REASONS
FOR JUDGMENT
Paris J.
Introduction
[1]
The Appellant is a non-profit organization that
provides free after-school music instruction to disadvantaged youth in
elementary schools in Toronto. The Appellant engages professional musicians to
provide that instruction.
[2]
This is an appeal from rulings by the Minister
of National Revenue (the "Minister") that Laurissa Chitty, Julia
Hambleton, Veronica Lee, Michele Jacot, Joaquin Nunez Hidalgo and Yvanna Mycyk,
who were hired by the Appellant to provide musical instruction, were engaged in
insurable and pensionable employment with the Appellant, within the meaning of
paragraph 5(1)(a) of the Employment Insurance Act and paragraph 6
(1)(a) of the Canada Pension Plan. I will refer to these workers
collectively as the “Instructors” .
[3]
The issue to be determined is whether the Instructors
were engaged by the Appellant under a contract of service or a contract for
services during the periods covered by the rulings, as follows:
Laurissa Chitty, Julia Hambleton, Veronica
Lee and Yvanna Mycyk: September 1, 2013 - March 24, 2014;
Michele Jacot: September 1, 2013 - March
18, 2014; and
Joaquin Nunez Hidalgo: January 1, 2013 -
March 24, 2014:
[4]
Nothing turns on the slight variations in
periods covered by the rulings.
[5]
One of the Instructors, Yvanna Mycyk, has
intervened in appeals 2015‑2712 (EI) and 2015-2713 (CPP), and supports
the position of the Minister that the Instructors were engaged by the Appellant
under contracts of service.
[6]
The Appellant’s sole witness was its President
and CEO, Mr. David Visentin, Ms. Mycyk also testified.
Test to be Applied
[7]
In 671122 Ontario Ltd. v. Sagaz Industries Canada
Inc., 2001 SCC 59, Major J. wrote that, while there is no universal test to
determine whether a person is an employee or an independent contractor, “the central question is whether the person who has been engaged to
perform the services is performing them as a person in business on his own
account. Major J. also referred to certain factors that
a Court must take into consideration, as follows:
In making this determination, the level of
control the employer has over the worker’s activities will always be a factor.
However, other factors to consider include whether the worker provides his or
her own equipment, whether the worker hires his or her own helpers, the degree
of financial risk taken by the worker, the degree of responsibility for
investment and management held by the worker, and the worker’s opportunity for
profit in the performance of his or her tasks.
[8]
In 1392644 Ontario Inc. (o/a Connor Homes) v.
M.N.R., 2013 FCA 85, the Federal Court of Appeal considered the question of
the weight to be afforded to the parties’ intention as to the nature of their
relationship in determining whether a contract of service or a contract for
services existed. The Court concluded that, according to two earlier decisions
of that Court - Wolf v. The Queen, 2002 FCA 96, 2002 DTC 6853 and Royal
Winnipeg Ballet v. Canada (Minister of National Revenue), 2006 FCA 87 - a
two-step process of inquiry should be followed. First, the subjective intention
of each party must be ascertained. It must then be determined whether an objective
reality sustains the subjective intent of the parties.
Analysis
A.
Intention
[9]
Mr. Visentin, testified that the Appellant began
offering its program of instruction at Parkdale Elementary School in September
2011 and expanded to Yorkdale Elementary School in September 2013.
[10]
Mr. Visentin stated that when the program
started in 2011, instructors were engaged by the Appellant as employees. Mr.
Visentin said that this was done because the Appellant’s main benefactor and
the benefactor’s bookkeeper, who also kept the Appellant’s books, felt that the
instructors were employees. Upon being hired by the Appellant, instructors
received an engagement letter setting out what are referred to in the letter as
the “terms and conditions of their employment.” The instructors were asked to
sign and return the letter to indicate their acceptance of those terms and
conditions, and in all cases they did so.
[11]
Starting in September 2012, Mr. Visentin decided
that new instructors would work as independent contractors rather than
employees. However, he said the Appellant mistakenly continued to use the same
engagement letter template. Mr. Visentin also said that the instructors
originally hired by the Appellant before 2012 and who were re-engaged for
subsequent years continued to be treated by the Appellant as employees.
[12]
The only material difference in how the two
groups of instructors were treated appears to be with respect to source
deductions. Mr. Visentin said that instructors engaged for the first time in September
2012 or later did not have source deductions taken from their pay, while those
hired in 2011 did.
