REASONS
FOR JUDGMENT
Jorré J.
[1]
The appellant appeals from determinations by the
Minister of National Revenue that Howard Fletcher, the worker, was in insurable
employment and in pensionable employment with the appellant within the meaning
of the Employment Insurance Act and the Canada Pension Plan
during the period from 1 January to 31 December 2010.
[2]
During the period, Chris Badour, the
appellant, operated a taxi business in Timmins and the worker drove one of the
appellant’s cabs.
[3]
The appellant, Robert Laporte and Rodney Badour,
the appellant’s brother, testified. Mr. Fletcher, the worker, was not at
the hearing. Three exhibits were filed.
The Employment Insurance
Appeal
[4]
I will start with the employment insurance
appeal because special provisions apply to taxi drivers. These provisions
create a “bright line” test that eliminates much of the uncertainty found in
other areas; however, these provisions have no application to the Canada
Pension Plan appeal.
The Law
[5]
Subsections 5(1) and (4) of the Act say,
in part, that:
5(1)
. . . insurable employment is
(a) employment . . . under
any express or implied contract of service . . ., written or oral,
whether the earnings of the employed person are received from the employer or
some other person and whether the earnings are calculated by time or by the
piece . . ., or otherwise;
. . .
(d) employment included by
regulations made under subsection (4) or (5); and
. . .
(4) The Commission
may, with the approval of the Governor in Council, make regulations for
including in insurable employment
. . .
(c) employment that is not
employment under a contract of service if . . .
[6]
Paragraph 6(e) of the Employment
Insurance Regulations (SOR/96‑332) is such a regulation and says:
6 Employment in any
of the following employments . . . is included in insurable
employment:
(e) employment
of a person as a driver of a taxi, . . ., where the person is not the
owner of more than 50 per cent of the vehicle or the owner or operator of the
business . . .
[7]
It is clear that the word “employment” used by
itself in section 5 of the Act and section 6 of the Regulations
is not limited to employment under a contract of service but is used in a wider
sense.
[8]
As a result of this regulation, employment of a
person as a driver of a taxi is always insurable employment unless:
(a)
the person owns more than 50% of the taxi
vehicle,
(b)
the person owns the business or
(c)
the person operates the business.
Facts and Analysis — Employment
Insurance
[9]
On the evidence before me, it is quite clear
that the appellant had the necessary licence for the taxi vehicle, equipped the
car with the necessary equipment, insured the car, paid for the fuel and
arranged for dispatching services for the vehicle; the worker did not. The
worker was engaged to drive the taxi during one of the two available 12‑hour
shifts, had no ownership interest in the taxi or the business and was not the
operator of the business.
[10]
Given the regulation and these facts, it
necessarily follows that the worker was in insurable employment for the
purposes of the Act. It is not necessary to determine whether or not the
worker was employed under a contract of service under the general law of Ontario.
[11]
The employment insurance appeal must be
dismissed.
The Canada Pension Plan Appeal
The Law
[12]
For the purpose of the Canada Pension Plan,
there is nothing like paragraph 6(e) of the Regulations. One must
consider the usual factors to determine whether or not the worker was employed
under a contract of service under the general law of Ontario.
[13]
The Canada Pension Plan provides in
paragraph 6(1)(a) that:
6(1) Pensionable
employment is
(a) employment in Canada that is not excepted employment;
[14]
The Canada Pension Plan also defines “employment” in section 2 as follows:
“employment” means
the state of being employed under an express or implied contract of service or
apprenticeship, and includes the tenure of an office;
[15]
There have been many cases on the question
whether an individual is an independent contractor or an employee. In 671122
Ontario Ltd. v. Sagaz Industries Canada Inc., the Supreme Court of Canada
reviewed the law.
Paragraphs 47 and 48 summarize the analysis to be undertaken:
47 Although there
is no universal test to determine whether a person is an employee or an
independent contractor, I agree with MacGuigan J.A. that a persuasive approach
to the issue is that taken by Cooke J. in Market Investigations, supra.
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. 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.
48 It bears
repeating that the above factors constitute a non-exhaustive list, and there is
no set formula as to their application. The relative weight of each will depend
on the particular facts and circumstances of the case.
[16]
More recently, in 1392644 Ontario Inc.
