Mullin Bros. Ltd. v. M.N.R., docket 95-116-CPP

Date:19971007

Dockets: 95-2371-UI; 95-116-CPP

BETWEEN:

MULLIN BROS. LIMITED,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Mogan, J.T.C.C.

[1]            The Appellant is a small trucking company in Southern Ontario which was started in 1986 by Mr. Kim Mullin and his brother. Around 1991, Kim Mullin bought out the shares of his brother so that from and after 1991, he was the sole shareholder of the Appellant. By the end of 1992, the Appellant owned five trucks. Two of the trucks were leased to Brockelbank Trucking ("Brockelbank") and the three remaining trucks were retained for local trucking by the Appellant.

[2]            The local trucking consisted of hauling livestock, hay, straw and gravel. The two trucks leased to Brockelbank were engaged in long-haul trucking usually to destinations in Western Canada like Calgary and Edmonton. Apparently, Brockelbank was a substantial operation with its own tractors and trailers, a dispatcher, and commercial connections throughout Canada and the United States. The two trucks which the Appellant leased to Brockelbank were only tractors capable of pulling trailers. Brockelbank would supply both the trailers and the cargo; and the Brockelbank dispatcher would instruct the drivers of the Appellant's two trucks with respect to the destination and cargo. All that the Appellant provided to Brockelbank were the tractors and the drivers.

[3]            Prior to January 1, 1993, the Appellant had regarded all of its drivers as employees, and had withheld the usual source deductions for income tax and premiums for unemployment insurance and the Canada Pension Plan. Effective January 1, 1993, Kim Mullin concluded that the drivers which he provided with his two tractors to Brockelbank were not in fact employees of the Appellant but were independent contractors. Accordingly, the Appellant stopped withholding source deductions with respect to those drivers who operated the two tractors leased to Brockelbank. Following an audit, the Minister of National Revenue concluded that the drivers who operated the two tractors leased to Brockelbank were in fact employees of the Appellant and not independent contractors. An assessment was issued to the Appellant with respect to the source deductions which would otherwise have been withheld for those drivers. The Appellant has commenced this appeal from that assessment.

[4]            The only issue is whether the drivers who operate the trucks leased to Brockelbank are employees of the Appellant or independent contractors. In order to determine the status of the drivers, it is necessary to review the commercial relationship between Brockelbank and the Appellant. When Brockelbank needed one of the Appellant's tractors to pull one of its trailers, the Brockelbank dispatcher would call the Appellant to state, for example, that they had a trailer to be hauled to Calgary. Kim Mullin would then offer the trip to one of his long-haul drivers who had the option of taking the trip or not. Mr. Mullin emphasized in evidence that a driver could turn down a particular trip for any personal reason. If the driver accepted the trip, he would take the Appellant's tractor over to Brockelbank to pick up the trailer and get on his way. If the first driver did not accept the trip, Mr. Mullin would offer it to the other drivers in rotation until it was accepted.

[5]            The Brockelbank dispatcher would then give the driver instructions concerning the cargo, the destination, and how much lead time the party receiving the cargo may need to assemble people to unload the trailer. Upon returning from the trip, the driver would submit his report to Brockelbank. It was in the form of a driver's log showing mileage, fuel consumed and any other relevant information. Brockelbank would settle with the Appellant on the 15th and 30th days of each month paying 90 ¢ per mile for each trip. Mr. Mullin explained that the mileage was actually an established number for each principal destination as, for example, 2,150 miles from Toronto to Calgary and 2,275 miles from Toronto to Edmonton. In other words, it did not really matter what route a truck travelled between Toronto and Calgary because, for that kind of trip, Brockelbank would pay to the Appellant 90 ¢ per mile based on the established mileage of 2,150 miles between Toronto and Calgary.

