Date: 20010917
Dockets: 2000-3809-EI,
2000-3819-CPP,
2000-3323-EI,
2000-3324-CPP,
2000-3325-EI,
2000-3326-CPP
BETWEEN:
RE-DIRECTIONS
INC.
O/A PRODUCTIVITY
POINT INTERNATIONAL,
Appellant,
and
THE MINISTER OF
NATIONAL REVENUE,
Respondent,
AND
Dockets:
2000-3327-EI,
2000-3328-CPP
RE-DIRECTIONS
INC.
O/A PRODUCTIVITY
POINT INTERNATIONAL,
Appellant,
and
THE MINISTER OF
NATIONAL REVENUE,
Respondent,
and
BARTON
LAMB,
Intervenor.
Reasonsfor
Judgment
Rowe,
D.J.T.C.C.
[1]
All parties agreed the appeals
would be heard on common evidence including the appeals filed
pursuant to the Canada Pension Plan (the
"Plan") arising out of decisions issued
concurrently by the Minister of National Revenue (the
"Minister") together with decisions issued pursuant to
the Employment Insurance Act (the "Act").
The parties also agreed the result in each appeal filed pursuant
to the Act would apply to the corresponding appeal
pursuant to the Plan. In addition, counsel for the
appellant and counsel for the respondent agreed the pleadings
filed in appeal 2000-3809(EI) would be used -
generally - for the purpose of dealing with all appeals pursuant
to the Act.
[2]
By letter dated April 26, 2000,
the Minister issued a decision to Re-Directions Inc. (RDI)
confirming certain assessments - dated November 2, 1999 - for
contributions pursuant to the Plan and employment
insurance premiums pursuant to the Act for the periods
January 1, 1998 to December 31, 1998 and from January 1,
1999 to December 31, 1999, in respect of certain workers named in
an attached Appendix A. The Minister decided to confirm the
assessments on the basis the individuals were employed under
contracts of service and, therefore, were engaged in both
pensionable and insurable employment. The appeals from this
decision are: 2000-3809(EI) and 2000-3819(CPP).
[3]
By letter dated April 26, 2000,
the Minister issued a decision to RDI confirming certain
assessments dated November 2, 1999 for contributions pursuant to
the Plan and employment insurance premiums pursuant to the
Act pertaining to named workers listed in an attached
Appendix A for the periods from January 1, 1998 to December
31, 1998 and January 1, 1999 to August 31, 1999 on the basis the
said workers were employed under contracts of service and, as a
result, were engaged in both pensionable and insurable
employment. The appellant appealed only from the 1998 assessments
- 2000-3323(EI) and 2000-3324(CPP) - as the Notice of
Appeal did not include any appeal of the assessments for the 1999
taxation year.
[4]
By separate letters - both
dated April 26, 2000 - the Minister decided the worker -
Randy Berrington - was engaged in both insurable and
pensionable employment with the appellant for the period
September 30, 1998 to February 5, 1999. The appeal by RDI
pursuant to the Act is 2000-3325(EI) and the corresponding
appeal pursuant to the Plan is 2000-3326(CPP).
[5]
By separate letters - both dated
April 26, 2000 - the Minister decided the worker
(intervenor) Barton Lamb was engaged in both pensionable and
insurable employment with the appellant during the period
September 30, 1998 to March 5, 1999 because he had been employed
under a contract of service. The appellant appealed from these
decisions - 2000-3327(EI) and 2000-3328(CPP) and Barton
Lamb joined as an intervenor in both appeals on the basis he
supported the decisions of the Minister finding him to have been
engaged in insurable employment with the appellant.
[6]
Keith Penner testified he is a
businessman, residing in Winnipeg, Manitoba, and is the President
of the appellant corporation. He was a high school teacher
between 1969 and 1975 and then began working as a computer
programmer. In 1983, he became the General Manager for a computer
company operating in Winnipeg and in certain locations in
California, U.S.A. and then he started his own business by
incorporating the appellant in 1993. The business of RDI was to
provide computer consulting to various entities and to deliver
computer training to municipalities or corporations through a
system of day classes lasting from one to five days. Leading up
to January 1, 2000, the Y2K issue was a major concern -
worldwide - and the appellant was extremely busy in dealing with
requirements of clients wanting to ensure their computer systems
would still be workable following the changeover to the year
2000. Penner stated the appellant corporation is now involved
more in training and establishment of networks than in
consulting, the workforce has shrunk from a high of 40 to 10 and
the corporation has undergone a re-organization. Penner stated
that during 1998 and 1999, there had been a lot of concern -
mixed with speculation - about the potential effects of the
arrival of January 1, 2000 on computers due to the date rollover.
In 1998, the government of the Province of Manitoba placed an
advertisement for proposals from persons and/or entities within
the computer industry for services required in relation to this
perceived problem. It took several months for the
appellant's bids to be accepted but thereafter documents
known as Statements of Work (SOW's) were issued quickly
once a contract was signed. A consulting company called Phase
Four Technology Management Corp. (Phase Four) had registered with
the provincial government to do Y2K work and its bid was accepted
and a SOW was issued to complete the Health Care Millennium
Assessment Project. In turn, Phase Four entered into a contract
with RDI to do part of the field work pertaining to the project.
