Citation: 2013 TCC 317
Date: 20131004
Docket: 2012-5126(CPP)
BETWEEN:
2177936 ONTARIO LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
C. Miller J.
[1]
2177936 Ontario Ltd.
("217 Co.") appeals a decision of the Minister of National Revenue
(the "Minister") dated September 27, 2012 that
Mr. Terry Dickey was an employee of 217 Co., employed as a taxi
driver for the period January 1, 2011 to October 1, 2011. 217 Co. appealed
under both the Employment Insurance Act and the Canada Pension Plan
("CPP"), but at the commencement of the trial, it withdrew its
appeal under the Employment Insurance Act. The sole issue therefore is
whether Mr. Dickey was in pensionable employment: was he an employee or an
independent contractor? There have been many taxi driver cases in this Court
and, not surprisingly, given how fact-specific this issue is, the cases go both
ways. A careful review of the facts is critical.
Facts
[2]
Mr. Baldev Gill is the
owner of 217 Co. Although he lives in Winnipeg, as an electronic technician, he
had occasion to work in Kenora, Ontario in setting up taxi meters. This
opportunity resulted in him acquiring a taxi from Mr. Greene in 2008. At that
time, Mr. Greene had an arrangement with Mr. Dickey to drive the taxi. This was
on a split-fare arrangement. There was some dispute whether it was 45–55 or 50–50
split. It is immaterial.
[3]
Mr. Gill presumed that
he would continue the same arrangement with Mr. Dickey that Mr. Dickey had
with Mr. Greene. 217 Co. was responsible for insurance and maintenance of the
vehicle. Indeed, Mr. Gill personally did the repairs on the vehicle, either
bringing it to Winnipeg or going himself to Kenora to do the repairs. 217 Co.
also acquired the necessary broker licence, while Mr. Dickey acquired the
necessary taxi driver’s licence from the Town of Kenora. Under the 50–50
arrangement, 217 Co. and Mr. Dickey shared the cost of fuel.
[4]
217 Co. acquired three
more taxis between 2008 and 2011. Mr. Gill had Mr. Dickey hire drivers for
the additional vehicles. Until 2011, 217 Co. paid Mr. Dickey $100 per
month per car for managing the taxis. Apart from hiring drivers, it was not
clear to me what else Mr. Dickey did in that regard. In 2011, due to health
reasons, Mr. Dickey stopped providing this service to 217 Co. and simply
remained a driver. Kathy Hall, who also owned taxis in Kenora that were handled
by the same dispatcher, COOT Taxi (1999) Ltd. ("COOT"), picked up
handling this service for 217 Co.
[5]
Mr. Gill had no written
agreement with Mr. Dickey. Mr. Gill would only get to Kenora occasionally,
mainly when a vehicle needed repairs. Prior to 2011, Mr. Dickey would go to Winnipeg on a monthly basis to deliver 217 Co.’s share of the fares to Mr. Gill, along
with a summary calculating the trips, fares and appropriate split. This was
supported by daily cash sheets, a form that Mr. Dickey created that would
list the day’s fares, the totals and the appropriate split. He would complete
this form manually during the day but computerize it in the evening.
[6]
In June 2011, there was
a change in the 50–50 arrangement. Mr. Gill testified this came about as Mr.
Dickey had complained that drivers were not fully filling the tank at the end
of a shift. This was resolved by changing the arrangement so that 217 Co. got 60% of the fare but would be responsible for the fuel. Mr. Dickey testified
this change came from the dispatcher, COOT, and that all vehicle owners and
drivers working with COOT had to make the change to 60‑40. COOT, the
dispatcher, was a company owned by the owners of the taxis, Mr. Gill, as owner
of 217 Co., being one of them.
[7]
Mr. Gill had no
day-to-day contact with Mr. Dickey. If he did not see Mr. Dickey for a
month, 217 Co. simply would not get its share of the fares from him. Mr. Gill
would not know when or where Mr. Dickey was working. There was no tracking, no
odometer readings and no requirement for Mr. Dickey to check in with Mr. Gill.