(Connor Homes) v. Canada (National Revenue), Justice Mainville of the
Federal Court of Appeal reviewed the test for determining whether an individual
is an employee or an independent contractor.
He summarizes the analysis as follows:
36 However,
properly understood, the approach set out in Royal Winnipeg Ballet
simply emphasises the well-know principle that persons are entitled to organize
their affairs and relationships as they best deem fit. The relationship of
parties who enter into a contract is generally governed by that contract. Thus
the parties may set out in a contract their respective duties and
responsibilities, the financial terms of the services provided, and a large
variety of other matters governing their relationship. However, the legal
effect that results from that relationship, i.e. the legal effect of the
contract, as creating an employer-employee or an independent contactor
relationship, is not a matter which the parties can simply stipulate in the
contract. In other words, it is insufficient to simply state in a contract that
the services are provided as an independent contractor to make it so.
37 Because the
employee-employer relationship has important and far reaching legal and
practical ramifications extending to tort law (vicarious liability), to social
programs (eligibility and financial contributions thereto), to labour relations
(union status) and to taxation (GST registration and status under the Income
Tax Act), etc., the determination of whether a particular relationship is
one of employee or of independent contractor cannot simply be left to be
decided at the sole subjective discretion of the parties. Consequently, the
legal status of independent contractor or of employee is not determined solely on
the basis of the parties’ declaration as to their intent. That determination
must also be grounded in a verifiable objective reality.
38 Consequently, Wolf
and Royal Winnipeg Ballet set out a two step process of inquiry that is
used to assist in addressing the central question, as established in Sagaz
and Wiebe Door, which is to determine whether the individual is
performing or not the services as his own business on his own account.
39 Under the first
step, the subjective intent of each party to the relationship must be
ascertained. This can be determined either by the written contractual
relationship the parties have entered into or by the actual behaviour of each
party, such as invoices for services rendered, registration for GST purposes
and income tax filings as an independent contractor.
40 The second step
is to ascertain whether an objective reality sustains the subjective intent of
the parties. As noted by Sharlow J.A. in TBT Personnel Services Inc. v.
Canada, 2011 FCA 256, 422 N.R. 366 at para. 9, “it is also necessary to
consider the Wiebe Door factors to determine whether the facts are
consistent with the parties’ expressed intention.” In other words, the
subjective intent of the parties cannot trump the reality of the relationship
as ascertained through objective facts. In this second step, the parties’
intent as well as the terms of the contract may also be taken into account
since they color the relationship. As noted in Royal Winnipeg Ballet at
para. 64, the relevant factors must be considered “in the light of” the
parties’ intent. However, that being stated, the second step is an analysis of
the pertinent facts for the purpose of determining whether the test set out in Wiebe
Door and Sagaz has been in fact met, i.e. whether the legal effect
of the relationship the parties have established is one of independent
contractor or of employer-employee.
41 The central
question at issue remains whether the person who has been engaged to perform
the services is, in actual fact, performing them as a person in business on his
own account. As stated in both Wiebe Door and Sagaz, in making
this determination no particular factor is dominant and there is no set
formula. The factors to consider will thus vary with the circumstances.
Nevertheless, the specific factors discussed in Wiebe Door and Sagaz
will usually be relevant, such as the level of control over the worker’s
activities, whether the worker provides his own equipment, hires his helpers,
manages and assumes financial risks, and has an opportunity of profit in the
performance of his tasks.
Facts and Analysis — Canada Pension Plan
[17]
The arrangement between the appellant and the
worker was quite straightforward.
[18]
There was no written contract of employment.
[19]
The appellant provided a properly equipped,
insured and licensed taxi vehicle and arranged for dispatching services.
[20]
In return for driving the vehicle, the worker
kept 40% of gross revenues, but paid no expenses. The appellant paid all the
expenses out of the 60% of gross revenues that went to him.
Intention
[21]
The appellant, his brother Rodney and
Mr. Laporte, who was also a driver for the appellant, all testified that
the intention was that the drivers were to be independent contractors.
[22]
The worker was not present to testify to his
understanding. The reply to the notice of appeal states that the Minister
assumed that the worker considered himself to be an employee.
[23]
Based on the testimony before me, I am satisfied
that the worker was aware of the fact that the appellant intended a
self-employment arrangement.
