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Citation: 2011 TCC 128
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Date: 20110504
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Dockets: 2009-1626(EI)
2009-1627(CPP)
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BETWEEN:
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RONALD S. CRAIGMYLE,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
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AMENDED REASONS FOR JUDGMENT
Little J.
A. FACTS
[1]
The period under review
is from February 16, 2008 to November 5, 2008 (the “Period”).
[2]
In the Period under
review, the Appellant operated a driving school in the Quesnel area of British
Columbia under the name of Ron’s Driving
School (the “Business”).
[3]
The Appellant operated
the Business as a sole proprietorship.
[4]
The Appellant’s
Business offered classroom driving instructions and in-car driving training.
[5]
The Appellant’s
Business was regulated by the Provincial Government.
[6]
The Appellant operated
his Business from his personal residence at 3102 Gook Road in Quesnel.
[7]
The worker, Tessa
Murray (the “Worker”), provided her services as a driving instructor to the
Business.
[8]
The Worker was
certified as a driving instructor.
[9]
The Appellant maintains
that the Worker was offered the option of being an employee or a contractor in
the Appellant’s Business. However, the Appellant stated that the Worker agreed to
be an independent contractor. The Appellant and the Worker signed a contract (Employment
Contract, Exhibit A-1, Tab 1). The contract clearly stated that the Worker was
a “Contractor”.
[10]
The Appellant maintains
that the Worker performed additional duties, including booking driving lessons,
providing information on prices for lessons and available times for lessons,
road tests, and assisting clients in preparing for the driver’s examination
process.
[11]
The Worker provided her
services to the Business for approximately fifteen hours per week.
[12]
The Appellant agrees
that the majority of the duties of the Worker were performed in the specialized
vehicle provided by the Appellant.
[13]
The Worker was required
to invoice the Appellant on the 15th and 30th of each month.
[14]
The Appellant was
responsible for repairs and maintenance of the specialized vehicle.
[15]
The Appellant provided
the Worker with a gas card to enable her to purchase gasoline for the
specialized vehicle.
[16]
The Appellant provided
the Worker with business cards and stationery.
[17]
The Appellant was
responsible for resolving customer complaints.
[18]
The Worker provided her
own computer, telephone and internet, plus an office in her home.
[19]
The Appellant maintains
that he was responsible for advertising the Business. However, the Worker
testified that she also did some personal advertising at the Williams Lake rodeo.
[20]
The
Appellant supplied the Worker with the specialized vehicle in order to offer
the in-car driving experience.
[21]
The
Worker was not allowed to use the Appellant’s specialized vehicle for personal
use.
[22]
The
Appellant paid the Worker at the rate of $20.00 per hour.
[23]
The
Appellant maintains that the Worker was covered under the Appellant’s Workmen’s
Compensation Plan and the Appellant’s insurance bond.
[24]
The written
contract (Employment Contract, Exhibit A-1, Tab 1) contained restrictive
covenants which had the effect of limiting who the Worker could work for,
including restricting her employment for up to one year after she was
terminated with the Appellant. However, it was specified in the contract that
the Appellant could waive these restrictions.
[25]
By
letter dated October 15, 2008, the Appellant terminated the Worker’s contract
effective November 15, 2008 (Exhibit R-1). The Appellant stated in his letter
to the Worker that the termination was made because there was insufficient work
to continue the contract.
[26]
In
November or December 2008, the Worker approached officials of Canada Revenue
Agency (“CRA”) and indicated that she was an employee of the Appellant for the
Period.
[27]
By
letter dated December 4, 2008, officials of the CRA advised the Appellant that
they had ruled that Tessa Murray was an employee of the Appellant from February
16, 2008 to November 5, 2008 (Exhibit A-1, Tab 3).
B. ISSUES
[28]
The
issues are:
a) The issue under the Canada
Pension Plan (the “Plan”) is whether the Worker was employed in
pensionable employment as defined by the Plan during the Period; and
b) The issue under the Employment Insurance Act (the “EI Act”) is whether the Worker
was employed in insurable employment with the Appellant as defined by the EI
Act during the Period.