Due to time constraints, Penner stated there was no opportunity
to interview and hire people in the normal course and Phase Four
acted as the manager of the project and had the responsibility to
analyze the results and to make recommendations to the provincial
government. Counsel for the appellant referred Penner to the
various assumptions of fact contained in paragraph 11 of the
Reply to the Notice of Appeal filed in 2000-3809(EI). Penner
agreed certain assumptions were accurate, except he did not agree
with the characterization of the hourly rate as a wage as stated
in subparagraph 11(h) of said Reply because the provincial
government had established an appropriate hourly wage and no one
in the computer consulting business would undertake a project on
a fixed-price basis due to the uncertainty of the potential scope
of the work and this policy was widely adhered to within the
industry. In addition, the working hours were set by the
provincial government in the contract with Phase Four. Penner
agreed the following assumptions were correct:
(a)
the Appellant is in the computer consulting business and provides
installation, compliance testing, and e-commerce
services;
(b)
Phase Four Technology Management Corp. (hereinafter "the
Client") entered into a contract with the Province of
Manitoba to complete the Health Care Millennium Assessment
Project;
(c)
the Appellant entered into an agreement with the Client to
provide manpower to the Client so it could complete the contract
with the Province of Manitoba;
(d)
the Client remunerated the Appellant for the manpower;
(e)
the Workers were hired as field technicians and team
leaders;
(f)
all of the Workers, except Steven Poe and Chris Jones, worked on
the Client's project;
(g)
Steven Poe and Chris Jones performed services for another client
of the Appellant's;
(h)
the Workers were paid a set hourly wage between $9.00 and $15.00
per hour, field technicians normally received $9.50 per hour
while team leaders normally received $13.00 per hour;
(i)
the Appellant paid the Workers semi-monthly by cheque;
(j)
the Appellant set the Workers' rates of pay;
(k)
the Workers were required to keep track of their hours and submit
timesheets;
(l)
the Appellant obtained the work;
(m)
the Workers normally performed their services at the
Appellant's client's premises or the
hospitals;
(n)
the Workers normally worked regular office hours of
8:00 a.m. to 5:00 p.m., Monday to Friday.
[7]
Penner stated the workers would
gather at the appellant's premises and then travel to a
specific worksite in order to perform the necessary services but
- on occasion - the recipient of the services was not
prepared and the visit by the appellant's team would be
cancelled. In this event, the workers would merely return home
but as time progressed they negotiated with RDI for payment of a
cancellation fee based on payment for 2-4 hours at the regular
rate depending on the circumstances. The position of RDI was that
the workers could have subcontracted their duties to others but
it would have required approval from RDI management as RDI was
required to answer to the client in relation to the performance
of their duties. Penner disagreed with the Minister's
assumption - at subparagraph 11(r) - that the workers were
supervised. In his view of the matter, once the workers were
assigned tasks at the work location, thereafter, they were merely
directed to the computers which were the subject of inspection
and analysis and left to proceed on their own in accordance with
the training and policies provided - and established - by
RDI. The only tool required to perform the field work was a
particular disc - containing a specific test - which
was supplied by the appellant. The workers were reimbursed for
any travel expenses incurred by them including mileage at 25
cents per kilometer and, in an effort to reduce costs, RDI rented
a van which was used to transport several workers to the same
site. None of the workers charged the appellant Goods and
Services Tax (GST) because no one earned $30,000 per year and
they were not registered within the system. Penner stated that
once the workers were at a Regional Health Authority (RHA) site,
they merely were shown the way to the computers and left alone to
perform highly repetitive work that did not require supervision.
Penner was referred to the letter of decision - Exhibit A-1
- dated April 26, 2000 pertaining to Randy Berrington. A
letter of decision of same date pertaining to the worker
(intervenor) Barton Lamb was filed as Exhibit A-2. Another
letter of same date confirming assessments in relation to named
workers - set forth on an attached Appendix A - was filed
as Exhibit A-3. Penner referred to a contract -
Exhibit A-4 - between the appellant and RDI dated October
15, 1998 in which - at clause 5.1 - Lamb agreed he
was an independent contractor and not an employee or agent of
RDI. Penner stated this document was used as the standard
agreement between RDI and all workers (Exhibit A-5 - a
contract between RDI and Roy Galapon is another example) but
there were differences in pay between field technicians and
persons functioning as Team Leaders. Pursuant to clause 5.5, Lamb
- and others who have signed similar contracts -
agreed not to enter into any direct or indirect contracts to
provide similar services to any other organization other than
through RDI, operating as Productivity Point International (PPI).
