Date: 19980814
Dockets: 96-1607-UI; 97-1851-UI; 96-67-CPP; 97-191-CPP
BETWEEN:
FIMRITE OILFIELD SERVICES LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Rip, J.T.C.C.
[1] Fimrite Oilfield Services Ltd. ("Fimrite")
appeals from determinations made by the Minister of National
Revenue ("Minister") pursuant to the Canada Pension
Plan ("CPP") and the Unemployment
Insurance Act ("Act") that
a) Wes Miskulin ("Miskulin") was employed by Fimrite
in pensionable employment within the meaning of the CPP
and in insurable employment within the meaning of the Act
during the period March 24, 1994 to August 31, 1994; and
b) that Beverly Headon[1], Rocky Pittman, Blain Dennis, Mark Cario,
Christopher Head, Kieran Moore, Troy Fimrite, Derwin Wheeler,
Kalvin Isele and Gary Kooll were employed by Fimrite in
pensionable employment within the meaning of the CPP and
in insurable employment within the meaning of the Act
during the period January 1, 1995 and June 30, 1996.[2]
[2] The appeals were heard on common evidence.
[3] Wavell MacArthur Fimrite, President of Fimrite, testified
on behalf of the appellant. Upon discharge from the Royal
Canadian Navy, Mr. Fimrite homesteaded in Silver Valley, Alberta.
He entered the oilfield industry to supplement his farm income.
He had been employed by Imperial Oil as a seismographer in the
Arctic, handling explosives and blasting holes in the seismic
operation. He incorporated the appellant. The appellant carries
on the business of oilfield servicing and more specifically,
provides the services of industrial steam units, vacuum trucks
and grass mowing services to corporations exploiting oilfields
and to forestry corporations.
[4] During the relevant period Fimrite owned three steamers
and three vacuum trucks and hired workers, who Mr. Fimrite
referred to as "subcontractors", to operate them on its
behalf. A steam unit is a truck mounted unit that produces steam
to thaw frozen pipes, oil wells and gas plants. The system has a
high pressure hot water wash used for to clean oil spills and to
wash industrial buildings, gas plant facilities and
"anything in the oil and gas industry". Chemical
dispensers for emulsifiers and degreasers are attached to the
units. Emulsifiers are used to break down the oil to facilitate
the cleaning.
[5] Fimrite also owns vacuum trucks that are used to clean oil
and other industrial spills or mishaps. The trucks are also used
to haul dirty water and condensation and hazardous waste from gas
well site and gas plant facilities. Anything that cannot be
transported by conventional trucks are transported by the vacuum
trucks. The truck tanks are licensed by the federal government
and are inspected by government.
[6] The services of property maintenance, grass cutting,
general trimming and maintaining of individual oil well leases
and plant sites are necessary for the prevention of ground fires
around wells.
[7] Mr. Fimrite estimated that the proportion of Fimrite's
business income is about ten per cent from grass mowing and
maintenance, 45 per cent from industrial cleaning and 45 per cent
from vacuum trucks. While the cutting of grass is done during the
spring, summer and fall, the steamer business is extremely busy
during the extreme cold of winter. Fimrite operates 365 days a
year, 24 hours a day.
[8] Fimrite performs services for about 75 to 80 different oil
and gas companies and some forestry companies who contact Fimrite
as the occasion requires, either when there is an oil spill or
when there is a freeze-up. The hauling of fluids is "a
little bit more regular" but that depends on how much a
particular plant may be producing.
[9] The workers who are the subject of these appeals operated
the various units. When Fimrite received a call from a client,
Fimrite would get in touch with one of the workers who would
proceed to the client's site. At the site the worker and the
client would discuss and decide what work was to be performed and
the worker proceeded to execute the job. After the work was
performed the worker would prepare an invoice, have the client
sign it and leave a copy with the client. In some cases, where
disposal of wastes is involved, the worker and the client would
determine the time required to complete the disposal and the time
would be entered on the invoice. The worker would then deliver
the waste to the disposal plant.
[10] Mr. Fimrite explained that Fimrite tried to have workers
who would be able to operate both the steamers and the vacuum
trucks because, in many jobs, the vacuum and steam trucks work
together. It was convenient to have one person who could work on
both trucks.
