Date: 20100316
Dockets: A-481-08
A-483-08
Citation: 2010 FCA 74
CORAM: NOËL
J.A.
NADON
J.A.
LAYDEN-STEVENSON
J.A.
BETWEEN:
OLTCPI INC.
Appellant
and
THE MINISTER OF NATIONAL
REVENUE
Respondent
REASONS FOR JUDGMENT
NOËL J.A.
[1]
These are appeals
from decisions of Weisman D.J. (the Tax Court Judge) confirming two
determinations made by the Minister of National Revenue (the Minister)
according to which Renu Arora (Ms. Arora) was engaged in insurable employment
pursuant to the Employment Insurance Act, S.C. 1996, c. 23 (the EI Act)
and pensionable employment pursuant to the Canada Pension Plan, R.S.C.
1985, c. C-8 as amended (the CPP), and that accordingly the appellant had the
duty to deduct and remit the contributions payable with respect to her under
these statutes.
[2]
The main issue turns
on whether the appellant, in making Ms. Arora’s services available to a related
company in her capacity as dietician, acted as a placement agency for purposes
of paragraph 6(g) and section 7 of the Insurable Earnings and
Collection of Premiums Regulations, S.O.R./97-33 (the EI Regulations) and
subsection 34(1) of the Regulations Respecting the Administration of the
Canada Pension Plan, S.O.R./78-142 s. 3 (the CPP Regulations).
[3]
The two appeals were
consolidated by order of this Court dated January 9, 2009. Pursuant to this
order these reasons dispose of both appeals, the original being filed in docket
A-481-08 and a copy thereof in docket A-483-08.
[4]
For the reasons which
follow, I am of the view that both appeals should be dismissed.
THE FACTS
[5]
During the period in
issue, the Ontario Long Term Care Providers Incorporated or OLTCPI (the
appellant) assumed the function of providing dieticians and social workers to
its related company and sole client Leisureworld Inc. (Leisureworld), Ontario’s largest operator of long term care facilities for senior
citizens. In addition, the appellant provided bulk purchasing services for food
and medical supplies for all of Leisureworld’s nursing homes (Reasons, para.
1). There was no written agreement reflecting this arrangement (Evidence of
David Cutler, Transcript, p. 171).
[6]
The Ontario Ministry
of Health and Long Term Care (the Ministry of Health) provided for minimum
standards for the dietary care of nursing home patients (Appeal Book, p. 37).
In addition, the Dietary Services and Criteria Guidelines published by
the Ministry of Health (the Ministry guidelines) required Leisureworld to
provide dietary services to its patients and meet specific requirements (Reasons,
para. 17). The evidence of the appellant was that its principal task with
respect to dieticians was to ensure that the guidelines and other requirements
of the Ministry of Health for dietary matters and for dieticians were being met
by Leisureworld nursing homes (Evidence of David Cutler, Transcript, p. 154).
[7]
The payment made by
Leisureworld for the services provided by the appellant took the form of a flat
fee computed by reference to the number of residents in the facility being
serviced (Evidence of David Cutler, Transcript, pp. 148 and 149). This flat fee
was for the dietician and social work services. The appellant did not bill
Leisureworld for the bulk purchasing service as it earned sufficient profits
from the spread between the flat fee paid by Leisureworld and the cost of
providing the dieticians and social workers (idem, p. 198).
[8]
When a dietician was
required at a Leisureworld facility, an advertisement would be posted on the
internet by the appellant using Leisureworld’s letterhead (Evidence of David
Cutler, Transcript, pp. 174 and 175; Job description, Appeal Book, p. 46). Upon
acceptance, the agreement between the appellant and the dieticians was reduced
to writing and followed a standard template (Consultant Agreement, Appeal Book,
p. 49). The only variables in the template were the hourly rate of pay and the
number of monthly hours required. The monthly hours were determined by the size
of the long term care facility being serviced by the dietician (Evidence of
Lori Halliwuska, Transcript, p. 27).