Penner stated this clause was required to ensure the workers did
not provide services to the RHA through Phase Four but only
through RDI which had entered into a subcontract with Phase Four
in relation to the project. Penner agreed the contract was
personal in nature and could not be assigned without the written
consent of the appellant corporation. Since the work was done in
a three-month period, the situation never arose concerning any
request by any worker to assign a contract. Appendix B to the
contract - Exhibit A-4 - pertained to payment
to the worker for services rendered and also contained a clause
relating to the quality of work and the right of the appellant
- as PPI - to reject any portion of a worker's
invoice when the work performed had received an unacceptable
evaluation from any of its clients. Penner stated the appellant
could not afford to pay workers for services that did not qualify
for payment by Phase Four as that company was often slow in
issuing cheques to the appellant. In accordance with the
agreement, Lamb was paid the sum of $13.00 for every hour of work
that was billable by RDI to Phase Four. Appendix D contained
certain clauses relating to non-disclosure pertaining to the
project and other information and intellectual property rights of
RDI and the signatory agreed to warrant that commitment. Penner
explained a typical day in the life of a worker was to arrive at
an RHA site and wait until the Team Leader met with the liaison
person assigned by the particular facility and the computers
requiring inspection would be identified. Some computers were
more complex than others but generally the work was carried out
in the following sequence. First, the worker checked the BIOS
(operating system) and then used a diagnostic disc in order to
ascertain if the date would roll over properly. Next, a search
was undertaken of directories and applications and software were
recorded. Other information of a similar nature was stored on a
disc and notes were taken of particular operating systems being
used. A Microsoft diagnostic utility was run and information was
recorded. Finally, a visual inspection was made of the personal
computer and a record was made of attachments such as printers,
scanners and drives. In the event a date would not roll over
properly - indicating that the program would not function
after January 1, 2000 - the mandate of RDI did not include
any requirement to repair the defect but merely to observe its
nature and to record details so the appropriate information could
be delivered to Phase Four where the analysis was undertaken. The
workers proceeded to complete their duties and if it was
necessary to continue the work the following day, they would stay
overnight and all travel expenses were reimbursed by RDI. During
the relevant period, Penner stated RDI had regular employees who
participated in a Blue Cross Plan and who were subject to the
usual deductions from their pay cheques for income tax,
employment insurance premiums and Canada Pension Plan
contributions. RDI also carried out training and this activity
constituted 50% of the corporation's gross revenue with the
remainder flowing from consulting which was provided by both
regular employees and independent contractors. Due to the
short-term nature of the Y2K project, in Penner's view it
was not suited to engaging individuals who would work with the
status of regular employment. In addition, the Y2K work amounted
to only 20% of the total payment - by RDI - to
workers.
[8]
In cross-examination by counsel
for the respondent, Ken Penner stated RDI provided corporate
training in various software programs by means of classes lasting
one to five days. In 1997 and 1998, the vocational training
component of the appellant's business was split off to an
allied corporation, Midwestern School of Business and Technology
Inc. During the relevant periods involved in the within appeals,
most of the workers were former students at Midwestern or were
still taking classes at that institution. All workers handed in
résumés to the RDI office and then an interview
would be held with an applicant. Penner stated the same procedure
was followed prior to signing a contract with any independent
contractor willing to supply a service to RDI. Penner was
referred to a contract - Exhibit R-1 -
between RDI and Christopher Jones - dated December 9, 1998
- whereby Jones agreed to provide services to an entity
described as Ceridian. Penner explained that this contract was
not in relation to Y2K work as Jones was a computer programmer
and he carried out most of the necessary work on site at
Ceridian. RDI and Ceridian had entered into an agreement -
Exhibit R-2 - dated November 25, 1998 - whereby RDI
would provide certain services. The workers required to perform
the work were named in attached Work Schedules and were to
complete the task in less than one month. The contract -
Exhibit R-3 - dated October 15, 1998 - entered into between
Randy Berrington and PPI provided for payment to him in the sum
of $9.50 per hour as opposed to the rate of $13.00 per hour for a
Team Leader. Penner agreed workers were trained by RDI prior to
commencing work and they were paid for that training because RDI
could bill Phase Four for that time. Penner stated it is common
within the industry for a client to pay a consulting company to
train workers in order to be able to provide services within the
context of a specific project. Although RDI developed a
methodology for testing in connection with the Y2K project,
it had not created the actual rollover test or other standard
methods in common use within the computer consulting industry.
Penner identified certain documents filed in a bundle -
Exhibit R-4 - as a timesheet on Phase Four letterhead, an
RDI timesheet and an RDI Employee Expense Form. Penner stated
Phase Four requested a worker's time be recorded on its own
form. Penner was referred to a document entitled Team Handbook
- Exhibit R-5 - which had been produced by Phase Four
and - at page 11, clause 2.8.1 - two timesheets were
required to be completed weekly by each worker and handed over to
the person acting as the Team Leader. The usual practice was to
have the Team Leader work with the same group of technicians
during the project. Penner agreed each worker was provided with a
disc to check the rollover capability of a computer and all
workers were - probably - provided with pens, paper
and related supplies but the tools were not particularly
significant in his opinion because the skills required to
complete the task were most important. In a location distant from
Winnipeg - such as Brandon - the workers would remain
there until the work was completed. Otherwise, they would come
back to Winnipeg each night and return - next morning
- to the site. Penner was directed to clause 1.2 of Appendix A of
Exhibit R-3 - the contract between RDI and Berrington
- wherein it stated the subcontractor (Berrington) "may be
asked by PPI to assist with other duties from time to time,
provided their services are not required by Phase Four and have
no impact on the project." Penner agreed that any person
hired by a worker as a substitute would have to be familiar with
the methodology utilized for Y2K testing. With respect to the
contract with Barton Lamb - Exhibit A-4 - his duties
- as Team Leader - included overseeing a team of five Field
Technicians and he also worked on servers which were more complex
than the ordinary personal computer at a work station. If
technicians encountered a problem, they would seek advice from
the Team Leaders who had been provided with cellular telephones
by RDI and that expense was then billed to Phase Four. In the
early stages of the project, workers would wait in the staircase
on the RDI premises until they were advised whether or not an RHA
site was ready for a visit by a team and, if it was not prepared,
then the workers assigned to that location would be sent home.