C. ANALYSIS AND DECISION
[29]
During
the hearing, the Appellant filed a document which is headed “Employment
Contract” (the “Contract”) (Exhibit A-1, Tab 1). The Contract was dated
February 18, 2008 and was signed by the Appellant and by the Worker.
[30]
The
Contract states at the top of the page:
THIS CONTRACT IS BETWEEN
RON’S DRIVING SCHOOL, HEREINAFTER CALLED THE COMPANY AND TESSA MURRAY,
HEREINAFTER CALLED THE CONTRACTOR.
[31]
Paragraph
1 of the Contract provides as follows:
1. The
relationship between the Contractor and the Company is one of contractor / sub contractor
and the Contractor is responsible for all his / her Costs, Pension Plan
Contributions, Income Tax, Medical Plan, Payroll Deductions etc.
[32]
It
is noted that the word “Contractor” (referring to Tessa Murray the Worker) is
found 17 times in the Contract. There is no reference to the word “employee”,
i.e., the Worker was always referred to as “the Contractor”.
[33]
It
should also be noted that the Company agreed to lend money to the Worker. The Company
Loan Agreement Contract (the “Loan Agreement”) (Exhibit A‑1, Tab 2)
reads, in part, as follows:
THIS CONTRACT IS BETWEEN
RON’S DRIVING SCHOOL, HEREINAFTER CALLED THE COMPANY AND TESSA MURRAY,
HEREINAFTER CALLED THE CONTRACTOR.
[34]
The
Loan Agreement also states:
IT IS AGREED THAT:
1. The Company
will pay the Contractor the sum of $2,000.00 (TWO THOUSAND DOLLARS) as an interest
free loan, …
[35]
The
Loan Agreement was signed by the Appellant and the Worker. The Worker signed the
Loan Agreement as the Contractor.
[36]
During
the hearing, the Appellant filed a copy of a letter from himself to officials
of the CRA (Exhibit A-1, Tab 3). In this letter, the Appellant made the
following comments:
Ms Murray as a
contractor for our company was responsible for: -
o
Having
an option of being an employee or contractor and ultimately agreeing to be a
contractor and signing a contract with our company indicating this.
o
Planning
all the work to be done and co coordinating this with all the students.
o
Time
frames of completing the work within the ICBC guidelines.
o
Scheduling
her hours of work.
o
The
work location.
o
She
was not supervised and had complete freedom in how the work was being carried
out.
o
Volumes
of work were decided entirely by her with the number of students requiring
training. She could work any amount of hours she wished and she flexed these
hours accordingly to suit her own needs and scheduling. Ms Murray also took
other employment during this contract that restricted her availability for the
driver training and was something we had no control over.
o
When
students did not show up for her scheduled appointments Ms Murray was not
paid and this clearly indicates there was a risk of loss, which was hers. It
was clearly explained to her on a number of occasions that the company could
not pay for hours that were not worked.
o
Any
upgrading of training was to be paid for by Ms Murray who incidentally paid for
all of her own driver training courses and she kept all the records of her
expenses incurred during her training to be presented later as legitimate
business expenses as a self employed contractor.
o
The
area covered was clearly Quesnel but in discussions with Ms Murray Williams Lake and Prince George were discussed as
additional areas and it was mentioned she would require her own vehicle prior
to working in these other communities.
o
Ms
Murray kept all records for the students, which were handed over to the company
after completion. The company did not have instant access to these records,
which were kept at Ms Murray’s home address and entirely in her possession and
not at our driving school offices. Our school had no means of verifying any
training with students or their parents without first consulting with Ms Murray
to obtain her records.
o
Ms
Murray could have hired a person to assist her with any part of this work i.e.
reception, telephone, booking appointments etc and could have hired a driving
instructor within the guidelines set by ICBC. The company cannot just hire a
driving instructor, as there are specific rules and guidelines applicable i.e.
the school must physically hold the instructors licence in their head office
and ICBC must be notified for insurance purposes in advance of the instructors
working for the company. Ms Murray well knows this as she went through this
upon her appointment as an instructor and she could not get clearance to work
until ICBC signed off on her and sent a formal written confirmation that she
was accepted.
o
Ms
Murray had her own office, home and cell phone, computer and other miscellaneous
expenses, which the company did not provide her with and she was claiming as
business expenses required by her to fulfil the terms of work in the contract.
