Oil & Rubber Specialties Inc. v. M.N.R., docket 1999-272-CPP

Date: 19990803

Docket: 1999-272-CPP

BETWEEN:

OIL & RUBBER SPECIALTIES INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

and

LOUISE RICHARD,

Intervenor.

Reasons for Judgment

MacLatchy, D.J.T.C.C.

[1] The appeal was heard at Kitchener, Ontario, on June 24, 1999.

[2] The Appellant appealed to the Respondent from the ruling that Louise Richard, the Worker, was employed in pensionable employment while engaged by the Appellant for the period from January 1, 1991 to August 28, 1997, within the meaning of the Canada Pension Plan (the "Plan") since she was an employee under a contract of service.

[3] The Respondent confirmed that the employment was pensionable for the period in question because there was an employer-employee relationship between the Appellant and the Worker and, therefore, the Worker was an employee under a contract of service but informed the Appellant that it had been determined that the Worker's engagement with the Appellant was not insurable employment for the reason that the Appellant and the Worker were not dealing at arm's length with each other within the meaning of paragraph 3(2)(c) of the Unemployment Insurance Act and paragraph 5(2)(i) of the Employment Insurance Act.

[4] It was agreed between the Appellant and the Worker that the Appellant is a federally incorporated company registered, with its head office in New Brunswick, on April 10, 1989. The Appellant was formed by joining a business known as "Custom Rubber Products" owned by Paul Richard (the "Workers" spouse) with a business known as "Quantex Chemical" owned by Talis Fortsmanis. Custom Rubber Products was a supplier of rubber products and services associated with these, including conveyor belting and belt splicing while Quantex Chemical was a manufacturer of chainsaw bar and chain lubricant sold using the trade name "Lumberol". After the formation of the Appellant corporation, Paul Richard's own business ceased soon after, and he became the branch supervisor of the New Brunswick operations of the new business enterprise. As branch supervisor of the Appellant's New Brunswick operations, Paul Richard arranged with the Appellant to employ the Worker as an office worker and paid her a base salary of $1,750 per month. During the period from January 1, 1991 to December 14, 1992, the Worker's duties consisted of invoicing clients, filing accounts receivable and payable. data entry, bookkeeping, payroll, bank deposits as well as customer service tasks. During the period beginning December 15, 1992, the Worker was promoted to manager to work closely with her spouse, Paul Richard, the branch supervisor of the Appellant's New Brunswick operations and to perform the office duties described above.

[5] Starting in 1994, the filing of accounts payable, payroll and data entry were no longer done by the Worker since these tasks were to be done from the Appellant's Kitchener, Ontario office. In July 1997, the Appellant hired another office worker to perform many of the worker's other tasks and had the Worker's monthly base salary cut in half. In August of 1997, the Appellant informed the Worker that her services were no longer required.

[6] The Appellant argued that the Worker was an independent contractor who was engaged to assist her spouse, Paul Richard, to run the operations of the Appellant in New Brunswick and not an employee.

[7] The Respondent stated that, based on assumptions made, the Worker was engaged by the Appellant on a contract of service and was therefore an employee of the Appellant.

[8] The question to be determined by this Court is whether the Worker had been engaged under a contract of service or a contract for services (i.e. an employee of the Appellant or an independent contractor). The law has developed slowly through the years, culminating in the definitive judgment of the Federal Court of Appeal in Wiebe Door Services Ltd. v. M.N.R. [1986] 3 C.F. 553. That judgment determined the best method to test the total relationship of the parties weighing all the relevant facts. Four criteria were to be used in analyzing the facts: (i) control and supervision – was the Worker under the control of and directed by the owner of the business and could he/she be suspended or dismissed? (ii) opportunity of profit and risk of loss – could the Worker share in the profit of the venture and/or suffer loss by reason of the failure of the exploit? Did the Worker pay his/her own expenses, materials, etc.? (iii) ownership of tools – what was provided to the Worker to perform his/her work, if anything? (iv) the organizational or integral test – whose business is it and how did the parties see their relationship and what was the true character of that relationship based on the facts elicited? The test is conclusive – all the evidence must be examined and the tests applied in order to determine the totality of the relationship at issue.

Control and supervision

[9] The evidence that came before this Court showed conclusively that control and supervision was with the Appellant. The work performed was designated by the Appellant as indicated by the services actually performed and by the fact that those services were taken away from the Worker as the Appellant directed. Finally, the Appellant terminated the Worker's employment as it saw fit.

Profit and loss

[10] The Worker could not share in the profits of the Appellant nor could she be responsible for or share any loss that the Appellant might suffer. No one could hold her responsible for any of the debts of the Appellant.

Ownership of tools

[11] The evidence produced before this Court established that all of the tools required or used by the Worker were those of the Appellant. The Worker brought no tools whatever to the employment.

Organizational or integration

[12] It was the business only of the Appellant. The Worker was a needed and an integral part of the operation and performed a necessary function in that business. The evidence given by the Worker supported her belief that she was an employee of the Appellant – at no time did she think otherwise.

[13] On viewing the actual relationship between the Appellant and the Worker as indicated by the evidence produced at trial, it is clear to this Court, and the Court so finds, that the relationship between the parties was one of employer-employee, the Worker being employed under a contract of service and also in pensionable employment.

[14] The appeal is dismissed and the decision of the Minister is confirmed.

Signed at Toronto, Ontario, this 3rd day of August 1999.

"W.E. MacLatchy"

D.J.T.C.C.