Simoni Foot Clinic Inc. v. M.N.R., docket 1999-4970-EI

Date: 20001218

Docket: 1999-4970-EI

BETWEEN:

SIMONI FOOT CARE CLINIC,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

and

COSTANTINOS SUGARMAN,

Intervenor.

Reasons for Judgment

Cain, D.J.T.C.C.

[1]            This is an appeal by the Appellant from a determination of the Respondent dated September 29, 1999, that the employment of Dr. Constantino Sugarman's (the "Worker") during the period March 10, 1998 to March 5, 1999 was insurable pursuant to the provisions of the Employment Insurance Act (the "Act") as the Worker was employed under a valid contract of service.

[2]            The Respondent based his determination on the following assumptions:

"(a)          the Appellant was a podiatric clinic;

(b)            Dr. Andre Simoni was the sole shareholder and operator of the Appellant;

(c)            the Worker was licensed to practice podiatry in the Province of Newfoundland;

(d)            the Worker was a resident of New York State at the time he entered into an agreement to provide podiatric services;

(e)            upon entering Canada, the Worker secured an Employment Authorization from Citizenship and Immigration Canada which restricted the Worker from:

attending any educational institution and taking any academic, professional or vocational training course,

working in any occupation other than podiatry or chiropody,

working for any employer other than the Appellant, and,

working in any location other than St. John's, Newfoundland.

(f)             during the period in question, the Worker performed services as a podiatrist at the Appellant's facility;

(g)            the Worker was required to see patients as scheduled by the Appellant;

(h)            the Worker was not permitted to solicit patients for his own benefit and all patients treated by the Worker, including the records for their treatment, were considered to be the property of the Appellant;

(i)             the Worker was not permitted to solicit the services of another qualified individual to perform his duties;

(j)             the Appellant retained the right to terminate the Worker's services and the Worker was not entitled to notice if he was dismissed with cause;

(k)            the Appellant provided the facilities, podiatric supplies, instruments and equipment required by the Worker in his practice as well as the services of a receptionist and the use of an office;

(l)             the Appellant paid all laboratory and equipment costs associated with patients treated by the Worker;

(m)           the Worker's wage was based on 40% of the patient fees and 20% of the sale of orthopedic footwear and related items which was collected by the Appellant from patients who were treated by the Worker;

(n)            the Worker was paid bi-weekly by cheque;

(o)            the Worker required the Appellant's approval prior to taking time off and he was restricted from taking more than two of the three weeks vacation leave available at one time;

(p)            the Worker received a memo from the Appellant dated February 9, 1999 requiring that he comply with the Appellant's dress code or he would be required to leave the premises and not return until he was wearing footwear which complied;

(q)            the Worker was under the direction and control of the Appellant;

(r)             the tools and equipment necessary for the Worker to perform his duties were provided by the Appellant;

(s)            the Worker did not incur expenses in the performance of his duties and was not in a position where he could suffer a loss from this employment;

(t)             the services performed by the Worker were an integral part of the Appellant's operation;

(u)            there was a contract of service between the Appellant and the Worker."

[3]            The Appellant admitted assumptions (a) to (p) inclusive, (r) and (s) but denied all of the other assumptions hereinabove set out.

[4]            The Appellant operates a foot clinic in St. John's, Newfoundland/Labrador. In February of 1998, unable to engage the services of a podiatrist in Canada, it advertised on the internet. The Worker who lived in Brooklyn, New York answered the advertisement and the Appellant made an offer of employment to him.

[5]            The Worker, being a foreigner, was required to make and did on February 18, 1998 make an application to the Department of Citizen and Immigration and the Department of Human Resources respectively for authority to enter Canada and to have the offer of employment confirmed. In due course this was completed and his entry into Canada and employment by the Appellant was authorized and confirmed in accordance with the conditions set out in assumption (e) above.

[6]            On March 10, 1998 the Worker and Dr. Andre Simoni ("Simoni") entered into a "Podiatry Services Agreement" (Exhibit A-1) wherein Simoni is described as the "Primary Podiatrist" and the Worker is described as the "Contract Podiatrist". It is clear from the evidence that the agreement was entered into by Simoni as agent for the Appellant of which he was the sole shareholder.

