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Citation: 2004TCC392
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Date: 20040608
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Docket: 2003-2667(EI)
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BETWEEN:
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AIRCOTECH INTERNATIONAL INC.,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent,
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and
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GASTON AUDY,
DONALD C. MACDONALD,
JOHN J. CALDWELL,
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Interveners.
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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Angers J.
[1] This is an appeal from an
assessment dated September 20, 2002, by the Minister of
National Revenue (the "Minister") against the Appellant
in connection with employer and employee employment insurance
premiums relating to 21 Workers with respect to 2001. The
three Interveners are three of the said Workers. On
April 24, 2003, the Minister confirmed the assessment
issued with respect to 2001 on the grounds that the Workers'
employment constitutes a contract of service and on the basis of
paragraph 5(1)(a); subsection 93(3);
sections 67, 68, 82 and 85 of the
Employment Insurance Act; and section 5 and
subsection 2(1) of the Insurable Earnings and Collection
of Premiums Regulations.
[2] In so assessing the Appellant, the
Minister relied on the following assumptions of fact, which were
admitted or denied:
(a) the Appellant
was incorporated on March 5, 1996; [admitted]
(b) Roger Boutin is
the sole shareholder of the Appellant; [admitted]
(c) the head office
of the Appellant was in St-Nicolas, Quebec; [admitted]
(d) the Appellant
operated a business in the field of pilotage and maintenance
of CL215 and CL415 air tankers; [denied]
(e) Bombardier was
the Appellant's main client; [admitted]
(f) Bombardier
had agreements with foreign government authorities to fight
forest fires; [denied]
(g) Bombardier asked
the Appellant to seek out, on Bombardier's behalf, all the
necessary Workers to fly and maintain the planes involved in
fire-fighting abroad; [denied]
(h) the Appellant
hired pilots and mechanics; [denied]
(i) the
Workers were ordinarily resident in Canada; [admitted]
(j) the
Workers had the option of accepting or refusing engagements with
the Appellant; [denied]
(k) Workers who
accepted an engagement with the Appellant would sign a contract;
[denied]
(l) the terms
and conditions of such contracts stipulated the duration of the
engagement with respect to each Worker; [admitted]
(m) the terms of the
contract stipulated a daily compensation of $100 to $300 per
day; [admitted]
(n) the terms of
the contract also included a $300 expense allowance. The expenses
were distributed as follows: $150 for the hotel room; $65 for
meals; and $85 for car rental expenses; [admitted]
(o) also,
depending on the agreement, there was a maximum compensation
stipulated for the duration of the entire contract;
[admitted]
(p) employees of the
Appellant would travel and work abroad; [admitted]
(q) their working
schedule was variable, but the Workers had to be available
7 days a week; [denied]
(r) the Workers were
under the supervision of the dispatcher who worked in the local
air base; [denied]
(s) the Workers had
to submit daily flight sheets to the dispatcher relating to their
trips; [admitted]
(t) the
Appellant would compensate the Workers according to the
individual contracts entered into with each one of them;
[admitted]
(u) the Appellant
paid the Workers by cheque or by direct deposit;
[admitted]
(v) the Appellant
assumed the transportation costs of the Workers;
[admitted]
(w) the Workers were
responsible for the expenses incurred with respect to their
uniforms and their cellular telephones;
[admitted]
(x) the Workers had
no chance of profit nor assumed any risk of financial loss;
[denied]
(y) the planes
belonged to Bombardier or to the government of the countries in
which the Workers were assigned to work; [admitted]
(z) the duties of
the Workers were integrated into the Appellant's operations;
[denied]
(aa) the Workers' employment
would constitute insurable employment if the work were performed
in Canada; [denied]
(bb) the Workers' employment is
not insurable under the laws of the countries where the work is
performed. [no knowledge]
[3] Roger Boutin attended the
hearing to clarify the assumptions of fact alleged by the
Minister. Mr. Boutin specified that the Appellant's role is to
seek out personnel on behalf of its main client, Bombardier Inc.
Bombardier's clients, who rent or buy planes from Bombardier,
need qualified pilots and technicians to fly and maintain the
aircraft. Moreover, since Bombardier's clients consist of
government organizations from various countries, the Appellant
must find pilots and technicians who speak the languages spoken
in those countries.
