Citation: 2011 TCC 450
Date: 20110926
Docket: 2009-2547(EI)
BETWEEN:
OBIDA SADDEN,
appellant,
and
THE MINISTER OF NATIONAL REVENUE,
respondent.
REASONS FOR JUDGMENT
Jorré J.
Introduction
[1]
This is an unfortunate
case insofar as it arises, at least in part, because of what, based on a number
of cases I have heard, appears to be a common misconception.
[2]
The appellant appeals
from the decision of the Minister of National Revenue (Minister) dated May 25,
2009.
[3]
In that decision the Minister
concluded that Edward Himour, the payee, was employed under a contract of
service with the appellant, the payor, for the period from August 15, 2006
to January 9, 2008 with the result that the payee was engaged in insurable
employment.
[4]
The appellant contends
that Mr. Himour was an independent contractor.
The Law
[5]
In Doan-Gillan v. M.N.R.,
2009 TCC 157, V.A. Miller J. gives the following succinct summary of the law:
16 The leading case on the differences between a contract of
service and a contract for services is 671122 Ontario Ltd. v. Sagaz
Industries Canada Inc. [2001 SCC 59]. Major J. delivered the judgment of
the Court and he reviewed the four‑factor test from Wiebe Door
Services Ltd. v. M.N.R. [[1986] 3 F.C. 553]. At paragraphs 47 and 48 of his
decision, he held that the key is set out in Market Investigations Ltd. v.
Minister of Social Security [[1968] 3 All E.R. 732]. He stated:
47 Although there is no universal test to determine whether a
person is an employee or an independent contractor, I agree with MacGuigan J.A.
that a persuasive approach to the issue is that taken by Cooke J. in Market
Investigations, supra. 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. (emphasis added)
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.
[6]
Many other factors may
be relevant including the intention of the parties. While intention may in some
cases be an important factor, particularly if the other factors are close, it
is not determinative if the other factors are inconsistent.
Facts and Analysis
[7]
In making the
determination, the Minister relied on the following assumptions of fact (in the
assumptions the respondent refers to Mr. Himour, the payee, as the “Worker”):
(a) the Appellant was in the business of
blowing insulation into the attics of residential and commercial buildings;
(b) the Appellant obtained the contracts and
the work;
(c) the Worker was hired as an insulation
applicator and his duties included operating the blower hose in the attic of
buildings;
(d) the Appellant also employed a hopper
operator who emptied bags of insulation into the blower hopper;
(e) the Worker and the hopper operator worked
as a crew;
(f) the Worker and the Appellant did not
enter into a written agreement;
(g) the Worker performed his services in the
field;
(h) the Worker was paid by piece work as
follows:
- $.05 per square foot for new buildings,
- $.06 per square foot for existing
buildings;
(i) the Worker also received a set wage of
$16.00 per hour for travel time, for out-of-town jobs;
(j) the Appellant guaranteed the Worker a
minimum monthly wage of $2,300.00;
(k) the Appellant determined the Worker’s pay
rate;
(l) the Appellant determined the amount of
work to be performed;
(m) the Worker did not bid for jobs;
(n) the Worker did not invoice the Appellant;
(o) the Appellant calculated the Worker’s
earnings based on the work completed;
(p) the Appellant paid the Worker on a monthly
basis with a mid-month advance;
(q) the Appellant also paid the Worker a
year-end bonus;
(r) the Worker worked whatever hours were
required to complete the assigned work;
(s) the Worker normally worked from 7:00AM to
6:00PM during the busiest period of fall and winter;
(t) the Worker worked shorter hours in
summer;
(u) the Worker was under the direction and
control of the Appellant;
(v) the Appellant scheduled the work;
(w) the Appellant assigned work to the Worker;
(x) the Worker did not have the power to
accept or reject work;
(y) the Appellant instructed the Worker
regarding the amount of insulation to install;
(z) the Worker informed the Appellant of any
leave required;
(aa) the Worker could not hire his own helper or
replace himself;
(bb) the Appellant supplied and paid all helpers
and replacements;
(cc) the Appellant provided all of the tools and
equipment required including a 5 ton truck with a blower system, 200 feet
of hose, knives, coveralls, masks, safety glass and boots;
(dd) the coveralls provided by the Appellant had
the Appellant’s business name on the back;
(ee) the Worker did not provide any tools or
equipment;
(ff) the Appellant provided all of the
supplies and materials required including the insulation;
(gg) the Worker did not incur any expenses in the
performance of his duties;
(hh) the Worker was not liable for any damages;
(ii) the Worker did not have a chance of
profit or risk of loss;
(jj) the intent of the Worker was employment;
(kk) the Appellant considered the hopper
operator an employee;
(ll) the Worker did not carry his own
liability insurance;
(mm) the Worker did not charge the Appellant GST,
and
(nn) the Worker was not in business for himself
while performing services for the Appellant.
