Citation: 2013 TCC 301
Date: 20130924
Docket: 2012-3442(EI)
BETWEEN:
DONALD ERIC SANDBERG,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
THE FRONTIER CENTRE FOR PUBLIC POLICY INC.,
Intervener.
REASONS FOR JUDGMENT
Woods J.
[1]
The issue in this appeal is
whether Donald Sandberg was engaged as an employee or independent contractor by
The Frontier Centre for Public Policy Inc. (“Frontier”) during a two-year
period from January 1, 2007 to December 31, 2008 (the “Period”).
[2]
The appeal relates to a decision
made by the Minister of National Revenue under the Employment Insurance Act
that Mr. Sandberg was an independent contractor. Mr. Sandberg appeals from that
decision.
[3]
Frontier has filed a notice of
intervention and its counsel has informed the Court that it relies on the
Minister to represent its interests at the hearing.
[4]
As a preliminary
matter, I note that this is not the first time that this issue has been
adjudicated. For purposes of employment standards legislation in Manitoba, Mr. Sandberg has previously been determined to be engaged as an independent
contractor by Frontier. Neither party
provided any detail regarding this decision and for this reason I have not
given any deference to it.
[5]
Three witnesses provided evidence
at the hearing. Mr. Sandberg testified on his own behalf and called Dennis
Owens, who is a friend and former colleague. The Minister called Peter Holle
who was, and continues to be, the president of Frontier.
Factual background
[6]
Mr. Sandberg is a status
Indian who lives in The Pas, Manitoba. He is a freelance writer who has had a
long-term interest in aboriginal affairs, and in particular in advocating for
more accountability by band leadership.
[7]
Frontier is a charitable
organization that undertakes research on a wide variety of public policy
issues. Mr. Holle described Frontier as a think tank.
[8]
Around 2004, Mr. Holle became
aware of Mr. Sandberg’s expertise on aboriginal policy issues and made an
arrangement with him to provide services to Frontier on a part-time basis for a
modest fee. The services generally involved writing a column twice a month and
making appearances at events.
[9]
Approximately two years after this initial retainer, Frontier embarked on a
project to study governance issues on reserves. The project involved obtaining the
views of residents of reserves by having a team of persons conduct surveys on
the reserves. The initiative was known as the Aboriginal Governance Index
(AGI).
[10]
Mr. Sandberg’s expertise was
essential to conducting the surveys because he had the trust of band leaders
and was able to obtain their consent to the surveys. Accordingly, he was in
charge of this aspect of the project.
[11]
The AGI project commenced around
2005 with the design phase, and Mr. Sandberg assisted in creating the survey
questions.
[12]
Subsequently, Mr. Sandberg led the
survey operation which took place annually for about 6 months. It was clear
from the evidence that Mr. Sandberg had the connections and skills necessary
to conduct this work, especially in convincing the band leadership to
cooperate.
[13]
After the annual survey work was
completed, Frontier arranged for a statistical analysis of the data and then
Frontier staff produced a report. Mr. Sandberg was not directly involved
in this process.
[14]
Initially, Mr. Sandberg was given
free rein with respect to the conduct of the surveys. In particular, he
selected the reserves to visit and was instrumental in choosing the team
members. The surveyors were generally young people, and many were acquaintances
or relatives of Mr. Sandberg.
[15]
Over time, disagreements developed
between Frontier staff and Mr. Sandberg. One of the main concerns from
Frontier’s perspective was high travel costs associated with the survey work.
[16]
Eventually, Frontier imposed more
control over the travel undertaken by Mr. Sandberg and the survey team,
including the selection of the reserves to be visited.
[17]
The arrangement between Mr. Sandberg
and Frontier was documented by written contracts dated January 13, 2004,
September 1, 2005 and October 1, 2006.
[18]
Frontier terminated the relationship
with Mr. Sandberg in 2010.
Applicable legal
principles
[19]
The meaning of the term
“employment” is central to this appeal. As the term is not defined in
legislation, it is necessary to apply the meaning developed in various court
decisions.
[20]
Some of the relevant
principles are summarized below, based on a recent decision of the Federal
Court of Appeal which is commonly referred to as Connor Homes
(1392644 Ontario Inc v MNR, 2013 FCA 85).
(a)
The ultimate question is whether
the worker is performing services as his own business (para 23).
(b)
The following factors are usually
relevant: level of control held by the payor, whether the worker provides his
own equipment, hires own helpers, manages and assumes financial risks, and has
an opportunity of profit in the performance of his tasks (para 29). These
factors are not exhaustive and no one factor is determinative.
(c)
The intention of the parties is also
relevant and should be considered first. However, the parties’ intent cannot
trump the objective reality, which must govern if it is inconsistent with
intent (para 39, 40).
