Date: 20010924
Docket:
1999-2626-EI,
2000-5096-CPP
BETWEEN:
3562710 MANITOBA
LTD.,
Appellant,
and
THE MINISTER OF
NATIONAL REVENUE,
Respondent.
Reasonsfor
Judgment
Porter,
D.J.T.C.C.
[1]
This appeal was heard on the 9th of
May, 2001 at Winnipeg, Manitoba.
[2]
The Appellant has appealed from the decision
of the Minister of National Revenue (the "Minister")
dated March 11, 1999 that contributions under the Canada
Pension Plan (the "Plan") were payable on
earnings paid to Maurice James Charette (the
"Worker") during the period January 1, 1997 to
July 6, 1998 for the following reason:
"Maurice
James Charette was employed under a contract of service and
therefore he was an employee."
The decision
was said to be issued pursuant to subsection 27.2(3) of the
Plan and was based on paragraph 6(1)(a)
thereof.
[3]
The material facts reveal that the Worker was engaged by the
Appellant to drive a taxi cab owned by the Appellant in and as
part of the fleet of Duffy's Taxi Cabs
("Duffy's") in Winnipeg, throughout the period in
question. The agreement between them was oral and never reduced
to writing. The Appellant, represented by Barbara Dixon, its
major shareholder, maintained that the arrangement was a contract
for services with an independent contractor. The
Minister, on the other hand, has decided that it amounted to a
contract of service with an employee. That is the
issue between the parties.
[4]
The Minister had issued a similar decision under the provisions
of the Employment Insurance Act (the "EI
Act"). However, the Appellant did not pursue an appeal
under that legislation as it was clear that the arrangement was
covered under the special provisions of paragraph 6(e) of
the Employment Insurance Regulations (Regulations)
relating to taxi drivers. No such provisions, however, are
contained in the Plan.
The
Law
[5]
The manner in which the Court should go about
deciding whether any particular working arrangement is a contract
of service and thus an employer/employee
relationship or a contract for services and thus an
independent contractor relationship, has been clearly laid out by
the Federal Court of Appeal in Wiebe Door Services Ltd. v.
M.N.R., 87 DTC 5025. The test to be applied has been further
explained by that Court in Moose Jaw Kinsmen Flying Fins Inc.
v. M.N.R., 88 DTC 6099. There are, following these
cases, numerous decisions of this Court, which demonstrate how
these appellate guidelines have been applied. In the Moose Jaw
Kinsmen Flying Fins Inc. case, above, the Federal
Court of Appeal said this:
"[Analysis]
The definitive authority on this issue in the
context of the Act, is the decision of this Court in Wiebe
Door Services Ltd. v. The Minister of National Revenue, 87
DTC 5025. MacGuigan J. speaking on behalf of the Court, analyzed
Canadian, English and American authorities, and, in particular,
referred to the four tests for making such a determination
enunciated by Lord Wright in City of Montreal v.
Montreal Locomotive Works Ltd., [1974] 1 D.L.R. 161 at
169-70. He concluded at page 5028 that:
Taken thus in
context, Lord Wright's fourfold test [control, ownership of
tools, chance of profit, risk of loss] is a general, indeed an
overarching test, which involves "examining the whole of the
various elements which constitute the relationship between the
parties". In his own use of the test to determine the
character of the relationship in the Montreal Locomotive Works
case itself, Lord Wright combines and integrates the four
tests in order to seek out the meaning of the whole
transaction.
At page 5029 he said:
... I interpret Lord Wright's test not as
the fourfold one it is often described as being but rather as a
four-in-one test with emphasis always retained on what Lord
Wright, supra, calls "the combined force of
the whole scheme of operations," even while the
usefulness of the four subordinate criteria is
acknowledged. (emphasis added)
At page 5030 he had this to say:
What must always remain of the essence is the
search for the total relationship of the parties.
He also
observed "there is no escape for the trial judge, when
confronted with such a problem, from carefully weighing all the
facts."
