Citation: 2013 TCC 291
Date: 20130919
Docket: 2012-4948(EI)
BETWEEN:
Peterborough Youth Services,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
and
Docket: 2012-4949(CPP)
BETWEEN:
Peterborough Youth Services,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Lamarre J.
[1]
This is an appeal from
a decision of the Minister of National Revenue (Minister), issued on
September 4, 2012, confirming a determination by the CPP/EI rulings officer
dated February 15, 2012, that Ms. Melissa McLaughlin (Melissa) was employed
in insurable and pensionable employment within the meaning of paragraph 5(1)(a)
of the Employment Insurance Act (EI Act) and paragraph 6(1)(a)
of the Canada Pension Plan (CPP) while working for the appellant
during the period from January 1, 2010 to December 8, 2011.
MINISTER’S ASSUMPTIONS OF FACT
[2]
The facts relied upon
by the Minister are set out in paragraph 14 of each Reply to the Notice of
Appeal (Reply), and are reproduced hereunder:
Assumptions
14.
In determining the Worker was engaged in
insurable [“pensionable” in the Reply in the CPP appeal] employment by the
Appellant for the Period, the Minister relied on the following assumptions of
fact:
The
Appellant
(a) the
Appellant operated a non-profit social service agency;
(b) the
Appellant's business provided counselling and support service to youth and
their families in the Northumberland County, which included Peterborough,
Cobourg and Port Hope, Ontario;
(c) the
Appellant received referrals from Probation Services for youth under the age of
eighteen who have been convicted of an offence and received a court ordered
disposition to participate in the program;
(d) the
Appellant had a contract with the Four Counties Community Support Team (the
"CST") to provide clinical support under the One-to-One Worker
Program;
(e) Michele
Laviolette (Coordinator of the CST Program) and Jamie Emerson (Executive
Director of the Appellant) controlled the day-to-day operations of the
Appellant;
The
Worker
(f) during
the relevant Period, the Worker performed her services under written
agreements;
(g) the
Worker was hired by the Appellant as a Youth Counsellor;
(h) the
Worker performed the following duties:
(i) provided
one-to-one support;
(ii) counselled
youth;
(iii) drove
the youth to and/or from doctor's appointments, probation appointments, school
appointments, court dates and errands in the community; and
(iv) helped
youth find employment, housing, orientation with the community, higher
education and other support services as required;
(i) the
Worker held a degree in criminology and had experience in the social service
field;
(j) the
Appellant required the Worker to have a Criminal Reference Check completed;
(k) the
Worker performed the majority of her duties in the Northumberland County community and at the Appellant's youth centre location;
(l) the
Worker provided her services continuously to the Appellant since October 2009;
(m) the
Worker is no longer working for the Appellant;
(n) there
were other workers performing similar services to the Appellant;
Control
(o) the
Worker worked on a part-time basis;
(p) the
Worker worked various times and days during the week;
(q) the
Worker's schedule was flexible, depending on the clients' needs;
(r) the
Worker was required to complete twenty hours per month, per client;
(s) the
Worker was normally assigned three youths per month;
(t) the
Appellant provided the Worker with timesheets and she was required to record
her work times, activities and expenses;
(u) the
Appellant provided the Worker with the client's criminal history, their
circumstances, risks, goals and objectives;
(v) the
Worker received direction from the clients' Probation Officers and Michele
Laviolette in order to clarify the clients' goals and objectives to ensure that
her services were coordinated with services provided by other members of the
clients' service teams;
(w) initial
meetings with the clients would include the Worker and her Supervisor, Michelle
[sic] Laviolette, and would normally take place at a Probation Office or
at a correctional facility;
(x) the
Worker was required to comply with the Appellant's:
(i) standards
of conduct;
(ii) policies
and procedures;
(iii) established
objectives, which were reviewed and re-evaluated on an on-going basis;
(iv) reporting
requirements;
(v) Supervision
Plans; and
(vi) Confidentiality
Agreement;
(y) the
Appellant provided the Worker with instructions and directions;
(z) the
Worker was required to submit to the Appellant, monthly reports showing the
progress that each client was making towards their goals and objectives;
(aa) the
Worker was required to report the following to the Appellant:
(i) if
she was going to be absent for a period of time;
(ii) incidents
that happened, such as criminal charges or the status of a client's health; and
(iii) serious
occurrences were to be reported immediately to the Appellant and the Probation
Officer and a Serious Occurrence form was to be completed;
(bb) the
Worker was required to obtain the Appellant's approval prior to taking certain
actions, such as:
(i) spending
money on clients, for activities, meals, entertainment and personal needs,
