Date: 19981016
Docket: 97-780-UI,
97-84-CPP
BETWEEN:
CUSTOM AUTO CARRIERS LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
CHRIS RODGERS,
Intervenor.
Reasons for Judgment
Porter, D.J.T.C.C.
[1] These appeals were heard together
on common evidence with the consent of the parties, at Edmonton,
Alberta on June 17, 1998.
[2] The Appellant Custom Auto Carriers
Ltd., (the "Company") appeals the decision of the
Minister of National Revenue (the "Minister") dated
February 6, 1997 that the Intervenor, Chris Rodgers,
(the "driver") was employed under a contract of service
and was thus an employee of the Company for the periods from
January 1 to June 7, 1995 and from July 14 to
November 1, 1995. The employment was thus determined to
be "insurable" and "pensionable" under the
provisions of paragraph 3(1)(a) of the Unemployment
Insurance Act (the "Act") and paragraph
6(1)(a) of the Canada Pension Plan respectively,
(collectively called the "legislation").
[3] The established facts reveal that
the Appellant carried on an emergency tow truck business in
Edmonton, Alberta and that during the periods in question it
entered into certain arrangements with the driver to operate one
of its tow trucks. The issue then is whether that arrangement was
a contract of service and thus both insurable and pensionable
employment under the legislation or whether it was a contract for
services and not so included within the meaning of those
terms.
[4] The Intervenor appeared and gave
evidence in support of the position of the Minister.
The Law
[5] The manner in which the Court
should go about deciding whether any particular working
arrangement is a contract of service and thus an
employer/employee relationship or a contract for
services and thus an independent contractor relationship, has
been clearly laid out by the Federal Court of Appeal in Wiebe
Door Services Ltd. v. M.N.R., 87 DTC 5025. The test to be
applied has been further explained by that Court in Moose Jaw
Kinsmen Flying Fins Inc. v. M.N.R., 88 DTC 6099. There are,
following these cases, numerous decisions of this Court, some of
which have been cited by counsel, which demonstrate how these
appellate guidelines have been applied. In the Moose Jaw
Kinsmen Flying Fins Inc. case, above, the Federal Court of
Appeal said this:
"[Analysis]
The definitive authority on this issue in the context
of the Act, is the decision of this Court in Wiebe Door Services
Ltd. v. The Minister of National Revenue, 87 DTC 5025. MacGuigan
J. speaking on behalf of the Court, analyzed Canadian, English
and American authorities, and, in particular, referred to the
four tests for making such a determination enunciated by Lord
Wright in City of Montreal v. Montreal Locomotive Works
Ltd., [1974] 1 D.L.R. 161 at 169-70. He concluded at page
5028 that:
Taken thus in context, Lord Wright's fourfold test
[control, ownership of tools, chance of profit, risk of loss] is
a general, indeed an overarching test, which involves
"examining the whole of the various elements which
constitute the relationship between the parties". In his own
use of the test to determine the character of the relationship in
the Montreal Locomotive Works case itself, Lord Wright combines
and integrates the four tests in order to seek out the meaning of
the whole transaction.
At page 5029 he said:
...I interpret Lord Wright's test not as the fourfold one
it is often described as being but rather as a
four-in-one test with emphasis always retained on
what Lord Wright, supra, calls "the combined force of
the whole scheme of operations," even while the usefulness
of the four subordinate criteria is acknowledged.
At page 5030 he had this to say:
What must always remain of the essence is the search
for the total relationship of the parties.
He also observed "there is no escape for the trial
judge, when confronted with such a problem, from carefully
weighing all the facts."
...like MacGuigan J. we view the tests as being useful
subordinates in weighing all of the facts relating to the
operations of the Applicant. That is now the preferable and
proper approach for the very good reason that in a given case,
and this may well be one of them, one or more of the tests can
have little or no applicability. To formulate a decision then,
the overall evidence must be considered taking into account those
of the tests which may be applicable and giving to all the
evidence the weight which the circumstances may
dictate."
[6] The nature of the tests referred
to by the Court can be summarized as follows:
a) The
degree or absence of control exercised by the alleged
employer;
b)
Ownership of tools;
c)
Chance of profit and risk of loss;
d)
Integration of the alleged employee's work into the alleged
employer's business.
[7] I also take note of the further
words of MacGuigan J., in the Wiebe case, above, where he
approved the approach taken in the English courts:
"Perhaps the best synthesis found in the
authorities is that of Cooke J. in Market Investigations, Ltd.
v. Minister of Social Security, [1968] 3 All E.R. 732,
738-9:
The observations of Lord Wright, of Denning L.J.,
and of the judges of the Supreme Court in the U.S.A. suggest that
the fundamental test to be applied is this: "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
to that question is "yes", then the contract is a
contract for services. If the answer is "no" then the
contract is a contract of service. No exhaustive list has been
compiled and perhaps no exhaustive list can be compiled of
considerations which are relevant in determining that question,
nor can strict rules be laid down as to the relative weight which
the various considerations 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."
