Citation: 2011 TCC 496
Date: 20111020
Dockets: 2011-1514(EI)
2011-1516(CPP)
BETWEEN:
TITANS FURNACE CLEANING LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Rowe D.J.
[1]
The Appellant, Titans
Furnace Cleaning Ltd. (“Titans”) appealed from two decisions issued by the
Minister of National Revenue (the “Minister”) on February 10, 2011 pursuant to
the Employment Insurance Act (the “Act”) and the Canada
Pension Plan (the “Plan”) wherein the Minister decided Wade Martin
Clark (“Clark”) was engaged in both insurable and pensionable employment with
Titans during the period from June 25, 2009 to May 15, 2010 on the basis he was
employed pursuant to a contract of service.
[2]
Counsel for the parties
agreed both appeals could be heard together.
[3]
Norton Earl Dodds (“Dodds”)
testified he resides in Edmonton, Alberta and is a certified Air Cleaning
System Technician. Titans was established in December, 2008 and is in the
business of furnace and duct cleaning. Dodds operates his own business –
Daffy’s Duct Cleaning Ltd. – and utilizes it to provide services to Titans.
Dodds – as a Technician – cleans ventilation systems and Titans is retained
from time to time by insurance companies or businesses providing restoration
services when there has been damage caused by fire or flood. Titans also
provides workers to an oil company to perform cleaning at an oil site and does
duct cleaning at schools and hospitals. The company owns a Peterbilt truck on
which special equipment is mounted that is capable of performing the type of
cleaning required in large jobs such as at a hotel fire site in south Edmonton where competitor companies were present with their
equipment and workers. The Peterbilt unit can perform robotic cleaning to
ensure the ventilation system of a building – such as a hospital - is free from
dirt, mold and other forms of contamination. The robot is equipped with a camera
which permits an inspection of the interior of the system. Dodds stated the
Titans telephone number is called – day or night – by customers who require
duct cleaning services as a result of fire or other disasters. Often, Titans is
contacted by Belfor (Canada) Inc., operating as Belfor Restoration
Services, (“Belfor”), an entity often retained by an insurance company to
provide workers at a site where damage has resulted. Dodds stated he worked
with Clark at times during the relevant period including on a job at a school
in Fort St. John, British Columbia that took 10 days. Clark also worked on the hotel job
site in south Edmonton where Titans supplied 4 or 5 workers, all
of whom invoiced Titans for their services. Titans billed the client
restoration company which – in turn – included these amounts in its invoice to
the particular insurance company. In total, there were 30 workers from several
different duct cleaning companies on that jobsite. Titans also performs
residential work cleaning ducts and furnaces and – on average – does 4 jobs per
day. Most of the work is attributable to contacts provided by one of the larger
restoration companies and a job might also entail cleaning up after a dryer
fire or a flood. Titans undertakes the duct cleaning work as part of its
strategy to obtain larger jobs from these companies. Titans had an office and
the company procedure was to issue a “job ticket” which described the nature
and location of work to be performed the following day. Workers attended at the
office and could choose a job that they were willing to perform. Dodds stated
all workers – including Clark – understood that they were providing their
services to Titans as subcontractors and were required to invoice Titans for
their services every two weeks. Dodds evaluated the proficiency of workers from
time to time, as required, and advised the President of Titans accordingly.
Dodds stated that he interviewed Clark, who had 20 years experience in
operating a carpet cleaning truck. During their conversation, Clark advised he wanted to be paid for a minimum of 8 hours
per day – at $18 per hour – whether he worked because he did not want his
income to fluctuate due to a lack of jobs on a particular day. Dodds stated
some workers charged a flat fee per day for their services. Sometimes, a job
was cancelled by a homeowner, and when residential cleaning services were
performed, Clark may have worked between 2 and 6 hours on a particular day and
was free thereafter to do whatever he chose. Jobs on industrial sites generally
occupied 8 hours per day. Dodds stated workers arrived with their own skill set
and Titans provided no training. However, they were evaluated and assigned work
to match their abilities. Workers could refuse a job and some did so for
various reasons. Dodds stated Clark took time off due to health problems
encountered by his spouse. When a worker was absent, Titans substituted another
worker from the roster. Dodds had intended to work with Clark on a job expected
to take 10 days – including a 24-hour drive – at the Watson Lake Hospital in
Yukon but Clark advised he would not accept that assignment so another worker
was contacted. Titans did not offer any company benefits and did not pay
vacation pay nor any overtime if the worker had agreed to provide services for
a flat fee. Titans guarantees its work and on one occasion, Dodds had to return
to a job site on his own time – and expense – to correct a problem. Usually,
any defect was relatively trivial such as not having noticed a register inside
a closet or having to relight a pilot light. Workers had their own cell
telephones and contacted the residential customers concerning matters such as
scheduling service times, methods of entry and related matters. Dodds stated
that 5 or 6 hours a day was usually sufficient to perform the necessary
cleaning jobs but some workers took a lunch break or coffee breaks and used a
full day. Titans scheduled jobs that would not occupy more than 8 hours. Titans
owned two trucks in addition to the Peterbilt which had a value of $150,000.