etc.;
(ii) travel
time to related activities with the clients; and
(iii) if
she wanted to spend more than the twenty hour maximum with a client;
(cc) the
Appellant determined, which client the Worker would be assigned to;
(dd) the
Worker determined when and where she would work with the client, unless there
were predetermined activities planned;
(ee) the
Worker was required to be available upon the Appellant's or Probation Officer's
request;
(ff) the
Worker was supervised by Michele Laviolette;
(gg) the
Appellant determined the Worker's priorities and deadlines;
(hh) both
parties had the right to terminate the Worker's services by providing one
week's notice;
Ownership
of Tools and Equipment
(ii) the
Appellant provided the Worker with a computer and mainframe system access for
reports, at no cost to the Worker;
(jj) the
Appellant provided the Worker with the electronic templates for timesheets and
reports;
(kk) the
Worker provided a computer, cell phone, vehicle and car insurance;
(ll) both
parties were responsible for the maintenance and repairs of their own tools and
equipment;
Subcontracting
Work and Hiring Assistants
(mm)
the Worker was required to provide her services personally;
(nn)
the Worker could not and did not hire helpers or replacements;
(oo)
the Appellant was responsible for hiring and paying replacements;
Chance
of Profit and Risk of Loss
(pp)
the Worker was paid $20.00 per hour;
(qq)
the Appellant determined the Worker's rate of pay;
(rr) the
Appellant determined the frequency and method of payment to the Worker;
(ss) the
Worker was paid on a monthly basis;
(tt) the
Appellant paid the Worker by cheque;
(uu) the
Worker was paid in her personal name;
(vv) the
Worker did not submit invoices in order to be paid;
(ww) the
Worker was paid for time she spent reading the Appellant's Policy and
Procedures Manual;
(xx) the
Worker did not receive bonuses, benefits, vacation pay or paid vacation leave;
(yy) the
Appellant put a cap on the maximum number of hours the Worker could spend on
each client, unless she received authorization for additional hours;
(zz) the
Appellant reimbursed the Worker for expenses that she incurred in obtaining her
Criminal Reference Check for the Appellant's records, parking and meals and
entertainment during periods that she was on outings with clients;
(aaa) the
Appellant paid the Worker mileage at the rate of $0.30 per kilometre;
(bbb) the
Appellant was ultimately responsible for resolving customer complaints which
resulted from the Worker's performance;
(ccc) the
Worker incurred minimal expenses in the performance of her work for her vehicle
and computer;
Intention
(ddd) during
the relevant Period, the Worker received T4 employment income from Cornerstone
Family Violence Centre and Kingston Employment Services;
(eee) the
Worker did not report business income or claim business expenses on her personal
income tax returns for the 2009, 2010 and 2011 taxation years;
(fff) the
Worker claimed her income from the Appellant as Other Employment Income on her
2009 and 2010 tax returns;
(ggg) the
Worker did not have her own clients; the clients were those of the Appellant;
(hhh) the
Worker did not manage her own staff;
(iii) the
Worker did not have a business bank account;
(jjj) the
Worker did not have a registered business name or trade name;
(kkk) during
the relevant Period, the Worker did not have a registered business number or
GST / HST number with the Canada Revenue Agency; and
(lll) the
Worker did not charge the Appellant GST / HST.
[3]
Counsel for the appellant
did not go through those assumptions in order to admit or deny each of them, but
presented evidence, as will be seen hereunder, that demolished a
number of them.
EVIDENCE IN COURT
[4]
The appellant called
Mr. James Emerson, the executive director of the appellant, as well as Ms. Michele
Laviolette, the coordinator of the appellant’s youth justice program, to
testify. In addition, Melissa was subpoenaed to testify by the appellant, but she
also received a subpoena from the respondent and I therefore gave some leeway
to counsel for the appellant in his questioning during Melissa’s examination in
chief.
[5]
Mr. Emerson, who
has a masters degree in Clinical Psychology, explained that the appellant is a not-for-profit
organization which is funded by the Ministry of Children and Youth Services of
the province for the most part, and through fundraising and United Way funding
to a small degree. It coordinates two programs: one voluntary mental health
program for children and one involuntary youth justice program for cases
referred by the courts and by probation officers. The appellant employs 12 full-time
employees (he and Ms. Laviolette among them) and 3 part‑time
employees. The appellant also contracts with outside workers, mainly for cases
referred by Probation Services. These outside workers are people like Melissa,
who was hired in the context of the involuntary youth justice program. Melissa
graduated from college with a diploma in Legal Administration and subsequently
obtained an honours degree in Criminology. Workers such as Melissa were not
considered as employees by the appellant.