[11] The workers, according to Mr. Fimrite, were
"skilled" since they had to be experienced in cleaning
up an oil spill or "wash out" a gas plant facility. The
work is dangerous. The workers were concerned with open flame
combustion and chemical reactions. Therefore, they have to be
trained and knowledgeable in working safely. The workers Fimrite
hired, said Mr. Fimrite, were people who were experienced in the
oilfield, who have been trained and had the necessary
certificates to do the work.
[12] The workers were not supervised nor did they require
supervision, according to Mr. Fimrite. The workers pay for
courses to obtain their licences and pay to maintain the licences
once the courses are completed. The only course that Fimrite paid
for was a course with respect to working in confined spaces. This
course, Mr. Fimrite explained, gives the workers training in how
to rescue another worker from inside a tank or a berm.
[13] The agreement between workers and Fimrite was not in
writing. Each contract was for a fixed term of one month. A Book
of Documents submitted by the appellant includes a document
entitled "Welcome!". The document explains to the
worker the relationship that Fimrite hoped to establish between
itself and the worker. The document states that the worker
has:
. . . entered into a verbal contract agreement with Fimrite
Oilfield Services Ltd. As a contractor, you are responsible for
paying your income tax and CPP. As well, contractors are not
covered by Unemployment Insurance. Each month begins a new
contract. Contracts are complete the last day of each month.
Contracts are paid upon completion of each contract (please drop
your completed record sheets off at month end). Advances are
available upon request.
Enclosed you will find:
F.O.S. Safety Manual
Contract Agreement
Safety Inventive Program
Monthly Record Sheets
Please read the safety manual carefully. If you have any
questions, please ask.
Contractors are responsible for ensuring that all safety
requirements are met and that your unit has all the required
safety wear and equipment.
Certificates that are required to be kept up to date:
Confined Entry * WHMIS
Transportation of Dangerous Goods H2S Alive
Class 3 Operator's Licence Air Brakes
* Costs of Confined Entry Course are covered by F.O.S.
Periodic safety meetings are held to bring up any concerns
that anyone has and to bring everyone up to date on any new
procedures.
The monthly record sheet is for you to keep an on-going record
of your invoiced hours as well as all shop time and detailed
explanation of all shop time. Shop time should also be initialled
by either Tex or Charlie. If you cannot get your time initialled
daily, arrange to do so weekly.
[14] Each of the workers was given the "Welcome"
document and a safety manual.
[15] The workers were attracted to Fimrite by word of mouth,
according to Mr. Fimrite. He said that Fimrite never
advertised for workers. "They came to us, and it was done
sort of over a period of years. . . As the company grew, so did
the number of workers retained by it."
[16] Fimrite obtained its work from word of mouth as well,
according to Mr. Fimrite. He explained that he worked in the
oil and gas industry for several years and "it just got to
be known that we had the equipment . . . to do that type of
work". He said he did very little soliciting. Doing well on
the last job resulted in a further job, he declared.
[17] Work was allotted as follows: a client of Fimrite would
phone Fimrite's office that it required services. If the
client asked for a particular worker, Fimrite would contact that
worker. If the worker was available, the worker would go to the
client's site and perform the necessary service. Frequently
the client would contact the worker the next day for another job
or, on the same day, have the worker go to different sites to do
other jobs once the first job was done. Fimrite did not have to
approve this extra work but the worker had to keep Fimrite
informed.
[18] Normally a worker was called when a job was available and
the worker was qualified. Once Fimrite telephoned a worker, the
worker would either go directly from his residence to the job
site or go to Fimrite's shop to get the equipment and then go
to the job site.
[19] In case of emergencies, if Fimrite could not find
"the right guy" for the job, Mr. Fimrite would do the
work or he would call a competitor.
[20] The workers were responsible for the maintenance and
cleaning of the vacuum and steamer trucks. They serviced the
trucks to keep them in good working order. The workers greased,
fuelled and washed the trucks in Fimrite's shop.[3] The workers were paid
for the time they performed these maintenance services. All other
work was performed at the client's site.