... like MacGuigan J. we view the tests as
being useful subordinates in weighing all of the facts relating
to the operations of the Applicant. That is now the preferable
and proper approach for the very good reason that in a given
case, and this may well be one of them, one or more of the tests
can have little or no applicability. To formulate a decision
then, the overall evidence must be considered taking into account
those of the tests which may be applicable and giving to all the
evidence the weight which the circumstances may
dictate."
[6]
The nature of the tests referred to by the
Court can be summarized as follows:
a)
The degree or absence of control exercised by the alleged
employer;
b)
Ownership of tools;
c)
Chance of profit and risk of loss;
d)
Integration of the alleged employee's work into the alleged
employer's
business.
[7]
I also take note of the further words of
MacGuigan J., in the Wiebe case, above, where he approved
the approach taken in the English courts:
"Perhaps the best synthesis found in the
authorities is that of Cooke J. in Market Investigations,
Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732,
738-9:
The observations of Lord Wright, of Denning
L.J., and of the judges of the Supreme Court in the U.S.A.
suggest that the fundamental test to be applied is this: "Is
the person who has engaged himself to perform these services
performing them as a person in business on his own account?"
If the answer to that question is "yes", then the
contract is a contract for services. If the answer is
"no" then the contract is a contract of service. No
exhaustive list has been compiled and perhaps no exhaustive list
can be compiled of considerations which are relevant in
determining that question, nor can strict rules be laid down as
to the relative weight which the various considerations should
carry in particular cases. The most that can be said is that
control will no doubt always have to be considered, although it
can no longer be regarded as the sole determining factor; and
that factors, which may be of importance, are such matters as
whether the man performing the services provides his own
equipment, whether he hires his own helpers, what degree of
financial risk be taken, what degree of responsibility for
investment and management he has, and whether and how far he has
an opportunity of profiting from sound management in the
performance of his task. The application of the general test may
be easier in a case where the person who engages himself to
perform the services does so in the course of an already
established business of his own; but this factor is not decisive,
and a person who engages himself to perform services for another
may well be an independent contractor even though he has not
entered into the contract in the course of an existing business
carried on by him."
[8]
To this I would add the words of
Décary, J.A. in Charbonneau v. Canada
(M.N.R.),[1996] F.C.J. No. 1337, where speaking for the
Federal Court of Appeal he said this:
"The
tests laid down by this Court ... are not the ingredients of a
magic formula. They are guidelines which it will generally be
useful to consider, but not to the point of jeopardizing the
ultimate objective of the exercise, which is to determine the
overall relationship between the parties. The issue is always,
once it has been determined that there is a genuine contract,
whether there is a relationship of subordination between the
parties such that there is a contract of employment ... or,
whether there is ..., such a degree of autonomy that there is a
contract of enterprise or for services. ... In other words, we
must not pay so much attention to the trees that we lose sight of
the forest. ... The parts must give way to the
whole."
[9]
With respect to
the second aspect of the decision of the Minister,
paragraph 6(g) of Regulations reads as
follows:
"...employment of a person who is
placed in that employment by a placement 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. SOR/97-31,
s.1."
[10]
In the case of
Vulcain Alarme Inc. v. The Minister of National Revenue,
(1999) 249 N.R. 1 in which the Federal Court of Appeal
revisited the issue. Létourneau J.A. said this:
"...
These tests derived from case law are important, but it should be
remembered that they cannot be allowed to compromise the ultimate
purpose of the exercise, to establish in general the relationship
between the parties. This exercise involves determining whether a
relationship of subordination exists between the parties such
that the Court must conclude that there was a contract of
employment within the meaning of art. 2085 of the Civil Code
of Quebec, or whether instead there was between them the
degree of independence which characterises a contract of
enterprise or for services...."
He also said later in the same
Judgment:
"A
contractor who, for example, works on site on a subcontract does
not serve his customers but those of the payer, that is the
general contractor who has retained his services. The fact that
Mr. Blouin had to report to the plaintiff's premises once a
month to get his service sheets and so to learn the list of
customers requiring service, and consequently the places where
his services would be provided, does not make him an employee. A
contractor performing work for a business has to know the places
where services are required and their frequency just as an
employee does under a contract of employment. Priority in
performance of the work required of a worker is not the apanage
of a contract of employment. Contractors or subcontractors are
also often approached by various influential customers who force
them to set priorities in providing their services or to comply
with the customers' requirements."