[6]
Mr. Emerson
explained that the employees are trained in clinical counselling and use very
specific psychotherapy techniques. They work with children in weekly psychotherapy
sessions. All employees work from the appellant’s office in Peterborough. They
have an office, a computer and a phone, and have access to secretarial and
reception services, to the client information system, to two vehicles belonging
to the appellant, to space for recreational activities, and to psychological
support. They are under Mr. Emerson’s supervision and he maintains regular
contact with them. The employees present their cases to Mr. Emerson on a
biweekly basis, give him their assessment of those cases and explain what they are
doing with the cases and how they are working toward terminating each one. They
also appear before a clinical team, of which Mr. Emerson is a member, to bring forward
different issues they might have.
[7]
By contrast, people like
Melissa, who contract with the appellant, do not have access to a computer, a phone,
clerical support, the two vehicles, staff training and development or psychological
consultation.
[8]
Ms. Laviolette is
the coordinator of the Community Support Team (CST) program for the
appellant. She is under the supervision of Mr. Emerson. She put in place
the case management plan established by Probation Services for young people of less
than 18 years of age who have been convicted of an offence and who have been
ordered by a court to participate in such a program. The appellant provides
that service in four counties, one of which is Northumberland, where Melissa worked.
[9]
It was Ms. Laviolette
who hired Melissa and had her sign the two Service Agreements for the periods
from October 2009 to October 2010 and October 2011 to October 2012
(Exhibit A-1, Tabs 3 and 4) which were filed in evidence. By those Service
Agreements, Melissa agreed to provide clinical support under the One-to-One Worker
Program upon request from the probation officer or the CST coordinator (Ms. Laviolette),
when the need arose. She agreed to provide a monthly written report in which
she was to note the time spent with the client (the young person receiving the
services) and summarize the activities and progress related to the established
objectives. She was entitled to remuneration of $20 per hour for a total of 20
hours per month with the client. If she needed to work more hours with the young
person, she had to obtain the prior approval of Ms. Laviolette. Melissa
received as well a mileage allowance of $0.30 per kilometre. Ms. Laviolette
said in court that Melissa also had an expense account of $25 per month, that
is, she was reimbursed up to that amount on the presentation of invoices. If
Melissa wanted to spend more for the young person, she needed to obtain Ms. Laviolette’s
approval before hand. Ms. Laviolette said that such approval was in turn
dependent on the approval of the bookkeeper and on the availability of funds. It
is indicated in the agreements that Melissa was not considered an employee and that,
accordingly, no deductions at source in respect of income tax, employment
insurance or CPP would be made. Further, she was not entitled to any benefits,
with the exception of travel and other pre-approved expenses. The contract
could be terminated upon one week’s notice by either party. As a matter of
fact, Melissa ended the second contract five months into the contract, as she
moved to Gananoque, which was outside the counties covered by the appellant.
[10]
Melissa was also
responsible for providing her own professional liability insurance and ensuring
that her vehicle was in good operating condition and that she had sufficient
and proper liability insurance coverage when transporting clients.
[11]
Ms. Laviolette
explained that, when she received a request from the probation officer, she
studied the referral form, evaluated the risks and needs with the help of the
risk assessment and psychological assessment provided by the probation officer,
and decided who would be the proper match taking into account the location of
the young person in need. She would then call the contractor she had chosen to
find out whether he or she would be interested or available. Ms. Laviolette
said that contractors like Melissa acted as role models or mentors for the
young people and their task was to develop a therapeutic relationship with the young
offender. Melissa described her work as providing guidance to the youth by
attempting to connect them with services in the community. Specifically, she
tried to achieve the goals outlined in the plan of care set out in the
probation order. Any input from the appellant with regard to Melissa’s work was
based upon the probation order. If the client (the troubled young person) was
not happy with the contractor assigned to him or her, Ms. Laviolette could
assign the file to another contractor, but this did not in fact happen considering
that the service was provided to youth on probation for the purpose of their
rehabilitation, and they did not really have any choice but to comply with the
court order. Ms. Laviolette said that once the contractor had agreed to
work with a client, he or she would contact either the probation officer or her
at his or her own discretion. She said there were no rules as such in this
regard. No training was provided, as was acknowledged by Melissa. It was
Melissa’s impression that the appellant hired her on the basis of her education
and existing skills.
[12]
The contract workers
determined their own schedule and they did not have to work 20 hours per
month with a client. They would work with the case management plan developed by
the probation officer, but had complete flexibility with respect to the manner
chosen to do their supports work. Melissa testified that she would meet the
young people anywhere in the community (coffee shop, school, youth shelter).
She confirmed that she herself determined, in conjunction with the young
person, the schedule for her work with that person.