Workers required some hand tools such as pliers, wrenches, screwdrivers and –
usually – brought their own in a tool box but sometimes they borrowed tools
from Dodds or another worker. They also provided their own steel-toed boots,
hard hat, mask, eye-protection, and safety vest. On an industrial job site, it
was normal for Belfor or another restoration company to provide hard hats to
workers. Titans also had hard hats available for workers, if required. If a
client requested it, workers were provided with a shirt or coveralls displaying
a Titans logo but some had their own coveralls. Dodds identified a series of
invoices – Exhibit A-1 – pertaining to services provided by Clark to Titans
during the period from June 25, 2009 to March 19, 2010. The invoices were
prepared by Dodds because Clark lacked proficiency in writing but Clark signed each one. Invoices were prepared to cover each
actual period of two weeks and not merely on the 15th and 30th
of each month. Dodds stated the invoices were not backdated as it was necessary
for an invoice to be submitted to Titans in order that a worker receive
payment. Except for the invoice covering the period from March 1 to March 14,
2010, all others were in the same amount – $1440.00 – based on 80 hours work at
$18.00 per hour. Dodds was referred to a letter – Exhibit A-2 – dated June 1,
2010 – on Titans letterhead which was signed by Glenda Rossouw, (“Glenda”) –
Manager of Titans – and by Clark, which stated Clark had worked as a
subcontractor for Titans until May 14, 2010 and that no taxes were deducted
from his pay nor was he entitled to any vacation pay or other amount except the
final payment due in the sum of $720.00. Dodds stated this letter was probably
signed at the office of an accountant acting for Titans. Subsequent to the
Ruling issued by Canada Revenue Agency (“CRA”) Titans advised its workers that
if they wanted to provide services to the company, they had to become employees
and not subcontractors. Dodds stated that within the industry some companies
that perform a considerable amount of residential cleaning services have
regular employees on a payroll but many larger jobs undertaken for restoration
companies are performed by workers who are independent contractors.
[4]
In cross-examination by
counsel for the Respondent, Dodds stated the owner of Titans – Winston Rossouw (“Winston”)
– resided in Ontario but the company had an office in Edmonton and a yard and shop where trucks, filters, jacks, and other tools were
stored. The office had a desk, computer and other equipment and supplies, and
Dodd’s spouse – Glenda – performed administrative and secretarial work,
including invoicing clients and issuing job tickets. Dodds had his own computer
but Titans provided a cell phone. At the office, there was a box which
contained information about impending jobs which were obtained from various
sources – including insurance companies – via e-mail, fax or by contacting the
website. Glenda was able to access the Titans e-mail account from home and
transmitted information to Dodds’ cell phone. All Titans workers had a key to
the office and yard. Sometimes, only Dodds, Clark and another person worked for
Titans but other occasions required as many as 30 workers and 5 or 6 workers
had provided their services over a particular two-month period. Dodds
acknowledged that on a business card – Exhibit R-1 – he was described as:
Operations Manager of Titans. Dodds stated that as part of his arrangement with
Titans, he represented the company when dealing with workers, customers and
third parties and that he wanted to become a shareholder in that corporation.
He billed Titans for services provided in carrying out his role as Operations
Manager. Dodds interviewed Clark and informed him that Titans required
workers to be subcontractors and not employees. Dodds recalled the discussion
took place at a fast-food restaurant – famous for its Root Beer – after which
Clark stated he would have to discuss the proposal with someone at home whom
Dodds assumed was Clark’s spouse. Dodds stated that after Clark had worked at
Titans for a while, he and Clark had discussed certain expenses that Clark could deduct from gross revenue earned from Titans.
Dodds stated that customers could contact a particular worker directly if not
satisfied with the work performed and that individual was required to re-attend
on his own time to rectify the problem. Titans provided Shell Oil credit cards
to workers to purchase fuel used in the trucks which were essential for the
performance of the work. Titans paid for all maintenance on the vehicles and
equipment. Dodds stated it is normal within the industry to pay service
providers on an hourly basis and each worker had his own invoice book. However,
it appeared Clark had difficulty to read and write so Dodds prepared the
invoices – Exhibit A-1 – and cheques were issued to Clark in payment thereof.