[8]
The appellant, the
appellant’s wife and the payee, Mr. Himour, testified.
Intention
[9]
There was a good deal
of evidence relating to the question of what the parties intended.
[10]
The appellant and the
payee did not enter into a written contract.
[11]
The evidence was
somewhat unusual. The appellant testified that he had always wanted the
relationship to be an employment relationship, but that the payee had refused
and insisted on being an independent contractor. The payee testified that he
wanted the relationship to be one of employment, but that the appellant refused
and insisted on his being an independent contractor.
[12]
Obviously the payor and
payee cannot both be right. Whatever the truth of the matter is, there could
not have been a common intention.
[13]
In the absence of a
common intention, intention is not a helpful factor. As a result, with respect
to intention, I do not need to make a factual finding as to whose version is
correct.
[14]
With respect to the
evidence relating to the other factors, the evidence of the payor and the payee
was more or less broadly consistent even if there was some disagreement.
The Other Factors
[15]
The critical questions
are: When the payee was doing work as an applicator for the appellant, whose
business was he carrying out? Was the payee engaged in his own business or was
he simply doing part of the work necessary for the appellant’s business?
[16]
During the period in
question, the payee performed the functions of an applicator of blown-in
insulation for the appellant. Occasionally, he would put batts in walls for the
appellant.
[17]
The work was done at a
wide variety of locations both in and out of town.
[18]
At the relevant time
the appellant had one crew for blowing insulation although there was some
variation in the membership of the crew.
[19]
Other than on very rare
occasions where a third person was required, a crew consisted of two persons:
the applicator, who was at the far end of the hose directing the insulation
into the correct location, and the helper, who would empty bags of insulation
into the hopper of the blower system on the truck.
[20]
Much of the time, it
was the payee’s job to pick up the helper and bring that person to the work
site. The appellant gave the payee a certain amount for gasoline on a monthly basis
in recognition of the fact that the payee picked up the helpers. The appellant
also loaned the payee money in order for the payee to buy the car. The payee
repaid the appellant a certain amount per month; these repayments were deducted
from the appellant’s payments to the payee.
[21]
The payee had a
business of his own installing batt‑type insulation. In that batting
business, his mother and various friends worked with him.
[22]
During the fall and
winter, the busiest time for the appellant’s business, the payee would work
between roughly 7:00 and 18:00, although the hours could vary.
[23]
During the summer, the
payee testified that he could usually work shorter hours from Monday to Friday.
It was during these slower times that the payee would take jobs for his own
business.
Control
[24]
In taking this factor
into account, one must consider not only actual control, but also the power to
exercise control, whether or not that power is used.
[25]
The appellant would
inform the payee where the jobs were, specify the job to do and give him a
rough timeline. Because of weather and other factors, it was not always
possible to follow the timeline.
[26]
Most of the time the
appellant did not go out to job sites and relied on the payee to get the work
done properly.
[27]
There was conflicting
evidence as to whether the payee refused to do certain jobs. The appellant’s
evidence was that this occurred a number of times. The payee’s evidence was
that this was rare and that generally he had difficulty taking time off; he
also testified that some of these issues arose because his common law spouse at
the time had health issues which made it necessary for him to take time off.
[28]
Exhibit R-2 is a
handwritten note from the appellant to the payee. It is headed “Ed: Things we
need to see improvement on as a team” and contains statements such as:
(2) . . . practice more patience with everyone
we are associated with.
(3) Limit text messaging if it stops you
from working.
. . .
(5) Problem solve job & employee issues more
so you don’t have to call me as much.
. . .
(B) I believe our future is bright and will
continue to grow which will make our pay cheques grow as well.
. . .
(D) Ed these issues that I have mentioned must
be addressed.
[Underlining in
original.]
