942259 Ontario Inc. v. M.N.R., docket 97-106-CPP

Date: 19990316

Docket: 97-990-UI; 97-106-CPP

BETWEEN:

942259 ONTARIO INC. o/a NIAGARA GROWERS' NETWORK,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

BOWIE, J.T.C.C.

[1] The Appellant has been assessed by the Minister of National Revenue (the Minister) for unpaid contributions under the Unemployment Insurance Act (the U.I. Act), the Employment Insurance Act (the E. I. Act), and the Canada Pension Plan (the Plan) for the period between January 1, 1996 and July 31, 1996, together with penalties and interest.[1] The assessments are in respect of the following individuals, all of whom did some work for the Appellant during that period: Rob Riddick, Tony Mancuso, Mike Riddick, Henry Muste, Ron Jackson, John Fast, David Pearce, Andy Evers and Chris Williams

[2] The amount of the assessments is not disputed. The only dispute between the parties is whether these individuals, when working for the Appellant, were engaged under contracts of service, in which case they are employees, or under contracts for services, in which case they were independent contractors. If it is the former, then their employment is insurable under paragraph 3(1)(a) of the U.I. Act and paragraph 5(1)(a) of the E.I. Act, and it is pensionable under paragraph 6(1)(a) of the Plan, and these appeals fail. If it is the latter, then the appeals succeed.

[3] The Appellant company is wholly owned by Mr. William Fryer. He started it in the fall of 1993. Its business is the distribution of potted plants, grown in the Niagara region of Ontario, to markets in the United States. The market area extends as far west as Minnesota, and as far south as the Carolinas. Chicago and Boston are two of the major centres served. The company buys the product from various growers, and fills orders from customers, most of whom are in the supermarket business. The trade is seasonal, with peak sales coinciding with the major holidays. Most of the Appellant's orders are delivered to the U.S. buyers by trucking companies which are common carriers.

[4] These appeals concern deliveries which are not made by common carriers, but in trucks driven by the nine persons named above. Subject to certain exceptions, to which I will return, these deliveries were made in one of three trucks owned by the Appellant. These are a van capable of holding about 50 cartons of plants, an 18' refrigerated truck which can carry about 250 cartons, and a 26' refrigerated truck which holds about 300 cartons. The large refrigerated trucks have a value of about $100,000.00. The van is not refrigerated, and has a much lesser value.

[5] The Appellant's practice from the outset, and particularly during the assessment period, was to have available at all times a pool of drivers who were licenced to drive these vehicles, and able and willing to do so from time to time as requested. If a shipment was not to be delivered by common carrier, either for cost or scheduling reasons, then a driver from this pool would be engaged to make the trip. This engagement is the subject of the present appeals, along with the occasional engagement of Henry Muste to make deliveries in a vehicle owned by him.

[6] The trips made in the Appellant's vehicles were of two kinds. Some were relatively short trips, as short as 2½ hours each way. Others were much longer, taking as much as 10 hours or more each way. Each time such a trip was to be made, it was offered to a driver from the pool. If he accepted it, which he did not have to do, then he would be told the time at which, or the times between which, he was required to arrive at the destination. These times were critical to the operations of the Appellant's customers, and therefore had to be adhered to strictly to maintain customer satisfaction. Within this parameter, the driver would decide when to leave, and what route to take. In reality, however, there are virtually no alternative routes to follow, and the departure time was dictated, between certain limits, by the prescribed arrival time.

[7] On these trips, the Appellant paid the expenses associated with the truck, such as fuel, repairs, and tolls. The Appellant also paid for the meals of the driver. Upon leaving the Appellant's premises with the loaded truck, the driver was given a sum, called the float, in U.S. currency, from which to pay all these expenses. Upon his return he would turn in, along with the documents relating to the shipment, the remaining cash, together with receipts for the amounts spent, and an invoice describing the destination and the amount that he was to be paid for the trip. Cheques were issued every two weeks to pay these invoices. Each driver was required by Canadian and U.S. regulations to maintain a log book showing the number of hours driven. These books were supplied by the Appellant to the drivers, who completed them and kept them in their possession when driving on the highway, as required by law.

[8] The evidence as to the fixing of the remuneration for trips was not totally clear. Mr. Evers, the only driver to testify, said that he billed the Appellant at the rate of "about $9.00 to $10.00 per hour". Mr. Fryer said that the amounts to be paid were negotiated. He also said that these amounts were governed by such things as the comparative cost to him of using a common carrier, the rates prevailing in the industry for a similar trip, and the class of licence held by the driver. On at least one occasion, a driver who was unhappy with the rate allowed for a trip, seems to have been successful in renegotiating it upward on his return. My assessment of the evidence is that Mr. Fryer fixed the amounts that he would generally pay for each of the runs, and that the drivers had very little ability to negotiate a better rate. For the most part, they took the rate that was offered, or else they did not get the work. Mr. Evers said that he stopped doing this work in part because the Appellant reduced the rate that it was paying.

[9] The drivers were not full-time employees of the Appellant. Most had another job. Mr. Evers worked for one of the growers in the area during the relevant period, although he later became a full-time warehouse manager for the Appellant. Mr. Fast was retired, and drove part-time delivering for a restaurant. Mr. Pearce was a university student. Mike Riddick had two other jobs, one driving for the Niagara Falls transit authority, and the other collecting tolls at one of the bridges. The others had various driving jobs elsewhere.