The only information Mr. Gill had as to how much Mr. Dickey was working
would be from the daily cash sheets or summaries he received when being paid.
217 Co. paid no vacation pay or sick pay to Mr. Dickey.
[8]
I will now turn to how
the dispatch worked. As indicated, COOT was the dispatcher. Mr. Horban, who,
like Mr. Gill, was one of the nine taxi owners who owned COOT, served as
manager for COOT in 2011. Mr. Horban had had a similar CPP issue with
the Canada Revenue Agency ("CRA") in 2011, and in 2011 received
notification that the two drivers with whom there was the same issue, were not
found to be employees.
[9]
Mr. Horban described
the arrangement between COOT and the drivers as loose. Owners, such as 217 Co., would pay a fee to COOT for its dispatching services. There was a handbook, "COOT
Taxi (1999) Ltd Dispatcher and Driver and Handbook", but Mr. Horban said
he was not sure all the drivers were even aware of the handbook. Mr. Dickey
testified that he was. Mr. Gill, however, had never seen the handbook before
this litigation. It was only about a dozen pages long and included a list of
the cars handled by COOT (27 in all), who the owners were and what shifts each
car had assigned to it. There were three shifts: the day 6:00 a.m. to 6:00
p.m., the night 6:00 p.m. to 6:00 a.m. and what was referred to as the
"dog" shift, 3:00 p.m. to 3:00 a.m.
[10]
According to Mr.
Horban, and confirmed by Mr. Gill and Mr. Dickey, these shifts were the times
within which a driver could work, but it was up to the driver how many hours
during that period he or she actually worked. Mr. Dickey indicated that he
would, as much as possible, work the full 12 hours, even starting half an hour
early if he could. As Mr. Dickey put it, if it did not suit you, you did not
work, but if you wanted to make money you had to be there. Similarly, a driver
could eat lunch on the run or actually stop for the lunch – his call. It also
appeared that the drivers could run the occasional personal errand.
[11]
Mr. Horban did indicate
that COOT could require drivers to stay beyond the shift if things got
particularly busy.
[12]
Mr. Horban also
testified that drivers could get someone else to drive their shift, although
they did not have to. Mr. Gill testified that he would not know if drivers
switched. Mr. Dickey testified that if he had to get someone to cover for him,
he would have to get approval from Mr. Gill or another COOT owner. A substitute
driver would get the driver’s 40% share of the fares.
[13]
A driver would keep the
vehicle at his or her home while working consecutive shifts, but would arrange
to get it to the next driver of consecutive shifts.
[14]
Mr. Gill felt that Mr.
Dickey could have driven taxi for anyone else, though Mr. Dickey felt he was
limited to driving for COOT, albeit possibly for other vehicle owners.
[15]
COOT would keep records
of drivers’ trips for three or four days, primarily for police purposes. Mr.
Horban did acknowledge that if an owner believed a driver was making
unauthorized trips, he might ask to see the records.
[16]
The following is some
of the items set out in the policy guide:
- cars must book on in the town zone;
- cars must sign off or
can be fined (Mr. Horban testified fines were rare and indeed could only think
of one instance of a fine);
-
radio is for business
only;
-
no smoking;
-
cars must be in proper
zone to accept a trip;
-
all trips must go
through dispatch;
-
a driver refusing an
in-town charge would be sent home (there were some exceptions);
-
a car can change
drivers during a shift.
[17]
The drivers are
personally responsible for any tickets and for the deductible with respect to
any accidents for which they were at fault.
[18]
In October 2011, Mr.
Gill sent a notice of termination of employment to his drivers stating:
Please
consider this notice of termination of employment effective October 31st,
2011. The company is changing its structure to a leasing company. If you are
interested in leasing a vehicle and being your own boss, please contact myself
or Kathy Hall.
