Chantler Packaging Inc. v. M.N.R., docket 98-50-UI

Date: 19990429

Dockets: 98-50-UI; 98-7-CPP

BETWEEN:

CHANTLER PACKAGING INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

and

WILLIAM J. BURCHELL,

Intervenor.

Reasons for judgment

Watson, D.J.T.C.C.

[1] These appeals were heard on common evidence with the consent of the parties at Toronto, Ontario on April 23, 1999. The question is whether the Appellant was correct in arguing that during the period at issue, from January 1, 1993 to July 31, 1995, William J. Burchell, the worker, held insurable and pensionable employment within the meaning of the Unemployment Insurance Act and the Canada Pension Plan with the Appellant, the Payor.

[2] The question is whether the worker's work meets the test laid down in well-settled case law, taking into account "all the various elements which constitute the relationship between the parties", namely control by the Payor, ownership of the tools, chance of profit and risk of loss and whether the employee is an integral part of the Payor's business. These elements are not exhaustive and the weight to be given to them varies in each case.

[3] The burden of proof is on the Appellant. It must establish on a balance of probabilities, that the Minister of National Revenue's (the "Minister") decision dated October 7, 1997 was ill-founded in fact and in law. Each case stands on its own merits.

[4] The Minister relied, in arriving at his decision, on the following allegations of fact:

"(a) the Appellant is a business involved in the manufacturing of packaging materials and related products;

(b) on November 26, 1991, the worker was hired by the Appellant as a sales representative and was hired to promote the Appellant's products;

(c) prior to approximately November 1993, the worker was paid a basic salary of $30,000.00 per year, a commission of 3% of his sales and also received expense allowance of $500.00 per month;

(d) on approximately November 1993, the Appellant arbitrarily changed the worker's status from an employee to a self-employed contractor;

(e) on July 14, 1995, the worker was dismissed by the Appellant;

(f) during the period under review, the worker was covered for various company plans such as life insurance, dental insurance and health insurance, the costs of which were paid by the Appellant;

(g) the worker performed the services for the Appellant partly on the Appellant's premises, partly on the road and also from his personal residence;

(h) the worker was required by the Appellant, to perform the services on a full-time basis;

(i) the worker was required by the Appellant, to perform the services, five days per week between 8:30 a.m. and 5:00 p.m.;

(j) the worker was required by the Appellant to complete and submit two call reports to the Appellant, every Friday;

(k) the call reports mentioned in paragraph (j) included the customers' name, the day the customer was contacted, the person contacted and the details of the contact;

(l) the reports mentioned in paragraphs (j) and (k) were also used for the worker's yearly budget;

(m) the worker reported to the Appellant on a daily basis either in person or by phone;

(n) the worker could not sell products of the Appellant's competitors;

(o) the price of the product sold to the customer was set by the Appellant and the worker did not buy the product from the Appellant nor did the worker set the price of the product sold;

(p) the worker was required to attend a ten day, time management course which costs were paid by the Appellant;

(q) the worker was required by the Appellant to meet certain sales objectives;

(r) the worker was required to attend sales meetings with the Appellant to discuss sales strategies;

(s) the worker was dismissed by the Appellant because the worker was allegedly disloyal;

(t) the worker was an integral part of the Appellant's operation since the worker was a sales representative for the Appellant's products;

(u) the worker performed the services for the Appellant on a repetitious and recurring basis for approximately three and one half years;

(v) the worker did not represent, advertise or promote himself as a self-employed individual;

(w) the worker was employed by the Appellant pursuant to a contract of service."

[5] At the hearing of the appeal, counsel for the Appellant admitted paragraphs (a) to (c), (e), (o) and (s) and denied all of the other paragraphs.

[6] The only witness at the hearing was the person who was the sales manager for the Appellant during the period at issue and who had hired the worker in November 1991.