Penner stated he did not consider this procedure to be fair to
the workers and - later - was able to negotiate with
Phase Four for them to be paid a cancellation fee. While
waiting to travel to an RHA site, Penner agreed some of them
did data entry work at the RDI premises.
[9]
The intervenor - Barton Lamb
- chose not to cross-examine.
[10]
Darcy Sabourin testified he is a
resident of Winnipeg, Manitoba and had entered into a contract
- similar to Exhibit A-4 - with RDI in order to
provide services as a Team Leader. He performed hardware and
software assessments for Y2K compliance and participated in
field testing of computers at various RHA centres. When he
was away from Winnipeg, he was not subject to any supervision by
the appellant. Sabourin stated he would meet with the contact
person at the RHA facility who would point out the location of
the computers to be checked and Sabourin would then assign
workers to various stations within the premises to carry out the
required testing. He always regarded himself as being
self-employed and reported his income on that basis. He was
paid every two weeks in accordance with the entries on the
timesheets and told the Field Technicians that the timesheets
would be considered as invoices - to RDI - upon which payment for
their services would be based. He informed his team of workers
that they were considered - by RDI - to be
independent contractors.
[11]
In cross-examination, Darcy
Sabourin stated he submitted timesheets to Brian Meyer
- the RDI Project Coordinator - every Friday. During
his two-week training period, he was paid at the rate of
$13.00 per hour, the same as when he later went into the field
and there had been no negotiation concerning that sum. He stated
he had always understood the work had to be performed by him
- personally - and he also agreed he had done some data
collection work at the RDI office in Winnipeg. The Team Handbook
- Exhibit R-5 - was provided to Field Technicians and
it contained guidelines concerning the work to be performed. He
was reimbursed for travel expenses and usually paid for overnight
accommodation by using an RDI credit card as arranged for by
someone at the appellant's office. Sabourin stated that
when filing his income tax return pertaining to the revenue
earned on the Y2K project, he had not claimed any deductions by
way of business expense.
[12]
Counsel for the respondent called
Barton Lamb as a witness. Lamb stated he was a computer
consultant and had received two designations from computer
schools. Between September, 1997 and February, 1998, he had
attended Midwestern and studied certain courses in pursuance of a
certificate as a Microsoft Certified Professional. Out of six
examinations required, he had successfully completed three. The
contract - Exhibit A-4 - dated October 15, 1998 -
originally intended to expire on November 6, 1998 was extended
until February 26, 1999 and a letter of confirmation -
Exhibit R-6 - was issued by RDI to that effect as well as
serving to further extend the contract to March 5, 1999. The
extension of the contract was not connected with the provision of
services relating to the Y2K project but pertained -
instead - to marketing certain services. The letter
- Exhibit R-6 - had been signed by Val Kroeker
- an officer of RDI - as she had been the person
advising the Team Leaders and other workers of any changes in
procedures during the project. Lamb stated that Phase Four and
RDI handled the project and two discs were provided to each Field
Technician, one of which was used to test for viruses, bugs,
worms, etc. and Phase Four later provided an updated disc.
Various forms were designed by Lamb and other Team Leaders but
the testing document was provided by RDI and was completed by the
workers in the field. A document entitled Testing Methodology
- Exhibit R-7 - was provided by the appellant -
operating as PPI - to the workers and the final version of
the boot disc was written by a person working at Phase Four.
Meetings were held at RDI premises and at least once a week there
was a performance review of the Team Leaders. One individual had
difficulty performing the work and, in an effort to obtain a
satisfactory performance level, this person was placed on three
different teams during the project. Lamb stated he brought a
résumé to Brian Meyer - at RDI - and
was interviewed by him. After working for three days as a Field
Technician - at the rate of $9.50 per hour - he was asked
to become a Team Leader. He accepted that position - at $13.00
per hour - and there was no negotiation with RDI in that regard.
He received training at RDI premises in Winnipeg and referred to
a training agenda - Exhibit R-8 - pertaining to
October 9, 1998. He described the training as hit-and-miss
due to uncertainty as to the scope of the Y2K project and
amendments were made - on two occasions - to testing
parameters. The Field Technicians were not experienced in dealing
with servers but were more accustomed to working on personal
computers. On occasion, if workers attended at a site only to
discover the facility was not prepared for their visit, then some
workers were assigned to collect data from previous field
operations. Workers were expected to be available between the
hours of 8:00 a.m. and 9:00 p.m., Monday through
Friday. Phase Four made the bookings for field trips, teams were
assigned to a site and persons with specialized skills were
added, as required. As the scope of the project came to be
enlarged, additional forms had to be created and, prior to
departing from a facility, the technicians and Team Leader would
meet and review the various forms and sheets to ensure the
information had been properly recorded and each technician was
required to hand in the two discs which would be needed to
work at other sites. The decision whether or not a team would
stay overnight at a location or return to Winnipeg was made by
Brian Meyer at RDI in Winnipeg and communicated to the Team
Leader. As the project continued, different tasks were carried
out in the field by the workers including gathering information
concerning the different levels of software in use as - in
Lamb's opinion - the Manitoba government wanted to
coordinate usage of programs and to eliminate certain other
versions. The teams varied in size from 3 to 8 persons -
depending on the nature of the site to be visited - and the
Field Technicians were requested to be at the RDI office by
7:30 a.m. each morning. Workers were transported to the
relevant site in a van leased by RDI but once the work was nearly
completed, a Jeep was substituted. As the volume of the work
dwindled, certain workers were laid off and others retained and
Lamb and other Team Leaders were involved in providing input
- to Brian Meyer - on their capabilities. All expenses were
fully reimbursed and all materials purchased became the property
of RDI. Pursuant to the non-disclosure provisions in the
contract, the workers were advised not to communicate directly
with any official of an RHA concerning any computer problems -
even if it were of a serious nature - as that advice had to be
forthcoming from Phase Four. The Team Handbook - filed as Exhibit
R-5 - was described by Lamb as being one of two or three
drafts in circulation before a final version was adopted. He had
never been required to attend at any site in order to rectify a
problem arising from his own work performance but had gone to an
RHA facility in order to finish work previously attempted by a
Field Technician and later - while working for RDI as a
marketer - did some follow-up work in that regard. His
duties - pursuant to the contract - required him to
assist in overseeing a team of five Field Technicians, one of
whom would interview a representative of the end-user
concerning various aspects of the hardware and software. Lamb
stated he ensured all workers were equipped with pens, plastic
folders, cell phone holders and fanny packs, all of which were
provided by RDI. Workers could not take any of their own discs to
a site in order to prevent misappropriation of information stored
on the computers which were the subject of the testing process.
