Puri v. M.N.R., docket 96-2519-UI

Date: 19980306

Dockets: 96-2519-UI; 96-2520-UI

BETWEEN:

JANNINE PURI,

Appellant,

THE MINISTER OF NATIONAL REVENUE,

Respondent,

AND

BETWEEN:

RAE ANNE HESKETH,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Rowe, D.J.T.C.C.

[1] The appellants and Counsel for the Respondent agreed the appeals would be heard on the basis of common evidence and that the decision herein will apply to the appeals of Jannine Puri - 97-19(CPP) and of Rae Anne Hesketh - 96-133(CPP).

[2] By Notice of Assessment dated November 15, 1995 the Minister of National Revenue (the "Minister") assessed Campbell River Skating Club (the Club) with respect to unemployment insurance premiums and interest payable pursuant to the Unemployment Insurance Act (the "Act") in connection with the services performed for the Club in the 1994 and 1995 years by the appellant, Jannine Puri, in respect of whose remuneration the club failed to make remittances to the Receiver General for Canada, as required. The Minister assessed the Club for failing to make remittances in connection with services performed by the appellant, Rae Anne Hesketh, during 1995. The Minister also issued an assessment to the Club, pursuant to the Canada Pension Plan, with respect to contributions to the Plan the Club was required to make in connection with services performed by the appellant, Jannine Puri, during 1994 and 1995, and in connection with services performed by the appellant, Rae Anne Hesketh, during 1995. The appellants and the Club objected to the assessments but the Minister issued a decision dated September 18, 1996 confirming the assessments. The Club had filed a Notice of Intervention with respect to each of the appeals of the appellants pursuant to the Unemployment Insurance Act and the Canada Pension Plan but each Notice was withdrawn by the Club prior to hearing.

[3] Rae Anne Hesketh testified she resides in Campbell River, British Columbia and is a figure skating coach. The Campbell River Skating Club is a non-profit society incorporated pursuant to the Society Act , R.S.B.C. 1979 c. 390 and is run by volunteers. In 1987, she began providing services to the Club when she agreed to teach skating, during sessions designed for students at various levels of skill, and to be paid the sum of $40 per hour. She stated she signed a contract each year regarding the provision of her services and that a typical contract was in the form of the one she entered into with the Club for the 1994 season, filed as Exhibit A-1. The contract for the 1995 season - at $45 per hour - was filed as Exhibit A-2. She stated the Club collected fees from the students in order to permit them to participate in a particular type of skating program such as Learn-to-Skate, Power Skating, Canfigure Skate and other instructions at varying skill levels. The sessions took place in the municipal arena and, provided enough people signed up for a particular program, the sessions would begin. The skating season started in September and ended in March, depending on the availability of ice. The appellant worked four days a week and, during 1995, taught lessons one or two hours per day. She invoiced the Club on a monthly basis and would receive a cheque based on the number of hours billed at the rate of $40 or $45 per hour depending on the applicable rate in the current contract. Individuals wanting private lessons rented ice-time from the Club at the rate of $52 per hour and paid for it directly. The private students paid the appellant for her coaching time and the Club was not involved except for allocating a period during which the ice could be used and collecting the fee from the student renting the ice. As for running the particular program for which she was under contract to the Club, in 1995, she billed out an average of 20 hours per month - at a rate of $45 per hour - for a total of $900. The method of providing services to the Club had not changed since 1987 and annual contracts had been entered into on the basis she was not an employee but was providing her special skills as a figure-skating and speedskating instructor as an independent contractor. The various programs offered to the public were described in Schedule "A" of Exhibit A-2. The appellant stated she operated out of an office in her residence and she carried out her business of teaching and coaching figure-skaters, much of the work flowing as a result of her work for the Club teaching sessions of the various programs. The times for each session of a particular program were set by her and the other coaches in consultation with the Club Co-ordinator. At that time, there was only one arena in Campbell River. The appellant stated she belonged to the Canadian Figure Skating Association (CFSA) and is a certified coach. In order to obtain this designation she had to take courses - including First Aid - and undergo a process of certification, including attaining a successful grade on an examination. She paid her own membership fees to the Association as well as any other fees and expenses associated with attending seminars. She also provided her own music which was used during the training sessions and she was not paid by the Club for the time involved in choosing and editing the music. She also supplied a stopwatch for use during the speedskating training, purchased her own skates, equipped her in-home office with the necessary items and paid for supplies needed to prepare lesson plans. The appellant estimated that approximately one-third of her income as a figure skating coach was derived from the Club. For any student of figure-skating to be permitted to enter a sanctioned competition, it is necessary for that person to belong to a skating club recognized by the CFSA. Although Schedule "B" of her contract for 1995, Exhibit A-2, referred to a rate of $30 per hour for private lesson time, this amount was not paid by the Club nor did it participate in the transaction between the appellant and any private student. The appellant stated she spent four hours per week preparing lessons for the various programs operated by the Club and was not remunerated for this time. Since 1987, she has filed her income tax returns on the basis of being a self-employed individual. Subsequent to the assessment by the Minister, the Club began taking deductions for unemployment insurance, Canada Pension Plan and income tax from her payments for teaching programs and, as a result, she had to lower, by $8, her hourly rate. The appellant filed, as Exhibit A-3, a statement of revenue for 1996 which indicated her income from teaching programs for the Club amounted to $8,378 while total professional coaching income was in excess of $25,000. The appellant stated Jannine Puri - her co-appellant - was another figure skating coach teaching programs for the Club and was included in the assessment.