The Facts
[8] Whilst many of the facts
surrounding the arrangement between the Company and the driver
are not in issue, some certainly are. There is thus an issue of
credibility, which has arisen between them.
[9] The basic agreement between the
Company and the driver was entered as an exhibit in the
proceedings. It is a one page document with nine paragraphs,
setting out the terms and conditions. It purports to be a rental
agreement or lease of a 1998 G.M.C. 3500 tow truck, for which the
driver would pay to the Company 60% of the total gross income
arising from the use of the truck, with a minimum of $1,500.00
per month. This latter amount was to be paid whether or not the
driver worked with the truck. In fact this amount was never
invoiced and never paid.
[10] The agreement further provided for the
driver to pay all taxes, Canada Pension Plan and Unemployment
Insurancepremiums directly and made him responsible for any
damage to the truck. It also provided the driver with a gas
credit card, which was to be paid by the Company, specified that
all cash receipts were to be turned into the Company, restricted
riders in the truck to customers only and forbade any personal
use of the truck. It allowed for work to be done for other
employers or to be sub-contracted out to other drivers in the
Company, but still required all invoices to be done in the name
of the Company.
[11] Although stated to be a rental and a
lease, all money, receipts and invoices were turned into or
collected by the Company directly and then the driver was paid
his share twice per month. The Company decided the prices to be
charged for all calls which came through its dispatch but the
driver was free to negotiate for whatever he saw fit for outside
work, which still had to be invoiced through the Company or if
for cash turned into the Company.
[12] The operating costs of the Company were
paid by the Company, including gas, oil, ordinary maintenance and
fair wear and tear items. The trucks bore the Company's name,
and the driver wore clothing with the Company's name on it.
The Company supplied a two-way radio for use in the truck.
[13] These foregoing facts were set out in
the Reply to the Notice of Appeal as being relied upon by the
Minister. They were agreed to by the Company and the driver. In
issue were items 11 (k), (l), (m), (n), (o), (p), (q) and (x)
which read as follows:
(k) Rodgers
generally worked 7:00 a.m. to 7:00 p.m., and at schedules times
was on call 24 hours a day;
(l) the
Appellant scheduled Rodgers' hours of work and assigned
specific times for him to be on call;
(m) Rodgers required the
Appellant's permission to take time off;
(n) the Appellant
required Rodgers to perform the services personally and Rodgers
could not hire, dismiss or pay his own helpers;
(o) if Rodgers was
away from work he did not have to find a replacement;
(p) if Rodgers was
away from work, the Appellant would assign another driver to
drive the tow truck;
(q) Rodgers was not
free to decide which jobs he would work on;
(x) Rodgers could
not work for another towing business while using the
Appellant's tow truck.
[14] Ed Miller, the owner and Manager of the
Company indicated in his evidence that the drivers were free to
book on and off as they wished. The driver Rodgers as well as
another driver Mark Albert, when they gave their evidence,
indicated that they were on call 24 hours per day and Rodgers
said he was expected to book on by 7:00 a.m. every day. Miller
said that the drivers were free to take calls or not as they saw
fit. The drivers seemed to indicate that whilst that was strictly
so, it was frowned upon. I gleaned from the evidence that there
was generally a not very subtle pressure by the Company upon the
drivers to be available as much of the time as possible.
Obviously the more the trucks were used the greater the return
for the Company. Thus whilst the Minister's assumption that
work hours were assigned and that the drivers needed permission
to take time off was not strictly correct, that in practice was
the way it worked out.
[15] Whilst the arrangement was said to be a
rental, the driver said, and I accept his evidence on this point,
that when he was sick the Company assigned another driver to his
truck and just came and took it. Likewise the driver said, and
again I accept his evidence, that upon another occasion the
company took his truck away from him, sold it and he had no say
in the matter. Apparently that did not work out and shortly after
the same truck was returned to him. However this is not very
consistent with a lease arrangement.
[16] The driver was able, according to the
contract, to sub-contract with other drivers to drive his truck,
as long as they were other drivers within the Company fold. It
was not clear to me how that would ever happen as other drivers
presumably had their own trucks to drive. It is also not clear to
me whether in fact that did ever happen.
[17] The driver agreed that he could work
for other tow businesses but that everything again had to be
invoiced through the Company. The Minister's assumption 11
(x) is incorrect in this respect.
[18] The driver also generated business on
his own. He was free to stop at accidents and break downs that
were not yet called in, and take his own direct calls. Everything
however had to be billed through the Company. In fact he fixed up
a special carrier for motorcycles and on his own initiative and
at his own expense promoted that, so that he generated for
himself a number of motorcycle tows.
[19] The Company maintained that the driver
would be responsible for n.s.f. cheques. The driver said he was
never charged for these. I am not sure how significant this point
is, although the parties dwelled on it. It may have been that
there simply were no n.s.f. cheques.