[21] Fimrite permitted workers to keep a vacuum truck at his
or her place of residence and when called, the worker could go
directly to the job site. The steamers, on the other hand, were
kept at Fimrite's shop since they had to be kept in a heated
location. Infrequently, a worker who had the proper facility at
home would be permitted to keep a steamer at home. None of the
workers in these appeals kept a steamer at home.
Mr. Fimrite's son, Troy Fimrite, purchased a vacuum
truck on his own account and entered into an agreement with
Fimrite for it to use the truck for a fee.
[22] The workers did not have to report to Fimrite's
premises on a daily basis. Only in extremely cold weather were
the steamer truck operators expected at the shop, usually at
seven or eight o'clock in the morning, "because in those
conditions we knew that all the steamers are going to be going
somewhere". Mr. Fimrite also explained that when a
worker went to a job site in extremely cold weather, he would
remain on the site until the end of the day, at least, in case
the problem recurred.
[23] As far as Mr. Fimrite was concerned, a worker could
refuse to work on a particular job. This would happen when the
worker was committed to a personal or a business matter. If a
worker refused a particular job, he or she would lose the
"spin-off work" that would be generated from the
original call. Some of the workers worked for a competitor as
well. Mr. Fimrite declared that the workers worked
"primarily" for Fimrite but they were free to work for
whomever they wanted.
[24] After the worker finished his work and had given the
client the invoice for the work, the worker would bring the copy
of the invoice to Fimrite's office. The invoice and the
worker's time would be recorded by Fimrite's
bookkeeper.
[25] The worker prepared the invoice based on Fimrite's
prices; the worker was not permitted to negotiate prices with
clients.
[26] Fimrite's bookkeeper received invoices from workers
on a daily basis each evening. At the end of the month the
bookkeeper compares the invoices against the worker's time
sheets, totals their maintenance hours and their shop time and
then subtracts any advances made to the worker during the month.
Then a cheque would be prepared for the worker. A typical record
of payment follows:
FIMRITE OILFIELD SERVICES
RR#1 Spirit River, Alberta
T0H 3G0
Contractor: TROY FIMRITE FOR THE MONTH OF JUNE 1996
GST #894338649RT0001
To supply operator, vehicle and tools during the current
month.
Worker's Compensation and Contractors Liability Insurance
provided by Fimrite Oilfield Services.
DETAILS TOTAL
AS PER INVOICES CE 0.0 $ 0.00
OP 125.5 2,150.50
H 0.0 0.00
8 50.0 500.00
BONUS 0.0 0.00
0.0 0.00
TOTAL CONTRACT $2,650.00
REIMBURSEMENT 23.99
SUB TOTAL $2,674.49
LESS HOLDBACK $ 143.66
LESS COURSES $ 0.00
LESS ADVANCES $ 0.00
TOTAL PAYMENT $2,530.83
PAID IN FULL _______________ CHEQUE NO. ________
PREPARED BY: _______________
[27] A worker's starting salary was $10.00 an hour for
shop time. If he required a helper, he was paid $13.00 an hour.
The shop time includes the maintenance the worker was expected to
perform on the trucks. The worker was paid $15.00 an hour for the
time he was in the field. Thus, if a worker was working with a
helper, he was paid $28.00 an hour, that is, the aggregate of
$15.00 and $13.00. More experienced workers would be paid more.
Workers also received extra pay for overtime; time in excess of
180 hours a month was considered overtime. Work performed on
statutory holidays also warranted more pay. Also, if a worker had
to work in a confined space, he would be paid an additional $2.00
an hour.
[28] Each job had a three-hour minimum; if a worker worked
only one hour, he would bill Fimrite for three hours of work. Mr.
Fimrite explained that if a worker completed a job quickly, he
was available for other jobs. The invoiced hours could easily
exceed the actual hours worked. For example, at the end of the
day the worker's invoices may total 16 hours but his
actual time is ten hours; the worker would be paid for 16 hours.
(Fimrite itself would charge the client on a three-hour minimum.
Travel time was included in the three hours.)
[29] In the event of a breakdown of equipment during a job the
worker would attempt to repair the equipment on site. If the
repair required a mechanic or additional parts, a mechanic would
be called to the site and make the repair. In some cases, Fimrite
would send another vacuum or steam unit to the site and remove
the damaged unit. When equipment did not function, the worker was
not paid for time he lost during the breakdown of the
equipment.