[10] The drivers did all the driving they were hired to do themselves, subject to some minor exceptions. One of the drivers from time to time had a brother assist him with the driving. Mr. Muste sometimes had his wife take a trip for which he was contracted. Whenever this happened it was with the explicit knowledge and consent of the Appellant and its insurance company. The arrangement with the insurer required that anyone who was to drive the company's vehicles must first submit their driving record to the company, which in turn passed them on to the Appellant's insurer, which verified them with the Ministry of Transportation before approving the person as a driver. Coverage depended on this being done in every case.

[11] The facts concerning Mr. Muste differ somewhat from those in respect of the other drivers. Mr. Muste owned a refrigerated truck which was somewhat larger than those of the Appellant. It carried between 350 and 400 cartons. It appears from the record of his earnings that, during the relevant period, he drove this truck to make deliveries for the Appellant on 18 trips, he drove a vehicle belonging to the Appellant on 16 trips, and his wife, Sylvia Muste, made six trips using the Appellant's vehicle. Not surprisingly, he was paid much more when he drove his own vehicle than when he drove one belonging to the Appellant. Apart from the use of the vehicle itself, on those trips he paid the cost of fuel, repairs, meals, tolls, and the other expenses of the journey.

[12] Mr. Muste drove the Appellant's vehicle to Boston on January 10, 1995, for which he was paid $200.00. When he drove one of the Appellant's vehicles to Boston on November 21, 1994, he was paid $225.00. In contrast, he was paid $900.00 for a trip to Cambridge, Mass. on December 5, 1994 in his own vehicle. He was paid $300.00 and $350.00 for two trips to Jamestown in his own vehicle in December 1994. He and his wife made four trips to Jamestown in the Appellant's vehicles between May 1994 and January 1995. For two of these he received $50.00, for one $60.00, and for the other $100.00.

[13] Mr. Fryer said in his evidence that another driver, Rob Riddick, twice leased vehicles in his own name to drive for the Appellant. However, he could not identify any such trips in the records which he produced at the trial, although he testified that these records were complete. I believe that he was mistaken on this point. Other than a few isolated occasions when a driver used his own car for some local errand, and was paid at the rate of $0.25 per kilometre for it, I find that only Mr. Muste drove his own vehicle on the Appellant's business, and that only he paid the expenses of the trip.

[14] The approach to be taken in these cases has been thoroughly reviewed by the Federal Court of Appeal in its judgment in the Wiebe Door case.[2] The trial judge must conduct a careful review of the evidence as to the circumstances of the employment, bearing in mind the factors referred to by the Court of Appeal in that case, with a view to determining whether in the particular case the worker is a servant or an independent contractor. There is no single easy test that will govern every case. The expressed wishes of the worker and the employer are a factor to be considered, but they are not dispositive of the issue.[3] Other significant factors include the degree of control exercised by the employer over the way in which the work is to be done, the ownership of the necessary tools and equipment, the opportunity for both profit and loss by the worker, the degree to which the work and the worker are integrated into the business of the employer, and whether or not the worker is bound to do the work himself, or if he may hire and pay people to help him with it. The Court of Appeal gave specific approval to the following formulation of the issue by Cooke J. in the Market Investigations[4] case:

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.

[15] In my view, these drivers, other than Henry Muste, when driving the Appellant's vehicles, were employed in its business as casual labour under contracts of service. There was little real discretion reposed in them as to how they would do the work. They supplied no tools, and their engagement had none of the hallmarks of entrepreneurship about it. Nothing in the evidence suggests to me that they were engaged in a business, rather than simply selling their labour at a piece rate. It is true that there was little direct supervision of the drivers, in most instances; direct supervision is impossible when the employee is away from the place of business driving on the highway. When they were delayed by weather, or for some other reason, and had to spend a night on the road, they were required to sleep in the truck rather than spend money for a motel, unless they could get Mr. Fryer to agree to it by telephone. There certainly was no opportunity for these drivers to go sightseeing or do other business while on trips. They had to deliver the product within rigid time frames, and then return the truck directly to the Appellant's premises.

[16] Paid, as they were, by the trip, the drivers did risk making less per hour than they normally would if the weather or a break-down delayed their return. However, they did not bear the risk of having to pay for repairs to the truck, or the normal costs of maintenance and depreciation. Nor did they pay for fuel or meals on the road.

[17] Different considerations apply to the employment of Henry Muste. On many occasions, Mr. Muste supplied his own vehicle and absorbed the expenses of the trip, as well as the risks of mechanical breakdowns and the cost of wear and tear on his vehicle. The rate paid to him on these occasions seems to have been about four times the rate otherwise paid to drivers, and it reflects these added costs and risks. He was subject to the same scheduling constraints as the drivers in the Appellant's trucks. Nevertheless, in my opinion, Mr. Muste, when his truck was used, was not acting as an employee, but was doing business on his own account. There was no direct evidence as to the value of his refrigerator truck, but it was larger than the Appellant's trucks, and I infer that it would have had a similar value. The value of the truck, and its importance in the operation, together with the financial risks and rewards, lead to the conclusion that Mr. Muste, when using his truck for a delivery, was acting as an independent contractor. When he and his wife drove the Appellant's trucks, they did so on the same terms as the other drivers, and there is no basis on which they should be distinguished from those other drivers.

[18] In the result, therefore, the appeals are allowed, only to the extent that the employment of Mr. Muste, on those occasions when he drove his own vehicle, is not insurable employment; in all other respects the assessments are confirmed. The assessments are referred back to the Minister for reconsideration and reassessment on that basis.

Signed at Ottawa, Canada, this 17th day of March, 1999.

"E.A. Bowie"

J.T.C.C.