Citation: 2014 TCC 133
Date: 20140502
Docket: 2013-1344(CPP)
2013-1345(EI)
BETWEEN:
766743 ONTARIO LIMITED
SOBEN MGMT. LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Bocock J.
I. Introduction
[1]
The Appellants appeal the
determination of the Minister that a worker, Ms. Balastros, a dental hygienist
(the “worker”), was engaged in insurable and pensionable employment with the
Appellants at their Dental Clinic, Unite Here Wellness and Dental Centre (the
“Dental Clinic”).
[2]
All of the dental hygienists at
the Dental Clinic were described as self-employed independent contractors. In
reassessing, the Minister characterized Ms. Balastros’ services as those
delivered under a contract of service rather than a contract for services or,
in more common language, as an employee and not that of an independent contractor.
This is the relevant distinction at law for the purpose of subsection 2(1) of
the Canada Pension Plan, S.C. 1996, c. 23 (the “CPP”) and
subsection 5(1) of the Employment Insurance Act, R.S.C. 1985 c. C-8 (the
“EI Act”). The Dental Clinic was operated solely to provide dental
hygienic services and related dental care to employees of various hotels in Toronto organized within the Unite Here Union, Local #75. Various dentists, dental
hygienists, denturists and related ancillary dental health care providers
worked at the Dental Clinic.
II. The legal
test and analysis required
[3]
The legal principles, tests and
authorities used over time to decipher this oft litigated question before this
Court are most recently encapsulated in two Federal Court of Appeal decisions.
[4]
TBT Personnel Services Inc. v.
MNR, 2011 FCA 256 at paragraphs 8 and
9 established that Wiebe Door Services Ltd. v. MNR, [1986] 2 C.T.C. 200,
as approved by the SCC in 671122 Ontario Ltd. v. Sagaz Industries
Canada Inc., 2001 SCC 59, reinforces the central question: whether the
worker performing the services does so in business on his/her own account?
While the level of control of the recipient of the services is relevant, other
factors are to be considered in relation to the worker: supervision and
control, provision of equipment, financial risk, responsibility and management;
and opportunity to profit in the performance, manipulation and the exploitation
of the services provided, among other factors. The Federal Court of Appeal
reconciles the common intention of the parties, held as a factor in Wolf v.
R, [2002] F.C.J. No. 375, and Royal Winnipeg Ballet v. MNR, 2006 FCA
48, by stating that subjective intention of the parties is evidence to be
considered, but the consideration of the factors in Wiebe Door remain
the proving ground for the express intention of the parties.
[5]
More recently and perhaps more
fulsomely, the Federal Court of Appeal in 1392644 Ontario Limited v. MNR, 2013
FCA 85 sub nom. Connor Homes, reviewed the developed “deceivingly
simple” test laid down in Sagaz as that of operating “one’s own business
for one’s own account” (paragraph 23). The fourfold test of Wiebe Door
is to be considered as regards the worker in its totality of the whole
operation (paragraph 28). This non-exhaustive list of factors adopted by Sagaz
(paragraph 29) is the prism through which one measures the intention of parties
relevant in Wolf and Royal Winnipeg Ballet. Once a common
intention is established, does the analysis of the factors established within Wiebe,
buttress or contradict such intention? (paragraph 33). While parties may
establish their intention through contract (express or implicit), a prima
facie, self serving narrative of what shall be does not make it so; the
analysis of the objective factors in Wiebe Door must reveal, replicate
and highlight the subjective intention of the parties (paragraph 36 and 37).
[6]
In summary, TBT Personnel v
Services Inc. and Connor Homes establish a two step process for the
determination of whether a worker is in fact a person in business on her own
account. Firstly, was the subjective intention of the parties established or reflected
in writing and/or by action? Secondly, does the objective reality, based upon
an analysis of the Wiebe Door factors, sustain or deny the subjective
intention of the parties.
III. Intention of the parties
[7]
Witnesses testifying at the
hearing regarding the intention of the parties included: the worker dental
hygienist, Ms. Balastros; the Dental Clinic director, Dr. Iperifanou; and,
another worker dental hygienist at the Dental Clinic, Kathy Peak.
[8]
Ms. Balastros commenced work for
the Dental Clinic for one day a week in 2006. This oral agreement paid the
worker $38.00 per hour. Eventually, she began working 2.5 days a week and by
2011 she was earning the sum of $39.58 per hour, at which level her rate of pay
has since remained. On January 31, 2011, the Appellants requested that all
workers execute a document entitled employment letter which contained specific
terms (the “Employment Letter”).
[9]
After executing the written
agreement, Ms. Balalstros’ salary did not increase; she, like all other workers
at the Dental Clinic, was paid $500 for signing the agreement. At the same
time, a written job description was provided encapsulating almost verbatim the applicable
professional code of conduct and ethics established by the College of Dental
Hygienists of Ontario (“CDHO”).