[30] Whether a worker did a particular job well or not was the
client's decision. If the work was not done to the
client's satisfaction, the worker would return to do the work
over at his or her own expense until the client was satisfied.
Mr. Fimrite recalled when Miskulin left a job site in a
"mess" and did not complete the job, Miskulin had to
return to the site and spend a full day cleaning up.
[31] When a worker wished to take a vacation or take time off
for personal reasons, he was free to do so, said Mr. Fimrite.
There was no formal work schedule. In the event of conflict
between workers, Mr. Fimrite stated, "he would try to have
the workers settle the time off between themselves."
However, Fimrite wanted to ensure that not everyone was taking
holidays at the same time. Ordinarily, if a vacuum truck
operator, for example, wanted a long weekend off, he would make
sure that another worker would "cover" for him.
[32] Mr. Fimrite stated that a worker had the right to hire an
assistant. Mr. Fimrite said that this would normally happen
if a worker required an additional person for safety purposes.
Fimrite, not the worker, would pay for the extra help. Mr.
Fimrite explained that Fimrite obtained many of its workers in
this manner. "They would go out on a job with one or the
other contractors as a helper on a couple of jobs, and then if
they were capable and liked their work and did a good job, they
would become contractors."
[33] As stated earlier, Fimrite provided the trucks to the
workers. Mr. Fimrite stated that Fimrite's newest vacuum
truck, purchased in 1998, cost $230,000.00. A steamer that was
also acquired in 1998 cost approximately $160,000.00. This was
the type of equipment that Fimrite provided to the workers. The
workers provided all other tools for the job, such as hand tools,
hard hats, safety goggles, boots and gloves, in addition to their
certificates.
[34] The only meetings held with workers, Mr. Fimrite
insisted, were safety meetings. These meetings were held
approximately once a month. There were also meetings called
"tailgate safety meetings" on job sites; these meetings
were usually initiated by the clients, said Mr. Fimrite,
particularly on gas plant sites. This safety meeting would be
held so that the worker and the client could review the hazards
of the job that may be expected during the performance of the
work. The worker would be required to fill out and sign a safe
work permit at the beginning of the job. At the end of the job,
the worker would have to sign off with the client.
[35] During the first half of 1996, Fimrite learned that
Revenue Canada was of the view that the workers were employees of
Fimrite and therefore ought to make contributions in respect of
the workers for purposes of the CPP and the Act. As
a result, Mr. Fimrite said, Fimrite changed the method of payment
to the workers: the workers were to be paid on an hourly basis
for time actually worked. The workers were no longer being paid
on the basis of job having a minimum of three hours. Many of
Fimrite's most experienced personnel left. In the meantime,
Fimrite's competitors, who had not been assessed by Revenue
Canada, continued to pay their field personnel in the same way
Fimrite had paid their workers during the period in issue, Mr.
Fimrite complained.
[36] Just prior to the commencement of Mr. Fimrite's
cross-examination, counsel for the respondent, with the consent
of the appellant's counsel, produced as Exhibit R-1 a Book of
Documents. The book contained various income tax returns as well
as the usual questionnaires, including answers, forwarded to each
of the workers and Fimrite. The book also contained a summary of
answers to the workers' questionnaires prepared, I assume, by
an official of Revenue Canada.
[37] Respondent's counsel, Miss Wong, referred Mr. Fimrite
to the questionnaire completed by Blain Dennis, one of the
workers. Attached to this questionnaire was a document with a
Fimrite letterhead; this document described the requirements and
obligations of Fimrite as well as the requirements and
obligations of the worker. According to this document, Fimrite
was to provide workmen's compensation and contractor's
liability insurance as well as supply safety clothing and other
equipment. Mr. Fimrite replied that Mr. Dennis at the time
had been engaged as an employee. Mr. Fimrite denied that Fimrite
ever paid workmen's compensation or liability insurance nor
indeed did it ever supply safety clothing and equipment. Fimrite
did, of course, pay for insurance on the vehicles it owned.
[38] Mr. Fimrite also acknowledged that Fimrite provided
vacation travel to "exotic" locations for its workers.
