Citation: 2012 TCC 214
Date: 20120614
Dockets: 2011-3341(CPP)
2011-3342(EI)
BETWEEN:
875527 ONTARIO LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Woods J.
[1]
The appellant, 875527 Ontario Ltd.,
manufactures and sells attractive wooden signs bearing children’s names. Sales
are made through kiosks which are set up in shopping malls on a short term basis.
Customers can purchase either customized signs that have been painted, or they
can purchase kits which enable them to do the assembling and painting
themselves. The business is aptly named “Loose Letters.”
[2]
In 2010, the appellant entered
into an arrangement for Lise St. Germain to act as a sales agent at Loose
Letters kiosks throughout Ontario. The question to be determined is whether Ms. St.
Germain was engaged as an employee or independent contractor for purposes of
the Employment Insurance Act and Canada Pension Plan.
[3]
Following an application by Ms.
St. Germain for employment insurance benefits, the Minister determined that she
was engaged as an employee for the period from August 2 to October 24, 2010.
The appellant disputes that determination.
Background facts
[4]
The appellant is the brainchild of
Michael Van Raay, an entrepreneur with a broad background, including furniture
design. Mr. Van Raay is the sole owner and manager of the business which
employs a small staff in manufacturing and sales.
[5]
The appellant enters into
contracts with shopping malls to rent kiosk space for short periods, such as two
weeks. Under the contracts, the kiosks are required to be open during mall
hours, which are approximately 11 hours during weekdays and less on weekends.
[6]
Ms. St. Germain responded to an
advertisement for someone to travel to retail malls in Ontario and
operate a Loose Letters kiosk. There was no guarantee of regular work. She
would be engaged on a per mall basis when there was work available. During an
engagement, it was anticipated that she would work four days on and four days
off, with someone else taking over on the off days.
[7]
Ms. St. Germain worked for about
10 weeks in malls which were located in three Ontario cities, North Bay,
Ottawa and London. Unfortunately, the relationship then soured and
ended.
Analysis
[8]
The applicable legal principles are
set out in TBT Personnel Services Inc. v. The Queen, 2011 FCA 256:
[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.
[9]
In applying these principles to
the case at bar, I will first consider the intention of the parties.
[10]
The arrangement was negotiated by
Mr. Van Raay and Ms. St. Germain over the telephone. There was nothing in
writing. Mr. Van Raay testified that it is always his intention to hire
independent contractors and he thought this was the common understanding with
Ms. St. Germain. I accept this testimony. No source deductions were taken from
Ms. St. Germain’s pay and Ms. St. Germain did not say anything about
this.
[11]
Ms. St. Germain testified that she
did not put her mind to the nature of the relationship until later and she
simply assumed that she was an employee. The fact that Ms. St. Germain did not
say anything about the lack of source deductions might suggest that she
accepted to be an independent contractor. However, because the relationship lasted
such a short period, I accept her testimony that she did not put her mind to
it.
[12]
I conclude that the parties did
not have a mutual intention as to the nature of the relationship.
[13]
I now turn to the Wiebe Door
factors of control, tools, chance of profit, and risk of loss.
[14]
As for control, the relevant
question is whether the appellant had the ability to control the manner in
which the work was performed.
[15]
I find that Mr. Van Raay exercised
relatively little control over the manner in which the work was performed. There
was control over hours worked, but this is not a significant factor for
purposes of the Wiebe Door analysis because this was a requirement of
the malls.
[16]
The test, however, is
not whether control was actually exercised, but whether the appellant had the ability
to control.
[17]
Mr. Van Raay testified that he was
aware of the CRA guidelines as to the difference between an employee and
independent contractor and that he did not intend to exercise control. In his
objection letter to the CRA, Mr. Van Raay stated that he would have been more
particular about Ms. St. Germain’s sales methods if she had been an employee.
[18]
I accept that Mr. Van Raay
understood the difference between an employee and independent contractor, but I
am not satisfied that he took sufficient steps to ensure that there was lack of
control. Of particular concern are training manuals that were kept at the
kiosks. The manuals are quite detailed as to sales techniques and proper
operation of the kiosk. Some of the sales techniques are listed as “tips”
rather than directives, but I do not find this to be significant. The documents
as a whole leave the impression that the appellant had the right to exercise
considerable authority over how the work of the sales agents was to be performed.
[19]
Although Mr. Van Raay was aware
that control is a factor in determining independent contractor status, the fact
that manuals were employed suggests that the ability to control was considered
necessary for the business.
[20]
Mr. Van Raay testified that the
manuals were prepared by an independent consultant, and suggested that they do
not represent an intention on his part to exercise control. The problem that I
have with this is that it was the appellant’s decision to place the manuals at
the kiosks.
[21]
On balance, I would conclude that
the control factor points in favour of an employment relationship.
[22]
As for tools, chance of profit and
risk of loss, I find that these are all neutral factors that are commonplace in
both employment and independent contractor relationships.
[23]
As for tools, Ms. St. Germain used
her own car and cell phone, but there were no significant other tools required.
[24]
As for profit and loss, Ms. St.
Germain was paid on an hourly basis and she was not entitled to benefits except
for a reimbursement of expenses.
[25]
Taking all the Wiebe
Door factors into account, I would conclude that although the appellant
wished to engage Ms. St. Germain as an independent contractor, it did not
take sufficient steps to ensure that it would not have the ability to control
how the work was performed. The factors
as a whole point more towards an employment relationship.
[26]
The appeal will be dismissed.
Signed at Ottawa, Ontario this 14th day of June 2012.
“J. Woods”
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