Citation: 2011TCC177
Date: 20110321
Docket: 2010-2842(EI)
2010-2843(CPP)
BETWEEN:
CANADA
FINANCIAL GROUP
O/A ELITE NAILS & SPA,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
AIQIN (LUCY) ZHOU,
Intervenor.
REASONS FOR JUDGMENT
V.A. Miller J.
[1]
The issue raised by the
pleadings in these appeals was whether Aiqin (Lucy) Zhou was employed by the
Appellant under a contract of service for purposes of the Employment
Insurance Act and the Canada Pension Plan during the period January
1, 2009 to September 12, 2009. The Minister of National Revenue (the
“Minister”) had determined that a contract of service existed between the
Appellant and Lucy for the relevant period.
[2]
The Appellant was
represented by Jie Hu who is the manager and owner of the Appellant. She made
the major business decisions and controlled the daily operations of the
Appellant.
[3]
At the beginning of the
hearing, Ms. Hu stated that Lucy had been employed by the Appellant as an
employee for the period June 1, 2009 to September 12, 2009; and therefore, the
only period at issue was January 1, 2009 to May 31, 2009. The only witnesses at
the hearing were Ms. Hu and Lucy. Their evidence, with respect to the terms of
Lucy’s employment, was diametrically opposed.
[4]
The Appellant operated
a spa in Barrie, Ontario under the trade name Elite Nails &
Spa. The services it offered were manicures (including the application of
artificial nails), pedicures, waxing, facial treatments and massage therapy.
Its business hours were Monday to Friday – 9:30 to 9:00; Saturday – 9:30 to
6:00; and, Sunday – 12 to 5.
[5]
In the Appellant’s
business, there were three categories of workers who performed spa services.
There were those who were hired as trainees. They were taught by Ms. Hu. The
second category of workers was the junior nail technicians who were paid 40% of
their gross sales and worked fewer hours than senior nail technicians who received
60% of their gross sales. All workers received their entire tips.
[6]
Lucy was hired as a
trainee on September 23, 2008. During the period October 20, 2008 to January
17, 2009, she worked 8 hours a day for one to three days weekly. She received
training from Ms. Hu who told Lucy what to do and explained how to perform the
services. Ms. Hu opened another spa in Pickering in November 2008 and she attended at the business in Barrie on Tuesday and Saturday. She gave training to Lucy
only on Tuesdays as Lucy did not work on Saturday.
[7]
According to Ms. Hu,
the cost of the training was $500 and Lucy was told that she could pay for the
training by performing spa services. As a trainee, Lucy could only serve
customers when the junior and senior nail technicians were busy. Lucy testified
that she was told that $500 would be deducted from her earnings but that if she
stayed with the Appellant for a year she would be reimbursed this amount. Ms.
Hu disagreed that there was a promise to reimburse the training fee.
[8]
Lucy’s training was
completed when her earnings were in excess of $500. This occurred on January
17, 2009. The Appellant kept $500 and gave Lucy a cheque for the balance. From
this time, Lucy was classified as a junior nail technician.
[9]
During Ms. Hu’s absence
from the Barrie spa, it was managed by Angela Gao.
[10]
According to Ms. Hu,
the workers’ duties were to open the store; answer the phone; make
appointments; greet clients; provide services to the clients; cash out; and,
clean their own work station. She stated that each technician, except Lucy, had
a key to open and close the store because they set their own hours and they
made appointments with their customers. She said that Lucy did not have a key
because she came to work late and left early and did not need a key.
[11]
Lucy was shocked to
hear that each technician had a key to open the spa because to her knowledge,
only two people had such a key. She was not asked if she wanted a key.
According to Lucy, her duties were to provide manicures, pedicures, facials,
massages and waxing services. She was also responsible for cleaning her work
station. She stated that she wanted to provide the service of applying
artificial nails but due to a conflict with Angela, she was not allowed to
provide this service. Ms. Hu stated that Lucy did not own the tools necessary
to apply artificial nails and she would not allow Lucy to use the tools owned
by the Appellant.
[12]
According to Lucy, she
worked 5 days a week and normally 8 hours a day from January 19 to March 14,
2009. She was paid a commission of 40% of her gross sales. Angela kept a record
of the services performed and sales earned by Lucy who was paid by cheque on a
weekly basis. From March 16 to September 12, 2009, Lucy worked 2 to 3 days a
week. She was paid on a weekly basis until June, when she became an employee,
and was then paid on a bi-weekly basis.
[13]
Lucy stated that when
the spa was not busy, Angela told her to do additional tasks which the other
technicians did not have to do. She complied with the manager’s instructions.