[7]            The following provisions of the agreement as they relate to the issues in this appeal may be summarized as follows:

the Worker was engaged as an independent contractor and would be responsible to remit to all lawful authorities any sums due in respect to income earned and any other sums required to be paid by law in respect to his work in Canada;

the Worker was prohibited from practising podiatry within an area to be mutually agreed upon but in any event not within the City of St. John's and surrounding areas;

the Worker would be entitled to 3 weeks vacation but subject to restrictions such as due notice and the work load of the clinic;

the Worker was to be paid on the basis set out in assumption (m), subject to the deduction of all laboratory expenses incurred by the Worker in the performance of his treatment of patients. All fees earned by the Worker were the property of the clinic, were collected by it and the Worker was to be paid at the end of each month;

the Appellant was to provide all the staff and the basic equipment that a podiatrist required in the normal operation of a foot clinic and that should the Worker require additional equipment not so provided he could purchase same at his own expense;

the Worker was to provide professional liability insurance at his own expense;

all patients treated by the Worker became and remained the property of the Appellant and at the termination of the Agreement the Worker agreed to deliver all files and records of such patients to the Appellant;

on the termination of the agreement, the Worker would be restricted from practising podiatry within the "borders of the City of St. John's".

[8]            The Respondent submits that the Worker was employed in insurable employment by the Appellant under a contract of service. The Appellant takes that position that the contract speaks for itself and that the Worker was an independent contractor.

[9]            The agreement defines the relationship of the Appellant and the Worker as one of contractor and subcontractor. But it is still necessary for the Court to determine whether that was the actual engagement relationship that existed during the period in question.

[10]          In The Minister of National Revenue v. Emily Standing (1992) 147 N.R. 238, the Federal Court of Appeal considered the question of the characterization that the parties to an agreement give to their engagement relationship. The parties described their relationship as one of employer-employee and the Tax Court of Canada held that where contracting parties agree on the definition of an oral or implied contract and there is nothing of substance to contradict that agreement, then the agreement between the parties should remain unchallenged by the Minister.

[11]          The Minister appealed and Stone J.A. who wrote the judgment for the Court said at pages 239-240:

"[5]          With respect, it is our view that this application must succeed. Regardless of what may have been the Tax Court's appreciation of the Wiebe Door test, what is crucial to it in the end was the parties own post facto characterization of the relationship as that of employer/employee. 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."

[12]          The reference to "Wiebe Door test" in the above quotation is reference to Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553 a decision of the Federal Court of Appeal. It is now considered the leading authority when distinguishing a contract for services from a contract of service.

[13]          Wiebe Door (supra) decided that in determining whether parties have established an employer-employee relationship, the total relationship of the parties must be considered. The test to be used to distinguish a contract of service from a contract for services is a "four-in-one test" with the emphasis on "the combined force of the whole scheme of the operations".

[14]          The Court stated that the test requires consideration of four items:

control;

ownership of the tools;

chance of profit and risk of loos; and

organizational test.

[15]          In Stevenson Jordan and Harrison Ltd. v. MacDonald and Evans, [1952] 1 T.L.R. 101 (CA) Lord Denning set forth a test now known as the "organizational test" where he said at page 111:

"One feature that seems to run through the instances is that under a contract of service a man is employed as part of the business, and his work is done as an integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it."

[16]          Commenting on the organizational test the late Mr. Justice MacGuigan in Wiebe (supra) at page 562 said:

"Lord Denning's test may be more difficult to apply, as witness the way it has been misused as a magic formula by the Tax Court here and in several other cases cited by the respondent, in all of which the effect has been to dictate the answer through the very form of the question, by showing that without the work of the "employees" the "employer" would be out of business. ... As thus applied, this can never be a fair test, because in a factual relationship of mutual dependency it must always result in an affirmative answer. If the businesses of both parties are so structured as to operate through each other, they could not survive independently without being restructured. But that is a consequence of their surface arrangement and not necessarily expressive of their intrinsic relationship." (The underlining is mine)

Continuing he said:

"Of course, the organization test of Lord Denning and others produces entirely acceptable results when properly applied, that is, when the question of organization or integration is approached from the persona of the "employee" and not from that of the "employer", because it is always too easy from the superior perspective of the larger enterprise to assume that every contributing cause is so arranged purely for the convenience of the larger entity. We must keep in mind that it was with respect to the business of the employee that Lord Wright addressed the question "Whose business is it"."

[17]          In posing the above question in Montreal v. Montreal Locomotive Works Ltd., [1947] 1 D.L.R. 161, Lord Wright was directing how the question might be answered. He said at page 169-170:

"... In many cases the question can only be settled by examining the whole of the various elements which constitute the relationship between the parties. In this way it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior".

[18]          In Wiebe Door the Court went on to say that in addition to the above tests, in making its the determination, the Court must look at and weigh all factors which include, but are not limited to:

control;

who provides the equipment and helpers;

the degree of financial risk borne by the person

the degree of responsibility for management and investment;

the opportunity to profit from sound management of the work.

The Court emphasised that all of the above factors should be considered in combination and not in isolation

CONTROL

[19]          Control usually is synonymous with supervision. However one can still have control but not have to direct how the work is to be performed, one of the criteria often cited in support of a finding in favour of a contract for services.