The company did support her with some paper work forms and occasional internet
access as she had difficulties in getting her email and internet but again this
was nothing more tha[n] being supportive to her due to her financial
difficulties. Ms Murray was known to drive around in order to find other
businesses[’] unsecured internet access to complete her work and emails.
Was there a contract of service
between the Appellant and the Worker?
[37]
The
first issue to be decided is whether the Worker was employed "under any
express or implied contract of service". Only if the Worker was employed
under a contract of service will she qualify for "insurable employment"
and "pensionable employment" (as defined by the EI Act and the
Plan).
[38]
What
constitutes a "contract of service" has been considered by the Courts
many times, often in the context of distinguishing the relationship from a
"contract for service". In other words, the Court must determine if
the Worker was an employee of the Appellant or an independent contractor.
[39]
An examination
of what the Courts have held to constitute a contract of service is required.
The Courts have developed a series of tests focusing on the total relationship
of the parties with the analysis centered around four elements:
(a) degree of control and supervision;
(b) ownership of tools;
(c) chance of profit; and
(d) risk of loss.
[40]
These
tests were propounded by the Federal Court of Appeal in
Wiebe Door Services Ltd. v M.N.R. (1986), 87 D.T.C. 5025 (F.C.A.) [Wiebe
Door], and accepted and expanded by subsequent cases. The Supreme Court of
Canada reviewed this issue in 671122 Ontario Ltd. v Sagaz Industries Canada
Inc., 2001 SCC 59, [2001] S.C.J. No. 61 [Sagaz]. Speaking for the
Court, Major J. stated, at paragraph 47:
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.
[41]
Accordingly,
Major J. considered the central question to be determined is “whether the
person who has been engaged to perform the services is performing them as a
person in business on his own account” or is performing them in the capacity of
an employee.
[42]
The
requirement to take a holistic approach in examining the tests has been
emphasized by the Federal Court of Appeal on past occasions:
... we view the tests as
being useful subordinates in weighing all of the facts relating to the
operations of the Applicant. That is now the preferable and proper approach for
the very good reason that in a given case, and this may well be one of them,
one or more of the tests can have little or no applicability. To formulate a
decision then, the overall evidence must be considered taking into account
those of the tests which may be applicable and giving to all the evidence the
weight which the circumstances may dictate.
(Moose Jaw Kinsmen
Flying Fins Inc. v M.N.R., [1988] 2 C.T.C. 2377 (F.C.A.), 88 D.T.C.
6099 at 6100)
Similarly, Major J. stated in Sagaz,
at paragraph 48:
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.
[43]
Before
applying the facts of the present case to the principles as set out above, it
should be noted that the Minister's determination that the Worker's employment
was pursuant to a contract of service is subject to independent review by the
Tax Court. No deference to the Minister’s determination is required (Jencan
Ltd. v M.N.R., [1997] F.C.J. No. 876 (F.C.A.) at para 24; cited with
approval in Candor Enterprises Ltd. v M.N.R, [2000] F.C.J. No. 2110
(F.C.A.).
[44]
As
stated above, the Wiebe Door test can be divided into four categories:
Control
[45]
MacGuigan
J. said in Wiebe Door, at 5027:
The
traditional common-law criterion of the employment relationship has been the
control test, as set down by Baron Bramwell in R. v. Walker (1858),
27 L.J.M.C. 207, 208:
It
seems to me that the difference between the relations of master and servant and
of principal and agent is this: A principal has the right to direct what the
agent has to do; but a master has not only that right, but also the right to
say how it is to be done.
[46]
In
other words, the key aspect of "control" is the employer's ability to
control the manner in which the employee carries out his or her work;
thus, the focus is not on the control that the employer, in fact, exercised over
the employee. Examples of this ability include the power to determine the
working hours, defining the services to be provided and deciding what work is
to be done on a given day (Caron v M.N.R., [1987] F.C.J. No. 270
(F.C.A.)).
