Date: 20070206
Docket: A-77-06
Citation: 2007 FCA 33
CORAM: LÉTOURNEAU
J.A.
SEXTON
J.A.
EVANS
J.A.
BETWEEN:
ANDRE GAGNON
Appellant
and
THE MINISTER OF NATIONAL
REVENUE
Respondent
REASONS FOR JUDGMENT
LÉTOURNEAU J.A.
[1]
This is an
appeal against a decision of a judge of the Tax Court of Canada (judge) which
upheld the Minister of National Revenue’s (minister) determination that eleven
individuals who performed work for the appellant were engaged in insurable and
pensionable employment contracts of service, rather than as independent
contractors under contracts for services.
[2]
The
appellant is a drywaller, much of whose work comes from a single construction
company. When he has more work than he can handle, he engages other drywallers
to work on the jobs.
[3]
The
appellant submits that the judge misapplied the criteria for determining
insurable employment to the facts of the case. In so doing, he made a palpable
and overriding error that warrants the intervention of this Court.
[4]
The judge
analyzed the business relationship of the drywallers with the appellant on the
basis of four factors approved by the Supreme Court of Canada in 671122
Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983, i.e.
direction and control, ownership of tools and opportunity for profit and risk
of loss. On the basis of his assessment of these factors he addressed what has
been called the “central question” in cases of this nature: were the drywallers
performing their services as individuals in business on their own account? See Sagaz,
supra, at para. 47.
[5]
The
contracts between the parties were oral contracts. At the hearing, no evidence
was provided as to the intention of the appellant and the individuals regarding
their business relationship. However, the four criteria analyzed by the judge
are relevant and helpful in ascertaining the intent of the parties to the contract
and the legal nature of their relationship. As the judge recognized, the four factors
are not exhaustive.
Direction and control
[6]
The
appellant submits that the judge gave no weight to the issue of direction and
control of the appellant over the individuals who worked for him. In the
appellant’s view, all the facts submitted to the judge showed a lack of
direction and control.
[7]
The judge
properly defined control as “the right to direct the manner of doing the work,
as opposed to whether that right was exercised by the Appellant”: see paragraph
14 of his reasons. He was of the view that the right to control and direct the
manner of doing the work was not a factor upon which he could put much emphasis
because the evidence failed to address the existence of the right: see
paragraphs 14 and 20 of his reasons.
[8]
In
assessing the insurability of a given employment, the minister assumes the
existence of a number of facts gathered from the workers and the business by
investigators. The burden is on the party who opposes the minister’s decision
to rebut these facts: see Le Livreur Plus Inc. v. The minister of National
Revenue and Laganière, 2004 FCA 68, at paragraph 12. In this case, as in
all others of the same nature, control of the activities of the workers is usually
a fact relied upon by the minister: see, for example, the letters sent by the
minister to the appellant on January 29, 2004 alleging control over the
workers, Appeal Book, volume 2, pages 120 to 141. The Notice of Appeal filed by
the appellant denies the existence of control over the activities of the
workers: see Appeal Book, volume 1, page 9, paragraph 38. The Reply to the
Notice of Appeal, although not as consistent in form and substance as it should
be, states control as an assumption of fact: see Appeal Book, volume 1, pages
15, 17, 18 and 20.
[9]
The
conclusion of the judge that the evidence failed to address the right of the
appellant to control and direct the manner of doing the work is supported by
the record. In these circumstances, given that the appellant failed to rebut
the asserted presumption of control, the fact of such control is deemed proven.
Ownership of tools
[10]
The judge
considered the ownership of tools in this case and concluded that this fact was
of no assistance in the present instance: see paragraph 17 of his reasons. He
was of the view that the investment by the workers was minimal, i.e. about
$1,000.00. In addition, the evidence revealed that the appellant or the builder
provided many other things, tools and other necessary supplies to the workers.
There was also evidence that drywallers who worked as employees, not
independent contractors, on union jobs also normally used their own tools.