Mr. Fimrite described this as
"a plan that we put into place to give our contractors
incentive to go out to work when it's 40 below and it's
in the middle of the night, and we felt that by doing it in any
cash basis wouldn't make any difference, because after the
first pay cheque it's gone, and this was something that we
also felt would give them a better perspective on their job, if
they had an opportunity to get right away from the oil field and
right out of the country. And we put this in, not as a -- we
didn't do it as a formal thing into the contract. It was a
just a verbal agreement, that if they did a good job and after
they had worked -- we based 2,000 hours is approximately a
year's work, and so it was just a bonus to -- that they could
work toward, and if they stayed working for us for those number
of hours and years, they'd become qualified. And we have had
quite a few of the people go on those trips".
[39] From time to time, Fimrite engaged the services of its
competitors, including Bob's Steaming and Cleaning
("Bob's"), a business owned by a person who had
earlier worked for Fimrite. The owner of Bob's had purchased
a steam truck and competed for business with Fimrite. However,
Fimrite hired Bob's on a "fairly regular basis".
Mr. Fimrite said Bob's is "our first call-in" when
a competitor is called.
[40] Bob's was not paid in the same manner as the workers.
Mr. Fimrite described a situation where Fimrite agreed to
clean pipeline equipment and control weeds on farm land. This
contract was performed, to a large degree, by Bob's. Fimrite
and the client had agreed to the rate at which the work would be
performed. The client paid Fimrite and then Fimrite paid
Bob's for the work. In most cases, however, where Bob's
was used, Bob's issued its own invoice to the client.
Fimrite, said Mr. Fimrite, was merely the contact person for
Bob's. Bob's work was not recorded in the books and
records of Fimrite as was the work of the workers. Bob's was
paid at its own rate schedule, not that of Fimrite. In some
situations, however, Bob's did bill Fimrite and Fimrite
billed the client. When other competitors were used, they also
invoiced the client directly, not Fimrite.
[41] Mr. Fimrite stated since Fimrite started paying the
workers on an hourly basis, Fimrite has hired a full-time foreman
to visit sites to ensure work is performed in an acceptable
manner. He also complained he now has some safety concerns
because the workers' "attitude is not the same as
before." Mr. Fimrite explained that at the time of trial, as
before, workers are called to work when they are required. Mr.
Fimrite also said he now fears that if he lays off any worker,
that worker will not return to Fimrite; he or she will apply for
unemployment insurance instead.
[42] Troy Fimrite, the son of Wavell MacArthur Fimrite, also
testified. He worked for Fimrite during 1994, 1995 and 1996. He
generally corroborated his father's evidence. He explained
the procedure followed when he first went to a job site: he drove
the truck to the site, met the client at the location, discussed
the situation with the client, filled out the necessary permits
and discussed safety factors with the client. Then, he proceeded
to perform the service.
[43] Troy Fimrite also reviewed the safety requirements in the
event of poisonous gas leaks or if an evacuation was necessary.
He also described the difficulty working in a confined space.
Troy Fimrite could not stress too much how carefully the work had
to be performed. Each job was different and potentially dangerous
and only a competent person could be entrusted to perform these
jobs.
[44] Troy Fimrite confirmed that he could have refused a job
if it was not safe, if he was too tired to travel or had personal
commitments. He also agreed that he was not paid for time
equipment could not be used, for example, if equipment were stuck
in the mud and could not be extricated or if the equipment broke
down.
[45] Case law is replete with litigants' attempts to
convince the courts that, depending on their interest in the
trial, a person is either an employee or an independent
contractor. At the present time the leading Federal Court of
Appeal decision is Wiebe Door Services Ltd. v. The
Queen.[4]
[46] Traditionally, the courts have established a series of
tests to determine whether a contract is one of service or for
the provision of services. The more commonly used tests were:
a) the degree or absence of control exercised by the alleged
employer,
b) ownership of tools,
c) chance of profit and risks of loss, and
d) integration of the alleged employees' work into the
alleged employer's business.
[47] These tests and their importance today are discussed and
analyzed by MacGuigan J. in Wiebe Door. According to
MacGuigan J., the tests do not bear equal weight. The real test
is a "four-in-one test with emphasis always retained on ...