[4] In cross-examination, the appellant Hesketh stated the Club obtained a block of ice-time - through an established allocation process - from the City of Campbell River at the beginning of each season. While the Club determines the nature of the programs to be offered during a season, the coaches are members of the Executive Committee involved in that process. Pursuant to the 1994 contract - Exhibit A-1 - the Club agreed to retain an additional coach for all club group sessions with more than 12 registered participants but that clause was not in the 1995 contract - Exhibit A-2. In the event she was unable to teach a particular Club Group Session, Hesketh stated she arranged for and paid a substitute coach, as stated in paragraph 4.02 of Exhibit A-2. Pursuant to paragraph 4.14 of that contract she was to supply the Club with a detailed weekly schedule of Group lessons given, unless otherwise agreed by the parties, and the appellant stated the Club did not insist on any schedule being provided.

[5] Jannine Puri testified she lives in Campbell River, British Columbia and, since 1991, has been a figure-skating coach. She began as a freelance coach "without Club time" under circumstances where she accepted any overflow of private students from other coaches and the Club was not involved at all. In 1994, she entered into a contract with the Club which was - except that it applied to her - identical to the one entered into by Rae Anne Hesketh (Exhibit A-1). In 1995, she entered into a new contract and it contained the same terms as the one signed by Hesketh (Exhibit A-2). Puri stated she taught students privately and billed the students or their parents for her time. A student wanting private instruction booked the ice-time through the Club and would pay the rental fee of $52 per hour directly to the Club. Puri stated that one-third of her total revenue was earned from teaching programs offered by the Club and the remainder was attributable to teaching private students. She stated she always assumed she was providing services to the Club on the basis of being an independent contractor. She explained she had applied for benefits on the basis of having a number of insurable weeks while employed by the Ministry of Forests for British Columbia and, in the process, discussed with an official in the unemployment insurance claims office her working relationship with the Club which she advised was that of an independent contractor. Later, she realized the Club was facing an assessment on the basis she and Rae Anne Hesketh were employees and she objected, to no avail. Puri explained that a typical day during the skating season would be for her to rise at 5:00 a.m. - in order to teach a private student at 6:00 a.m. - for which she would bill a maximum of 1.5 hours. Then, at 9:00 a.m. she would teach a session pursuant to her contract with the Club and would bill 45 minutes at $45 per hour. After public school hours, she would teach another session for the Club or perhaps another private student. In the evening, she taught private lessons. Only the group lessons were provided directly to the Club. All private or individual lessons were arranged for and paid by the student. Puri stated she regarded all income as coming in on the basis of her profession as a coach and she did not distinguish between the amount paid by the Club and the other fees she charged to private students. In the event of a power failure or some other event requiring cancellation of a Club Group Session, she was not paid for that time nor for any delays or cancellations created by maintenance requirements or equipment problems. It was not possible to make up the lost sessions due to the lack of available ice-time which, for the most part, had been pre-assigned at the beginning of the season. In order to teach the programs for the Club, Puri explained she used her own portable tape deck and provided her own music - which she edited - together with a stopwatch, a Walkman, and her own skates. She also operated an office out of her home and used a computer for purposes of scheduling and billing. In the event she was unable to attend a session, she found - and paid for - a substitute. She explained the Coaches' Code of Ethics established by the CFSA prohibits advertising or solicitation of students so a working relationship with a recognized figure-skating club - such as the one in Campbell River - is extremely important in order to build a client base.