[7] The Appellant is a small family owned successful enterprise involved in the manufacture of packaging materials made of flexible plastic and sales of its products. It has been operating since 1930 and it is located in Mississauga, Ontario. The worker was hired as an experienced salesperson in November 1991 as a full-time employee and as one of the Appellant's four sales representatives; he was paid a fixed annual salary plus an automobile allowance and a commission on sales over a set out amount, subject to the usual deductions including income tax and premiums for unemployment insurance and Canada Pension Plan. The worker was also entitled to various company benefits paid by the Appellant such as life, dental and supplementary health insurances. The Appellant had approximately 38 full-time employees including the four sales representatives. In the summer of 1993 his fixed annual salary and automobile allowance were gradually phased out with a corresponding increase in sales commission up to 6% of his sales; since he was no longer considered to be an employee, the cheque for his remuneration of the sales commission included an amount for GST but was no longer subject to the usual deductions for income tax on premiums for unemployment insurance and Canada Pension Plan. However, as a friendly gesture on the Appellant's part, he continued to be covered for the life, dental and health insurances at the Appellant's expense until he was dismissed on July 31, 1995.

[8] The witness recalls that when the worker changed his status and method of remuneration in November 1993, very little changed in the way that the worker carried on his sales for the Appellant except that his total sales almost doubled over the previous year. In July 1995, the Appellant lost confidence in the way the worker performed some of his sales with its customers and he was terminated on July 31, 1995 for "disloyalty".

[9] A "Memo" dated November 22, 1994, produced as Exhibit R-1 at the hearing in cross-examination by counsel for the respondent, addressed to all of the Appellant's sales representatives, including the worker, from the President, with a copy to the sales manager, stated they were henceforth to fill out two sales call reports each week to be submitted to him "without fail"; one report for the past week and the other for the coming week. They were told of the importance of the reports since they were to be used as the basis for the representative's yearly budget.

[10] Another "Memo" dated December 5, 1994, produced as Exhibit R-2, again addressed to the same persons as Exhibit R-1, including the worker, revealed that there would be a sales meeting at the Appellant's meeting room on December 13, 1994 that would set "Goals and Objectives for us to meet in the coming year"; item 2 on the agenda stated that the worker would give a "Dissertation on the value of call reports, 4 minutes" and item 5 would be setting a date for the January 1995 meeting and agenda for that meeting. It goes on to state as follows:

"Lets review what will be necessary for the budget portion of the meeting. Each person should have ready information on their existing accounts. Customer name, product-bag, sheeting, etc. Dollar value on a monthly basis. Potential growth at the account. Next, a list of potential accounts, with all the necessary information as well as a strategy on how will you secure the account. We will review 5 accounts for each sales person. We will then fill in our budget sheets on a monthly basis so we have a goal and objective and a tool for the future.

Keep in mind that we will review our progress at each meeting and work as a team to meet our objectives."

[11] The witness recalls that these two memos were never enforced and in practice were ignored by management.

[12] The issue before the Court is whether from November 1993 to July 31, 1995, the worker performed his sales work for the Appellant pursuant to a contract of service resulting in an employer/employee relationship or pursuant to a contract for services as an independent subcontractor.

[13] Seldom in these kinds of appeals is it clearly the one or the other. In these appeals some of the evidence favours a contract for services and other evidence favours a contract of service. Although the matter is not free from doubt, I am satisfied that having regard to all of the circumstances, including the testimony of the witness, the admissions by both parties and documentary evidence produced, in the light of the case law, the Appellant has failed in its onus of establishing on a balance of probabilities that the Minister's decision was ill-founded in fact and in law and that the worker was not performing his sales tasks for it pursuant to a contract of service resulting in an employer/employee relationship.

[14] Accordingly, the appeals are dismissed and the Minister's decision dated October 7, 1997 is affirmed.

Signed at Ottawa, Canada, this 29th day of April 1999.

"D.R. Watson"

D.J.T.C.C.