From time to time, Winston was in Edmonton but Glenda
responded to inquiries for services from prospective customers and assigned
jobs to workers. She also dealt directly with representatives of insurance
companies. The workers’ hours were not recorded and Clark
was paid 8 hours per day whether he worked as few as 4 or as many as 10. No
worker shared in profits of Titans nor did they receive any bonuses. Clark did
not add Goods and Services Tax (“GST”) to his invoices.
Titans had a shop where the
trucks were stored and each worker had a key to the yard gate. Each truck was
equipped with a Global Positioning System (GPS).
[5]
Andres Sanchez (“Sanchez”)
testified he is a Duct Cleaning Technician and provides services to Titans
pursuant to a written contract – Exhibit A-3 – dated September 17, 2010 – which
is outside the period relevant to the within appeals. Sanchez stated he
responded to an advertisement in a newspaper because he had some experience in
duct cleaning and also worked as a general purpose cleaner for other
businesses. Titans advised him of available jobs the day before they were
scheduled and he could either accept or reject any assignment. Sanchez charged
Titans a flat rate of $160.00 per day and invoiced for his services every two
weeks. While working for Titans, Sanchez had other jobs – as a janitor – which
he performed on a part-time basis since the duct cleaning services usually
occupied less than 8 hours per day. He chose his own working hours and had not
been recalled by any Titans customer to correct any problem. For using his own
cell phone to contact customers, Dodds, Glenda, or others in the course of
providing his services, he billed Titans $100.00 per month. Sanchez stated that
he had rejected a job in Yukon because he did not want to be away from Edmonton for an extended period. Sanchez always worked with
another person, and one of them was assigned to rig out the truck while the
senior worker – a qualified Technician – performed the cleaning. Workers were
paired with another person who either had more – or less – experience to
provide a balanced team. Sanchez had some tools and safety equipment and when
he borrowed tools from Titans, was required to sign a form in which he agreed
to accept responsibility for any loss or damage.
[6]
In cross-examination,
Sanchez stated he had never worked with Clark.
When providing services to Titans, he was provided with the name and address of
the customer and the time to arrive at the job site.
[7]
Wade Martin Clark testified
he delivers parts for a trucking company. He responded to a newspaper ad placed
by Titans and went to an interview where he spoke with Dodds. Clark stated
there was no discussion about working status and that he told Dodds he wanted
to be paid $18.00 per hour for driving the truck to service duct and furnace
systems in residences and commercial buildings. Although he had worked for
several duct-cleaning businesses, he had never operated his own business. Some
days, he worked for 4 hours and – at first – Dodds picked him up and drove him
to the job. Clark stated he had the key to the Titans shop
and yard and went to the office every morning to pick up the paperwork which
had information about the jobs. Rarely, was he given a specific deadline to
finish a job but received instructions about the location and an estimate of
the amount of time needed to complete the task. Clark stated he did not want to
work for anyone else while providing service to Titans and was not permitted to
use the Titans truck for his own purposes. He wore a uniform every day
comprised of some combination of a shirt, hoodie or T-shirt with a Titans logo.
He also handed out business cards advertising Titans, similar to the one filed
as Exhibit R-1. Titans provided the necessary truck, equipment and tools and
paid for all related expenses. The tools required to perform the work – such as
screwdriver, pliers, socket set – were provided by Titans and were located in a
toolbox in the truck. Clark went with Dodds to perform inspections and
used a pay-as-you-go cell phone card for work purposes and received some
payment from Titans to cover this cost of business use. Clark identified a
photocopy – Exhibit R-2 – of a pay cheque payable to him personally. He
received the sum of $1440.00 every two weeks even if he had not worked on
certain days due to lack of demand. Referring to Exhibit A-1 – Clark stated he signed an invoice – at the Titans office –
when Dodds handed him a pay cheque. When working at a customer’s residence or
place of business, a co-worker – Marty – collected the fee. At the beginning,
Clark worked on a school project and also at the site of a fire-damaged hotel
but on residential jobs Dodds or Marty worked with him. Clark stated he did not have any liability for work
performed by him and Dodds or Marty dealt with the client directly if a problem
had arisen. Clark had no business licence and was not registered for purposes
of GST. He was aware that no deductions had been taken from his pay cheques.
With regard to the letter – Exhibit A-2 – Clark
stated he felt compelled to sign it so he could receive his pay cheque and end
his relationship with Titans. He had attended school only to Grade 4 and cannot
read nor write much beyond that level.