Application to facts
[21]
I now turn to an application of
the legal principles to the facts of this case.
Evaluation
of evidence
[22]
I would comment first about the
reliability of the testimony.
[23]
With respect to Mr. Sandberg’s
testimony, I do have significant concerns. The testimony was evasive at times,
some of it was inconsistent with other evidence, and at other times the
testimony was improbable.
[24]
For example, at first Mr. Sandberg
acknowledged that he worked for Frontier in 2004. However, he backtracked from
this when he was shown a statement that he signed in connection with bankruptcy
proceedings in September 2005 which did not list any income from Frontier.
[25]
In addition, Mr. Sandberg
denied knowledge of two letters involving the termination of his contract in
February 2010. Both letters appear to be signed by Mr. Sandberg but he denied
that one of the signatures was his. It is unlikely that the signature would
have been forged. I did not find this testimony to be believable.
[26]
It is difficult in these
circumstances to have confidence in the reliability of Mr. Sandberg’s
testimony generally, and especially Mr. Sandberg’s testimony to the effect that
he signed the contracts with Frontier under duress.
[27]
As for the testimony of Mr. Owens and Mr. Holle, I found their testimony
to be generally reliable. I would note, however, that Mr. Holle’s testimony was
self‑interested and I did take that into account.
[28]
I would also comment that some of Mr. Holle’s
testimony had limited usefulness because the questions by counsel for the
Minister were not detailed enough to be persuasive.
[29]
As an example, Mr. Sandberg
testified that the contracts were generally signed much later than the date on
the contracts. Counsel for the Minister asked Mr. Holle when the contracts
were signed and he appeared to simply adopt the date at the top of the written
agreement. No evidence was led as to why Mr. Holle believed that this was
the date of signing and I was not persuaded that Mr. Holle had a personal
recollection of the signing date.
What
is the intent of the parties?
[30]
The written agreement that governs
the Period is dated October 1, 2006. As with the previous agreements, it
provides that Mr. Sandberg is engaged as an independent contractor and not
as an employee.
[31]
Mr. Sandberg testified that
he thought he was an employee notwithstanding the wording of the contract, and
he submits that he signed the contracts under duress and was not allowed to
consult with a lawyer. Mr. Holle disputed this testimony.
[32]
I find Mr. Holle’s version to be
more likely and I accept it.
[33]
Mr. Sandberg also submits
that the agreements were generally signed much later than their effective date.
Mr. Sandberg had been working under similar contracts since 2004. I do not
think the signing date of the 2006 contract has a bearing on the parties’
stated intention that Mr. Sandberg be an independent contractor.
[34]
Mr. Sandberg also submits
that no one had explained to him what independent contractor status meant. This
does not assist Mr. Sandberg. The written agreement governs the
relationship. By signing the agreement, Mr. Sandberg agreed to be bound,
even if he was under a mistaken impression as to its meaning.
[35]
I conclude that the clear intent
of the parties is an independent contractor relationship.
Does
the intent reflect objective reality?
[36]
The second step in the analysis is
to consider whether the reality is consistent with the expressed intent. The
factors noted above will each be considered.
(a)
Ability to control
[37]
Mr. Sandberg testified that
he was subject to micromanagement in his
AGI role.
[38]
Mr. Holle testified that at
the beginning of the relationship Frontier was a fledgling enterprise with few
processes and procedures. At first, Mr. Sandberg was given free rein in
his role with the AGI project. Over time, serious financial problems developed
and at the end of the relationship there was tight control over the financial
aspects of Mr. Sandberg’s AGI work, such as which reserves to visit.
[39]
Mr. Holle described that the
restrictions that Frontier placed on Mr. Sandberg over time were limited
to high level issues such as financial and libel matters.
[40]
The difficulty with the evidence
as a whole is that it focuses on the actual control exerted by Frontier. The
test is not actual control, but the ability to control (Meredith v The Queen,
2002 FCA 258).
[41]
In this case, the 2006 agreement
contains a provision dealing with control that was not in the prior agreements
with Mr. Sandberg. It states:
[…] The Independent
Consultant will work under the direction of the President of [Frontier] and the
Senior Policy Analyst, or as otherwise directed.
[42]
The wording of this clause is very broad, and it does not provide any
limit to the type of direction that Frontier may give. I would conclude that if
Mr. Sandberg refused to follow a particular direction, Frontier could exert its
legal right to give the direction under this provision.
[43]
Mr. Holle testified that
Mr. Sandberg needed only high level direction since he was the expert on
aboriginal matters.
[44]
I accept Mr. Holle’s
testimony in this regard, but the written agreement does not limit the nature
of the control that Frontier could exert if it wished to. It is the ability to
control that is the relevant consideration, and I find that Frontier had
considerable power under the agreement.
