Citation: 2012 TCC 369
Date: 20121019
Dockets: 2011-3768(CPP)
2011-3769(EI)
BETWEEN:
NORTH DELTA REAL HOT YOGA LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
SUKHDEV PANGALIA,
Intervenor.
REASONS FOR JUDGMENT
Woods J.
[1]
Sukhdev Pangalia worked at the
appellant’s yoga studio for about six months, after which he was terminated and
applied for employment insurance benefits. This led to a determination by the
respondent that Mr. Pangalia was engaged in insurable and pensionable
employment for purposes of the Employment Insurance Act and the Canada
Pension Plan.
[2]
The appellant appeals from this determination and submits
that Mr. Pangalia was engaged as an independent contractor. Mr. Pangalia has
intervened in these proceedings.
[3]
The engagement turned out to be an
unhappy affair and it resulted in several legal proceedings being instituted by
Mr. Pangalia.
[4]
I would note in particular that the
British Columbia Employment Standards Tribunal concluded that Mr. Pangalia was
an employee for purposes of the relevant legislation. The conclusion of the
Tribunal is not dispositive of the issue in this appeal, partly because the
Tribunal takes an expanded view of the meaning of “employment” in order to
further the policy objectives of the legislation (Employment Standards
Tribunal, file no. 2011A/189, paragraphs 53-59). Nevertheless, it is useful to
have regard to the findings of the Tribunal, especially as to the facts. Those
findings are consistent with the conclusion that I have reached on the evidence
before me.
Background
[5]
The appellant’s yoga
studio is located in Delta, British Columbia. It is a small family-run business
with Makan Parhar as President and his spouse, Rapinder Lalli, providing
administrative support. Mr. Parhar and Ms. Lalli each testified on behalf of
the appellant.
[6]
Mr. Pangalia testified on behalf
of the respondent.
[7]
Mr. Parhar and Mr. Pangalia originally
became acquainted in another yoga studio and became friends. After Mr. Parhar
opened his own studio, he was interested in Mr. Pangalia’s previous business
experience since Mr. Pangalia had been an owner of a dance studio.
[8]
The working relationship between
Mr. Parhar and Mr. Pangalia was strained, to put it mildly, and it was evident at
the hearing that there was considerable animosity between the two men. This animosity
appeared to affect the reliability of all of the testimony, including the
testimony of Ms. Lalli. As an example, Mr. Parhar and Mr. Pangalia each
accused the other of fabricating a draft agreement for purposes of the
employment standards’ dispute.
[9]
It is difficult to untangle the
substance of the relationship in these circumstances. All that can be done is
to determine what are the most likely facts based on the evidence as a whole.
[10]
As for the nature of the duties
performed, Mr. Pangalia testified that he was hired for front desk duties.
These were set out in considerable detail and were under the control of the
appellant.
[11]
Mr. Parhar and Ms. Lalli testified
that Mr. Pangalia was not hired for front desk duties, but as a manager and consultant
on business matters.
[12]
I have concluded that it is most likely that Mr.
Pangalia was engaged to perform a front desk shift on a full-time basis, and
that he was also to have some managerial duties and provide business
assistance. It does not make sense that Mr. Pangalia would be hired only
for front desk duties since he was to be paid much more than other staff,
$3,000 per month.
Applicable legal
principles
[13]
The general legal principles to be
applied were most recently set out by Sharlow J.A. in TBT Personnel Services
Inc. v The Queen, 2011 FCA 256, at para. 8 and 9:
[8] The leading case on the principles
to be applied in distinguishing a contract of service from a contract for
services is Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553
(C.A.). Wiebe Door was approved by Justice Major, writing for the
Supreme Court of Canada in 67112 Ontario Ltd. v. Sagaz Industries Canada
Inc., 2001 SCC 59, [2001] 2 S.C.R. 983. He summarized the relevant principles
as follows at paragraphs 47-48:
47. [...] The central
question is whether the person who has been engaged to perform the services is
performing them as a person in business on his own account. In making this
determination, the level of control the employer has over the worker's
activities will always be a factor. However, other factors to consider include
whether the worker provides his or her own equipment, whether the worker hires
his or her own helpers, the degree of financial risk taken by the worker, the
degree of responsibility for investment and management held by the worker, and
the worker's opportunity for profit in the performance of his or her tasks.
48. It bears repeating
that the above factors constitute a non-exhaustive list, and there is no set
formula as to their application. The relative weight of each will depend on the
particular facts and circumstances of the case.
[9] In Wolf v. Canada, 2002 FCA
96, [2002] 4 F.C. 396 (C.A.), and Royal Winnipeg Ballet v. Canada (Minister
of National Revenue - M.N.R.), 2006 FCA 87, [2007] 1 F.C.R. 35, this Court
added that where there is evidence that the parties had a common intention as
to the legal relationship between them, it is necessary to consider that
evidence, but it is also necessary to consider the Wiebe Door factors to
determine whether the facts are consistent with the parties’ expressed
intention.