[8]
In cross-examination,
Clark stated he met Dodds at a restaurant and was informed there was not enough
current demand to provide him with a full-time job. Clark
stated he told Dodds he would not work as a subcontractor or on commission. He
denied that he had told Dodds that he had to check with his spouse about his
working status before starting work at Titans. The first job was at a school in
Fort St. John and subsequently there was more work
available but Clark received payment for 8 hours per day even if he did not
work that long, or at all. Clark acknowledged the invoices referred to “sub-contractor
hours worked” but had not noticed that wording for the first “few months.”
Clark did not know whether wearing a uniform was mandatory since Marty sometimes
did not wear one but Clark had 3 shirts, a T-shirt, hat and hoodie, all
identifying him as a worker for Titans. Clark agreed it is common in the
industry for companies to issue clothing or items to workers that display a
logo, printed advertising message or slogan. Clark stated he did a lot of
residential work and when approached – by Dodds – about a job in Whitehorse, Yukon, inquired, “How long?” to which Dodds
replied, “Too long for you” but did not provide any other explanation. Clark
stated he had not refused any job and when he needed time off, he asked
permission, which was granted. There was no inspection by Titans of work done
at any residence and he did not fill out a time sheet. If he finished early, he
stayed at the shop and performed duties such as washing the truck. He did not
sign an invoice to receive his first cheque but later signed several – at the
same time – even though he had already received payment for the periods covered
by those invoices. Although he had not requested any payment for usage of his
cell phone, Dodds – twice – handed him $20 cash as reimbursement. With respect
to the letter – Exhibit A-2 – Dodds stated he signed it to finalize the matter
and to receive final payment for his work. About 6 months after starting at
Titans, he had started looking for another job. Within a month after leaving
Titans, he found his present employment and had not applied for Unemployment
Insurance benefits in the interim. He recalled discussing the topic of certain
expense deductions with Dodds but always considered that he was an employee
throughout the entire period. He recalls a Questionnaire that was completed by
his “roommate.” Clark stated he has friends who operate their
own businesses and understands that some workers are subcontractors. He
acknowledged that each pay cheque had the word “sub-contract” written on the
memorandum line.
[9]
In re-direct
examination, Clark stated he would not have worked as a subcontractor and had
asked for “pay stubs” once or twice but did not receive any response. He knew
he did not have his own truck or tools and was not operating his own business. Clark stated that in the course of a working career of 40
years, he has always been an employee.
[10]
Counsel for the Appellant
submitted that although Clark’s preference may have been to work pursuant to a
contract of service, he had provided his services to Titans as a subcontractor
on the basis that he receive a guaranteed amount regardless of hours worked.
Counsel conceded it was not helpful to have based the daily guarantee on an
hourly rate – multiplied by 80 hours in each two-week period – but this
arrangement was acceptable to Titans as it required workers to perform services
locally, mainly at residences. Counsel submitted that Dodds had made it clear
to Clark at the outset that he would not be an employee of Titans. Clark was an experienced truck operator and was not subject
to inspection of his work nor was he compelled to meet any deadlines. He was
also able to refuse work and did so. Clark – like other workers – was expected
to provide his own tools apart from the specially-equipped truck. Counsel
submitted Titans was operating in accordance with a new business model which
was akin to that of a broker that brought parties together to achieve a result.
By retaining the services of independent contractors, clients could be
satisfied by ensuring workers were available to perform the required services.
[11]
Counsel for the Respondent
submitted that Clark received a guaranteed income whether he
worked a full day, or at all. He reported to work each day and was assigned
jobs using the specialized, expensive truck and equipment owned by Titans.
Clark did not incur any expenses or hire any helpers and did not have any
chance of profit nor any risk of loss. Counsel submitted the evidence
demonstrated there had been no common intention at the outset that Clark provide his services as an independent contractor and
that their conduct throughout the working relationship was consistent with an
employer-employee relationship. Therefore, the decisions of the Minister were
correct.
[12]
The Supreme Court of Canada in 671122
Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983 – (“Sagaz”)
dealt with a case of vicarious liability and in the course of examining a
variety of relevant issues, the Court was also required to consider what
constitutes an independent contractor. The judgment of the Court was delivered
by Major, J. who reviewed the development of the jurisprudence in the context
of the significance of the difference between an employee and an independent
contractor as it affected the issue of vicarious liability. After referring to
the reasons of MacGuigan, J.A. in Wiebe Door Services Ltd. v. Canada
(Minister of National Revenue - M.N.R.), [1986] 2 C.T.C. 200 and the reference
therein to the organization test of Lord Denning – and to the
synthesis of Cooke, J. in Market Investigations Ltd. v. Minister of Social
Security, [1968] 3 All E.R. 732 - Major, J. at paragraphs 47 and
48 of his judgment 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.