[4] The Appellant has what is referred
to as an "engagement" with Bombardier. Aircotech
contacts the pilots who are likely to agree to provide the
required services and then offers them an engagement. Most of the
time, the engagements are for pilotage and maintenance of
aircraft used for firefighting. Most of the pilots who deal with
the Appellant are retired and they are free to accept or to
reject the engagements offered by the Appellant. Mr. Boutin
qualified the Workers as very independent and sometimes
oversensitive. Once they accepted an engagement, most of them
signed a contract, some amended its terms and conditions, and
some were satisfied with a simple handshake to signify their
acceptance of the contract.
[5] Four types of contracts were
produced as evidence. They contain, inter alia, the
sentences reproduced in the Reply to the Notice of Appeal, in
subparagraphs (l) to (p) of paragraph 8,
inclusively. The Appellant has used these contracts for more than
ten years to hire pilots, mechanics and technicians for the
various engagements undertaken for Bombardier. Three of the
contracts submitted are signed by a pilot and by a company. Some
of the terms and conditions that were brought to the attention of
the Court were subject to further explanations.
[6] According to Mr. Boutin,
Article 1 is inaccurate. Thus, the description of the
services offered by the Appellant, "services of full operation
responsibility" is apparently false. Mr. Boutin also
affirmed that the Appellant does not decide how the pilots or
mechanics would work, since the governmental organizations of the
countries where the services are provided decide how to use air
tankers. The Appellant retains the services of the pilot or the
mechanic. Article 1 also provides that the pilot is hired as a
self-employed worker who must assume all responsibilities
in connection with the performance of his work.
[7] Mr. Boutin also specified
that Article 3 is not actually applied. This article
mandates that the pilot or the mechanic be directly accountable
to the representative of the Appellant who will provide all
necessary advice and direction with respect to the engagement.
Apparently, this situation only happened once. According to
Mr. Boutin, the pilot or the mechanic is in fact accountable
to the government organization of the country where the
engagement takes place, and not to him. The organization assigns
the tasks and prepares work schedules.
[8] The agent for the Appellant also
stated that, although the contract includes a clause permitting
the contract to be extended, pilots and mechanics are allowed to
refuse. He maintained that the contract was not properly drafted.
He also added that, even though the contract provides that one of
the parties may terminate the contract upon notice, the fact
remains that Bombardier or the pertinent government organization
of the countries where the pilots and mechanics are assigned to
work hold the authority to decide whether to keep or fire the
Workers.
[9] The contract also provides that
pilots and mechanics must indemnify the Appellant of any claim
that may arise. It also provides for a 10% holdback on expense
allowances granted to the pilots and mechanics under the terms of
the contract. According to the agent for the Appellant, the
latter clause has never been applied by the Appellant. Finally,
there is a non-competition clause to protect the
Appellant's business deal with Bombardier or its competitors.
Mr. Boutin specified that, in fact, pilots and mechanics
were free to offer their services to other parties and that the
penalty provided for breach of this undertaking was never
imposed. In fact, in one of the contracts produced as evidence,
the said clauses have been struck.
[10] Sometimes the compensation provided in
the contract was modified, but this happened very rarely. Because
of forest fires, pilots and mechanics had to be available seven
days a week, to answer the needs of Bombardier or the government
organizations of the countries to which they were assigned. They
were supervised by the local air base dispatchers and the latter
were not employed by the Appellant. In any event, Bombardier
could refuse to use a pilot or a mechanic.
[11] Gaston Audy is a retired pilot who
accepts engagements offered by the Appellant. He considers
himself an independent worker, free to work for other companies.
He is an air tanker pilot and he holds all the necessary
licenses. He finances his own training at Bombardier and he
assumes all the expenses necessary to keep his qualifications as
a pilot. He buys all the necessary books, software and material
to keep up-to-date. He takes care of his own medical examination
and deals directly with Transport Canada.
[12] According to Mr. Audy, his pilot
permit allows him to accept certain engagements. The Appellant
finds engagements for him and, once he accepts the engagements,
he is no longer accountable to the Appellant. He reports to the
dispatcher in the country to which he was assigned and
establishes his work schedule with that dispatcher. His
performance is not assessed by the Appellant, since there are no
agents for the Appellant in situ. He does not need to
submit daily sheets, he just needs to update the logbooks of the
aircraft he flies. He must comply with the aviation rules of
the country where he works and he is subject to disciplinary
action in the said country if he breaches the rules.