[13]
Mr. Visentin testified that the engagement
letter was modified in January 2014 to clarify that the instructors were
independent contractors. The new version was sent out to all of the instructors
for them to sign and return. Mr. Hidalgo, Ms. Chitty, Ms. Lee and Ms. Hambleton
apparently did so, but Ms. Jacot and Ms. Mycyk did not. The evidence showed
that Ms. Jacot and Ms. Mycyk wished to continue as employees of the Appellant.
[14]
The revised engagement letter modified certain
of the material terms of the agreement as follows:
•
The term “employment” was changed to
“engagement”
•
The Appellant no longer agreed to pay the
instructors vacation pay and for statutory holidays.
•
The Appellant no longer agreed to pay severance
pay and to provide notice of termination.
•
The instructors were now required to use their
own instruments.
•
The revised letter specifically set out that no
taxes or other source deductions would be taken and that the instructors would
be required to determine their obligations for HST.
•
The restriction on taking other work that might
conflict with the instructors’ duties was deleted.
[15]
Mr. Visentin said that none of the Instructors
apart from Ms. Jacot and Ms. Mycyk expressed any concerns to him about the
change to the engagement letter. He also said that none of the Instructors
hired from September 2012 or ever expressed concern about the fact that no
source deductions were made.
[16]
The Appellant maintains that in the case of each
of the Instructors except Ms. Mycyk, the Appellant and the Instructor had a
common intention that the work was to be carried out under a contract for
services.
[17]
In the case of Ms. Mycyk, the Appellant concedes
that the parties shared a common intention that she was to be an employee of
the Appellant.
[18]
In the case of Ms. Jacot, the Appellant
maintained that, while she did not sign the revised engagement letter, she had
accepted that source deductions were not being taken from her pay. With respect
to the remaining Instructors, the Appellant asks the Court to infer their
intention from their acceptance of the revised engagement letter and their
acceptance of the Appellant’s treatment of source deductions.
Analysis
[19]
With respect to Ms. Jacot, I am unable to
conclude that she intended to perform her duties for the Appellant under a
contract for services. The evidence shows that she did not sign the revised
engagement letter because she wanted to be an employee. Her expressed intention
and the engagement letter she signed when she began with the Appellant
overwhelmingly point to an intention to work as an employee.
[20]
I am also of the view that there is insufficient
evidence that the remaining Instructors, (Chitty, Hambleton, Lee and Hidalgo,)
intended to work as independent contractors for the Appellant prior to the
execution of the new engagement letters in January 2014. Their acquiescence to having
no source deductions made is not convincing evidence of their intention,
especially in light of the terms of the original engagement letter they signed,
which clearly sets out an employment relationship. Also, I do not accept that
the signing of the revised engagement letter in January 2014 amounted to a
retroactive acceptance of the status of independent contractor, especially
since the letter itself indicates that it was to become effective on the date
it was signed.
[21]
For the period after January 2014, I find that
Chitty, Hambleton, Lee and Hidalgo all intended to perform their work for the Appellant
as independent contractors, based on the execution of the revised engagement
letter. This evidence was not challenged by the Respondent.
B.
Objective reality of the parties’ conduct
[22]
I now turn to the second step of the two part
enquiry into the nature of the contract between the Appellant and the Instructors,-
namely, a determination of the objective reality of the parties’ conduct based
on a review of the relevant factors referred to by Major J. in Sagaz.
(1) Control
[23]
In Wolf, at paragraph 74, Desjardins J.A.
described the control test as follows:
The control test, as it is commonly referred
to, purports to examine who controls the work and how, when and where it is to
be done. In theory, if the worker has complete control over the performance of
his work once it has been assigned to him, this factor might qualify the worker
as an independent contractor. On the other hand, if the employer controls in
fact the performance of the work or has the power of controlling the way the
employee performs his duties (Gallant v. Canada (Department of National
Revenue) (F.C.A.), [1986] F.C.J. No. 330 (Q.L.), the worker will be considered
an employee.
[24]
The Court also went on to point out that, in
cases of highly skilled workers, the control test can be inadequate because the
skills and expertise of the worker may exceed those of the employer, and
therefore little supervision can be exercised over the manner in which the work
is performed.
[25]
The evidence showed that each Instructor had a
high level of expertise and specialized training in music and music
performance. They were engaged by the Appellant over the summer for the
following school year and in many instances instructors who had worked for the Appellant
during the previous school year were re-engaged and were required to sign a new
engagement letter.