[10]
Within the January 2011 agreement
were certain relevant provisions:
i)
confirmation throughout of the
status of “independent contractor” and not that of “employee”;
ii)
the right of the Appellants to
change working hours in their sole discretion;
iii)
the title of the document was that
of “Employment Letter for Hygienists”;
iv)
execution of the agreement was
mandatory for continued services:
v)
the establishment of a written
”job” description which may be unilaterally amended from time to time by the
Appellants;
vi)
an express statement of no “pay”
when absent from work and, if more than one day’s absence, a doctor’s note was required;
vii)
upon termination of the agreement,
Employment Standards Act minimum termination pay provisions would apply;
viii)
a conflict of interest provision
governing “direct or indirect personal interests” of the worker and the
requirement of the worker to report such “personal interests” promptly to the
Dental Clinic; and,
ix)
the non-compliance of providing a
doctor’s note ((vi) above) would constitute a breach and cause for termination,
without notice or payment in lieu thereof.
[11]
While the balance of the analysis
concerning the express intention of the parties follows in the Analysis and
Decision, Section V of these reasons, the parties testified directly that they
intended the relationship to be that of independent contractor. The worker
viewed the relationship this way because she testified the Employment Letter
provided no other option. Even aside from the name of the document, the terms
of the Employment Letter per se were not unequivocal or determinative of
the worker’s legal relationship with the Appellants.
IV. Subjective intention measured against the verifiable objective
reality
[12]
The following is an analysis of
the factual findings in relation to the objective factors to be considered
under the authorities cited in Section II above.
a)
Supervision and Control
[13]
Factually there was no dispute
that the CDHO was the pre-eminent authority providing the overall regulatory
oversight for the worker. The worker’s livelihood depended upon compliance with
the CDHO’s code of conduct and professional standards. Occasional on-site interviews
by the CDHO provided for oversight which, when occurring, gained the focus of
the worker and Dental Clinic alike.
[14]
While patients might request the
worker’s services, the patients remained those of the Dental Clinic which chose
which hygienist a patient saw, where possible taking into account patient
requests. The attending dentist would see each patient at some point during a
dental hygienist session so that the dentist could conduct an oral examination.
This likely contributed to the nexus each patient had to the dentist rather
than to the worker.
[15]
Hours of work were scheduled by
the Dental Clinic upon advance notice from the worker. Extra work was to be
discussed as were any changes to the schedule. The worker was allowed to work
elsewhere outside of her scheduled hours. In the present case, the worker did so
as an employee. Extended holidays were permitted provided sufficient notice was
provided. The worker was encouraged to attend certain staff meetings held by
the Dental Clinic for infection control, major policy announcements and
changes.
[16]
The worker paid for her own
uniforms, course tuition fees for continuing education and licensing fees.
Remedial work arising from errors was scheduled by the Dental Clinic, carried
out by the worker, but at the usual rate of pay paid to the worker by the
Dental Clinic. If CDHO policies were not complied with, the worker would likely
be disciplined by CDHO and terminated by the Dental Clinic.
[17]
In terms of the worker’s daily
routine, the worker would utilize the Dental Clinic’s premises, computers,
charts, day sheets, attending staff dentist and front office reception staff in
order to deliver her entirely on-site provision of services. The worker
described her job as not “supervised,” but “interdependent” with those other
services provided at the Dental Clinic supporting her efforts.
b) Ownership Tools and Equipment
[18]
Initially, a favorite scaler or
two might be brought by the worker, but that practice was discontinued in order
to ensure consistent sterilization techniques. Otherwise, all tools and
equipment were supplied, maintained, and replaced by the Appellants. The
worker paid for her own licensing fees, insurance, continuing education and
uniforms. No rental or user fees were paid by the worker for the use of the
equipment and tools. There was some discrepancy in testimony as to whether the
worker’s hourly rate of pay was reduced by an amount representing a cost for
equipment overheads, but there was no clear or specific evidenced offered as to
the details of any such calculation. The costs of repair for damage to any equipment
were borne by the Appellants.
c) Chance of Profit
[19]
The worker had no capital
investment in the Dental Clinic, could not manipulate or exploit labour or
production costs in order to enhance her profit. The worker could, as always,
work more or less hours to increase her revenue. She had no business cards,
promotional materials, nor did she have a trade name, corporation, registered
business entity and/or business information number. There was no opportunity for
the worker to directly hire or sub-contract replacement workers at will. Such
replacements and payment for such replacements were undertaken directly by the
Dental Clinic.
d) Risk
of Loss and Liability
[20]
The Appellants suggested
professional liability related to negligence constituted a risk of loss for the
worker. In reality this also was an imposition by the CDHO, which required
mandatory malpractice insurance to ensure that personal impecuniosity did not
place patients at risk of non-collection for damages arising from the worker’s
negligence. Any dental hygienist in Ontario, whether employee or independent
contractor, would incur the same responsibility and require the same college
provided insurance. In fact, if there were such a choice, and an independent contractor
were free to decline such insurance, declining such mandatory insurance might be
evidence of risk of loss, but this was not the case. Moreover, the Court
suspects the Dental Clinic would strongly object to this freedom of choice and would
likely impose a mandatory insurance requirement of its own as a contractual
term.