[45]
The control factor points heavily
towards an employment relationship.
(b) Whether worker provides own equipment
[46]
The relevant facts are that Frontier
agreed to reimburse Mr. Sandberg’s travel expenses, and provided him with
the use of an apartment in Winnipeg. Mr. Sandberg was also provided with a
laptop and blackberry. These factors point towards an employment relationship.
[47]
The evidence also reveals that Mr. Sandberg
was approached by Mr. Holle about purchasing vehicles that could be used
by the survey team when traveling to reserves. Mr. Sandberg would be paid a per
kilometer rate for providing the vehicles. Mr. Sandberg agreed to this
since the rate was generous. After a period of time, Frontier terminated this
arrangement because of the cost and began to employ rental cars from Enterprise.
[48]
The arrangement with the vehicles
shows entrepreneurial initiative on the part of Mr. Sandberg. However, I would
characterize it as a commercial arrangement separate from the provision of
services under the written agreements. I do not view this as a significant
factor in determining the nature of the services provided by Mr. Sandberg.
[49]
The submission by the Minister regarding
equipment focused on the expertise that Mr. Sandberg brought to the
arrangement. No authority was provided on this point, and I do not accept that
the supply of equipment is meant to encompass expertise.
[50]
Further, I consider that Mr. Sandberg’s expertise is a
neutral factor in considering whether he is an employee or independent
contractor. Expertise is a valuable attribute that is sought after in both
types of relationships.
[51]
Overall, I consider equipment to
be a factor that slightly favours an employment relationship.
(c)
Whether worker hires own helpers
[52]
There was conflicting evidence as
to whether Mr. Sandberg selected the surveying team. Mr. Holle suggested
that he did, whereas Mr. Sandberg testified that he only selected some of
the team.
[53]
I do not think that anything turns
on this. Mr. Sandberg may have chosen his team, but the team was engaged
by Frontier who paid their expenses. The evidence by Mr. Holle suggested
that the motivation for this was administrative. I do not think that motivation
has much relevance. The evidence as a whole suggests that the team members were
not hired by Mr. Sandberg.
[54]
I consider that this factor is
neutral.
(d) Whether worker manages and assumes financial risk
[55]
In general, Mr. Sandberg did
not assume financial risk with the arrangement because Frontier agreed to pay
his expenses.
[56]
Two special circumstances need to
be considered. The first concerns the vehicles supplied by Mr. Sandberg on
which I have already commented. In my view, this is a neutral factor because it
was a separate commercial arrangement.
[57]
The second circumstance is that
Mr. Sandberg sometimes advanced money to his team, and paid for his own
travel expenses, because there were problems obtaining payment from Frontier.
[58]
It is not clear from the evidence
whether the problems were only due to administrative issues at Frontier or
whether Mr. Sandberg and/or the survey team were partly at fault in these
disputes.
[59]
I do not view this as a significant
factor. It would not be unusual for a person leading a group of young surveyors
to have advanced funds as necessary regardless of whether the leader was an
employee or independent contractor. The important point is that the arrangement
contemplated that travel expenses of Mr. Sandberg and the team would be paid
for and/or reimbursed by Frontier.
(e)
Whether worker has opportunity for
profit
[60]
The fee schedule provided for in
the contract contemplates a fixed monthly fee of $3,120 plus disbursements, $50
for each radio commentary and a possible bonus of up to 10 percent for meeting
individual and corporate performance targets in accordance with Frontier’s
policies and performance targets. The fee structure is slightly in favour of
employment status, because it is based partly on corporate performance which
may have little to do with Mr. Sandberg’s contribution.
[61]
There was some opportunity for
profit from the vehicles purchased by Mr. Sandberg. As noted above, I have
concluded that this is a separate arrangement which does not affect the nature
of the services provided.
[62]
On balance, I find that the
opportunity for profit factor tilts slightly towards an employment
relationship.
Conclusion
[63]
In weighing the above factors, I
would conclude that the objective reality is not consistent with an independent
contractor relationship. In reaching this conclusion, I find that the control
that could be exerted by Frontier is a dominant factor in this case.
[64]
The objective reality must trump
the parties’ intention. Accordingly, the decision of the Minister will be
varied on the basis that Mr. Sandberg was engaged as an employee of
Frontier during the Period.
[65]
Finally, I would comment that it
is unsettling to find in favour of a litigant whose testimony I find to be
untruthful. However, since it is the duty of the Court to apply the applicable
legal principles to the evidence as a whole, I find that Mr. Sandberg
succeeds in this appeal.
[66]
The appeal will be allowed. Each
party shall each bear their own costs.
Signed at Ottawa, Ontario this 24th day of September
2013.
“J. M. Woods”
Email this Content