[9]
The agreement between
the appellant and Ms. Arora stipulated that she was an independent contractor
and was not to be considered an employee of the appellant or any of its
clients; that Ms. Arora would be required to obtain liability insurance; and
that, Ms. Arora would provide 82 hours of service per month, at an hourly rate
of $35, to be billed to the appellant via invoices (Reasons, para. 2).
Leisureworld was not a party to this agreement.
[10]
Ms. Arora filed her
income tax returns on the basis that she was an independent contractor (Reasons,
para. 2).
[11]
While performing her
services, Ms. Arora had the ability to set her own hours. However, she was
expected to attend the facilities during normal business hours, Monday to
Friday, 8:00am to 6:00pm (Evidence of Robert Low, Transcript, p. 137). She was
able to set the order of her patient visits, but was obliged to prioritize
patient referrals made by the nursing staff, doctors or the directors who were
acting on behalf of Leisureworld (Evidence of Lori Halliwuska, Transcript, pp.
64 and 66; Evidence of Renu Arora, Transcript, pp. 34 and 35).
[12]
The Ministry
guidelines required that nursing home patients be served a variety of foods, be
consulted on menus, that foods be served at normal meal times in a pleasant
manner. Leisureworld had its own “Clinical Dietician Job Description” which
incorporated the Ministry guidelines and required the dietician to go beyond
those guidelines (Reasons, para. 17).
RELEVANT STATUTORY PROVISIONS
[13]
Paragraph 6(g)
and section 7 of the EI Regulations and subsections 34(1) and (2) of the CPP
Regulations provide respectively:
EI Regulations
|
6. Employment
in any of the following employments, unless it is excluded from insurable
employment by any provision of these Regulations, is included in insurable
employment:
…
(g)
employment of a person who is placed in that employment by a placement or
employment agency to perform services for and under the direction and control
of a client of the agency, where that person is remunerated by the agency for
the performance of those services.
|
6. Sont inclus dans les emplois assurables, s’ils ne sont pas des emplois
exclus conformément aux dispositions du présent règlement, les emplois
suivants :
[…]
g) l’emploi exercé par une personne appelée par une agence de placement à
fournir des services à un client de l’agence, sous la direction et le
contrôle de ce client, en étant rétribuée par l’agence.
|
|
7. Where a
person is placed in insurable employment by a placement or employment agency
under an arrangement whereby the earnings of the person are paid by the
agency, the agency shall, for the purposes of maintaining records,
calculating the person's insurable earnings and paying, deducting and
remitting the premiums payable on those insurable earnings under the Act and
these Regulations, be deemed to be the employer of the person.
|
7. L’agence de placement qui procure un emploi assurable à une personne
selon une convention portant qu’elle versera la rémunération de cette
personne est réputée être l’employeur de celle-ci aux fins de la tenue des registres,
du calcul de la rémunération assurable de la personne ainsi que du paiement,
de la retenue et du versement des cotisations exigibles à cet égard aux
termes de la Loi et du présent règlement.
|
CPP Regulations
|
34. (1) Where any individual is placed by a
placement or employment agency in employment with or for performance of
services for a client of the agency and the terms or conditions on which the
employment or services are performed and the remuneration thereof is paid
constitute a contract of service or are analogous to a contract of service,
the employment or performance of services is included in pensionable
employment and the agency or the client, whichever pays the remuneration to
the individual, shall, for the purposes of maintaining records and filing
returns and paying, deducting and remitting contributions payable by and in
respect of the individual under the Act and these Regulations, be deemed to
be the employer of the individual.
(2)
For the purposes of subsection (1), “placement or employment agency” includes
any person or organization that is engaged in the business of placing
individuals in employment or for performance of services or of securing
employment for individuals for a fee, reward or other remuneration.
|
34. (1)
Lorsqu’une personne est placée par une agence de placement pour la fourniture
de services ou dans un emploi auprès d’un client de l’agence, et que les
modalités régissant la fourniture des services et le paiement de la
rémunération constituent un contrat de louage de services ou y correspondent,
la fourniture des services est incluse dans l’emploi ouvrant droit à pension,
et l’agence ou le client, quel que soit celui qui verse la rémunération, est
réputé être l’employeur de la personne aux fins de la tenue de dossiers, de
la production des déclarations, du paiement, de la déduction et du versement
des contributions payables, selon la Loi et le présent règlement, par la
personne et en son nom.