[6] In cross-examination, Puri stated the Club was operated entirely by volunteers. She stated she was not permitted to mix private students and her Club Group Session. As for the hourly rate of $40 and $45 paid by the Club, Puri stated that amount was regarded as reasonable and was, in effect, the "going rate" for that type of instruction.

[7] Both appellants submitted that they should be categorized as independent contractors as intended when each of them entered into contracts - from time to time - with the Campbell River Skating Club. In their view, they were professional skating coaches with their own business, part of which was teaching certain programs organized and sponsored by the Club.

[8] Counsel for the respondent submitted that the appellants were providing services under a contract of service and, despite earning the majority of their income from teaching private students, were employees of the Club while teaching the group classes.

[9] In Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025, the Federal Court of Appeal approved subjecting the evidence to the following tests, with the admonition that the tests be regarded as a four-in-one test with emphasis on the combined force of the whole scheme of operations. The tests are:

1. The Control Test

2. Ownership of Tools

3. Chance of Profit or Risk of Loss

4. The Integration Test

[10] The appellants were qualified coaches, certified by the CFSA. As members of the CFSA, they were required to adhere to the by-laws, rules and regulations of that organization and to abide by the CFSA Coaching Code of Ethics. The requirement in the contracts between the appellants and the Club to this effect was merely surplusage and does not impact on the aspect of control. There was little supervision over the appellants as they were qualified and able to teach the classes making up the particular programs offered by the Club. However, the Club - at paragraph 3.05 - Exhibit A-2 - reserved the right to determine the type of instruction to be given at a particular session in consultation with the appellants, in their role as a coach. Pursuant to the contract(s), the appellants were required to attend monthly executive meetings of the Club and had to ensure all students were aware of and complied with the rules and regulations of the Club (Paragraphs 4.08 and 4.09 - Exhibit A-2). As coaches, they had to work with the session convenor or other coaches to ensure that all rules and regulations were adhered to and to maintain discipline during a session when directed to do so by the Club (Paragraph 4.10 - Exhibit A-2). They were also obligated to maintain harmonious relations with all Club members, coaches and instructors. More significantly, they were assigned classes or programs that the Club organized, advertised, structured, scheduled and funded by collecting registration fees. The Club set the hourly rate for group instruction and, in the 1995 contract, set the fee of $30 per hour for private lesson time (a curious provision for which no explanation was given). The appellants could not mix any of their own students with a group session taking place under the auspices of the Club. The number of hours of instruction was set by the Club as was the duration of a particular program. The appellants were required to undertake the instruction personally and, except for limited substitution under certain circumstances, could not subcontract out their duties.

[11] The tools necessary to carry out the teaching duties included the availability of ice-time at the arena which was arranged by the Club through an allocation method established by the City of Campbell River. The appellants provided their own music, skates, stopwatches, and provided necessary office supplies in order to carry out teaching the Club Group Sessions.

[12] As for the chance of profit or risk of loss, the appellants were paid an hourly rate to teach classes within a particular program and it did not depend on the number of students attending. There was a risk of loss only in the sense that cancellation of a particular class - for reason of equipment failure or unavailability of ice - would deprive an appellant of payment for that period and it could not be made up later due to lack of ice-time.