V. Analysis and Decision
[21]
The analysis of the objective
factors, when coupled with the superimposed third party directives dictated by
the CDHO, dislodge the subjective intention of the parties which was already less
than clear from the ambiguous documentation. The Appellants own lawyer drafted
the Employment Letter, without input on the terms from the worker who saw no
opportunity for negotiation. The Employment Letter incorporated by reference
the CDHO code of conduct which was comprehensively instructive as to the duties
and the methods for discharging same. Moreover, the document was laced with
tailings of both a services contract and an employment agreement. It narrates
repeatedly the intention to establish a relationship of independent contractors,
each responsible for the payment of taxes and remittances. However it also
contains terms indicative of employment: its title of “Employment Letter”, a
unilateral right of the Appellants to change hours of work, a precondition of
execution of the document for the continuation of the relationship, the
requirement of notice of a particular worker’s absence from the worksite
without a right to sub-contract and the requirement of doctor’s certificates
after more than one day’s sickness.
[22]
At best, this somewhat hybrid
document expresses a muted versus an express intention of independent contractor
which must be measured against the objective factors. Nonetheless, the
subjective intention, even if opaque, gravitates slightly more favourably towards
that of independent contractor.
[23]
The ensuing analysis of the Wiebe
Door factors is neither a mathematical exercise nor a checking of boxes; an
assessment of the factors is to be based upon the totality of the entire
organized arrangement: Sagaz at paragraph 48.
[24]
Supervision and control, when not
interdicted by the overlay of the CDHO code of conduct and its oversight as a
mandatory regulatory college, leaves the Court with a situation where each
patient was also seen by a licenced dentist during each worker’s cleaning. The Dental
Clinic organized patients, bookings, replacements workers, staff meetings,
holidays, absences, operatories and the Dental Clinic marshalled the conduct of
and paid for remedial work.
[25]
Tools and equipment, apart from
some favored hand tools (themselves now forbidden), were uniformly and
consistently provided, maintained, cleaned and replaced by the Dental Clinic.
Whatever obfuscated charge-back fee there may have been for such tools and
equipment appears to have been accounted for more tangibly in the Dental Clinic’s
business model than by any focused and impactful adjustment to the worker’s
rate of pay.
[26]
Aside from increasing hours of
work or working elsewhere there were no opportunities for the worker to enhance
revenue or reduce costs by the manipulation and exploitation of capital, labour
and materials. The worker attended the Dental Clinic, worked the hours
scheduled and returned home. The substitution of sub-contracted labour by the
worker was forbidden. There were no other collateral or related endeavors in
combination with the service recipient (the Dental Clinic) demonstrating the worker’s
ownership, propriety of clients or provision of value added services. There
were no other indicia of a separate business operation: trade name, corporation
or sole proprietorship, rendered invoices, business identification numbers or
other recognizable business structures, customs or dealings.
[27]
Risk of loss did not exist.
Mandatory professional liability insurance is not evidence of such a risk in
this context. As stated earlier in these reasons, there was no capital, labour
or materials at risk by the worker. Such a business risk relates to the
obligation of an independent contractor to provide contracted services, even where
the negotiated revenue received for such services may not exceed by a
sufficient margin (or at all) the labour, capital and/or material costs of
production and delivery of the services. The costs were nominal and
commensurate with those of an employee and no someone in business. Where the costs
of such services provided are not comprised of such expenses of delivery and/or
production, objectively finding the existence of a distinct business becomes
more difficult. Save the costs of work uniforms, professional accreditation
renewal and transportation to the same workplace each day, all of which were fixed
costs borne by employee and independent contractor alike, there were no other
costs impacting or affecting a potential profit or a correlative risk of loss
for the worker.
[28]
Based upon the entire arrangement
as revealed by analysis of the objective factors, there is only one business
present here: the Dental Clinic. The final three factors analyzed above clearly
draw such a picture within that singular frame. The hierarchy of control and
supervision of the “services” may be ranked in priority: the highest level was primarily
through regulatory authority usurped by the CDHO; the next was secondarily exercised
by the Dental Clinic in the protection of its business; and the lowest level of
control was possessed by the worker in carrying out her scheduled, regular and
daily job as a regulated dental hygienist in the part-time service of the Dental
Clinic.
[29]
In conclusion, while the agreement
among the parties was somewhat equivocal as to subjective intention (at least
to the extent of the Employment Letter), the analysis of the Wiebe Door
factors was not; the factual objective reality reveals much greater indicia of employment
than that of an independent contractor in business on her own account.
[30]
For these reasons, the appeals are
dismissed.
Signed at Vancouver, British Columbia, this 2nd day
of May 2014.
“R.S. Bocock”
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