[20]          In the case at bar the Worker was a graduate of the New York College of Podiatric Medicine, had done one years residency in the Veterans Affairs Hospital in New York City, U.S.A. and had worked at the Whitney Medical Centre in New Orleans, Louisianna, U.S.A. prior to his engagement by the Appellant.

[21]          With these qualifications, how he treated patients would not be a concern of the Appellant and no evidence was led by the Appellant that Simoni did in fact direct how the Worker treated his patients or that he had any concern for the methods employed by the Worker in the treatment of patients. However the Worker testified that on one occasion Simoni suggested that the Worker not treat the patients assigned to him too quickly which would result in fewer visits to the Clinic.

[22]          The Worker did not in fact have his own practice. He did not have a client base that would be his and for whom he would be the sole treating doctor. The contract specifically provided that all patients whether treated at the clinic before or after the Worker was engaged remained the patients of the Appellant.

[23]          The Worker was not entitled to a share of the income of the Clinic. His income was controlled by the Appellant by the number of patients that the Appellant assigned to him and he treated.

[24]          The Worker was not allowed to practice his profession within the City of St. John's and "surrounding areas", whatever that phrase means, but could practice in areas "mutually agreed upon". The Worker was required to be present at the Clinic at such time as the parties "may mutually agree upon". Again this phrase appears in the contract and in contract law an agreement to mutually agree at some later date is no agreement at all.

[25]          After the contract ended the Appellant still exercised some measure of control over the Worker. He was prohibited from practising his profession within the "borders of the City of St. John's".

[26]          The work performed by the Worker at the Clinic was under the management of the Appellant. Simoni opened and closed the Clinic. The Worker made no investment in the financing of the Clinic unless the percentage retained by the Clinic from income earned by the Worker could be somehow classified as such.

OWNERSHIP OF THE TOOLS

[27]          The Appellant supplied the Worker with the space, facilities and equipment that he required to perform his function as a doctor. The Worker agreed to perform his service for a percentage of the fee charged by the Clinic less any laboratory costs incurred. The percentage retained by the Clinic represented the cost of supplying such space, facilities and equipment and presumably some measure of profit.

CHANCE OF PROFIT OR RISK OF LOSS

[28]          The Worker's financial remuneration was controlled by the Appellant. He could not suffer a "business loss" as such. The Worker did not have any way to profit from the sound management of the Clinic since he had no say in such management. His duty was to see and treat patients referred to him by the Appellant.

ORGANIZATION

[29]          The Worker had no patients of his own and had no control over the management of those patients except while he was treating them. The patients were the Appellant's. His work was part of the general operation of the Clinic and in no way could be separated from it.

[30]          Considering all of the several tests and factors, the answer to the question of whose business is it is that the business was that of the Appellant and the Worker was an employee, notwithstanding his characterization as an independent contractor in Exhibit A-1. To borrow from the vocabulary of the late Mr. Justice MacGuigan in Wiebe Door (supra) the relationship of the Appellant and the Worker as employer-employee was not a consequence of any "surface arrangement" but truly expressive of their "intrinsic relationship".

[31]          The Appeal of the Appellant is dismissed and the determination of the Respondent is confirmed.

Signed at Rothesay, New Brunswick, this 18th day of December 2000.

"M.F. Cain"

D.J.T.C.C.

COURT FILE NO.:                                                 1999-4970(EI)

STYLE OF CAUSE:                                               Simoni Foot Clinic Inc. and M.N.R.

PLACE OF HEARING:                                         St. John's, Newfoundland

DATE OF HEARING:                                           August 24, 2000

REASONS FOR JUDGMENT BY:      the Honourable Deputy Judge M.F. Cain

DATE OF JUDGMENT:                                       December 18, 2000

APPEARANCES:

Agent for the Appellant:                     Andre Simoni

Counsel for the Respondent:              John O'Callaghan

For the Intervenor:                                                The Intervenor himself

COUNSEL OF RECORD:

For the Appellant:                

Name:                     

Firm:                       

For the Intervenor:               

Name:                     

Firm:                       

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                Ottawa, Canada

1999-4970(EI)

BETWEEN:

SIMONI FOOT CARE CLINIC,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

and

COSTANTINOS SUGARMAN,

Intervenor.

Appeal heard on August 24, 2000 at St. John's, Newfoundland, by

the Honourable Deputy Judge M.F. Cain

Appearances

Agent for the Appellant:             Andre Simoni

Counsel for the Respondent:      John O'Callaghan

For the Intervenor:                     The Intervenor himself

JUDGMENT

The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.

Signed at Rothesay, New Brunswick, this 18th day of December 2000.

"M.F. Cain"

D.J.T.C.C.