(2) Une agence de
placement comprend toute personne ou organisme s’occupant de placer des
personnes dans des emplois, de fournir les services de personnes ou de
trouver des emplois pour des personnes moyennant des honoraires, récompenses
ou autres formes de rémunération.
|
DECISION UNDER APPEAL
[14]
The Tax Court Judge
begins by asking whether paragraph 6(g) of the EI Regulations can apply
to Ms. Arora if she is an independent contractor, a status which she recognized
in the agreements which she signed (Reasons, para. 6). Relying on the decision
of this Court in Sheridan v. Canada, [1985] F.C.J. No. 230 (Sheridan), the Tax Court Judge answers this
question in the affirmative (Reasons, paras. 7, 8 and 9). However, he holds
that the same cannot be said with respect to subsection 34(1) of the CPP
Regulations which require that Ms. Arora be engaged under a contract analogous
to a contract of service (Reasons, para. 10).
[15]
Dealing with the
central issue, the Tax Court Judge finds that the appellant acted as a
placement or employment agency (Reasons, para. 13). According to the Tax Court
Judge, it is clear that the appellant placed Ms. Arora in Leasureworld’s
Lawrence Avenue facility, as the purpose of the advertisement which it placed
on the Dieticians of Canada website was to fill its client’s vacancy at that
location (Reasons, para. 15). The evidence also revealed that the appellant
earned a profit for doing so (Reasons, para. 13).
[16]
In reaching the
conclusion that the appellant was a placement agency, the Tax Court Judge
rejected the appellant’s contention that it was providing a distinct service
and was in a situation analogous to that of a contractor who agrees to send
personnel to a construction site to perform a particular service under the
supervision of a general contractor (Reasons, para. 14).
[17]
The Tax Court Judge
then turns to the question of whether Ms. Arora was “under the direction or
control” of Leisureworld, as these words are used in paragraph 6(g) of
the EI Regulations. In this respect, the Tax Court Judge notes that she was
required by Leisureworld to perform tasks over and above those set out in the
Ministry guidelines (Reasons, para. 17), and that she had to report and account
for every minute of the day (Reasons, para. 18). The Tax Court Judge goes on to
conclude that Ms. Arora was under the de facto control of Leisureworld
which had effective authority to dismiss her (Reasons, paras. 19 and 20).
[18]
The Tax Court Judge
then addresses the question of whether the contract pursuant to which Ms. Arora
performed her services was “analogous to a contract of service” for purposes of
subsection 34(1) of the CPP Regulations. This according to the Tax Court Judge
requires an examination of the total relationship of the parties using the four
traditional criteria identified in Wiebe Door Services v. M.N.R., 87 DTC
5025 (FCA) (Wiebe Door) (Reasons, para. 21).
[19]
As to control, the
Tax Court Judge finds Ms. Arora’s working relationship with Leisureworld, for
reasons already given, analogous to a subordinate employee (Reasons, para. 22).
With respect to ownership of tools, the only significant tools with which Ms.
Arora was provided was the facility in which her patients resided (if that can
be viewed as a tool) and an office with a computer allowing access to patient
information. Ms. Arora for her part contributed her expertise, although this
may not be considered as a tool (Reasons, paras. 23 to 27). As to the chance of
profit arising from Ms. Arora’s activities with Leisureworld, the Tax Court Judge
found that these existed in theory only (Reasons, paras. 28 to 30).
[20]
While the common
intention of the parties was clearly that Ms. Arora be an independent
contractor, the Tax Court Judge notes that three of the four criteria
conclusively indicate that her working relationship with Leisureworld was
analogous to a contract of service. The Tax Court Judge concludes that, in
those circumstances, the intention of the parties is not to be given great
weight (The Royal Winnipeg Ballet v. M.N.R., [2006] F.C.J. No. 339
(F.C.A.) (Reasons, para. 31).
[21]
The Tax Court Judge
goes on to deny both appeals on the basis that the Minister’s determinations
for EI and CPP purposes were objectively reasonable (Reasons, paras. 33 and
34).