[26]
Prior to the beginning of classes in September, instructors
were required to take part in one or two safety procedure orientation sessions
put on by the respective principal of the schools where the music program was
offered. Instructors were also required to obtain a criminal record check, paid
for by the Appellant, and were required to agree to abide by the terms of the Appellant’s
Crisis Management Policy and its Ethical Standards and Code of Conduct. The
contents of those policies were drawn mostly from Toronto School Board
policies, but Mr. Visentin said that about 20% of the material came from the Appellant,
itself.
[27]
From about mid-September to mid-June, instructors
were required to provide their services four days a week beginning at 3:45 p.m.
Classes were divided by instrument. They would pick up their students in the
school cafeteria after the students had received a snack, and take them to a
classroom for an hour of instruction. After this, some students would
participate in larger group ensembles and some would take part in small group
lessons, which the Instructors taught. Time spent setting up and cleaning up
was unpaid. Each of the Instructors covered by these
appeals provided 7 hours of instruction per week, except Ms. Mycyk, who worked
one extra hour.
[28]
While Mr. Visentin said that the Instructors did
not have to submit lesson plans, Ms. Mycyk said that she was required to submit
weekly lesson plans for a number of weeks at the beginning of two of the years during
which she taught.
[29]
The Appellant chose the repertoire of pieces to
be played at the quarterly performances, but otherwise did not set the
curriculum for the lessons given by the Instructors. Ms. Mycyk said that at the
end of her first year teaching with the Appellant it held a meeting for instructors
for the purpose of developing a common curriculum. Instructors were also
required to use “universal
terminology” in all classes, which Ms. Mycyk
said refers to a uniform and consistent use of musical terms.
[30]
Mr. Visentin said that there were ad hoc
meetings every week or two to relay information to the instructors, but that attendance
at such meetings was not compulsory. An email provided by Ms. Mycyk from the
teacher coordinator at her school, however, referred to weekly meetings that
all instructors were required to attend. That email was sent in September 2013.
The Appellant also put on one or two professional development workshops for instructors
each year, which workshop instructors were not required to attend.
[31]
Instructors were required to prepare evaluations
of their students, which were reviewed by Mr. Visentin before being given to
parents, and instructors themselves were subject to informal evaluations and
random classroom visits by the teacher-coordinator. Checks would be conducted
to follow-up on any areas that required improvement.
[32]
If an instructor encountered any difficulties
disciplining a student, he or she was expected to contact the teacher-coordinator,
who would then provide guidance and assistance. If the problem escalated, Mr.
Visentin would be advised and might become involved. Instructors had
walkie-talkies, supplied either by the Appellant or by the Toronto School Board,
for security purposes.
[33]
If an instructor was unable to teach a class, he
or she was required to contact the centre coordinator, who would arrange for
someone to fill in. In most cases, the replacements were paid by the Appellant,
but apparently Mr. Hidalgo paid them himself from what he received from the Appellant.
Mr. Visentin said that the Appellant tried to deal with requests for time off
in a cooperative manner and that no request was ever refused. He also said,
though, that the Appellant had an expectation that the Instructors would form a
commitment to their students and that the teaching schedule did not leave much
room for flexibility.
[34]
In this case, counsel for the Appellant asserted
that the Appellant exercised control over the Instructors only to the extent
necessary to achieve its objectives, which were to put on four performances by
the students during the school year and to maintain the safety of and care for
the children who participated in the program. He said that the Instructors were
not told how to teach their classes, that there was minimal evaluation of the
work done, that the Instructors were not restricted in what other work they
could do and that there were no negative consequences if they were unable to
teach on a particular day. Finally, the Appellant submitted that the Instructors
are highly skilled professionals who required little or no direction in how
they performed their duties.
[35]
In my view, the evidence on the question of
control favours the view that the Instructors were engaged under contracts of
service and that the degree of control exercised by the Appellant, or which it
had the right to exercise over the Instructors, was more consistent with an
employment relationship. The Appellant’s ability to control the Instructors
appears to me to be a function of the nature of the Appellant’s program, which
put the Instructors in frequent contact with vulnerable elementary school
students.
[36]
The Code of Conduct and other policies that the Instructors
were required to follow were a form of control over the Instructors’ performance,
as were the performance reviews and class spot checks. While the reviews and
checks may not have been frequent, they are an illustration of the right the Appellant
retained to monitor performance. The same can also be said of lesson plan
reviews and staff meetings. I accept Ms. Mycyk’s testimony that she felt that
at least some of the meetings were obligatory. This is borne out by the email
she produced from her teacher-coordinator. I also accept that she was required
to submit lesson plans, although the Appellant’s practice in this regard was
not consistent.