[24]
The Minister also included in the assumptions
that the worker reported what he received from the appellant as “other employment income” on his 2010 income tax return
and that the worker did not claim any expenses in his return. There was no
evidence to the contrary.
[25]
While the worker’s return is consistent with him
considering himself as an employee insofar as the income was reported as “other employment income”, I would note that the fact of
not claiming any expenses, in itself, does not show much since, on the evidence,
he had no expenses to claim.
[26]
While I am satisfied of the appellant’s
intention to have a self-employment arrangement, the evidence does not allow me
to conclude that there was a common intention to that effect. I now turn to the
objective reality of the contract.
Ownership of the Tools
[27]
It is quite clear that all the relevant tools
were provided by the appellant. This factor points in the direction of
employment.
Chance of Profit
[28]
Clearly the worker could earn more by working
more and by making astute choices in the course of taking calls, but this would
be equally true of any employee driver except one who is paid a flat hourly
salary. This points mildly towards self‑employment.
Risk of Loss
[29]
As a practical matter the set‑up was such
that the worker had no possibility of loss. Since he did not pay for fuel, or
any other expense, even if he drove for a day without a client he would not
have a loss; he would simply have no net income for a day. This is consistent
with employment under a contract of service.
Control
[30]
It is useful to bear in mind that the key with
respect to control is whether the payer has the power to control the worker; it
is not whether control is actually exercised on a day‑to‑day basis.
Indeed, as Justice Hershfield said in Follwell v. The Queen:
42 . . .
That an employer chooses not to exercise control by virtue of trust and
confidence in an employee, or in a third party to whom control has been
delegated, does not mean that the control factor favours a finding that the
contract is one for services. . . .
[31]
The appellant argues that the worker was free to
work or not and set his own hours and that the worker did in fact choose his
hours and would suddenly stop working without telling the appellant.
[32]
However, the evidence is not quite that
straightforward.
[33]
In the fall of 2009 the appellant had just bought
his third taxi vehicle and, since no one was driving the car yet, both the day
shift and the night shift were available with the result that the worker, who
started driving the taxi at that time, was free to choose the shift he wanted.
[34]
Certainly the worker was free to choose his own
hours within the shift but he could not drive outside his shift; the taxi
vehicle needed to be available to the driver who had the other shift.
[35]
The driver was also free to not drive on any
given day and, indeed, according to the evidence there were many such days
after the day when the driver had started taking care of his 14‑year old
daughter who had previously been living in Sudbury.
[36]
The appellant had arranged for dispatching
services by another company, Beal Taxi, which imposed quite a few rules on
taxis which it dispatched. The worker had to conform to those rules. For
example, if the worker took a call which had been given to a different cab,
then the dispatching company would require the worker to pay the fare to the
driver who should have received the call and both the worker and the vehicle
would be “parked” for the rest of the day by the dispatching service.
[37]
At one point there were certain customer
complaints to the dispatching company that the worker was preaching to the
clients. The dispatching company spoke to the appellant and asked the appellant
to tell the worker that it was not acceptable. The appellant spoke to the
worker.
[38]
While the freedom to work or not and to choose
how long to work is more consistent with self-employment, on balance, there is
control by the appellant of the worker. This is clear from:
(a)
the fact that the worker cannot work during the
other shift,
(b)
the fact that part of the arrangement is the
dispatching services arranged by the appellant which compel the worker to
comply with the rules imposed by the dispatching service.
Other Considerations
[39]
A limited number of clients could charge their
cab fare and would provide some sort of voucher for the ride. When this
happened the worker would be paid his 40% share as if the voucher was a cash
receipt and the appellant was the one who had to wait until the charge was
actually paid to the customer.
[40]
There was no evidence that the worker hired
anyone to replace him.
[41]
Both of these considerations point away from
self‑employment.
Conclusion on the Canada Pension Plan Appeal
[42]
When one considers the totality of these factors,
this is an arrangement where the worker works pursuant to a contract of service
with the result that the employment is pensionable employment.
[43]
This would be the result even if there were a
common intention that the worker was to be self-employed.
General Conclusion
[44]
As a result, both appeals will be dismissed.
Signed at Montreal, Quebec, this 25th
day of September 2014.
“Gaston Jorré”
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