And:
"...
Although Mr. Blouin's income was calculated on an hourly
basis, the number of hours of work were determined by the number
of service sheets he received from the plaintiff. Mr. Blouin and
his company thus had no guaranteed income. Unlike the technicians
working as employees within the plaintiff's business, whose
weekly salary was constant, Mr. Blouin's income fluctuated
with the service calls. In fact, towards the end of his contract
with the plaintiff Mr. Blouin was no longer doing the equivalent
of forty hours a month as he was receiving few service
sheets.
Further, Mr.
Blouin, who used his own vehicle for work, had to pay the losses
resulting from an accident in which he was involved and obtain
another vehicle."
The
Facts
[11]
In deciding as he did, the Minister was said
in the Reply to the Notice of Appeal signed on his behalf, to
have relied upon the following assumptions of fact:
(a)
the Appellant is in the business of providing taxi cab
services;
(b)
the Worker was hired as a taxi driver;
(c)
the Worker worked a regular shift of 3:00AM to 3:00PM, Monday to
Friday;
(d)
the Appellant also employed another driver who drove the shift
opposite to the Worker;
(e)
the Worker received 50 % of the daily taxi earnings, net of
G.S.T.;
(f)
the Worker could not negotiate fares;
(g)
the Worker notified the Appellant if he was going to miss a
shift;
(h)
the Appellant owned and provided the taxi;
(i)
the Worker did not lease the taxi from the Appellant;
(j)
the Worker could not use the taxi for personal use;
(k)
the Appellant paid for all operating expenses;
(l)
the Worker could not replace himself;
(m)
the Worker reported to and was instructed by a
dispatcher;
(n)
the Worker was required to keep a record of the mileage he
drove;
[12]
Evidence was given by Barbara Dixon. She was
the sole witness. She agreed with items 6(a), (b) (although she
preferred the word "engaged" to the word
"hired"); (c), (d) (again, she preferred the word
"engaged" to the word "employed"); (e), (g),
(h), (i), (j) (although she would not know if he did); (k), and
(n).
[13]
She disagreed with items (f), (l), and
(m).
[14]
I found Mrs. Dixon to be a straight forward
and honest witness and have no hesitation in accepting her
evidence in its entirety nor do I have any doubt that she
genuinely believed the arrangement to be as she described
it.
[15]
The arrangement, as Mrs. Dixon described it,
came about when her company purchased the cab in question in
November 1996. She needed somebody to drive it. She spoke to
Duffy's and they recommended the Worker to her. In order to
form part of Duffy's fleet, she had to engage a driver
acceptable to Duffy's and this worker was acceptable. The
arrangement with Duffy's was to use their logo and their
dispatch for which she paid a monthly fee, regardless of the use
of the taxi.
[16]
The Worker was hired to work from 3:00 a.m. to
3:00 p.m. Her understanding of the discussion was that he would
be self-employed. After deducting G.S.T., he would receive 50% of
the daily earnings of the cab and turn over the other 50%,
together with the total G.S.T., to her. She had to trust him as
there was no printout system on the meter. Her company paid all
the expenses and maintenance costs on the cab. The Worker would
be responsible for any damage caused to the cab by his own
negligence and for any insurance deductible.
[17]
The Worker would keep all his cash receipts in
a special envelope, which she purchased from Duffy's. He
could use money from this envelope for fuel and oil and would
keep his receipts for these also in the envelope. On the outside
of the envelope were listed each of the fares which he undertook.
She had, however, no way to check up on the Worker and had to
take him at face value. If he received cash for a trip with the
meter turned off, she had no means of knowing. She did not know
if that happened or not.
[18]
Whenever the Worker could not drive, he would
arrange for another driver. That driver would have to be part of
Duffy's fleet of approved drivers. She would not
necessarily know who was driving at any particular
time.