[37]
The finding that the Appellant retained the
right to supervise and control the Instructors’ work performance is also
supported by the terms of the engagement letter, as it read both before and
after January 2014. In particular, the Appendix A to the letter lists the
duties of the Instructors, as follows:
APPENDIX A – GENERAL DESCRIPTION OF DUTIES
Your duties will be those determined by the
Academy from time to time and may include:
(a) To be “a (Insert instrument)
Teacher” for the Academy Toronto program in Toronto, Ontario, teaching
beginner, intermediate and senior level children, as required from time to
time.
(b) To prepare, in consultation with
the program’s Artistic Director and Coordinator, lesson plans and teaching
schedules that deliver the core elements of the offered program.
(c) To demonstrate/play musical
examples as required.
(d) To follow established policies and
procedures, including policies and procedures with respect to issues as abuse,
harassment, bullying, and health and safety.
(e) To report each week and submit
total weekly hours worked to the Teaching Coordinator or Executive Director.
(f) Generally, to mentor and care for
children who may be vulnerable or at-risk.
Your non-teaching duties may include
assisting in public relations functions to increase the recognition and
appreciation of the Academy. These duties may include appearances as a
performer in both solo and ensemble capacities.
[38]
This description of duties is indicative of an
ongoing level of supervision and control that is more consistent with a
contract of service than that of an independent contract relationship.
[39]
While the Appellant’s counsel is correct in
pointing out that the Instructors were highly trained in their field, this
factor was also present in two similar cases involving music instructors whom
the Court determined to be employees: Lippert Music Centre Inc. v. M.N.R.,
2014 TCC 170, and Menoudakis v. M.N.R., 2015 TCC 248. The level of
expertise of a worker is only one factor to be considered in assessing the
level of control retained by the party for whom the work is performed.
(2) Who
provided the equipment?
[40]
In Lippert , the Court stated, at paragraph
23, that in a case of this kind, the test “is not whether the Workers supplied the tools necessary to operate a
music school business but rather whether they supplied the tools necessary to
operate a business of supplying music teachings services to a school.”
[41]
In this case, up to January 14, 2014 the
Appellant made instruments available for the use of the Instructors, but some
of the Instructors chose to use their own. The Appellant also provided the
sheet music that was used. As well, Mr. Visentin said that the Appellant
encouraged Instructors to use games and craft activities as part of their
teaching, and that the Appellant offered to reimburse the Instructors for any
materials that were used.
[42]
While the Appellant’s counsel submitted that the
Instructors’ knowledge of music was a tool that should be taken into account in
applying this test, and that this was the most important tool they used, I do
not believe that such knowledge is property of the kind contemplated by this
test.
[43]
In summary, few tools were used by the Instructors
in the course of their work. Given that for the majority of the periods under
review the Appellant and the Instructors both provided musical instruments used
by the Instructors, this test is inconclusive as to whether the Instructors
were employees or independent contractors.
(3) Chance
of profit and degree of risk taken
[44]
The Instructors were paid a fixed amount of $50
per hour of instruction. The only opportunity they had to increase their
earnings was by working more hours. Therefore, they did not have the chance of
making a profit in the way that is normally the case for an independent contractor
(see: City Water International Inc. v. M.N.R 2006 FCA 350 at para 24).
[45]
Nor did the Instructors have any risk of loss.
They were not required to incur any material expenses in the course of
providing instruction. Of note as well, the Appellant had insurance that
covered the Instructors, and the cost of such insurance was borne by the
Appellant.
[46]
These factors also support the position that the
Instructors were employees.
(4) Other
factors
[47]
Other relevant factors are: whether the
Instructors hired their own helpers and the degree of
responsibility for investment and management held by the Instructors. There was
no evidence to show that the Instructors ever hired assistants or that they had
any investment or management responsibilities with the Appellant. These factors
therefore also support the finding that the Instructors were employees of the
Appellant.
Determination
[48]
A weighing of all of the relevant factors leads
me to conclude that the Instructors were employed under contracts of service
during the relevant periods and did not perform the
services as persons in business on their own account.
[49]
To the extent that the Appellant and Ms. Chitty,
Ms. Hambleton, Ms. Lee and Mr. Hidalgo shared a common intention that they work
as independent contractors after January 2014, this intention is not consistent
with the objective reality of the terms and conditions of the work
relationship.
[50]
For all of these reasons, the appeals are dismissed.
Signed at Toronto,
Ontario this 8th day of September 2016.
“B.Paris”
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