[47]
In
his closing argument, the Appellant said:
… Control of work to be done. Again,
entirely was at her control. She had control of the students. I don't have
access to her diary, her scheduling. It would be impossible for me to even
attempt to try and book an appointment for her, because I don't know when she's
working, when she's not working, what her schedule was. And there was nothing
in the evidence to say that I was controlling.
(Transcript of closing argument, page 8,
lines 1-8)
[48]
The
Appellant also said:
So the control of work certainly was --
nothing in the testimony, I don't believe, insinuates that I've been
controlling her work in any form or fashion, as an employer. And clearly it was
only guided information when it was being sought, general conversations at the
beginning and end of the day.
(Transcript of closing argument, page 9,
lines 18-23)
[49]
I
have concluded that the evidence in this case is that the amount of control
exercised by the Appellant over the Worker is not the type of control that an
employer would exercise over an employee. In my opinion, the extent of control
exercised by the Appellant is the type of control that may be found in an
independent contractor status.
Ownership of Tools of the Trade
[50]
In
this situation, the main tool that was used was the specialized driving vehicle
that was owned by the Appellant. However, the Worker had her own computer,
office, home and cell phone.
[51]
I do
not believe that this test is that significant in this situation.
Chance for Profit and Risk of Loss
[52]
The
Appellant said:
… The chance of profit
or risk of loss certainly was there. That component was a factor in her job, with
the students not showing up with time travelling and stuff. She took that on
entirely. …
(Transcript of closing
argument, page 10, lines 21-24)
[53]
While
it is not a major factor in this situation, I believe that this test is more in
favour of the fact that the Worker was an independent contractor rather than an
employee.
Contractual Intention
[54]
Recent
decisions of the Federal Court of Appeal have placed importance on the
intention of the parties. I refer to the following Court decisions:
(a) Royal Winnipeg Ballet v Minister of National Revenue,
2006 FCA 87, [2007] 1 F.C.R. 35;
(b) Combined
Insurance Company of America v M.N.R., 2007 FCA 60, [2007] F.C.J. No. 124; and
(c) City
Water International Inc. v M.N.R., 2006 FCA 350, [2006] F.C.J. No. 1653.
[55]
In
this situation, it will be noted that the Contract clearly specifies
17 different times that the Worker agreed to be recognized and treated as a Contractor.
In addition, it should be noted that, after the Worker was terminated by the
Appellant, she claimed that she was an employee of the Appellant and not a
Contractor. In recognition of the fact that she considered herself to be an
employee of the Appellant, she filed a Notice of Intervention with the Court Registry
on July 13, 2009. By letter addressed to the Department of Justice, dated July
21, 2010, the Worker said:
To whom it may concern,
I am withdrawing as
Intervener in the above mentioned matter.
[56]
In
connection with the Worker’s decision to withdraw her Notice of Intervention,
Counsel for the Respondent said:
MS. SANDHU:
I can refer to my
notes, but it was my understanding that she decided that she'd have to drive
down, and it simply wasn't something that she was willing to do, just on
principle.
JUSTICE: She
made that decision before she got the subpoena.
MS. SANDHU: Sorry?
JUSTICE: She
made that decision before she got your subpoena.
MS. SANDHU: That's
correct.
(Transcript of
closing argument, page 49, lines 14-23)
[57]
In
other words, the Worker had apparently lost interest in pursuing her position
that she was an employee of the Appellant and she only appeared in Court as a
witness for the appeal after she was served with a subpoena by the Respondent.
[58]
I
accept the Appellant’s testimony that he and the Worker intended their
relationship to be that of a Contractor in the Period in question and that she
was not an employee of the Appellant.
[59]
I
find as follows:
A.
The
Worker was not employed in pensionable employment as defined by the Plan.
B.
The
Worker was not employed in insurable employment as defined by the EI Act.
[60]
The
appeals are allowed.
Signed at Vancouver, British Columbia
this 4th day of May 2011.
Little
J.
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