[13]
Talking about Melissa,
Ms. Laviolette said that she performed her work in Northumberland County (Melissa
stated that she worked in Peterborough and in Cobourg, the latter being in that
county and the former in the county of Peterborough) and was not required to
report to the appellant in Peterborough. She herself met Melissa initially when
she hired her, and twice more after that. She spoke to her on the phone perhaps
once or twice a month (Melissa did not remember how many times she spoke to or
met with Ms. Laviolette). She said that when Melissa signed the Service Agreement,
she (Ms. Laviolette) verbally highlighted the key points such as the rate
of pay (non-negotiable), the maximum number of hours for which she would get
paid, the expense allowance, the mileage allowance, and finally the fact that
she was not being hired as an employee and that no deductions for taxes, EI and
CPP would be taken from her pay. Ms. Laviolette testified that Melissa did not
ask her what the difference between an employee and a contractor was.
[14]
Ms. Laviolette
mentioned that she sometimes attended the second meeting with the probation
officer, the worker and the young person. According to Melissa’s recollection,
the initial meeting took place at Probation Services, usually with the probation
officer, Michele Laviolette and the young person.
[15]
Ms. Laviolette
said that Melissa worked with four young offenders in total, which was
confirmed by Melissa. Ms. Laviolette testified that with high-risk youth
the probation officer would be more involved and they would meet with the contract
worker more often. The probation officer was the one in control. She would
rarely meet Melissa without the probation officer. Although Melissa reported on
her client’s progress to the probation officer, she could call Ms. Laviolette
informally. Melissa testified that she received instructions in respect of each
young person from Ms. Laviolette in person or from the probation officer.
[16]
Contract workers were
required to invoice for the number of hours worked and they filled out
timesheets in order to get paid. Melissa’s invoices were filed as Exhibit R-1,
Tab 5. It can be seen that sometimes she worked less than 20 hours per month
and sometimes more. The number of hours varied from month to month. Like all the
other workers, Melissa filed her monthly reports through Ms. Laviolette,
who approved and initialled them before sending the invoices to the bookkeeper so
that Melissa could paid.
[17]
In the Questionnaire
for a Payor (Exhibit A-1, Tab 1), Ms. Laviolette answered no to the
question whether the worker was permitted to subcontract her work to another
party, but she said in court that such a situation never presented itself. Ms. Laviolette
also indicated on the same form that the worker was not permitted to send a
substitute to perform her duties, but testified that if it happened that
Melissa could not keep an appointment, Melissa would only reschedule it.
[18]
Ms. Laviolette
testified that, in the event of a complaint from the probation officer about a
worker, she would probably call the worker to ask him or her to settle the
matter, and possibly would set up a meeting between the parties concerned, if
necessary. Melissa said that if there had been a complaint against her during an
assignment with a young person, she would have spoken to Ms. Laviolette with
a view to resolving that complaint. But she acknowledged that she did not know
the procedure, and said there was in fact never any complaint against her.
[19]
Melissa acknowledged
that she also worked for another organization (Northumberland Services for
Women) on a contract basis at some time during her second contract with the
appellant. When she signed her contract with the appellant, her understanding
was that she was not a permanent employee, that she was being hired on a
contract basis, and that no deductions would be taken from her pay. She did not,
however, consider herself to be self-employed as she did not have her own
business as a consultant. She thought that she was an employee. She was aware
that she had to provide her own car, and she paid for her gas, but although she
had her own insurance, she did not get the insurance coverage required by her
contract. She had read the contract very quickly and did not recall Ms.
Laviolette having brought the matter of insurance specifically to her
attention. She provided her own computer and was not assigned a computer by the
appellant.
[20]
Melissa testified that
it was her understanding that Ms. Laviolette was her supervisor, as it was
Ms. Laviolette who determined the number of hours she would work with a
young person. She had 20 hours per month to work with each young person, and if
there was a crisis situation, she would draw on the expertise of Ms. Laviolette.
Larger purchases for a youth had to be pre-approved by Ms. Laviolette.
[21]
Melissa said that for
support she could contact either Ms. Laviolette or the probation officer,
but stated that she would mainly ask Ms. Laviolette for guidance,
depending on the young person she was working with. For example, if she needed
to take a young person out of a specific community and the probation order
restricted moves, Melissa would talk to Ms. Laviolette first. She could
not say, however, how frequently she contacted Ms. Laviolette.
[22]
When she wanted to take
an extended period of time off (a week or two or three) at a time when she was
in contact with a young person on a weekly basis, Melissa would definitely
inform Ms. Laviolette. Further, Melissa said that she was not the one
deciding how many hours she would work with a young person. She did not recall ever
refusing to take a young person assigned to her.
Appellant’s Arguments
[23]
The appellant briefly
summarized the evolution of the case law and began its analysis of the question
whether Melissa was employed under a contract of service (as an employee) or
under a contract for services (as an independent contractor) with the fourfold
test set out in Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553, [1986]
2 C.T.C. 200. While not exhaustive, the following are the four tests most
commonly referred to in the case law: (a) the degree or absence of control
exercised by the alleged employer; (b) ownership of tools; (c) chance of profit
and risk of loss; and (d) integration of the alleged employee’s work into the
alleged employer’s business (Wiebe Door, page 556 F.C.). The fourfold
general test involves “examining the whole of the various elements which
constitute the relationship between the parties” (Wiebe Door, page 560
F.C.).