ALLEGED ERRORS
[22]
The appellant first
claims that the Tax Court Judge misunderstood the functions which it was called
upon to perform within the Leisureworld group. Specifically, the appellant
contends that it was responsible for ensuring that the Ministry guidelines and
requirements for dietary matters and for dieticians’ duties were being met by
the Leisureworld nursing homes (Memorandum, para. 30). It also had functions
beyond dietary matters in that it provided Leisureworld with social workers and
arranged for bulk purchases (Memorandum, para. 35). Relying on the decision of
the Tax Court in Supreme Tractor Services Ltd. v. M.N.R., 2001 CanLII 748
(T.C.C.),
2000-4909-CPP (Supreme Tractor), the appellant contends that it should
be viewed as a subcontractor which, in the course of providing services, places
personnel at the premise of the client being serviced, rather than as a
placement agency (Memorandum, paras. 49 to 53).
[23]
Alternatively, the
appellant contends that the Tax Court Judge erred in holding that for EI
purposes, it was sufficient to hold that Ms. Arora was performing her functions
at Leisureworld under the direction and control of Leisureworld (Memorandum,
paras. 54 to 61). At the hearing of the appeal, counsel for the appellant conceded
that this issue was academic since the Tax Court Judge did conduct the required
analysis, albeit for CPP purposes. Hence he did not pursue this argument.
[24]
In any event, the
appellant contends that the Tax Court Judge erred in holding that the
relationship between Ms. Arora and Leisureworld was analogous to a contract of
service. In this respect, the appellant submits that the evidence did not allow
for the conclusion that Ms. Arora had no chance of profit or risk of loss, and
that the Tax Court Judge did not place sufficient weight on the contractual
intent of the parties (Memorandum, paras. 78 to 89).
ANALYSIS AND DISPOSITION
[25]
Two issues arise from
the submissions made by the appellant in support of the appeals, namely,
whether the Tax Court Judge properly held that the appellant was a “placement
agency” and that the terms and conditions under which Ms. Arora worked were analogous
or similar to a contract of service.
[26]
The appellant did not
address the standard of review. In my view, the question whether the appellant should
be viewed as a placement agency based on the test set out in Supreme Tractor
gives rise to a question of mixed fact and law as does the question as to whether
the Wiebe Door factors were properly applied. It follows that absent an
extricable error of law, this Court cannot intervene unless the Tax Court Judge
is shown to have committed a palpable and overriding error.
Placement agency
[27]
Turning to the first
issue, the relevant provisions of the EI Regulations and the CPP Regulations,
which are relevant to the disposition of the appeals, are similar but not
identical. For one thing, the term “placement agency” is defined in the CPP
Regulations (subsection 34(2)) but not in the EI Regulations. The Tax Court
Judge nevertheless applied this definition for EI purposes as well, an approach
with which the appellant does not take issue.
[28]
It is common ground
that Leisureworld was a client of the appellant, that Ms. Arora was placed by
the appellant at the Leisureworld Lawrence facility and that the appellant
remunerated Ms. Arora. However, the appellant maintains that in so doing, it
was providing a basket of services including that of ensuring that Leisureworld
met the requirements of the Ministry of Health for dietary matters and for
dieticians’ duties. As such it was not acting as a placement agency.
[29]
In support of this
argument, the appellant refers to the distinction drawn by Porter D.J. in Supreme
Tractor. The key passages relied upon by the appellant are the following:
[12]
Thus, the
first question to be asked is whether the worker is performing services for
entity A as part of the business of the latter, albeit part of that business
may be a contract for entity A to provide a service for entity B, or whether
entity A is simply acquiring personnel as its very business with no contract to
undertake anything further than to pass the worker on to entity B to undertake
whatever the business of entity B might be. The simple question to ask is
whether entity A is under any obligation to provide a service to entity B other
than simply provide personnel. Is it obligated to perform in some other way
than simply to make people available? If the answer is yes, it clearly has
business of its own as does any general contractor on a building site and the
worker is not covered by the Regulations under either statute. If however, the
answer is no, that is, it is not obligated to carry out any service other than
to provide personnel, then clearly the worker in such a situation is covered by
the Regulations under both statutes.
