REASONS FOR JUDGMENT
C. Miller J.
[1]
These Employment Insurance and Canada
Pension Plan cases concern the status of the working relationship between
the Appellant, Model Roofing Company Inc. (“Model
Roofing”) and the Intervenor, Mr. Zeru. Mr. Zeru and the Respondent
maintain that Mr. Zeru was employed by Model Roofing as an employee, while Mr.
Desta, the owner of Model Roofing, maintains Mr. Zeru was an independent
contractor. Regrettably, the Appellant and the Invervenor have had a falling
out, as Mr. Zeru has sued Model Roofing for close to $20,000. The Parties
seemed more concerned in addressing this aspect of their dispute than putting
their minds to the real issue before me, being the true nature of Mr. Zeru’s
work with Model Roofing for several months in 2012.
[2]
There were serious issues of credibility in this
case; a prime example was the introduction of invoices which both Mr. Zeru and
Mr. Desta denied preparing. I am satisfied from a review of the invoices that
Mr. Zeru is lying when he claims he did not prepare the invoices and that in
fact he did prepare those invoices. I reached this conclusion for two reasons.
First, the invoices purportedly from Mr. Zeru to Model Roofing, numbered
716-721, indicate that payments were made by both cheque and cash, as well as
indicating amounts of tax that were deducted. Mr. Desta’s position, on behalf
of Model Roofing, is that Model Roofing never paid by cash and that it never
deducted any tax. It makes no sense that he would prepare this type of invoice
for Mr. Zeru to submit to Model Roofing. Second, three invoices numbered 722,
726, and 733, from Mr. Zeru to another roofing company, Cameron Roofing,
are numbered subsequent to the invoices to Model Roofing, notwithstanding they
are for periods of time (February to April 2012) which are prior to the time
periods of the invoices to Model Roofing, being May to October 2012. No, Mr.
Zeru has been caught in a web of deception. Given my finding with respect to
his lack of credibility, I do not accept any of his testimony. I prefer that of
Mr. Desta. Unfortunately, there was something of a language barrier and, as
this was an informal procedure case, I allowed Mr. Desta’s wife to translate
where necessary. Both the Respondent’s counsel and Mr. Zeru agreed to allow
Mr. Desta’s wife to translate.
[3]
The Respondent’s counsel took Mr. Desta through all
the Minister of National Revenue (the “Minister”)
assumptions, which I will repeat, indicating where Mr. Desta’s testimony
differed.
a)
The Appelant’s sole shareholder was Hagos
Desta;
b)
Hagos Desta controlled the day-to-day
operations of the Appellant’s business;
c)
The Appellant operated a roofing business
in Calgary, Alberta;
d)
The Appellant’s customers were primarily
residential;
e)
The Appellant’s business did not have set
hours of operation;
f)
The Worker was not related to the
Appellant;
g)
The Worker was hired by the Appellant
under a verbal agreement to work as a roofer;
h)
The Worker was an experienced roofer at
the time he was hired by the Appellant;
i)
The Worker’s duties included the
following:
i) Removing and disposing of old shingles;
ii) Cleaning roof surfaces;
iii) Hauling materials onto roofs; and
iv) Installing new shingles.
j)
The Worker was hired for an indefinite
period of time. Mr. Desta clarified that the work
was on a job-by-job basis;
k)
The Worker worked for the Appellant on a
continuous basis from May 1, 2012 to October 15, 2012. No, according to Mr. Desta, there were two gaps during this period
when the Worker worked elsewhere, for example, with Cameron Roofing;
l)
The Worker was not a member of a trade
union;
m)
The Appellant assigned the work to the
Worker;
n)
The Appellant set the timeframes for
completion of the work. No, according to Mr. Desta,
there was no time set as such: it was just a matter of getting the work done;
o)
The Worker worked as part of a crew or
alone, as determined by the Appellant;
p)
The Appellant provided the Worker with
rides to and from the jobsite on a daily basis;
q)
The Worker was not allowed to decide
which jobs to work on. Again, Mr. Desta clarified
that he simply gave Mr. Zeru a job and he did it. Mr. Zeru could refuse a
job if he so wanted.