Analysis
[19]
Employee or independent
contractor? The Respondent suggests that the Federal Court of Appeal in the
recent decision of 1392644 Ontario Inc. O/A Connor Homes v Canada (the
"Connor Homes") case has established a two step process of
inquiry:
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.
[20]
Here, notwithstanding
Mr. Gill’s letter of termination, I find the evidence supports opposing intents
as to the relationship. In such a case, I believe I must rely on the objective
reality as determined from the factors identified in the cases of Wiebe Door
Services Ltd. v M.N.R.
and 671122 Ontario Ltd. v Sagaz Industries Canada Inc. Interestingly,
the Federal Court of Appeal lists intent and the terms of the contract as
factors to consider in the second step, where courts are to determine the
objective reality "using the prism of that intent". Two opposing
prisms can only create a confusing kaleidoscope. Intent is not a factor in this
case.
[21]
Before addressing the
other taxi driver cases relied upon by counsel, I will be clear that the main
factor to distinguish employment from independent contractor in these types of
cases are control, chance of profit and risk of loss. Other factors are not
determinative, or can be argued in neutralizing ways. For example, one might
think a huge factor in the taxi business is the ownership of the taxi – a
strong indication the non-owner driver is just an employee. But, as has been
pointed out in cases such as Labrash v M.N.R. in
addressing this issue of ownership of tools, the service provided by the driver
is just that, driving:
28. I do not find this a particularly helpful consideration in a case such as
this. The taxicab owners owned or controlled everything needed to run the
overall taxi business except, of course, the drivers. On the other hand the
taxicab drivers owned and paid for what they needed if they were in the
business of driving taxicabs for others. That is, their city licence and their
provincial driver’s licence. This does not usefully lead in either direction in
businesses such as these.
[22]
Putting it another way,
as Justice Bonner put it in Pemberton Taxi Ltd. v M.N.R.:
… the arrangement between the appellant
and its drivers was essentially in the nature of a lease of the cabs in exchange for a share of the revenues
earned from the operation of the vehicle by the driver who rented it.
Also as Justice Bowie indicated in Algoma Taxicab
Management Ltd. v M.N.R.:
13. Neither
counsel placed much reliance on the ownership of the tools as an indicator of
the nature of the contract. Nor do I think that it is a very significant
factor. Certainly the drivers have no investment in the vehicles. It is not
clear from the evidence to what degree the Appellant, or more accurately its
subsidiary KCUB, has capital invested in the vehicles, as they are all either
leased or financed at the time of acquisition. It must have some investment,
however, and it certainly is at risk if the vehicles are lost or destroyed.
However the cost of leasing or buying the vehicles, and the cost of insurance,
is recovered from the drivers as it is factored into the computation of the
rental rates that they pay, as is the cost of fuel, and all the other
vehicle-related expenses incurred by the Appellant. I therefore do not consider
this to be a factor that should be given significant weight in this case.
[23]
Likewise, investment
and capital of the business is not significant. Again, from the perspective of
a driver offering a driving service, that factor is a nominal consideration not
worthy of influencing the determination. I reiterate, the key three factors to
distinguish between employment and independent contractor in this case are the
control, the chance of profit and the risk of loss. Let us see how other cases
have addressed these factors.
Labrash
In Labrash, Perry Sound Taxi was owned by a
group of taxicab owners who shared operating costs of dispatch, paying a fee to
the dispatch operation. The owners and drivers split fares 60-40. Drivers could
drive other taxis. Drivers could refuse fares. Drivers could take breaks when
they please. Drivers could run personal errands during their shift. Justice
Boyle found control, or lack thereof, favoured an independent contractor
arrangement. He also found the profit depended in large measure on the driver
and "while they had no risk of actual loss, they were at considerable risk
of receiving little or no income and could undoubtedly have considerable
influence and control over their earnings on any shift".
Finding: Independent contractor
Algoma
In Algoma, the drivers did not own the vehicles
but had the necessary Sault Ste.Marie Police Board Taxi Driver’s Licence.