[6]            If on the return trip Brockelbank instructed the driver to make a detour perhaps down into the United States to pick up a return cargo, then Brockelbank would provide additional information to the Appellant showing the required destinations of the truck in order to pick up a return cargo and deliver it to a particular destination in Eastern Canada. In any event, the only remuneration paid by Brockelbank to the Appellant was 90 ¢ per mile for each trip by a particular truck.

[7]            Out of this remuneration, the Appellant paid all of the operating costs of the truck like gas, oil, repairs and maintenance. Also, the Appellant paid the driver on a mileage basis as opposed to an hourly basis. This was in contrast to the drivers operating the other trucks which the Appellant kept in Ontario for local use hauling livestock, hay and gravel. The drivers in Ontario were paid only by the hour.

[8]            For the long-haul drivers of trucks leased to Brockelbank, the Appellant provided each driver with petty cash of approximately $500 for each trip. This petty cash was used for unforeseen expenses like maintenance work on the truck or a detour to a different location to pick up cargo for a return trip to Ontario. Each driver was required to account for the petty cash upon his return and any personal expenses were subtracted from the settlement made with him for a particular trip.

[9]            Mr. Mullin emphasized that although he paid the drivers on a mileage basis for their long-haul trips as determined by the Brockelbank dispatcher, each driver was free to accept or reject a trip. He could not order a long-haul driver to take a trip to Calgary in the same way that he could order a regular employee to do a specific short trip while at the job site here in Ontario. Also, although Mr. Mullin interviewed the drivers first to determine whether he wanted them to be operating his equipment, they would also have to be interviewed at the Brockelbank office and submit to a medical examination if they were going to be driving in the United States because it was the Brockelbank insurer who would determine whether a particular driver would be permitted to drive or not.

[10]          Mr. Mullin acknowledged at the hearing that there was no significant change from December 1992 to January 1993 in the way he treated these drivers who were operating the trucks which the Appellant leased to Brockelbank. They were paid on a mileage basis at the same rate with respect to each trip. They drove his tractors but their destination was determined by the Brockelbank dispatcher. He continued to own the vehicles and provided a petty cash advance for each trip. He continued to pay all of the operating and maintenance expenses for the truck and, in particular circumstances, he would pay special travel expenses of a driver like motels and meals if the driver was delayed because of some problem with the truck or cargo.

[11]          Applying the basic tests of (i) control, (ii) ownership of tools and (iii) opportunity for profit or risk of loss, I would conclude that the drivers of the trucks leased to Brockelbank were employees of the Appellant and not independent contractors. These drivers were under the Appellant's control. He could determine which driver would operate which truck on a particular long-haul trip. The fact that the destination was controlled by the Brockelbank dispatcher and that the dispatcher would issue instructions to the driver from time to time in the course of a particular trip did not take away from the fact that it was the Appellant who determined whether a particular driver would be permitted to take a particular truck on a particular trip. The test of control points in the direction of employment.

[12]          With respect to ownership of tools, the trucks were all owned by the Appellant. Mr. Mullin stated that he had to be satisfied whether a particular candidate would be permitted to drive one of his trucks. This is understandable given the cost of the large tractors required to haul long trailers on the open highway. The drivers were not required to be mechanics. Mr. Mullin described the two locations where he had his trucks maintained at Feversham, Ontario or Barrie, Ontario. The test of ownership of tools points in the direction of employment.

[13]          For those drivers operating the Appellant's vehicles under the direction of the Brockelbank dispatcher, there was no risk of loss. They were paid on a mileage basis for each trip and the operating expenses of the truck were paid by the Appellant. Therefore, like any other employee, they received remuneration with respect to the services they performed with no off-setting expenses which could reduce that remuneration and put them in a loss position. The test of opportunity for profit or risk of loss points in the direction of employment.

[14]          Having concluded that the three basic tests point towards employment, it is my conclusion that the drivers in question were employees of the Appellant and were not independent contractors. Therefore, the assessment issued to the Appellant with respect to source deductions is upheld and the appeal is dismissed.

"M.A. Mogan"

J.T.C.C.