r)
The Appellant set the Worker’s schedule. Again, Mr. Desta clarified that it was on a job-by-job basis. He
did acknowledge, however, that he gave Mr. Zeru a ride to work when Mr. Zeru
did work for Model Roofing;
s)
The Appellant determined the Worker’s
hours of work. No, according to Mr. Desta, it was
Mr. Zeru’s choice what hours he worked. It was up to the owner of the property
being roofed when the roofers could start, and they would simply work until the
job was done;
t)
Both the Appellant and the Worker tracked
the Worker’s hours of work. No, according to Mr.
Desta, they just worked until the job was done;
u)
The Worker recorded his daily hours on a
calendar. I do not accept Mr. Zeru’s testimony
in this regard that he did record his daily hours on a calendar;
v)
The Appellant determined the method and
frequency of the Worker’s remuneration. No,
according to Mr. Desta, Mr. Zeru would be paid when he provided an invoice;
w)
The Worker performed his duties at the
Appellant’s clients’ premises;
x)
The Appellant supervised the Worker in
the performance of his duties. No, Mr. Zeru was not
supervised during the day;
y)
The Appellant addressed customer concerns
and inspected work completed by the Worker;
z)
The Appellant provided the tools,
equipment and supplies required by the Worker to perform his duties, at no cost
to the Worker.
aa)
The tools and equipment provided by the
Appellant included a nail gun, hammer, shovel, garbage bins and a helmet. Mr. Desta testified that some of this equipment came from the main
contractor;
bb)
The Worker provided his own work gloves
and a knife;
cc)
The Appellant was responsible for the
maintenance and repairs of the tools and equipment it provided to the Worker;
dd)
The Worker was required to provide his
services personally;
ee)
The Worker could not hire helpers or
assistants. Mr. Desta indicated that Mr. Zeru could
in fact hire helpers or assistants;
ff)
The Worker could not subcontract his work
to another party. According to Mr. Desta, Mr. Zeru
could subcontract his work;
gg)
The Appellant was responsible for hiring
and remunerating replacement workers. According to
Mr. Desta, if Mr. Zeru did not show up for work, Mr. Desta simply did the work;
hh)
The Worker was paid on an hourly basis
for the services provided. No, according to Mr.
Desta, Mr. Zeru was paid according to the number of bundles of tiles he roofed;
ii)
The Worker’s rate of pay was $17.00 per
hour. No, it was not.
jj)
The Appellant determined the Worker’s pay
rate. Yes, Mr. Desta determined the Worker’s pay
but it was not on an hourly basis but on a basis of the number of bundles of
tiles;
kk)
The Worker submitted invoices to the
Appellant;
ll)
The Appellant withheld income tax from
the Worker’s earnings. No, Mr. Desta testified that
he did not do that;
mm) The Worker was paid in cash and by cheque. No, according to Mr. Desta, he was paid by cheque only;
nn)
The Worker could turn down work offered
by the Appellant;
oo)
The Worker could work for competitors of
the Appellant;
pp)
The Worker did not incur any expenses in
performing his services for the Appellant. Mr. Desta
clarified that Mr. Zeru had to pay for his knife and gloves;
qq)
The Appellant provided liability
insurance for the Worker. According to Mr. Desta,
Model Roofing did not provide such insurance.
rr)
The Appellant guaranteed the quality of
the work;
ss)
The Worker was not entitled to any
bonuses or profit-sharing;
tt)
The Appellant’s intention was that the
Worker performed his services as a sub-contractor;
uu)
The Worker’s intention was that he
performed his services as an employee of the Appellant. I am not satisfied that was in fact Mr. Zeru’s intention at
the outset. I will have more to say on that later;
vv)
The Worker did not have a trade name or
business licence;
ww) The Worker did not advertise his services;
xx)
The Worker did not have business cards;
yy)
The Worker was registered for the
GST/HST, effective May 1, 2012;
zz)
The Worker did not charge the Appellant
GST/HST. According to Mr. Desta, Mr. Zeru was
in fact charged GST and he did pay it.