Timesheets were turned over to an RDI employee every Friday
afternoon. Any person unable to attend for work was expected to
advise the Team Leader and either Brian Meyer or Val Kroeker at
RDI.
[13]
In cross-examination by counsel
for the respondent, Barton Lamb agreed the discs initially
provided by Phase Four had later been amended in conjunction with
input from various Team Leaders. At the beginning of the project,
Phase Four was located in the same building as RDI but it later
moved to another building. As for signing the contract -
Exhibit A-4 - Lamb stated the choice was either to work -
or not - at the rate offered by RDI and he wanted the work,
even if it meant agreeing to the status of an independent
contractor in connection with the provision of his services. He
agreed that improper work could have been the subject of a
deduction from payment for other work performed and this could
have resulted in a loss of income. He never questioned the lack
of deductions from the cheques issued to him by RDI in payment of
his services and he did not inquire as to his status within the
working relationship but stated he now agrees with the decision
of the Minister that he had been engaged in insurable - and
pensionable - employment with the appellant. The hours of
work varied in accordance with the demands of the particular site
being visited by the team. He did not consider it to be at all
practical to attempt to assign his contract with RDI to someone
else in order to have the work performed at a lower rate and then
retain the difference.
[14]
In re-examination by counsel for
the respondent, Barton Lamb stated the information disseminated
to the workers was based on material flowing from Phase Four
and all Team Leaders were made aware of matters pertaining to
human rights, racism, and sexual harassment in the workplace
because they were out in the field with a group of people. Any
violations of that nature were to be reported to RDI by using the
cell phones provided to each Team Leader. Lamb stated he was
unaware of any worker who had not been paid for each hour of work
due to a deduction for unsatisfactory performance at a specific
site.
[15]
Barton Lamb - in his
capacity as intervenor - testified that none of the
Team Leaders had passed a sufficient number of exams in
order to earn any professional designations. The Y2K problem was
unique and while working as a Team Leader he was supervised by
Brian Meyer - by telephone conversations during the day - and in
the course of reporting to Meyer during the evening if it had
been necessary for the team to stay overnight.
[16]
Roy Galapon testified he was a
computer programmer and had worked as a Field Technician during
the Y2K project. He had been a student at Midwestern but had
already graduated when he was telephoned by a secretary at RDI
advising of the availability of certain work. He submitted a
résumé and was interviewed by a person from Phase
Four. He completed a Questionnaire - Exhibit R-9 - as
requested by an official at Canada Customs and Revenue Agency
(CCRA) - and believes his answers were accurate. Although
timesheets were submitted weekly, he was paid bi-weekly at the
rate of $9.50 per hour and had earlier received training from
persons representing both RDI and Phase Four. He was required to
be at RDI premises each morning and did not believe it would have
been possible to hire other persons to perform his work at
various sites.
[17]
In cross-examination by counsel
for the appellant, Galapon agreed he had been aware of the clause
in the contract whereby he was to provide services as an
independent contractor. He stated he reported his 1998 and 1999
income - earned from RDI - as revenue from self-employment.
At the time, he had another job - between 11:00 p.m. and 7:00
a.m. - and now believes he had been an employee of RDI during the
relevant period.
[18]
In cross-examination by Barton
Lamb - intervenor - Galapon agreed everything he did
at work was under directions or according to standards pursuant
to a work schedule. As duties were amended, the handbook was
changed to accommodate the collection of additional on-site
information at various RHA facilities.
[19]
Ken Penner - testifying in
rebuttal, stated Midwestern does not require the Microsoft
examinations to be completed prior to graduation, although it is
recommended students do so during the course of their
study.
[20]
Counsel for the appellant
submitted the facts in the within appeals supported a finding
that the workers were independent contractors even though they
were utilizing tools provided by RDI because the unique nature of
the Y2K project was consistent with the obligations of the
parties as set forth in a contract entered into by a worker and
the appellant. In counsel's view of the evidence, the fact
the workers were paid at a set hourly rate on the basis of
timesheets submitted to the appellant did not transform them into
employees since RDI - in turn - was a subcontractor
to Phase Four and the government of Manitoba had established
rates it was willing to pay for certain services in connection
with the Y2K project.