This occurred during the period from January to March 14, 2009. Finally, when
she refused to clean the floor of the entire spa, because she had cut her
finger, Angela cut her hours of work. She was thereafter scheduled to work only
2 or 3 days each week.
[14]
It was Lucy’s evidence
that, during the period January 1 to May 31, 2009, when Angela scheduled her to
be at the spa, she was required to attend even if she had no appointments with
clients. She needed to report to the manager if she was going to be late or
couldn’t attend work and she could not leave the spa early without permission
from the manager.
[15]
Ms. Hu stated that the
technicians were free to decide their hours of work; and they could “could come
and go” as they wished regardless of the Appellant’s needs. It was her evidence
that Lucy could go shopping during her work hours and that Lucy’s work schedule
was discussed and decided by both Lucy and the Appellant. The Appellant only
coordinated the technicians’ schedules.
[16]
The Appellant supplied
Lucy with a uniform which was custom made for her. She was required to wear it
each day.
[17]
Lucy testified that,
contrary to Ms. Hu’s evidence, the technicians could not offer the customers a
discount unless the manager agreed to it. The fee for services was set by the Appellant
and could not be altered by the technicians. To support her statement, Lucy
submitted exhibit I-3 which was a brochure with the list of services offered by
the Appellant. The cost for each service was also printed on the brochure.
[18]
The conflicting
evidence offered by Lucy and Ms. Hu raises the issue of credibility and in
making my decision as to whose evidence is more trustworthy, I am cognizant of
the statements made, at paragraph 13, by Bowman CJ, as he then was, in Faulkner
v MNR[1]:
The power and
obligation that a trial judge has to assess credibility is one of the heaviest
responsibilities that a judge has. It is a responsibility that should be
exercised with care and reflection because an adverse finding of credibility
implies that someone is lying under oath. It is a power that should not be
misused as an excuse for expeditiously getting rid of a case. The
responsibility that rests on a trial judge to exercise extreme care in making
findings of credibility is particularly onerous when one considers that a
finding of credibility is virtually unappealable.
[19]
I have reviewed all of
the evidence in this case and I have concluded that Lucy’s evidence is more
reliable. My conclusion is based on the following facts:
(a) Her work schedule (exhibit R-1, p.
7 and 34) supports her testimony that her days of work decreased from 5 each
week in January, February and early March to 2 or 3 days each week for the
rest of the year that she worked at the spa. The exception was the week of
March 30 when Lucy worked only 1 day.
(b) Ms. Hu stated that, when Lucy
became an employee, she was paid an hourly wage and she had to work a specific
number of hours each week. However, Ms. Hu did not know Lucy’s hourly wage. She
pointed to the Record of Employment (exhibit R-1 p. 10) and stated that the
hourly wage was the total insurable earnings divided by the total insurable
hours. Whereas, Lucy stated that she was not told what her hourly wage was and
her earnings continued to be 40% of her gross sales and the terms of her employment
did not change when she became an employee. Lucy’s receipt book for the period
September 10 to 12 (exhibit I-1) and the cheque that she received for this
period (exhibit I-2) confirm that Lucy was indeed still paid 40% of her gross
sales when she was classified as an employee.
(c) I find some of Ms. Hu’s statements
implausible. I especially find it unbelievable that the technicians could come
and go as they liked regardless of the Appellant’s needs.
[20]
As a consequence of my
finding, where there is a conflict in the evidence of the two witnesses, I
accept Lucy’s evidence.
[21]
To determine whether
Lucy was an employee or an independent contractor while employed by the
Appellant during the period January 1, 2009 to May 31, 2009, it is necessary to determine if she was performing the
services as a person in business on her own account. The factors from Wiebe
Door[2] are used to analyze
the work relationship between her and the Appellant. Those factors are control,
ownership of tools, chance of profit and risk of loss. In Combined Insurance
Company of America v M.N.R.[3], Nadon, J.A. reviewed the case law and stated the
principles to be applied as follows:
[35] In my view, the
following principles emerge from these decisions:
1.
The relevant facts, including the parties’ intent regarding the nature of their
contractual relationship, must be looked at in the light of the factors in Wiebe
Door, supra, and in the light of any factor which may prove to be relevant
in the particular circumstances of the case;
2.
There is no predetermined way of applying the relevant factors and their
importance will depend on the circumstances and the particular facts of the
case.
Although as a general rule the control test
is of special importance, the tests developed in Wiebe Door and Sagaz,
supra, will nevertheless be useful in determining the real nature of the
contract.
[22]
The test that was stated in Sagaz[4] is as follows:
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.