Mr. Audy does not receive any employee benefits from the
Appellant. He affirmed that, if he fails to comply with his
undertakings, he does not receive compensation. He receives
his daily allowance and does not worry about the contract he
believes he has signed with the Appellant. On this issue, he
added that some pilots have never met the agent for the
Appellant. He finished his testimony by saying that he assumes
all the liabilities that may arise in the performance of his
duties as a pilot.
[13] The report prepared by the appeals
officer was produced as evidence. He met the agent for the
Appellant and three of the twenty-one Workers concerned.
The information provided to him by these three Workers confirms
the testimony of Mr. Audy with respect to a number of
characteristics of their relationship with the Appellant. Thus,
all the pilots consider themselves self-employed
individuals; they assume all the expenses connected with the
renewal of their permits, books, material, clothing, their
cellular telephones, the flight simulator software programs,
insurance, computers and loss of income if they must stay in the
hotel longer. They are allowed to work for clients other than the
Appellant. They have no contact with the Appellant and are
accountable to the dispatcher in the country where they work.
They have the right to refuse some destinations or assignments.
The report also reveals that the Workers were paid monthly once
they had forwarded their invoices. The airplane maintenance costs
were assumed by the owners. All the expenses incurred abroad,
such as room, meals, car rental, etc. were the responsibility of
the pilots and mechanics; and they were required to use the daily
fixed allowance stipulated in the contract.
[14] It should be noted that the Appellant
assumed all travel expenses incurred by the Workers when they
were travelling to the work site.
[15] In Wiebe Door Services Ltd. v.
Minister of National Revenue,
[1986] 3 F.C. 553, the Federal Court of Appeal
established useful tests to distinguish a contract of service
from a contract for services. The Supreme Court of Canada, in
671122 Ontario Ltd. v. Sagaz Industries Canada Inc.,
[2001] 2 S.C.R. 983, confirmed these tests and
provided the following summary of the law at
paragraphs 47 and 48:
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.
[16] In
Charbonneau v. Canada,
[1996] F.C.J. No. 1337 (Q.L.),
Marceau J. reminds us that these factors are useful
guidelines to consider. However, their use should not compromise
the ultimate purpose of the whole exercise, which is an overall
assessment of the relationship between parties.
[17] In my opinion, applying the control
test seems inappropriate for the case at bar by reason of the
specialization of the Workers, particularly the pilots. In
Wolf v. Canada, 2002 FCA 96, Desjardins J.
summarized the manner in which the control test should be applied
in similar situations, at
paragraphs 75 and 76:
In practice, such a distinction is difficult to apply as both
the worker and the employer usually hold some measure of control
over the work that is performed. A pilot hired by an air carrier,
for instance, is generally an employee, although no one tells him
how he should fly the plane (see
Marc Noël, supra, at
pages 723-724). A doctor working in a clinic may be an
employee although he is the master of his professional conduct.
The control test can therefore be inadequate in situations like
these where, because the skills and expertise of the worker
exceeds those of the employer, little control or supervision can
be exercised over the manner in which the work is performed. (See
Joanne E. Magee, in her article entitled "Whose
Business is it? Employees Versus Independent Contractors"
(1997), 45 Can. Tax J. 584, at page 596.)
While the control test is the traditional civil law criterion
of employment, it is often inadequate because of the increased
specialization of the workforce. The Court in Wiebe Door,
supra, essentially stated that the control test, while still
important, is no longer regarded as conclusive on its own. In
agreeing that there is no "magic" test to be applied,
Major J. reiterates the necessity of examining the total
relationship of the contracting parties in order to determine
"whose business is it?".
[18] Once the Worker has accepted the
assignment, he is accountable to the government organization in
the country where the assignment is performed. Then the
dispatcher of the said country assigns the tasks to be
accomplished and establishes the work schedules. Performance is
assessed by the dispatcher in the country that benefits from the
services of the Workers. As to the work to be performed, the
Workers are highly specialized, which leaves very little control
in the hands of the Appellant. Therefore, it is difficult to
conclude that the control imposed by the Appellant establishes a
relationship of subordination between the Appellant and the
Workers.
