. In order to distinguish 1) an establishment that is the
sum of its parts from 2) an enterprise that is comprised of discrete
establishments, one must look to the place where the profits are recognised.
The establishment is the place where the profits are recognised as such.
[12] In the present case, each Worker operated a stand-alone business,
independent of the others. They did not advertise as a group, and it is not
even possible to say that they were working together to a common end. Profits
were earned at the chair level and were distributed at the chair level. Consequently,
in this particular case, I find that each "chair" is a separate
establishment for the purposes of paragraph 6(d) of the Employment
Insurance Regulations.
[13] There also arises the question as to whether the hairdressers were
"employees" based on the facts found. Using the criteria reviewed in Wiebe Door Services Ltd. v. Minister of National Revenue, 87 D.T.C. 5025, the Court finds:
1. Control
The Appellant did not exercise control over the hairdressers, who
came and went and kept the hours that each individual chose.
2. Tools
Each hairdresser owned his or her own tools and inventory.
3. Risk of Loss / Chance of Profit
Each hairdresser had this risk and this chance.
4. Integration
No hairdresser's work was integral to the Appellant's. The Appellant
did not even advertise. Some of the hairdressers did very small amounts of
advertising. The Appellant's business was really to be a rental agency of the
location, including the business license – whether the latter was legal or not.
Thus, in this case, each chair really did constitute that hairdresser's
establishment. Each chair was, to use the words of the Shorter Oxford
Dictionary respecting "establish", that hairdresser's "set
up on a secure basis."
[14] The appeal is allowed. The Appellant is awarded such costs and
disbursements as are permitted by the Employment Insurance Act.
Signed at
Saskatoon, Saskatchewan, this 15th day of October 2003.
Beaubier,
J.
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