[19]
She said the Worker would get fares either
through dispatch, for which she paid as part of her membership
fee with Duffy's, directly off the street, or would receive
direct calls over his cell phone.
[20]
She would meet the Worker regularly to receive
the envelope and the cash receipts.
[21]
Those, really, are the salient facts as I
understand them.
Application
of the 4 Aspects of the Test to the Facts
[22]
I first remind myself that it is not so much
the label put upon any particular working arrangement by the
parties as the real substance of the arrangement, with which the
Court must concern itself. If parties choose a particular
arrangement, it is not for the Minister or the Court to rewrite
their arrangement. If the parties put a particular label upon an
arrangement, the Court should give such due deference, in the
absence of good reason to derogate from that choice of label. If,
however, in reality the substance of the arrangement does not
accord with the title put upon it by the parties, then it is the
substance that must prevail.
[23]
In actual fact, it is far from clear what
label the parties put upon the arrangement in question as it was
not reduced to writing. There is, however, some evidence that
they intended to proceed on the basis of a contract
for services. The evidence of Mrs. Dixon is to that
effect and it is clear that she made no statutory deductions of
the 50% of the receipts retained by the Worker.
[24]
Control: I
must remind myself when considering this aspect of the test that
it is not so much whether actual control was exercised in any
particular situation, that is important so much as consideration
as to whether there was a right to control. The more competent
professional and capable a worker may become, the less he or she
may actually be supervised. However, it is the right to exercise
some element of control that I must consider.
[25]
The Appellant has indicated that much of what
the Worker did was beyond the knowledge of Mrs. Dixon. She had to
trust him. That, however, was the arrangement which she set up
with him. She could have set up any other arrangement she chose
so long as it was acceptable to Duffy's and the Worker.
She, in actual fact, controlled the cab and could tell the Worker
to present himself with the cab at any particular place or time.
She set up the money arrangement with the envelopes, by which he
was required to account to her. She had choices around the type
of worker she installed in the vehicle. Whilst she did not direct
him in his day-to-day driving, as he was a professional taxi
driver and probably had more knowledge about how to do the job
than she did. For her, it was an investment. For him, it was his
work. The point, however, was that she could have given him this
type of direction if she had so chosen. She owned the cab and
could have terminated the arrangement at any time. She
effectively had control even though she did not in practice
exercise very much of it.
[26]
This test, in my view, points more to a
contract of service than a contract
for services.
[27]
Tools and Equipment: Clearly, in this situation the major tool was the cab
itself along with the meter and the dispatch radio system and the
envelopes. All of these were provided by the Appellant. All the
Worker provided was his own cell phone. Clearly, the investment
in this operation was principally that of the Appellant, not the
Worker, who had no stake in it. He simply worked. This aspect of
the test points to a contract of
service.
[28]
Profit and Loss: The driver worked for commission - 50% - after
deduction of G.S.T. Out of the other 50%, the Appellant paid all
the expenses. Clearly, the more he worked, the more the Worker
made. However, that is not considered profit in the sense that
the word is used in this situation. However, there was an element
of entrepreneurial profit available to the Worker. The better he
placed himself to find fares and the better service he offered,
would all contribute to his success as would his relationship
with the dispatch.
[29]
However, with regard to loss, it seems the
driver was at little risk except to the extent that he might
carelessly damage the vehicle when he would be liable to at least
pay the insurance deductible.
[30]
There are elements of entrepreneurship in this
situation. To that extent, this aspect of the test is somewhat
ambivalent. Generally speaking, I am of the view that the test
points far more to an employee working under a contract
of service on commission than to a contract
for services.