[19] Although Article 3 of the
contracts stipulates that the Appellant, through its agent, shall
provide the pilots and mechanics with all the necessary advice
and directions concerning the engagement, the contract is simply
a guideline to help the Workers identify the engagement to be
performed, the type of aircraft they will fly or the type of
maintenance they will provide.
[20] As to the ownership of the tools that
are necessary to perform the work, the evidence shows that the
air tankers either belonged to the country where the assignment
took place or the planes were rented by the country. The pilot of
such a plane could very well be a self-employed worker: in
fact, it is difficult to establish which thesis is better
supported by the test in the specific circumstances of this case.
As to the mechanics, I am unable to determine this issue from the
evidence adduced, except that it seems rather difficult for these
Workers to take with them the tools they require to the country
in which their engagement will take place.
[21] The test concerning the chance of
profit and the risks of loss provides, with respect to the case
at bar, an element that may weigh in favour of the thesis that
the Workers are self-employed. Each one of the pilots
assumes the responsibility of renewing his permit and paying the
renewal fees. The pilots make their own arrangements to attend
the annual training course prescribed by Transport Canada;
however, Bombardier pays the training costs pursuant to the
contract. The pilots also make their own arrangements to undergo
the prescribed medical examination. In order to better perform
their duties, pilots own computers and buy flight simulator
software, and all the pertinent literature. They pay their own
health insurance premiums and assume all the professional
liabilities connected with the performance of their duties.
[22] During their engagements, Workers must
use the allowance they receive for room and meal expenses.
However, according to the evidence, it seems that pilots are
sometimes obliged to get two hotel rooms owing to unusual
circumstances: when that is the case, the pilot assumes the
additional expenses. These Workers are also responsible for their
own training and they manage their own expenses. Moreover, the
evidence shows that if they do not perform the engagements they
have undertaken, they go home and receive no compensation.
[23] The Appellant is not in charge of fire
fighting and is not hired by the government organizations in
question. It provides a service to Bombardier, who in turn seeks
out pilots and mechanics capable of meeting the requirements of
various government organizations that buy or rent Bombardier
planes. The tasks performed by these pilots and mechanics address
the needs of these various government organizations in charge of
fire fighting. The integration test is therefore rather difficult
to apply and is not appropriate for the case at bar.
[24] In my opinion, we are confronted with a
situation in which we must examine how the parties characterize
their relationship. In order to do so, we must examine the
contracts that have been filed as evidence and the clauses
pertinent to such characterization. We must also take into
account the fact that some of the Workers amended the terms of
the contract after negotiations. For instance, the
non-competition provisions and the applicable penalties
were struck in some of the contracts. Some of the Workers did not
even sign the model contract and only agreed to them by way of a
simple handshake. Finally, we must take note that at least two of
the three contracts not only bear the signature of the Worker,
but also the name of a company.
[25] According to the agent for the
Appellant, the latter has been using this type of contract for
over ten years. From time to time, the contract has been amended
and some remaining clauses are no longer accurate. For instance,
he explained that article 1 indicating that the Appellant is
fully responsible for the operations is inaccurate. In fact, the
foreign government organizations involved deal with the pilots
and mechanics and see that the latter complete their
engagements.
[26] According to the contract, the Workers
are self-employed and, as such, are liable with respect to
all tax and insurance deductions that may be required in the
country where they are working. Moreover, the contract provides
that the Workers are responsible for the performance of their
work. Article 3 provides that the Workers are accountable to
the agent for the Appellant; however, this is limited to
guidelines for the engagement. In my opinion, this clause is
necessary to explain the engagement and its requirements. Once
Workers agree to the contract, they report to the government
organization needing the services at issue; that organization
then directs the operations and the Workers.
[27] The other provisions of the contract
relate to fees and the duration of the contract. These clauses do
not help us resolve the issue at bar. Article 9 provides
that the Workers are responsible for the performance of their
work and that the Appellant is entitled to compensation if any
claim were to arise. I do not attach much significance to
articles 10 and 11 since they are not always applicable.
The clause providing that the Workers undertake to project a
positive image of the Appellant is frequently used in employment
contracts.
[28] Considering all the circumstances of
the case, I find that in the overall relationship that exists
among the parties, the Workers are self-employed.
On these grounds, the appeal is allowed and the assessment
is vacated.
Signed in Ottawa, Canada, this 8th day of June 2004.
Angers J.
Translation certified true
on this 27th day of
September 2004.
Ingrid B. Miranda, Translator
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