[14]
The application of these general
principles to a particular case is largely a fact-driven exercise. However,
some principles have emerged from the cases which have been expertly summarized
by Hershfield J. in a case dealing with in-home nursing care: Direct Care
In-Home Health Services Inc. v The Queen, 2005 TCC 173. The relevant parts
are reproduced below.
Control
[11]
Analysis of this factor involves a determination of who controls
the work and how, when and where it is to be performed. If control over work
once assigned is found to reside with the worker, then this factor points in
the direction of a finding of independent contractor; if control over
performance of the worker is found to reside with the employer, then it points
towards a finding of an employer-employee relationship. However, in times of
increased specialization this test may be seen as less reliable, so more emphasis
seems to be placed on whether the service engaged is simply "results"
oriented; i.e. "here is a specific task - you are engaged to do it".
In such case there is no relationship of subordination which is a fundamental
requirement of an employee-employer relationship. Further, monitoring the
results, which every engagement of services may require, should not be confused
with control or subordination of a worker.
Tools and Equipment
[13] The question to be
asked in relation to this factor is who, of the employer or the worker, owns
the assets or equipment that is necessary to perform the work. This factor
points to a finding of independent contractor if it is the worker who controls
the assets or equipment. Conversely, a finding of employee is likely if it is
the employer who controls them.
Risk of Loss/Opportunity for profit
[16] This factor examines
the worker's potential of profit or loss. An independent contractor normally
assumes the risk of loss and chance for profit resulting from the performance
of work, while in the case of an employee it is the employer who bears that
burden and has that opportunity.
Whose Business is it?
[22] One ought not,
however, fall into the trap of thinking that only that which has the trappings
of a "business" qualifies as such for the purposes of this analysis.
I refer to paragraph 13 of D & J Driveway:
... It is important to
guard against a reflex of thinking solely of a business corporation or an
organized commercial undertaking when one is dealing with work which is done or
services which are provided other than under a contract of employment. The
examples of electrical, plumbing or building contractors immediately spring to
mind in such a context. However, there is a whole range of services which are
offered under a contract for services. In fact, article 2098 of the Civil Code
of Quebec was very careful to place on an equal footing a "contract of
enterprise" and a "contract for services" and to describe as a
"contractor" the person who performs a contract of enterprise and a
"provider of services" the person who carries out a contract for
services.
[23] Although the Civil
Code of Quebec does not apply in this case, I nonetheless find the words of
Letourneau J. instructive. […]
Analysis
[15]
I start with the factors from Wiebe
Door.
[16]
As for control, the preponderance
of the evidence suggests that Mr. Pangalia was subject to the control of the
appellant. I find that he was assigned full-time shift work during which he
performed front desk duties that were performed by all front desk staff (e.g., opening
the premises, cleaning, monitoring students coming in). He also performed a few
managerial-type duties.
[17]
Mr. Parhar suggests that Mr. Pangalia
did not work full time and that he falsified the work schedule. I would
conclude that the schedule was not falsified. It is unlikely that Mr. Pangalia
would be assigned less than full-time hours given that he was paid at a fixed
rate that was considerably higher than other staff.
[18]
As for whether Mr. Parhar had the
ability to dictate the manner in which Mr. Pangalia’s work was done, I find that he did. In addition to the oral
testimony, several email exchanges between the two men suggest that Mr.
Pangalia was working under the detailed instructions of Mr. Parhar.
[19]
In terms of business consulting, the
evidence suggests that very few services of this nature were performed, if any.
The poor relationship between Mr. Parhar and Mr. Pangalia likely prevented the
relationship developing in this way.
[20]
The factor of control strongly
points to an employment relationship in this case.
[21]
As for the other Wiebe Door
factors, they are fairly neutral. As for tools and equipment, Mr. Pangalia
used the computer and other equipment owned by the appellant. He used his own
car without reimbursement, but this likely was a rare occurrence.
[22]
As for profit and loss, these also
are not significant factors in this case. Mr. Pangalia was to be paid a
fixed monthly amount. There was little opportunity for profit or risk of loss,
but this is not uncommon in both employment and independent contractor
relationships.
[23]
I have concluded that the evidence
as a whole points to an employment relationship. There are very few factors
which suggest that Mr. Pangalia had his own business.
[24]
In light of this conclusion, the
intention of the parties is not relevant. However, if it were, I would conclude
that the parties likely agreed that Mr. Pangalia would be an independent
contractor. He accepted an arrangement on which source deductions would not be
made. I do not accept Mr. Pangalia’s evidence that his remuneration was to be
$3,000 on a net basis. I find that it was to be $3,000 without source
deductions. As a former business owner, Mr. Pangalia likely understood that this
meant that he was to be an independent contractor.
[25]
The actual dealings between the
parties, however, were not consistent with an independent contractor
relationship. If parties wish to have an independent contractor relationship respected
for purposes of the Employment Insurance Act and the Canada Pension
Plan, their actions need to be consistent with their intent. Unfortunately
for the appellant in this case, the evidence as a whole suggests that the
parties did not act in a manner consistent with an independent contractor
relationship.
[26]
The appeal will be dismissed, with
each party bearing their own costs.
Signed at Ottawa, Ontario this 19th day of October 2012.
“J. Woods”
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