[13]
The question
as I see it is not so much about who is the ultimate recipient of the work or
services provided as this will cover every single possible subcontract
situation, but rather who is under obligation to provide the service. If the
entity alleged to be the placement agency is under an obligation to provide a
service over and above the provision of personnel, it is not placing people,
but rather performing that service and is not covered by the Regulations.
[30]
In so saying, Porter
D.J. was addressing the difficulty in insuring that the placement agency
provisions not apply to persons, such as a subcontractor, providing services
which require that workers attend to the premises of the client and perform
functions, sometimes at the direction of the client. The question in this
regard is whether the person concerned is merely supplying workers or is doing
so in the course of providing a distinct service.
[31]
The difficulty
confronting the appellant in this regard is that its agreement with
Leisureworld was not reduced to writing and the evidence suggests that the dieticians
assigned to Leisureworld were asked to do more than ensure compliance with the
requirements of the Ministry of Health. For instance, Leisureworld’s “Clinical
Dietician Job Description” beyond incorporating the Ministry guidelines
required the dieticians to: develop programs; provide resource services;
participate in the pharmacy and therapeutics committee; and meet with the
facility administrator (Reasons, para. 17).
[32]
Ms. Arora was also
required to: generate weight change reports; prepare high risk resident reports
for Leisureworld’s Director of Nursing; author supplement change reports for
the purpose of cutting Leisureworld’s food costs; and prepare detailed site
visit reports (Evidence of Ms. Arora, Transcript, pp. 16 to 19, 27 and 32).
While Ms. Arora’s mandate was mainly for high risk patients, the Director of
Nursing also required her to follow low and moderate risk patients as well (Reasons,
para. 18).
[33]
The picture which
emerges from the evidence is that, beyond insuring compliance with the
requirements of the Ministry of Health, the dieticians were assigned by the
appellant to Leisureworld in order to answer to Leisureworld’s specific needs
and provide the particular services which they were called upon to provide by
the Leisureworld staff. As such, it was open to the Tax Court Judge to hold
that the appellant’s situation was not analogous to that of a contractor
providing personnel in the performance of a distinct service.
[34]
The fact that more
than one service was provided by the appellant is of no assistance on the facts
of this case. The bulk purchasing service has no connection with the supply of
dieticians. As was stated by the Tax Court Judge, there is no requirement in
the definition of a placement agency that the placing of workers be the sole
function of the agency (Reasons, para. 14).
[35]
The situation is
rather like the one in Big Sky (Lundle) Drilling Inc. v. Canada (Minister of National Revenue), [2002] T.C.J. No. 16 (Big Sky),
a case also decided by Porter D.J. In that case, Porter D.J. rejected the
appellant’s claim that personnel was being supplied to a third party in the
course of the performance of a distinct service. He found that the appellant
was in fact providing two separate services, that is supplying personnel on the
one hand and providing management and consulting functions on the other (Big
Sky, paras. 43 and 49).
[36]
I can detect no error
in the Tax Court Judge’s conclusion that in supplying dieticians to
Leisureworld, the appellant was acting as a placement agency.
Analogous to a contract of service
[37]
The Tax Court Judge
concluded that the terms and conditions of Ms. Arora’s working relationship
with Leisureworld were analogous to those which would apply to a subordinate
employee. In reaching this conclusion, the Tax Court Judge used the four in one
criteria set out in Wiebe Door, namely control ownership of tools,
chance of profit and risk of loss.
[38]
The appellant does
not take issue with the legal approach used by the Tax Court Judge in reaching
his conclusion. Rather, it argues that the conclusion reached was not supported
by the evidence. In particular, the appellant contends that the Tax Court Judge
erred in holding that there was direction and control where there was none, in
failing to find that Ms. Arora had a chance of profit and a risk of loss where
both elements were present, and in failing to give proper weight to the
intention of the parties.
[39]
With respect to
control, it is apparent from the reasons of the Tax Court Judge that there was
evidence to support the conclusion that he reached.
Email this Content