[31]
Integration: The Appellant was clearly in business. The question is
whether the Worker was also in business for himself or was he
working for and as part and parcel of the business of the
Appellant. One has to ask the question "whose business was
it?" and that question has to be considered from the point
of view of the Worker. He had no investment. He simply went to
work and took a commission. He was not involved in the provision
of that service nor did he deal with anybody else. He just did
his job. He had to do it, if things had come down to the wire, in
accordance with directions given to him by the Appellant. If he
had left that engagement, he would have taken nothing with him;
no goodwill, for instance. He would simply get a job somewhere
else. There is, in this situation, not a sufficient degree of
entrepreneurial independence on the part of the Worker from the
business of the Appellant to say that he was in business for
himself. In my view, this aspect of the test points far more
clearly in the direction of a contract of service
than to a contract for services.
Conclusion
[32]
Counsel for the Minister relied on the case of
Nadoryk (c.o.b. Duffy's Taxi 296) v. Canada (Minister of
National Revenue - M.N.R.) [1996] No. 1708, a decision
of my brother Judge Sarchuk of this Court, relating to another
cab, part of the Duffy's fleet in Winnipeg. I quite
frankly, see no distinguishing features in the case before me
from that decision, nor am I able to depart from the logic
expressed by Judge Sarchuk. It thus bears a great deal of weight
upon my decision.
[33]
Over and above that, when I stand back and
look at the forest as a whole instead of the individual trees, I
quite clearly see a picture of a contract of
service and not a contract for services.
[34]
In closing, I wish to bring to the attention
of the Minister a matter of some concern to the Court. Mrs.
Dixon, who as I say is without doubt a completely reliable and
honest witness, gave evidence that, when she purchased this taxi,
she approached officials at Revenue Canada (as it then was) and
requested information as to how to deal with her situation. She
was told that for employment insurance purposes, the driver would
have to be treated as an employee and deductions made and
remitted for employment insurance premiums on account of the
special regulation relating to taxi drivers. She did this and has
never changed that situation. She was lead to believe, however,
that for Canada Pension Plan purposes that this was not the case
as there was no special regulation similar to paragraph
6(e) of the Regulations. She thus, did not make the
appropriate deductions. She is now being assessed for these, plus
interest and penalties, which seems grossly unfair in the
circumstances. That she should pay the contributions to the
Plan is not in question. That she should pay penalties and
interest simply goes against the grain and I would urge the
Minister to reconsider that aspect of the assessment.
[35]
In the result, the appeal is dismissed and the
decision of the Minister is confirmed.
Signed at Calgary, Alberta, this 24th day of
September 2001.
"Michael H.
Porter"
D.J.T.C.C.
COURT FILE
NO.:
1999-2626(EI)
STYLE OF
CAUSE:
3562710 Manitoba Ltd. and M.N.R.
PLACE OF
HEARING:
Winnipeg, Manitoba
DATE OF
HEARING:
May 8, 2001
REASONS FOR JUDGMENT
BY: The Honourable Deputy Judge M.H.
Porter
DATE OF
JUDGMENT:
September 24, 2001
APPEARANCES:
Agent for the
Appellant:
Barbara Dixon
Counsel for the
Respondent:
Lyle Bouvier
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, CanadaCOURT FILE
NO.:
2000-5096(CPP)
STYLE OF
CAUSE:
3562710 Manitoba Ltd. and M.N.R.
PLACE OF
HEARING:
Winnipeg, Manitoba
DATE OF
HEARING:
May 8, 2001
REASONS FOR JUDGMENT
BY: The Honourable Deputy Judge M.H.
Porter
DATE OF
JUDGMENT:
September 24, 2001
APPEARANCES:
Agent for the
Appellant:
Barbara Dixon
Counsel for the
Respondent:
Lyle Bouvier
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
1999-2626(EI)
BETWEEN:
3562710 MANITOBA LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the
appeal of 3562710 Manitoba Ltd. (2000-5096(CPP)) on May 9,
2001 at Winnipeg, Manitoba, by
the Honourable Deputy Judge Michael H.
Porter
Appearances
Agent for the
Appellant:
Barbara Dixon
Counsel for the
Respondent:
Lyle Bouvier
JUDGMENT
The appeal is dismissed and the decision of the Minister is
confirmed in accordance with the attached Reasons for
Judgment.
Signed at Calgary,
Alberta, this 24th day of September 2001.
D.J.T.C.C.
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