[24]
The appellant
emphasized the fact that there were two types of workers in the organization.
There were workers who were clearly employees working on premises owned by the
appellant, who had their own offices and computers on those premises, who had
access to the vehicles of the appellant, and who were invited to staff
functions and meetings. There were also the fieldworkers, like Melissa, who
contracted with the appellant.
[25]
Analyzing the control
component of the test, the appellant pointed out that this case involved a quadripartite
relationship between the worker (Melissa), the troubled young person, the probation
officer and Ms. Laviolette. The latter assigned the young person to
Melissa, but it was Melissa who decided how to mentor the troubled young person
within the parameters established by the probation officer. It was a one-on-one
relationship between the mentor (Melissa) and the troubled young preson. Ms. Laviolette
only served as a “buffer” between the probation officer, who had authority under
the court order and had received direction from the court as to what to do, and
the worker. The appellant being a non-profit organization serving many people —
the whole object being to get troubled youth back into society — explains why
the worker had a limited number of hours with each young person.
[26]
With respect to
ownership of tools, the appellant argued that there is no real issue here as
there were no tools really. In fact, Melissa used her own car, which she herself
insured for her own needs, and she was compensated for mileage. The contract stipulated
that she was responsible for obtaining additional liability coverage, but she
did not have such coverage as she said she had not read that provision in the
contract.
[27]
As for the chance of
profit and risk of loss, the appellant raised the fact that, in the context of
a non-profit organization, those tests do not make much sense, as the whole
organization, including the people working for it, is oriented towards
providing social services and not making money. In fact, 90 per cent of the
appellant’s funding comes from the government and the balance from fundraising
and the United Way.
[28]
Finally, according to
the appellant, the integration test can be looked at by asking whether
Melissa’s work, although done for the organization, was not integrated into it
but only accessory to it (Wiebe Door, at page 560 F.C.). According
to the appellant, the sole fact that she left her employment seven months
before the end of the second contract with just a week’s notice, without it
causing any problems, shows that her work was not essential and not integral to
the organization.
[29]
The appellant concluded
its analysis of the fourfold test by quoting the following comment of the
Supreme Court of Canada in 671122 Ontario Ltd. v. Sagaz Industries
Canada Inc., [2001] 2 S.C.R. 983, [2001] 4 C.T.C. 139 at paragraph 48: “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.”
[30]
The appellant then
referred to the recent decision of the Federal Court of Appeal in 1392644
Ontario Inc. (c.o.b. Connor Homes) v. Canada (Minister of National Revenue),
[2013] F.C.J. No. 327 (QL), 2013 FCA 85, and to the decision in Wolf v. Canada,
2002 FCA 96, [2002] 4 F.C. 396, [2002] F.C.J. No. 375 (QL), in asserting that
it is now necessary to also determine what, in essence, was the intention of
the parties. The appellant also referred to TBT Personnel Services Inc. v. Canada,
[2011] F.C.J. No. 1340 (QL), 2011 FCA 256 at paragraph 35, where it is
stated that “[t]he Wiebe Door factors must also be considered to
determine whether the contractual intention suggested by the intention clauses
is consistent with the remaining contractual terms and the manner in which the
contractual relationship operated in fact.” Here, the appellant argues that
while its intention was obviously to enter into a contract for services with
Melissa, it was Melissa’s intention to plead that she was nothing more than an
employee. However, the appellant is of the view that Melissa — given her educational
background and the fact that she could determine her own timetable, that she
simply had to advise the appellant if she wished to take time off, that she did
not receive any benefits, that she had no office, and that she had to provide
her own car, computer and phone —knew that the true nature of her relationship
with the appellant was such that she was employed as an independent contractor.
[31]
Finally, the appellant drew
a parallel between this case and the decision by Judge Rip (as he then was) of
this Court in Family Services Perth-Huron v. Canada (Minister of National
Revenue), [2000] T.C.J. No. 2 (QL), 2000 CarswellNat 3714, which involved a
non-profit charitable organization. In that case, the agency provided a whole
series of social services on a voluntary basis and Judge Rip found that the
special-service provider hired by the agency, who was also required to prepare
reports on the progress of her clients and who had meetings with the co‑ordinator
in the course of performing her work, was not under the control of the agency.
After analyzing all the other factors, Judge Rip held that the service provider
was not an employee.
[32]
The appellant concludes
that the reality of the relationship between the parties, as ascertained
through the objective facts in this case, points to its being one in which the
worker was an independent contractor.