[21]
Counsel for the respondent
submitted the workers were under the control of the appellant and
were restricted in their ability to perform similar services to
others even though the opportunity for this type of work would
not re-occur for another 1,000 years. Counsel pointed to
evidence of control over workers while they were in the field and
the requirement that they abide by detailed instructions
contained in various documents including the Team Handbook.
Counsel submitted the workers brought nothing of consequence to
the job in terms of tools and there was no opportunity -
whatsoever - for profit or any true risk of loss as all expenses
were paid by the appellant and the services performed by the
workers were totally within the context of the business of the
appellant.
[22]
Barton Lamb - intervenor
- submitted there was no real opportunity for any worker to
have subcontracted any portion of the work to another person with
a view to gaining a profit on the differential in remuneration.
He submitted the reality of the situation was contrary to the
wording of his own contract as throughout the relevant period of
his working relationship with RDI, he was - in effect
- told "where to jump, when to jump, where not to
jump and with whom to jump."
[23]
In Wiebe Door
Services Ltd. v. M.N.R., [1986] 2 C.T.C. 200, the Federal
Court of Appeal approved subjecting the evidence to the following
tests, with the admonition that the tests be regarded as a
four-in-one test with emphasis on the combined force of the whole
scheme of operations. The tests are:
1. The control test
2.
Ownership of tools
3.
Chance of profit or risk of loss
4. The integration test
[24]
Counsel for the
appellant relied on the decision of the Federal Court of Appeal
in Vulcain Alarme Inc. v. M.N.R., [2000] 1 C.T.C. 48. I
will, therefore, refer to that decision while undertaking an
analysis of the evidence in accordance with the four-in-one test
required by the decision in Wiebe,
supra.
Control:
[25]
It is apparent from the evidence that a high degree of control
was exercised by the appellant throughout the course of the Y2K
project and other related work. Brian Meyer - from RDI
- was in contact with the Team Leaders and appropriate
instruction was provided, as required, together with direction as
to whether or not the team was to remain overnight in a certain
municipality and arrangements to that end were made by RDI staff.
The workers assembled each morning at the RDI premises and waited
there - in the stairway - until they were advised of
a destination. In the interim, some worked in the RDI office
performing various tasks. On site, having travelled there in a
van leased by RDI, they were instructed as to the method of
performing the work and were required to abide by standards set
forth in the Team Handbook provided by Phase Four. The fact that
a payor agrees to assign a degree of control and supervision over
workers to be exercised by a third party pursuant to a contract
does not - without more - transform those persons
into independent contractors. The evidence of Barton Lamb -
intervenor - was clear on this point and it is apparent
there was not the sort of freedom one would normally associate
with an entrepreneur performing the same service within the
context of his or her own business. In fact, the workers were
forbidden to engage in similar work with any other entity even
though this type of service was relevant only in the context of
the turnover of the date on January 1, 2000. In Vulcain
Alarme, supra, the worker had been operating a
business under his own trade name since 1965 and even though he
had to report to the Vulcain Alarme premises once a month to
receive the list of customers requiring service, he could work at
his own pace on condition the service was provided to those
clients within 30 days. In that case, the worker - Mr.
Blouin - worked exclusively for Vulcain Alarme even though
he was not contractually bound to do so and was required to
submit his time sheets and expense reports in order to be paid at
a rate determined by the plaintiff. In this sense,
Létourneau, J.A. - writing for the Court - found
Vulcain Alarme did exercise control over Blouin through the
operation of the billing system. However, Létourneau
stated, at p. 51 of the judgment:
In the case at bar,
the evidence did not disclose that the plaintiff controlled
Mr. Blouin by giving him orders and instructions in the way
his work was to be done. On the contrary, the latter was complete
master of the way in which he provided his services, except that
they had to be done within 30 days. No one imposed any control on
him or exercised any supervision over his provision of the
services, and Mr. Blouin set his own schedule. We will also
return to this concept of control in the following analysis of
the concept of ownership of tools.
[26]
With regard to this particular test, I find the evidence favours
the status of employment.
Tools:
[27]
The only tools required to perform the tasks carried out by the
workers were provided by the appellant directly or through its
contractual arrangements with Phase Four. The workers were
provided with discs to check the computer operating systems and
all other incidental office supplies were provided by RDI and
remained the property of the appellant. The cell phones were
provided by the appellant and the workers were transported to the
sites in vehicles leased by RDI. In the
Vulcain Alarme appeal, the worker - because he
had been in business for himself over the course of nearly 35
years - had owned various tools and equipment. However, in
order to perform the particular tests required of him, Blouin had
to use a special detector not readily available and - in
any event - the inspection of the detectors did not require
many tools. Due to the nature of the Y2K project and the fact the
work had to be performed on the premises of the client, the issue
of tools is not particularly significant nor is the requirement
that - for security purposes - the workers were not
permitted to take their own discs into the premises being
inspected. With regard to this test, there is no evidence
supporting the status of independent contractor. However, within
the special context of the task being performed, the issue of
ownership of tools does not play a significant part in the
overall analysis. In many cases now arising out of working
relationships within a modernized workplace this traditional test
is losing much - if not most - of its significance
and - in my view - requires redefinition in light of
existing technology and use of intellectual property. When
old-fashioned hardware gives way to software and tasks can be
performed at various locations by way of transmission of data
through cyberspace using shared networks and a variety of
computer systems, the question of who owns the hammer and the
pick-up truck is increasingly less relevant and the need to draw
an analogy between modern devices and those sorts of items is
usually not appropriate in the context of the analysis demanded
by existing jurisprudence.