[23]
The contract between
Lucy and the Appellant was oral. There was no common understanding between them
as to the nature of their contract. According to the Appellant, Lucy was hired
as an independent contractor; whereas, Lucy stated that she intended to be hired
as an employee for the entire period that she worked for the Appellant.
[24]
Lucy stated that when
she asked Ms. Hu why there were no deductions from her pay cheque, she was told
that she was self-employed and not an employee. It was her evidence that she asked
Ms. Hu to deduct the employment insurance and Canada Pension Plan premiums as
she wanted to be an employee. It was not until May that Ms. Hu agreed. Ms. Hu
stated that the business increased in May and she could hire Lucy as an
employee.
Control
[25]
Lucy reported to Angela
who decided the days and hours that Lucy worked. Lucy stated that she was not
allowed to leave the store early unless she received permission from the
manager. Contrary to Ms. Hu’s statement, Lucy stated that she could not leave
the spa to go shopping even if the spa was not busy. Likewise, she was required
to attend at the spa on her scheduled days even if she had no scheduled
appointments.
[26]
The Appellant told Lucy not only
what her duties were but also how they were to be performed. The Appellant
trained Lucy. If Angela was not pleased with a service that Lucy performed, she
could tell Lucy to correct it.
[27]
Ms. Hu stated that the
Appellant’s business was conducted on the basis that the first technician into
the spa on any given day, served the first customer. It was Lucy’s evidence
that there were occasions when Angela would not allow her to service a customer
even when it was her turn.
[28]
Ms. Hu stated that she
and Lucy negotiated Lucy’s commission rate. I find this implausible given that
it was Ms. Hu who decided when Lucy was no longer a trainee; it was Ms. Hu who
decided when Lucy could become a junior technician and a senior technician. The
commission rates for each of these positions were set by Ms. Hu. Lucy’s
evidence was that “The payer determined the percentage of commission”[5].
[29]
Based on my review of the above, I
have concluded that Lucy was subject to the control and supervision of the
Appellant. This factor indicates that she was an employee.
Ownership of Tools
[30]
The Appellant provided
the facility, the massage chairs, towels, tables, chairs, work stations,
washing machine, dryer, sanitizer and, all supplies necessary to perform the
services offered by it. Lucy supplied the small tools which she used to give a
manicure and a pedicure. Her tools consisted of a cuticle cutter, nipper,
clippers, skin scrubber, and gel brushes. The cost of these tools was $97.54.
[31]
In this appeal, the
cost of tools owned by Lucy was negligible. However, in Precision Gutters
Ltd. v Minister of National Revenue[6],
the fact that workers supplied their own hand tools was considered by the
Federal Court of Appeal to be an indication that they were independent
contractors. Likewise, in this appeal, this factor does point to Lucy as being
an independent contractor.
Chance of Profit
[32]
The Appellant
established the fees that could be charged for each service. Lucy could not
change those fees. The only way Lucy could increase the commissions she earned
with the Appellant was to increase the number of days she worked; the number of
customers she served; and her status from junior technician to senior
technician. She had no control over any of these factors. Her manager scheduled
the days that she was allowed to work with the Appellant. She had to wait her
turn to serve a customer as the Appellant operated on the basis that the first
technician in the spa served the first customer. It was the Appellant who
determined when Lucy would be promoted to a senior technician.
[33]
Lucy had no chance to
make a profit in the entrepreneurial sense. The customers were those of the
Appellant. Lucy had no client base; she was not holding herself out as carrying
on a business[7].
Risk of Loss
[34]
Lucy did not incur any
expenses in the performance of her duties. Ms. Hu stated that if a customer was
not pleased with Lucy’s services, Lucy or another technician would redo the
service. Lucy would lose her commission. It was Lucy’s evidence that this never
occurred but she assumed that Ms. Hu’s testimony in this regard was correct.
Thus, Lucy had a potential risk of loss.
[35]
Lucy had no
responsibility for investment in the business and her financial risk was
minimal. It was limited to the cost of her tools which was $97.54.
[36]
When I ask the question
whether Lucy was performing the services as a person in business on her own
account, the unequivocal answer is no. Her services were fully integrated into
the Appellant’s business. They were at the core of the Appellant’s business.
The Appellant exercised control over how and when Lucy performed her services.
Although she owned her own tools, this was insufficient for me to conclude that
Lucy was an independent contractor. I have given little weight to the factor of
ownership of tools. When I review all of the evidence, I conclude that Lucy was
employed by the Appellant as an employee for the period January 1, 2009 to May
31, 2009.
[37]
The appeal is
dismissed.
Signed at Ottawa, Canada, this 21st day of March 2011.
“V.A. Miller”
Email this Content