Respondent’s Arguments
[33]
The respondent referred
to the Connor Homes decision and mentioned that that case also involved
youth workers working with troubled youth. The respondent stated that the
intention of the parties must be looked at, but said it is clear that intention
should only be accorded weight if there was a common intention. It was clear
for the appellant that the contract workers were independent contractors. As for
Melissa, it was her first job, having just come out of school. She was
presented with a service agreement but she testified that she did not know the
difference between an employee and an independent contractor. It is clear,
however, that she never meant to go into business on her own behalf. Her
understanding was that she was a “contract employee”, as indicated in her
answer to a question in the questionnaire given to her by the CRA (Exhibit R-1,
Tab 2, pages 7 of 8), meaning not a full-time employee. As observed in Connor
Homes, supra, at paragraphs 33 to 37, to simply state in the
contract that the services are provided as an independent contractor is not
sufficient to make it so. The intent must reflect the objective reality of the
relationship.
[34]
Looking at the
different tests developed in the case law and relied upon by the appellant, as
seen above, the respondent argued, with respect to control, that this factor
should be considered as neutral here. The respondent compared the situation to that
in TBT Personnel Services, supra, where it is stated, at
paragraph 35, that the drivers were highly skilled professional drivers
who would have needed little supervision whether they were employees or
self-employed workers. In the present case, Melissa had just graduated with an honours
degree in Criminology, and she was trusted by the appellant to do the work that
she was paid to do. She received supporting guidance from Ms. Laviolette
and had to make monthly reports on the young person’s progress. However, it is
not clear how many times per month they contacted each other. The goals and
objectives were provided to her by either the appellant or Probation Services.
This is very similar to the case in Connor Homes, where there were
directions given to the workers.
[35]
With respect to tools,
the respondent agreed with the appellant that there were not really any tools
required for Melissa’s work. As did the workers in Connor Homes, the
worker here provided her own vehicle, for which she had insurance, and she was
reimbursed for mileage. Further, to paraphrase a comment of the Federal Court
of Appeal in Connor Homes (at paragraph 49), it is not because a worker
provides his or / her own phone and computer, which is today a common requirement
for many employees, that the worker is an independent contractor.
[36]
According to the
respondent, Melissa did not have any chance of profit. Just as in Connor
Homes, the appellant here imposed financial limits. An hourly rate was
imposed and a maximum number of hours was set for each your person. Melissa
needed the appellant’s approval to work more hours. At paragraph 12 of Connor
Homes, the Federal Court of Appeal stated that there was no chance for the
workers to increase their income by reducing expenses or producing more. The
respondent argues that the situation is the same here.
[37]
As regards the risk of
loss, the respondent referred to paragraph 49 of Connor Homes,
where the Court said that “[t]he individuals were not required to take any
financial risks, nor were they required to take out loans or make any
investments in the form of capital assets, specialized equipment or working
operating funds”. Similarly, Melissa had no risk of loss. Further, Ms. Laviolette
testified that, had Melissa been the subject of a complaint, she
(Ms. Laviolette) would have had to call everyone concerned. It was she who
would have had to make sure that everything was straightened out.
[38]
Finally, with respect
to the integration test, Melissa testified that she never intended to operate and
did not operate a business of her own. The respondent relied on paragraph 51
in Connor Homes to conclude “that the reality of this arrangement by
which the [worker’s] tasks were dictated by [the objectives set by Probation
Services and/or the appellant] and carried out under the supervision of [Ms. Laviolette],
where rates of pay were fixed and hours scheduled by the [appellant], and where
no significant financial risks or investments were required of the [. . . worker],
is not sufficient to qualify the legal relationship between the parties as that
of an independent contractor arrangement.”
Appellant’s Rebuttal
[39]
The appellant asked
this Court to be careful in applying Connor Homes in the present case as
the case before the Federal Court of Appeal involved a business and not a
non-profit organization. Further, in the appellant’s view, the facts in Connor
Homes are fundamentally different from those here, and the factual analysis
in that case should be looked at with that in mind. As an example, in Connor
Homes, one worker was bound by a non-competition clause, which is not the
case with the worker here. On the contrary, Melissa worked elsewhere during a
certain period while she was working for the appellant. Further, in Connor
Homes, for one worker 60 days’ prior written notice was required in
order for the worker to terminate the agreement. Here, the requirement was one week’s
notice, and the evidence is that Melissa left before the halfway point of the contract
just by sending a written notice.
Analysis
[40]
In Connor Homes,
referred to abundantly in argument, the Federal Court of Appeal summarized the
state of the law with regard to determining whether the legal status of a
worker is that of independent contractor or employee. There is a two-step
process of inquiry that is followed to assist in addressing the central
question as stated in Sagaz, supra, and Wiebe Door,
supra, which is to determine whether or not the individual is performing the
services as a person in business on his or her own account. In the first step,
the subjective intent of each party to the relationship must be ascertained.