The drivers had a "rental agreement" with the appellant which
stipulated several regulations, including penalties. As Justice Bowie
described, "where it is necessary for the protection of the Appellant’s
business, there are some quite stringent controls on the drivers, and where it
is not, they have considerable freedom as to the manner in which they do the
work". The appellant paid for insurance, fuel and other supplies. The
split fare ranged from 38% to 30% for the driver. A driver could go to work at
any time and find a vehicle available. Drivers were not required to work any
minimum period nor required to be available for a whole shift. They could
cultivate their own customers who could call them directly.
Justice Bowie concluded the rental agreement did not
demonstrate sufficient control to justify employment. Further, the drivers
could increase profit by choosing busy shifts, strategically positioning their
cabs and avoiding penalties. Justice Bowie also found significant risk of loss
arising from accepting credit cards or cash plus the possibility of paying the
deductible on an accident.
Finding: Independent contractor
City Cab (Brantford-Darling St.) Ltd. v M.N.R.
In City Cab, the appellant owned 26 cabs in Brantford with 75 drivers operating them. The appellant was licensed by Brantford as a
taxi broker, while drivers held the appropriate Brantford taxi driver’s
licence. The fares were split 60-40, with the company responsible for fuel and
maintenance. The drivers were free to move to any part of city. Credit card
losses and dishonoured cheques were at the drivers’ expense. The drivers got a
69 page manual which the judge described as directed towards protecting the
Appellant’s economic interest, for example, defensive driving. The drivers
could develop regular clientele and could refuse fares. The judge found that
while the drivers did not own their taxis, part of the gross receipts (60%)
they paid to the Appellant went to cover capital and operating costs. There
were also independent drivers who owned their own taxis who used the same
dispatch. Justice Bowie concluded:
The
drivers are indistinguishable from the independent owner-drivers in most
respects. Both groups have the same call dispatch made available to them. Both
have the same use of the company logos, signs and business cards. Both operate
in the same way and in the same geographic area. The only significant
difference is that the independent drivers own their vehicles and licenses, pay
for their own fuel and other vehicle operating costs, and pay a fixed weekly
fee to the appellant, while the company drivers do not own the vehicles or the
taxi licenses, do not pay the fuel and other operating costs, but instead pay a
percentage of their gross receipts to the appellant.
Finding: Independent contractor
1022239 Ontario Inc.
In 1022239 Ontario Inc., Justice Woods made it
clear at the outset that "in my view an individual can carry on a business
on his own account if the business consists only of driving a taxi".
Justice Woods highlighted control as the most important consideration citing
the following facts to demonstrate insufficient control for a finding of
employment:
-
drivers were free to
determine when they work and could work less than a full shift;
-
drivers were not
instructed where to drive;
-
drivers were encouraged
to pick up passengers on their own;
-
drivers could attend to
personal business on a shift.
She found other factors not significant.
Finding: Independent contractor
Barton v M.N.R.
In
this case, it was the driver, Mr. Barton, who was the appellant. He did not own
the taxi that he drove. He split the fare with the owner on a 50-50 basis
though with a guaranteed minimum of $6.25 an hour. Maintenance and fuel were
covered by the owner. The owner assigned shifts, though Mr. Barton always worked
days. The owner assigned the vehicles. Justice Webb found that control favored
an employment relationship. He also emphasized the vehicle was not owned by
Mr. Barton, with little investment and no financial risk.
Finding: Employment
Hayer
v R.
In
this case, the appellant owned and operated two taxis using Kelowna Cabs
dispatch, an operation owned by the vehicle owners including Mr. Hayer. Kelowna
Cabs, through its computer system, could track each driver’s route, how much
they were working and even how fast they were traveling. Mr. Hayer could
ascertain why one driver was bringing in fewer fares than another. The
appellant provided trip sheets to its driver tracking fares which were split on
a 40-60 basis.