Chance of profit or risk of loss:
[28]
The workers were offered two positions: Field Technician at $9.50
per hour or Team Leader at $13.00 per hour. There was no evidence
supporting the view that any worker could have subcontracted out
the task to another person since approval was required from the
appellant and it was not practical to do so for a variety of
reasons. There was no evidence that any worker had suffered any
loss due to having performed unsatisfactory work and Barton Lamb
testified he was paid to attend at an RHA site to finish
providing the requisite services that had not been supplied
properly by a member of a team during a previous visit for that
purpose. All work-related expenses were paid by RDI and they were
reimbursed for all expenditures including travel at the rate of
25 cents per kilometer if they chose to travel to a work site in
their own vehicle. For the most part, the teams travelled to work
in vehicles leased by the appellant. The Team Leaders were
provided with cellular telephones owned by RDI. In the Vulcain
Alarme case, the Court found Blouin had to use his own
vehicle in the course of providing the service and - due to
an accident - had to pay for losses arising from that misfortune.
In addition, Létourneau, J.A. placed reliance on the fact
Blouin's income fluctuated with the service calls and that
he had no guaranteed level of income. In the within appeals, the
workers were instructed to work specific hours - Monday through
Friday - and, once the management of RDI was able to obtain
a cancellation fee in the event a site was not ready for
inspection, their hours of work - per week - would have been
capable of calculation with a high degree of certainty. In my
opinion, this test favours a finding that the workers were
engaged in employment as opposed to providing services as
independent contractors.
Integration:
[29]
In the within appeals, RDI obtained work in its own right by
bidding in response to proposals advertised by the provincial
government. In addition, it entered into a contract with Phase
Four to perform services in connection with a successful bid
submitted by Phase Four in relation to the Y2K work. The entire
infrastructure was owned and operated by RDI and was not created
by grouping together the individual workers in the sense of
organizing a consortium of persons each engaged in the operation
of their own businesses. The work was obtained by RDI through its
bid and by virtue of the contract with Phase Four. The training
of the workers - many of whom were current or former
students of Midwestern - a school operated by RDI -
was carried out by RDI and/or Phase Four. The assignment of work
sites was carried out by the appellant and all activities related
to the successful conclusion of the work - including
entries of data - were performed by the workers within the
framework of the business organization of RDI. The workers were
forbidden to work for others and could not communicate directly
with the appropriate official of an RHA even if a serious
computer deficiency had been discovered on site. It is clear from
the evidence that the end-user would always seek redress
from RDI itself or through Phase Four, in which case RDI was
still responsible pursuant to the terms of its contract with
Phase Four. The evidence of Ken Penner - President of
RDI - was that only 20% of the annual payroll that year
related to the Y2K work and that this one-time project was
not vital to the operation of the business. It is apparent the
workers were required to carry out the terms of the Statements of
Work received from the government of Manitoba by both RDI and
Phase Four and there were no independent consulting entities
chosen to be recipients of an assignment of work by way of
subcontracts. Instead, the workers were recruited - by RDI - from
the classroom at Midwestern or former students were called by an
office worker at RDI and invited to submit an application for
forthcoming Y2K work. From the standpoint of a worker, in
response to the question - "whose business is
it?" - the evidence supports only one reasonable
conclusion; it was the appellant's business. In the
Vulcain Alarme decision, Létourneau, J.A. relied on
the fact the worker had chosen to work exclusively for the
company and accepted the evidence that all complaints were
directed to that entity but found these factors did not make him
an employee even in view of the fact the testing service provided
by Blouin - at 20% of turnover - was a significant
portion of its overall business. In that case,
Vulcain Alarme also maintained an internal technical section
consisting of a manager and about 15 technicians and Blouin was
not part of that group and the services he did provide -
through the vehicle of his established trade name - Service
Électronique Enr. - were only a small part of that
revenue stream. In my view, a significant finding was that Blouin
was not working in the offices or workshops of Vulcain
Alarme and, as noted by Létourneau, J.A. at p. 53 of
his judgment:
... Further, his comings and goings, his work
hours and days were in no way integrated into or coordinated with
the plaintiffs operations.
[30]
The appellant relied on the agreement with Barton Lamb -
intervenor - and other workers which stated the parties
agreed the status of independent contractor was appropriate in
relation to the work being performed. In the
case of the Minister of National Revenue v. Emily
Standing, 147 N.R. 238, Stone, J.A. at pages 239-240
stated:
...There is no foundation in the case law for
the proposition that such a relationship may exist merely because
the parties choose to describe it to be so regardless of the
surrounding circumstances when weighed in the light of the
Wiebe Door test ...
[31]
In all of these cases, there is a need to examine the evidence
with a view to determining the appropriate status of the workers
involved. Sometimes, it is obvious and on other occasions it is
extremely difficult because relatively small differences in facts
- examined during a sequence of events and circumstances -
within a particular context - can lead to a contrary result.