The second step is to ascertain whether an objective reality sustains the
subjective intent of the parties. In this second step, the parties’ intent as
well as the terms of the contract may be taken into account. The factors to be considered
will vary with the circumstances. The level of control over the worker’s
activities, whether the worker provides his or her own equipment, whether the
worker hires his or her helpers, whether the worker manages and assumes
financial risks, and whether the worker has an opportunity for profit in the performance
of his or her tasks are specific factors discussed in Wiebe Door and Sagaz
that will usually be relevant (Connor Homes, paragraphs 38 to 41). Other
factors, such as the lack of job security, the absence of employee benefits,
freedom of choice, and mobility may also be considered (Wolf, supra, at
paragraph 120; Lang v. Minister of National Revenue, 2007 TCC 547, 2007
DTC 1754, 2007 CarswellNat 2998, paragraphs 24 and 38).
[41]
Here, my perception of
Melissa’s testimony and attitude in court is that she surely understood that
she was being hired on a contract basis to assist young at‑risk people
within the parameters indicated by the probation officer, as set out in the court
order. She understood that she was going to be paid at the rate of $20 per hour
to work for a maximum of 20 hours per month with a young person assigned to her
by Ms. Laviolette. She understood that she needed to invoice for the exact
number of hours she spent on the young person and that she needed Ms. Laviolette’s
approval to exceed 20 hours with the client. She knew that her expenses would
be reimbursed. The invoices filed as Exhibit R-1, Tab 5, show that the hours
she worked varied from one month to another. Melissa was also aware that she
was not entitled to any benefits (with the exception of the travel allowance
and the reimbursement of certain expenses) and that no deductions at source
were taken from her remuneration. Still, in her tax returns, she declared her income
from the appellant as other employment income. She said that she did not know
the difference between an employee and an independent contractor. She had just
finished university and she was attracted by the job and did not discuss the
terms of the contract. On the other hand, it was clearly the intention of the
appellant not to treat her as an employee. In those circumstances, it is
difficult to say that there was a mutual understanding between the parties or a
common intention regarding their relationship. In fact, it is my view that
Melissa did not pay any attention to, or did not really understand, the
subtleties of the Service Agreement that she signed.
[42]
I will therefore analyze
the different factors developed in the case law, and referred to by the parties
in their arguments summarized above, to determine whether Melissa was in fact
an employee or an independent contractor. The respondent conceded that the
level of control should be considered as a neutral factor as Melissa was
working according to her own schedule, did not contact Ms. Laviolette
regularly and dealt with a young person according to the skills she possessed, although
she abided by the rules laid down in the court order with respect to the young
person. She was not required to perform administrative tasks nor was mandatory
attendance at staff meetings to discuss work procedures imposed on her. She did
not work on the appellant’s premises, unlike the appellant’s employees.
[43]
The respondent also
conceded that the ownership of tools factor was not significant here as, apart from
her cell phone and computer, the worker really only provided her car, for which
she received a mileage allowance.
[44]
With respect to the
chance of profit and risk of loss, the respondent argued that there was none
for Melissa, while the appellant argued that that test is difficult to apply in
the context of a non-profit organization. Melissa was paid at a fixed rate for
each hour she spent on a young person and any time in excess of 20 hours with the
young person had to be pre-approved by the appellant. She had an expense
allowance and was reimbursed for expenses beyond the amount of that allowance
that were approved by Ms. Laviolette. The fact that Melissa was paid for
each hour worked and that the appellant exercised a degree of control over the
hours she could work with each young person may have prevented any chance of
profit.
[45]
Further, Melissa was
not required to take any risks nor was she required to take out any loans or
make any investments in capital assets or operating funds. Moreover, Melissa
was not entitled to subcontract or to hire helpers. She had to perform the work
herself and, if unavailable, she had only to reschedule her appointment with
the young person. As in Connor Homes, supra, the fact that she
provided her own phone and computer is not an indication that she was not an
employee.
[46]
However, the fact that
she used her own car is a factor that may be considered as favouring
independent contractor status, especially since, under her contract, Melissa
was required to obtain extra liability coverage for transporting youth. The
evidence showed that she did not do so as she misunderstood that part of the
contract; but the requirement existed nonetheless. Furthermore, she was not
entitled to employee benefits (except for the travel allowance and the reimbursement
of her pre-approved expenses) or vacation pay. She had no job security as her
contract could be terminated upon one week’s notice, and she was free to accept
other engagements. Moreover, she worked only when there was a need, and it is
my understanding that she could accept or refuse any client, although she in
fact refused none. Finally, it is not that clear what the procedure would have
been in the event that a complaint was made against Melissa, as the case did
not in fact arise. My understanding from both Ms. Laviolette and Melissa is
that, if it had, the latter would have called Ms. Laviolette, whose approach would
have been to call all the persons concerned. On the whole, I find that the
chance of profit and risk of loss factors do not necessarily point toward either
employee or independent contractor status.