The
driver signed a two-page "Driver Operator Agreement" agreeing to
observe Kelowna Cab rules. The driver was given a shift schedule with no
opportunity for input. The driver had to work the full shift, with no choice to
work fewer hours. The driver was told when to cover the Kelowna airport and
also told that if he was scheduled to work in one part of the city he could not
work in another part.
Mr.
Hayer was responsible for maintenance and fuel. The driver could not hire a
replacement.
The
judge found sufficient control to justify an employment arrangement. She
factored in the car was a major asset of the business and was not owned by the
driver. She also found the driver had little opportunity to maximize profit as
the shifts were pre‑established.
Finding: Employment
Control
[24]
While there are similarities
between the case before me and all of the above cases, I conclude that the
level of control here is more in line with the first four cases of an
independent contractor, rather than the latter two cases of employment. While there
is not the degree of freedom given to drivers as found in the Algoma case,
there is nothing near the level of control exercised by owners in Hayer.
No, this case is in that grey area of control that brings these matters to
court, but for the following reasons, I find the factor of control, similar to Labrash,
City Cab, Algoma, and 1022239 Ontario Inc., favours an independent contractor arrangement:
-
Mr. Dickey could drive
for other owners;
-
Neither Mr. Gill nor
COOT had any means of monitoring Mr. Dickey while on the job;
-
Mr. Gill had virtually
no contact with Mr. Dickey in 2011;
-
Mr. Dickey could drive
the hours he pleased; he did not have to work a full shift;
-
Mr. Dickey could take
breaks when he pleased;
-
Mr. Dickey kept control
of the vehicle as long as he had consecutive shifts;
-
Mr. Dickey created the
trip sheets;
-
Mr. Dickey could run
personal errands while on a shift;
-
While there was a
Handbook it was not rigidly enforced and went more to the well being of the
taxi operation generally than the control of the drivers;
-
Mr. Dickey was not instructed
where to drive;
-
Mr. Dickey was not told
where he could or could not work;
-
Mr. Dickey could find
someone to substitute for him on a shift.
Chance of profit
[25]
Clearly there is a difference with
the Barton case where the driver was provided with a guaranteed hourly
rate. In Hayer, the ability to maximize profit was limited by the
pre-assigned shifts. Mr. Dickey chose to work day shifts, but he could
determine the hours within that shift that might be most productive. He chose,
however, to work as many hours as possible four days a week. He could work more
shifts or, indeed, work for others. He had a means to increase his profit from
his driving business. This is not however as significant a factor as control,
or of itself determinative.
Risk
of loss
[26]
Similarly, while there is some
risk it is not as significant as those situations where the driver assumes risk
of loss from credit cards or bounced cheques. The risk lies either in a car
being unavailable due to repairs or from the cost of deductible if the driver
caused an accident as well as the car being unavailable. Again, this factor is
not strongly pro-independent contractor but more so than pro‑employment.
[27]
In evaluating the factors to
distinguish employment from independent contractor, it will seldom be the case
that all factors point overwhelmingly in one direction. There would be no need
for a trial of the issue. It will more often be the situation where some
factors might point one way and other factors another way. Some factors may be
neutral. It is always necessary to bear in mind what the analysis is addressing
– whose business is it? There is no magic formula. There is seldom a bright
line. It is a matter of degree, and as that degree narrows, so too does the distinction:
the expression "dependent contractor" comes to mind.
[28]
What it really comes down to is
whether a review of the factors supports Mr. Dickey being part of Mr.
Gill’s business or supports Mr. Dickey carrying on his own business of
providing driving services. Based primarily on the elements reviewed in
connection with control, I conclude that Mr. Dickey was carrying on his own
business and was therefore not in pensionable employment. The Appeal is allowed
and the Minister’s decision that Mr. Dickey was in pensionable employment is
vacated.
Signed at Ottawa, Canada, this 4th day of October 2013.
"Campbell J. Miller"
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