[20] The driver registered his own trade
name, C.C.R. Enterprises and operated under that name. Mark
Albert, the other driver to give evidence, also did the same
thing. Each said they were told to do so by the Company. Ed
Miller said they were not told they had to do this. I accept the
driver's evidence on this point that they were required to
do so. Again it may have been done subtly. It was not done in
writing, but I gleaned from the evidence that if they wanted to
work for this company that is how it had to be.
[21] With regard to training, Ed Miller said
that Rodgers came to him already experienced and did no training.
The latter said that he rode along with another driver for about
a week. Mark Albert said he rode along for three weeks. I do not
think that much turns on this but clearly the Company, in my
view, required its drivers to follow certain procedures, which
needed to be learned, even if they had experience elsewhere.
Application of Tests
[22] Control: It is clear that
the Company endeavoured to set up an independent contractor
status with its drivers, ostensibly by leasing to them the
trucks. However it was not a lease in the true sense of the word.
No flat payment of $1,500.00 was ever paid by the driver to the
Company, nor was he ever billed for this. He was required to turn
over all his receipts. He was required to use Company invoices
for all work with the truck, whether dispatched by the Company or
independently obtained. All his fuel and maintenance costs were
paid by the Company. The truck was simply taken from him on two
occasions without his agreement. He operated always in the
Company's name, with the Company sign on the truck and on his
clothing. There were strong expectations as to his availability
and how and when he worked. He was paid twice per month. There
were restrictions on the truck against personal use and who could
ride in it. The driver was free once dispatched to arrange the
tow or other emergency service as he saw fit. He also could set
his own prices for independently generated work but was required
to charge the Company rate for anything that came through
dispatch.
[23] I find there was a considerable amount
of control exercised by the Company over the driver and I am
inclined to the view that this made the arrangement more
consistent with a contract of service than a contract for
services, albeit there are some aspects which point in the other
direction.
[24] Tools : The truck was
provided by the Company, under the terms of what they called a
lease. This was a sham in my view. It was not a lease in reality.
Everything in the evidence pointed to the Company still very much
in control of the truck. In reality it was an arrangement whereby
the driver used the truck and was paid 40% of the gross income
that he generated with it, rather than he paying 60% to the
Company.
[25] He was also provided with a two-way
radio . He provided his own tools and kit for getting into locked
cars and he had his own scanner so he could find out about
accidents and stalls more quickly. In reality the main piece of
equipment, the truck, was provided by the Company, it remained
under its control and was serviced by and insured by it. The
Company had access to it and could take it when it saw fit. In my
view this aspect of the test is also more consistent with an
employer/employee situation than with a truly independent
contractor.
[26] Chance of Profit and Risk of
Loss: For the most part the driver had little to lose
unless he damaged the truck through neglect. Ostensibly he might
lose the $1,500.00 if he did not put the truck to work for a
whole month. However this never occurred and he was never billed
for this amount. I really have to wonder how genuine that
arrangement was.
[27] The driver did go to the expense
building his own motorcycle carrier and doing some advertising.
This was an expense to him and he stood to gain additional
revenue if that worked out. This amounted to an element of profit
and loss but as I understood the situation, it was far from a
major and regular part of his work.
[28] Although there was an element of chance
of profit and risk of loss on the whole, the arrangement was not
consistent with this but more with an employee being paid on a
percentage basis and doing a little moonlighting in addition.
[29] Integration: This is
always a difficult aspect of the test. Obviously without drivers
the Company would have no business; thus from their perspective
there was an integration aspect to the arrangement. It is from
the point of view of the driver however, that I must look at the
situation. The question is whose business was he operating, his
own or that of the Company? It is true that he had a trade name
and filed his income tax return as a self-employed contractor.
This is indicative of his being in his own business. However he
did not run his own finances. They were all run through the
Company and he received his net percentage. He did not bear any
of the principal expenses and had to, in effect, toe the Company
line and follow Company policy. Everything he did in my view was
integrated with the business of the Company.
Conclusion.
[30] It is perhaps trite to say that it is
the substance of the arrangement and not the form, that the Court
must consider in these situations. Although it purported to be a
lease arrangement to an independent contractor in my view the
lease aspect was a fiction and the Company retained effective
control of the truck. With respect to how he worked with the
truck, I am not of the view that the driver was shown to have had
a sufficient degree of independence from the Company that one
could come to the conclusion that he was an independent
contractor. I appreciated that there was a certain animosity
which existed between the driver and the Company, for whatever
reason, and that I should accordingly be a little cautious about
his evidence. It was however to a great extent backed up by the
evidence of the second driver and on the whole I found it to be
credible. I am of the opinion that the Company wanted, in form,
to have an independent contractor relationship with its drivers
but in substance wanted to keep control. In my view at the very
least it has not met the onus cast upon it by law, to show that
the decision made by the Minister was in error. In my opinion it
was correct.
[31] In the result the appeals are dismissed
and the decision made by the Minister is confirmed.
Signed at Calgary, Alberta, this 16th day of October 1998.
D.J.T.C.C.
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