'the combined force of the whole scheme of operations',
even while the usefulness of the four subordinate criteria is
acknowledged".[5]
[48] The essence of a relationship between a purported
employee and employer is found in searching for the total
relationship of the parties. MacGuigan J. refers with approval to
the work of Professor P.S. Atiyah:[6]
[I]t is exceedingly doubtful whether the search for a formula
in the nature of a single test for identifying a contract of
service any longer serves a useful purpose.
... The most that can profitably be done is to examine all the
possible factors which have been referred to in these cases as
bearing on the nature of the relationship between the parties
concerned. Clearly not all of these factors will be relevant in
all cases, or have the same weight in all cases. Equally clearly
no magic formula can be propounded for determining which factors
should, in any given case, be treated as the determining ones.
The plain fact is that in a large number of cases the court can
only perform a balancing operation, weighing up the factors which
point in one direction and balancing them against those pointing
in the opposite direction. In the nature of things it is not to
be expected that this operation can be performed with scientific
accuracy.
This line of approach appears to be in keeping with what Lord
Wright said in the little-known Privy Council decision on
Montreal Locomotive Works. . . .
[49] At the end of the day one must ask the question "Is
the person who has engaged himself to perform these services
performing them as a person in business on his own account?"
If the answer is "yes", wrote Cooke J.,[7] then the contract is a contract
for service. If the answer is "no" then the contract is
a contract of service. Cooke J. adds:
No exhaustive list has been compiled and perhaps no exhaustive
list can be compiled of consideration which are relevant in
determining that question, nor can strict rules be laid down as
to the relative weight which the various consideration should
carry in particular cases. The most that can be said is that
control will no doubt always have to be considered, although it
can no longer be regarded as the sole determining factor; and
that factors, which may be of importance, are such matters as
whether the man performing the services provides his own
equipment, whether he hires his own helpers, what degree of
financial risk be taken, what degree of responsibility for
investment and management he has, and whether and how far he has
an opportunity of profiting from sound management in the
performance of his task. The application of the general test may
be easier in a case where the person who engages himself to
perform the services does so in the course of an already
established business of his own; but this factor is not decisive,
and a person who engages himself to perform services for another
may well be an independent contractor even though he has not
entered into the contract in the course of an existing business
carried on by him.
[50] The trial judge, MacGuigan J. concluded, must weigh all
of the relevant factors. Each case must by scrutinized on its own
facts. Each case has its own peculiarities that influence a trial
judge. All the facts taken together will determine the
relationship between the person who performs a service and the
person who pays for the service.
[51] In the appeal at bar it is clear that the business
carried on was that of Fimrite. Fimrite controlled which worker
would perform a particular job and what price would be charged to
the client. The worker had no discretion in choosing a job or
charging a rate different from that directed by Fimrite. The
machinery, the steamers and vacuum trucks, required to do the
bulk of the job was Fimrite's property. The workers did
provide some equipment, usually small tools, but without the
equipment supplied by Fimrite, no job could be performed.
[52] The individual works were permitted to take on a helper,
if necessary; Fimrite paid the worker an additional amount if a
helper was hired; the worker did not absorb the total cost of
hiring the helper.[8] The financial risks to the worker were minimal.
[53] The workers engaged themselves to work as Fimrite's
employees. It is true they did not require supervision in
performing their work but this was because the workers were
highly trained and qualified personnel. They were employees of
Fimrite.
[54] Mr. Fimrite took umbrage at the fact the appellant was
forced to change the method of payment to the workers once
Revenue Canada determined the workers were employees and, as a
result, Fimrite lost some of its workers. Method of payment is
only one of many factors that influence what the true
relationship is between a provider of service and a user of the
service. There is nothing to stop Fimrite from continuing to pay
its workers as it had in the past, subject to withholding
statutory amounts from pay. The true nature of the relationship
between Fimrite and the workers should be compared to the
relationship between Fimrite and the competitors it frequently
hires. In the latter situation, for example, the competitor such
as Bob's determines rates and is subject to absolutely no
control by Fimrite and this is because the competitor is an
independent contractor.
[55] The appeals are dismissed and the determinations of the
question by the Minister are affirmed.
Ottawa, Canada, August 14, 1998
"Gerald J. Rip"
J.T.C.C.
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