[47]
As for the integration
test, it is not a factor that the courts seem to consider by itself anymore. The
central question of whether the person who has been engaged to perform the
services is performing them as a person in business on his or her own account
is to be determined by considering all of the other above‑mentioned
factors in applying the so-called four-in-one test (Wiebe Door, supra,
Sagaz, supra, paragraph 47). The fact that the worker,
on being engaged to perform the services in question, did not perform them in
the course of an already established business of her own is not decisive, and
she may well have been an independent contractor even though she did not enter
into the contract in the course of an existing business carried on by her (Wiebe
Door, supra, page 564, where reference is made to the observations of
Cooke J. in Market Investigations, Ltd. v. Minister of Social Security,
[1968] 3 All E.R. 732).
[48]
In Family Services
Perth-Huron, supra, Judge Rip concluded that a special‑service
provider working for a non-profit organization under conditions similar to those
in the present case was an independent contractor even though she was not
carrying on an existing business. That organization provided support services
at home to children who had developmental or physical handicaps or who required
specific services. It referred to service providers people requiring or
desiring services available under the Special Services at Home Program of the
Ontario Ministry of Community and Social Services. When the family was matched with
a provider, there was an initial meeting between the co-ordinator, the service
provider and the family. The service provider then followed a program prepared
by a psychologist or a social worker. Together the family and the service provider
arranged how and when the services would be provided. The contract stipulated
the number of hours per week that the services were to be provided and the rate
per hour. The service provider kept time sheets and travel expense sheets, and
her profit was determined by the number of hours worked with a client. She was
entitled to a travelling allowance when using her own vehicle. She submitted
progress reports, and the co-ordinator was responsible for supervising and
monitoring the program followed and was to be informed immediately if any
concerns or problems arose. The service provider could work with more than one
client at a time.
[49]
In Connor Homes,
Connor Homes was licensed by the province of Ontario to operate foster homes
through which it provided care for children with serious behavioural and
developmental disorders. Connor Homes retained child and youth workers to provide
those services. Two of the workers were remunerated on the basis of an hourly
rate upon submission of invoices, and they also received payments to cover
transportation. The contract could be terminated on 14 days’ notice by the
worker. Another worker, working as an area supervisor, signed a five-year
contract, which she could terminate on 60 days’ prior written notice. She was
remunerated at a per-diem rate for each child resident in a foster home who was
under her supervision, payment being made upon presentation of invoices. The
contract included, in her case, a non-competition clause. The three workers
were not required to take any financial risks.
[50]
The Federal Court of
Appeal concluded that these individuals were acting as employees of Connor
Homes. The Court found that there was a significant degree of control over the
duties exercised by the workers and the manner in which these duties were
carried out. Indeed, Connor Homes controlled the individuals’ duties on a
day-to-day basis. The performance of administrative tasks was dictated to the
workers and mandatory attendance at staff meetings to discuss work procedures,
work scheduling and day-to-day occurrences in the homes was imposed upon them.
Connor Homes also provided guidance and instruction to them regarding how to
manage difficult situations with clients, as well as with respect to marketing
activities to be undertaken on Connor Homes’. It was even acknowledged that the
duties performed by the workers concerned were, in fact, the same as those
exercised by Connor Homes’ employees.
[51]
I am of the view that
the present case bears greater similarity to the situation in Family
Services Perth-Huron, supra, than to that in Connor Homes,
since the control exercised by the payer in the former case and in the case
before me was minimal in comparison to the control exercised over the workers in
Connor Homes. Although the chance of profit here was minimal, I conclude,
as judge Rip did with regard to the worker in Family Services Perth-Huron,
that Melissa had skills which she could eventually use for profit even though
she was not carrying on an existing business.
[52]
On the whole, I find
that it may be inferred from the evidence that the appellant and Melissa
operated in a manner consistent with a client-independent contractor
relationship.
[53]
I therefore conclude
that Melissa was not employed in insurable and pensionable employment within
the meaning of paragraph 5(1)(a) of the EI Act and paragraph 6(1)(a)
of the CPP while working for the appellant during the period from January 1, 2010
to December 8, 2011.
[54]
The appeals are allowed
and the decision of the Minister issued on September 4, 2012, is vacated
and the determination by the CPP/EI rulings officer dated February 15, 2012,
is reversed.
Signed at Ottawa, Canada, this 19th day of September 2013.
“Lucie Lamarre”
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