Certainly, the appellant was correct to seek comfort from the
decision of the Federal Court of Appeal in Vulcain Alarme
as a casual reading of that judgment could lead one to believe it
was at odds with several others decisions - in this field of
jurisprudence - issued by that Court over the course of several
years, none of which - in my opinion - support the
proposition advanced by the appellant. However, the evidence in
the within appeals does not establish the same conditions -
overall - to have been present in sufficient force so as to
assign the status of independent contractor to the workers named
in the various assessments and/or in the relevant decisions
issued by the Minister. Taking into account all of the factors on
the basis set forth in the Wiebe decision, I cannot find
any error in the decisions issued by the Minister - whether in
confirmation of previous assessments or by way of decision(s) as
to the status of any worker(s). The workers were engaged in both
insurable and pensionable employment with the appellant during
the relevant periods pertinent to each appeal filed pursuant to
the Act and the Plan. As a result, the decisions of
the Minister are hereby confirmed and each of the within appeals
is hereby dismissed. As agreed by the parties at the outset, this
result will apply to all appeals filed pursuant to the
Plan and each appeal is hereby dismissed.
Signed at Sidney, British Columbia, this 17th
day of September 2001.
"D.W. Rowe"
D.J.T.C.C.
COURT FILE
NO.:
2000-3809(EI), 2000-3323(EI) and
2000-3325(EI)
STYLE OF
CAUSE:
Re-Directions Inc. o/a Productivity Point
International and M.N.R.
PLACE OF
HEARING:
Winnipeg, Manitoba
DATE OF
HEARING:
May 22, 2001
REASONS FOR JUDGMENT
BY: the Honourable Deputy Judge D.W.
Rowe
DATE OF
JUDGMENT:
September 17, 2001
APPEARANCES:
Counsel for the Appellant: Sean D.
Shore
Counsel for the
Respondent:
Tracey Harwood-Jones
COUNSEL OF RECORD:
For the
Appellant:
Name:
Sean D. Shore
Firm:
Pitblado Buchwald Asper
Winnipeg, Manitoba
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, CanadaCOURT FILE
NO.:
2000-3819(CPP), 2000-3324(CPP) and
2000-3326(CPP)
STYLE OF
CAUSE:
Re-Directions Inc. o/a Productivity Point
International and M.N.R.
PLACE OF
HEARING:
Winnipeg, Manitoba
DATE OF
HEARING:
May 22, 2001
REASONS FOR JUDGMENT
BY: the Honourable Deputy Judge D.W.
Rowe
DATE OF
JUDGMENT:
September 17, 2001
APPEARANCES:
Counsel for the Appellant: Sean D.
Shore
Counsel for the
Respondent:
Tracey Harwood-Jones
COUNSEL OF RECORD:
For the
Appellant:
Name:
Sean D. Shore
Firm:
Pitblado Buchwald Asper
Winnipeg, Manitoba
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, CanadaCOURT FILE
NO.:
2000-3327(EI)
STYLE OF
CAUSE:
Re-Directions Inc. o/a Productivity Point
International and M.N.R. and
Barton Lamb
PLACE OF
HEARING:
Winnipeg, Manitoba
DATE OF
HEARING:
May 22, 2001
REASONS FOR JUDGMENT
BY: the Honourable Deputy Judge D.W.
Rowe
DATE OF
JUDGMENT:
September 17, 2001
APPEARANCES:
Counsel for the Appellant: Sean D.
Shore
Counsel for the
Respondent:
Tracey Harwood-Jones
Counsel for the
Intervenor:
The Intervenor himself
COUNSEL OF RECORD:
For the
Appellant:
Name:
Sean D. Shore
Firm:
Pitblado Buchwald Asper
Winnipeg, Manitoba
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
For the
Intervenor:
Name:
Firm:
COURT FILE
NO.:
2000-3328(CPP)
STYLE OF
CAUSE:
Re-Directions Inc. o/a Productivity Point
International and M.N.R. and
Barton Lamb
PLACE OF
HEARING:
Winnipeg, Manitoba
DATE OF
HEARING:
May 22, 2001
REASONS FOR JUDGMENT
BY: the Honourable Deputy Judge D.W.
Rowe
DATE OF
JUDGMENT:
September 17, 2001
APPEARANCES:
Counsel for the Appellant: Sean D.
Shore
Counsel for the
Respondent:
Tracey Harwood-Jones
Counsel for the
Intervenor:
The Intervenor himself
COUNSEL OF RECORD:
For the
Appellant:
Name:
Sean D. Shore
Firm:
Pitblado Buchwald Asper
Winnipeg, Manitoba
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
For the
Intervenor:
Name:
Firm:
2000-3809(EI)
2000-3323(EI)
2000-3325(EI)
BETWEEN:
RE-DIRECTIONS INC.
O/A PRODUCTIVITY POINT
INTERNATIONAL,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeals heard on common evidence with the
appeals of Re-Directions Inc. o/a Productivity Point
International (2000-3819(CPP), 2000-3324(CPP) and
2000-3326(CPP)) and Re-Directions Inc. o/a Productivity
Point International and Barton Lamb (2000-3327(EI) and
2000-3328(CPP)) May 22, 2001 at
Winnipeg, Manitoba, by
the Honourable Deputy Judge D.W.
Rowe
Appearances
Counsel for the
Appellant:
Sean D. Shore
Counsel for the
Respondent:
Tracey Harwood-Jones
JUDGMENT
The appeals are allowed and the decisions of the Minister are
confirmed in accordance with the attached Reasons for
Judgment.
Signed at Sidney, British
Columbia, this 17th day of September 2001.
D.J.T.C.C.
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