[11]
While it
is true, as the appellant pointed out, that the fact that others might provide
tools to the workers does not necessary entail that these workers are employees
(see Capri Interiors Ltd. v. Canada (Minister of National Revenue – M.N.R.),
2004 TCC 23; Precision Gutters Ltd. v. Canada (Minister of National Revenue
– M.N.R.), 2002 FCA 207), I do not believe that, in this case, the
ownership of tools and the circumstances surrounding that ownership carry
sufficient weight to overcome the finding relating to direction and control. I
can see no basis on which I can conclude that the judge committed an overriding
and palpable error in giving little weight to this factor.
Opportunity for profit and risk of loss
[12]
The judge
stressed the importance of this factor in determining the relationship between
the appellant and the workers: see paragraph 18 of his reasons. Of the eleven
workers, only two were paid on a piecework basis and, therefore, could earn
more if they did more work or worked faster. It is also true, as the judge
noted, that employees paid by the hour could also earn more if they worked more
hours: ibidem.
[13]
The
difficulty in applying this factor comes from the fact that paragraph 5(1)(a)
of the Employment Insurance Act, S.C. 1996, ch. 23 also recognizes as
insurable employment an employment under a contract of service where the
earnings are calculated by the piece or partly by the hour and partly by the
piece. The provision reads:
|
INSURABLE EMPLOYMENT
Types of insurable employment
5. (1) Subject to subsection (2), insurable
employment is
(a)
employment in Canada by one or more employers, under any
express or implied contract of service or apprenticeship, written or
oral, whether the earnings of the employed person are received from the
employer or some other person and whether the earnings are calculated by
time or by the piece, or partly by time and partly by the piece, or
otherwise;
|
EMPLOI ASSURABLE
Sens de « emploi assurable »
5. (1) Sous réserve du paragraphe (2), est un
emploi assurable :
a) l’emploi exercé au Canada pour un ou
plusieurs employeurs, aux termes d’un contrat de louage de services
ou d’apprentissage exprès ou facile, écrit ou verbal, que l’employé reçoive
sa rémunération de l’employeur ou d’une autre personne et que la
rémunération soit calculée soit au temps ou aux pièces, soit en partie
au temps et en partie aux pièces, soit de toute autre manière;
|
(Emphasis added)
[14]
It is therefore not
sufficient to simply look at the fact that the earnings are calculated by the
piece and that, as a result, these earnings can be more substantial than if
they were calculated by the hour. This fact has to be assessed in the broader
context of all the other circumstances and conditions relating to the
performance of the contract. Otherwise, the process involves an element of
circularity: paragraph 5(1)(a) admits of the possibility that a contract
of service can exist where the earnings are calculated by the piece and the
very fact that the earnings are paid by the piece is used to determine whether
the contract is a contract of service.
[15]
The judge looked at
all the circumstances surrounding the performance of the contract when he
considered the fact that two workers were paid by the piece: see paragraphs 18
to 21 of his reasons. There was evidence on the record to support his
conclusion that the opportunity for profit and risk of loss in this case did
not militate in favor of the conclusion that the workers were independent
businessmen. I cannot find in this conclusion, and in his assessment of this
factor, a palpable and overriding error.
[16]
Counsel for the
appellant relied heavily upon the decision of this Court in Precision
Gutters Ltd., supra, where a number of installers of building
gutters were found to be independent contractors. That case is distinguishable
on three grounds.
[17]
First, the Tax Court
judge applied the wrong test in that case: see paragraphs 13 to 15 of the reasons.
As a result, this Court needed to apply the proper test to the facts. No
deference was then due to the decision of the Tax Court.
[18]
In addition, the
judge of the Tax Court found that the control test favored characterizing the
installers as independent contractors. Our Court did not disagree with that
finding: see paragraph 22 of the reasons. Here, the control test favors a
characterization as employees.
[19]
Finally, that case
did not involve piecework and earnings by the piece. Rather, the work was
performed under a contract whose price was negotiated 20%-30% of the time. Our
Court found that the ability to negotiate the terms of the contract entailed a
chance of profit and a risk of loss.
Conclusion
[20]
For these reasons, I
would dismiss the appeal with costs.
“Gilles
Létourneau”
“I
agree
J.
Edgar Sexton J.A.”
“I
agree
John
M. Evans J.A.”
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