[4]
As I have concluded that Mr. Zeru’s testimony is
unreliable, I rely entirely on Mr. Desta’s explanation of the facts surrounding
Mr. Zeru’s work with Model Roofing.
[5]
Since the Federal Court of Appeal in 1392644
Ontario Inc. o/a Connor Homes v The Minister of National Revenue the courts have
undertaken the two‑step approach to the employment versus independent
contractor analysis. First, determine if there is a mutual intention between
the parties to the agreement, and, if so, review the usual factors (control,
ownership of tools, chance of profit/risk of loss and any other relevant
factors) in the context of this mutual intention. Clearly, Mr. Desta, on
behalf of the Appellant, intended there to be an independent contractor
arrangement. He charged GST, did not make source deductions and simply had no
intention that Mr. Zeru was to be an employee. Mr. Zeru, at trial, claims he
was an employee. He suggested that obtaining a GST number, shortly before he
started with Model Roofing, was for another business which he never actually
undertook. I do not believe him. He claims he never prepared invoices. I do
not believe him. Notwithstanding his position at trial, an objective view of
his behaviour in 2012 suggests to me he did indeed intend to have independent
contractor status.
[6]
So, viewing the working relationship through the
mutual intention of independent contractor status, can the traditional factors
support such status? I believe they can.
CONTROL
[7]
As the Supreme Court of Canada indicated in the
case of 671122 Ontario Ltd. v Sagaz Industries Canada Inc., control is always a
significant factor, yet here, where the worker, Mr. Zeru, is an experienced
roofer, it is not particularly helpful to look at the most common control
factor being daily supervision of how the work is performed. Mr. Zeru did not
require such supervision and indeed there was none. The Crown therefore points
to several other factors that suggest control by the Appellant:
1. Inspection of the work at the conclusion of the job. I do not see
why such inspection anymore reflects employment than independent contractor. I would
assume a main contractor would inspect the work regardless of who actually
performed it.
2. The Appellant was responsible to the client for the quality of the
work.
3. The Appellant set the schedule. With respect, my understanding is
that the Appellant would get a job and the schedule would be set more by the
client and the nature of the work. According to Mr. Desta, the workers would
simply work on the job until concluded.
4. The rate of pay was determined by the Appellant. While Mr. Desta did
acknowledge he set the price per bundle there was no detailed account of how
this was done or whether it was an industry norm for example.
[8]
I accept that from a review of these factors
alone there is some slight favouring of an employment arrangement, but only
slight. But then I consider the following factors:
1. Mr. Zeru could refuse a job.
2. Mr. Zeru could work for competitors and, in fact, he did work for a
competitor.
3. Mr. Zeru was not required to track his hours.
4. Mr. Zeru could hire helpers or sub-contractors although he did not
do that.
[9]
I find these factors more than offset the
factors relied upon by the Respondent and, viewed through the prism of a mutual
understanding of independent contractor status, firmly support that independent
contractor status.
TOOLS
[10]
Mr. Zeru provided gloves and a knife while Model
Roofing provided directly, or through the main contractor, the nail gun and
remaining necessary roofer tools. The Crown acknowledged that in the industry,
roofer tools are often provided by the main contractor. This factor does
however favour employment.
CHANCE OF PROFIT
[11]
Given payment was by the bundle of tiles as
opposed to an hourly wage, this is more compatible with business venture and
the ability of someone in business to increase profit. It points to an
independent contractor arrangement rather than employment. Further, Mr. Zeru
could increase profits by working for competitors, which he did.
RISK OF LOSS
[12]
While Mr. Zeru had little expenses, he could
choose simply not to work.
[13]
The financial factors taken together are neutral
though, viewed through the lens of an independent contractor understanding,
they do not fly in the face of independent contractor status.
[14]
On balance, I conclude Mr. Zeru was not an
employee of Model Roofing and, therefore, the Appeals are allowed and the
Minister’s decision is vacated on the basis that Mr. Zeru was not in insurable
or pensionable employment.
Signed at Ottawa,
Canada, this 13th day of April 2015.
“Campbell J. Miller”
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