[13] In terms of integration, it is clear the Club - a non-profit Society - was incorporated for purposes in connection with the sport of skating. The programs taught by the appellants were the product of organization by the Club and, as canvassed earlier in these Reasons within the context of the indicia of control, could be held only because the Club had booked the necessary ice-time and had organized the various programs and administered them in a manner so as to obtain sufficient participants in a particular program. Only then was it feasible for each appellant to be assigned coaching duties in accordance with the details set out in Schedule "A" - Exhibit A-2. Both appellants stated it was vital to their success as a skating coach to have access to students through the Club. Due to the CFSA stricture against advertising or solicitation, participation as a coach within the context of programs sponsored by the Club was, almost, the only way they could develop a client base. The teaching of students privately, without any connection to the Club, occurred only after the requirements pursuant to the contract with the Club had been fulfilled. While each appellant was in the business of providing private lessons or coaching advice to assist skaters entering a competition or participating in an ice carnival or other special event, the organization and administration of the group skating programs in the arena was totally within the purview of the Club.

[14] There is no doubt the appellants and the Club wanted their relationship to be on the basis they were coaches providing services as independent contractors. In fact, Rae Anne Hesketh and the Club had been operating on that basis since 1987 until the assessment was issued in November, 1995 and confirmed on September 18, 1996.

[15] What the parties thought their relationship was will not change the facts. In the case of The Minister of National Revenue v. Emily Standing, 147 N.R. 238, Stone J.A., at p. 239 stated:

"There is no foundation in the case law for the proposition that such a relationship may exist merely because the parties choose to describe it to be so regardless of the surrounding circumstances when weighed in the light of the Wiebe Door test."

[16] In the case of Whistler Mountain Ski Club v. M.N.R., unreported, 95-1723(UI), August 2, 1996, the Honourable Judge Sobier, Tax Court of Canada, heard the appeal from assessments against the appellant, a Society, who had hired persons to coach alpine events and had done so on the understanding the coaches were independent contractors pursuant to a written contract. Judge Sobier found, inter alia, the following facts:

- the coaches were not supervised and were entitled to hold other jobs and work for others outside the time they were coaching for the appellant;

- the coaches supplied their own equipment and accessories;

- classes were assigned to them and they were teaching classes to improve alpine racing skills;

- the coaching schedule was closely tied to the racing schedule which was determined by an outside authority prior to the beginning of each season;

- the coaches were paid a fixed amount on a per diem or monthly basis and invoiced the appellant twice per month for the number of days worked during those periods but the rate did not change depending on the number of persons in the class;

- the coaches could not subcontract out their duties but could make some alternate arrangements with the appellant's permission;

- the coaches were able to take courses to improve or upgrade their qualifications, generally at their own expense.

[17] After referring to the decision in Wiebe Door, supra, Judge Sobier, at p. 6, stated:

"The tests set out by MacGuigan J. are tests which had been used before. It is how they were to be examined which led him to the conclusion arrived at. The tests are control, ownership of tools, chance of profit and risk of loss. In themselves, these tests are not conclusive. He said at page 5029 of Wiebe Door Services Ltd. (supra):

I am inclined to the same view, for the same reason. 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.

He was also remarking on the fact that the control tests alone shall not be applied. At page 5029, he referred to Morren v. Swinton & Pendlebury Borough Council [1965] 1 W.L.R. 576, where

...Lord Parker stated that the control test was perhaps an over-simplification. His Lordship added that: "clearly superintendence and control cannot be the decisive test when one is dealing with a professional man, or a man of some particular skill and experience." Thus the courts started modifying and transforming the test into "common sense" test. [Somervell L.J. in Cassidy v. Minister of Health [1975] 2 K.B. 343] or "multiple" test [Mocatta J. in Whittaker v. Minister of Pensions & National Insurance [1967] 1 Q.B. 156].

Supervision or control of how a professional or expert performs his functions cannot be said to be control since the professional generally knows more about his functions than his employer. He can however exercise control over his employee by setting his hours of employment, his place of employment, whether he can come and go at his own wish.

I am in agreement with the reference made at page 5030 of Wiebe Door Services Ltd. (supra), to Professor P.S. Atiyah when he said:

It 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.

I conclude that the four tests must be kept in mind but they are not fixed and immutable tests which must be examined as if they were shapes which one must fit into the appropriate holes. They are tools and not the end in themselves. This of course was shown in the paragraph above concerning control.