[29]
While much of the
evidence relating to the existence, or not, of the power to control would not
appear to be decisive, Exhibit R-2 removes any doubt in respect of this factor.
[30]
Not only is the tone of
the note in Exhibit R-2 far more consistent with an employment relationship than
with an independent contractor relationship, the note reflects the actual
exercise of control.
[31]
This factor points to
an employment relationship.
Chance of Profit/Risk of Loss
[32]
The appellant paid the
payee based on the work done although the rate would be determined in different
ways depending on the circumstances.
[33]
For travel outside of Medicine Hat, the payee would receive $16 an hour. Most jobs were
paid at the rate of 5 cents per square foot for new buildings and 6 cents
per square foot for old buildings. However, certain jobs were paid on the basis
of a fixed rate for the job.
[34]
Finally, according to
the payee, there were times when he was paid for application work at different
hourly rates which varied depending on what the appellant had bid to do the
work.
[35]
The appellant testified
that these rates were negotiated. The payee testified that he did not have much
of a say in setting the pay rates.
[36]
The payee was
guaranteed a minimum of $2,000 and also received a mid‑month advance.
[37]
The payee received a
year-end bonus.
[38]
The appellant provided
the insulation, gasoline for the truck and also maintained the truck.
[39]
The payee did not have
any expenses to pay in relation to the job. Whether, in the end, the job took
more or less insulation than expected did not affect the amount he received.
[40]
The payee had no
financial risk; he could not suffer a loss.
[41]
He was simply paid for
work. Because some of the work was paid on a piecework rate, the payee might on
occasion spend less time to earn his pay. He could not however earn more than
the agreed pay.
[42]
This factor is
consistent with an employment relationship.
Ownership of Tools and Equipment
[43]
The major piece of
equipment used was a five-ton truck together with a blower system on it and a
lengthy hose. This was provided by the appellant who also provided coveralls,
masks and knives.
[44]
The payee had to have
his own squares for cutting and different tubes for caulking; the payee also
had some other small tools such as tackers, hammers and nails.
[45]
The investment in
equipment by the appellant was much more significant than that of the payee.
Again, this factor points towards an employment relationship.
Other Factors
[46]
It was the appellant who
would decide whether or not to hire a particular individual as a helper; the
appellant also paid the helpers.
[47]
When the payee was not
available, the appellant would hire and pay the replacement person although the
payee was expected to help ensure that someone else was available. It appears
that in general a friend of the payee would replace him when he took time off.
[48]
Both the payee and the
helper wore coveralls with the company logo and name on the back.
[49]
These factors are again
consistent with employment income.
[50]
What is the effect of
the fact that the payee had his own business as an insulation subcontractor?
[51]
I would note that in
his own business the payee would install batt‑type insulation whereas the
bulk of the appellant’s business was blown-in insulation. In his own business,
the payee also hired his own helper and his customers contracted for a result,
insulation of the building, and not for him to do certain work necessary to
produce that result.
[52]
The nature of the payee’s
business was quite distinct from the work that he did for the appellant as an
applicator.
[53]
Accordingly, I conclude
that the work done by the payee for the appellant was not part of the payee’s
business of installing batt-type insulation.
Integration
[54]
Often the integration
test is compatible with both types of contract.
[55]
In this case, however,
the nature of the work performed, doing only the application of the insulation
when the work must be done together with another person and the use of
specialized equipment, makes it rather difficult for someone to establish a
business consisting solely of providing the application labour, but not the
other worker and the machinery. The customer would have to simultaneously
arrange for the provision of the two other essential elements necessary to
actually have the insulation blown in.
[55]
[56]
Such a unique business
model might in unusual circumstances be possible, but here I think the
integration of the appellant’s work into the application process is supportive
of the conclusion that the relationship is one of employment.
Conclusion
[57]
Given all these factors
which are consistent with an employment relationship and inconsistent with the
appellant being an independent contractor, I am satisfied that the Minister was
correct in his conclusion that the relationship between the appellant and Mr.
Himour was one of employment.
[58]
The appeal will be
dismissed without costs.
[59]
At the beginning, I
said that this case was unfortunate. I said that because I gathered the
impression that there may have been a misapprehension on the appellant’s part
that the intention of the parties was determinative no matter what the actual
arrangements between the parties were.
Signed at Ottawa, Ontario, this
26th day of September 2011.
“Gaston Jorré”
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