In the case at bar the coaches were told who they would instruct, when and where the instruction was to be given. They were not able to come and go as they pleased. It is an entrepreneur who takes risks, not an employee. An entrepreneur may say: "If I work hard and long, my efforts will be rewarded". He will say: "The more people I coach, the more I will earn". On the other hand, compensation on piece work or commission basis does not determine self-employment if the employer sets the other standards and otherwise controls the employee. Here, the coach cannot earn more than his per diem or per month rate. If his group shrinks because of non-attendance of athletes, his rate is not reduced. Here, no matter how few or how many hours worked, no matter how few or how many athletes he coached, he earns the same amount. The coaches are assigned groups and told when to coach them. He may not include outsiders into his group. He risks no loss."

[18] After an analysis of the effect of a purported assignment of status pursuant to written contract, Judge Sobier then continued, at p. 8, as follows:

"Because one is engaged on a part-time basis does not mean that one is not an employee. One may have several part-time jobs and still be an employee in all of them.

When one asks the question - "Whose business is it?", counsel for the Appellant invites the Court to say that ski coaching is the business of the coach and if the coach does not produce results, he will loose [sic] his client - the ski club. However, this argument is just as applicable, if not more so, to the argument that the ski club's business was that of producing racers and the coaches are its employees.

The coaches are not permitted any of the leeway or latitude afforded independent contractors. They cannot coach others at the same time as they coach members of the club. Their first duty is to the ski club and not themselves. They do not provide the sophisticated equipment required for use in coaching. The club owns and provides this equipment."

[19] The reality of the modern workplace is that people often have a mixture of income-producing activities arranged in a variety of permutations and combinations. Some have a full-time job and one or more part-time jobs and others have five or six part-time or casual, non-repeating, sources of income, all of which are on the basis of being an employee. Still others are an employee - either full time or part time at one or more jobs - and also operate a business or provide a service as an entrepreneur. In recognition of the changing workplace, Parliament enacted the Employment Insurance Act which was assented to on June 20, 1996. Under the new legislation, the insurance system is changed from one based on weeks of work - with a weekly minimum and maximum on insurance coverage - to a system based on total earnings and total hours worked in which every dollar earned, from the first hour on the job, is counted. The intent was to move to a system which is more compatible with the current labour market. The rules for determining status of an individual within a working relationship, however, remain the same. It is extremely confusing for persons - whether employers or employees - to know where they stand in situations where it is not a simple black-and-white case of categorizing the services provided. There is a natural tendency to look at the overall income earned during a year and to assign a status to a working relationship based on the amount of revenue generated from providing that particular service. Then, there is the pervasive urban myth - regrettably extending to high levels in both the public and private sectors - in which it is believed a person discharged from a position, occupied for years as an employee, and then hired back "on contract" to sit at the same desk and do the same work is no longer an employee but has been magically transformed into an independent contractor.

[20] I do not know the reason why the assessment issued by the Minister with respect to Rae Anne Hesketh was restricted to the 1995 year while the Club was assessed for 1994 and 1995 in relation to the services provided by Jannine Puri. The fact is the appellants and the Club had a workable arrangement which was satisfactory to both parties. Rae Anne Hesketh had been providing services to the Club, since 1987, on the basis of being an independent contractor. However, as a matter of public policy, there is no ability under the Unemployment Insurance Act, for parties to contract out of the general application of the legislation even in circumstances where there is no atmosphere of duress or disparity in bargaining power between the parties and they have acted throughout in good faith.

[21] Having regard to all of the evidence and applying the tests in the manner directed by the Federal Court of Appeal in Wiebe, supra, and subsequent decisions, I conclude that the appellants were in fact employees of the Club during the periods covered by the assessments and were in insurable and pensionable employment. The assessments are valid, the decisions of the Minister are hereby confirmed and the appeal of each appellant pursuant to the Unemployment Insurance Act and the Canada Pension Plan is hereby dismissed.

Signed at Sidney, British Columbia, this 6th day of March 1998.

"D.W. Rowe"

D.J.T.C.C