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.
[13]
I will examine the facts in the
within appeals in relation to the indicia set forth in the judgment of Major,
J. in Sagaz.
Level
of Control:
[14]
Clark was an experienced truck
driver and had previous experience operating equipment used to clean ducts and
furnaces. He worked with at least one other person on residential cleaning jobs
and with several others when attending an industrial job site. He was not
subject to supervision nor inspections and – unless he was working with Dodds –
was the senior worker. Clark took the position that he was required to seek
permission to take days off and could not – and did not – refuse any jobs. He
reported to work at the Titans office and for some portion of the relevant period
was picked up at his residence and driven to work by Dodds.
Provision
of equipment and helpers:
[15]
The essential piece of equipment
was the specially-equipped truck operated by Clark. Clark used
small tools provided by Titans which were located in a tool box inside the
truck. Titans provided him with various articles of clothing with the Titans
name/logo displayed thereon and he chose the appropriate item depending on the
circumstances. He returned the clothing when he left. Clark worked – usually –
on a two-person crew in accordance with company policy by which Dodds or Glenda
assigned workers to particular jobs. Clark did not hire his own helper nor choose his co-worker.
Clark had his own pre-paid cell phone which he used both personally and for
work.
Degree
of financial risk and responsibility for investment and management:
[16]
Clark did not have any risk of loss. Even if he worked only
a few hours a day, he was paid for 8 hours at $18.00 an hour. If there was no
work available, he was paid for that day and the arrangement with Titans
incorporated a guarantee that he would be paid for 80 hours every two-week
period regardless of actual hours worked. Clark had no investment in the truck
or equipment or other items used in the course of carrying out the work and
Titans paid for fuel, insurance, maintenance and all other expenses. Any other
expenses such as those incurred when working away from Edmonton were
paid by Titans. Clark had not expected any reimbursement for using his cell
phone for work but accepted a total payment of $40.00 from Dodds to cover the
estimated cost of minutes attributable to business calls. Clark was not
required to exercise any management function to carry out his tasks.
Opportunity for profit in the performance of his tasks:
[17]
Clark did not have any opportunity
for profit. He was not entitled to any bonus or commission arising from performing
services for Titans. Although expressed by an hourly rate, the guaranteed floor
also served as a ceiling. Provided he presented himself for work, he could not
earn less than $1440.00 every two weeks nor was there any opportunity to earn
more.
[18]
In several recent cases including Wolf
v. The Queen, 2002 DTC 6853, The Royal Winnipeg
Ballet v. The Minister of National Revenue – M.N.R., 2006 DTC 6323, Vida Wellness Corp. (c.o.b. Vida
Wellness Spa) v. Canada (Minister of National Revenue - M.N.R.),
[2006] T.C.J. No. 570 and City Water International Inc. v. Canada (Minister
of National Revenue – M.N.R.), [2006] F.C.J. No. 1653, there was a clearly‑expressed
mutual intent of the parties that the person providing the services would be
doing so as an independent contractor and not as an employee. In the within
appeals, there is a conflict in the evidence on this issue. Dodds’ version is
that Clark was informed during the interview at the restaurant that he would be
providing his services as a subcontractor even though Titans was willing to
guarantee income based on 80 hours – at $18.00 per hour – to be paid every two
weeks. Dodds stated that Clark wanted time to reflect on the proposal and to
consult with his spouse which – presumably – he did and then accepted the
Titans offer. Clark testified he had made it abundantly clear that he was
not interested in any working relationship where he would be dependent on
earning a commission or other arrangement which carried with it the potential
for his income to fluctuate depending on the amount of revenue Titans was able
to generate from the residential duct cleaning sector of its business.
Unfortunately, Clark was functionally illiterate and had not operated any
business nor did he wish to do so since he had been an employee for various
business entities over the course of 40 years. There was no written contract
and the letter – Exhibit A-2 – purporting to confirm – retroactively – a pre-existing
relationship of payor and independent contractor, was signed by Clark under
circumstances where he wanted to finalize his relationship with Titans, receive
his final payment, and move on to seek work elsewhere. I do not attribute any
weight to this document in support of the proposition that there was an intent
by Clark to provide his services as an independent contractor at the time of
his initial engagement. Throughout the relevant period, Clark received payment
based on the guaranteed amount, except for the period from March 1 to March 14,
2010 when it was $100.00 less because he took some time off. Dodds testified Clark was not
paid unless he had signed an invoice which Dodds prepared for him. Clark’s
version is that he received his initial cheque without submitting any invoice
and that he had signed several of them at the same time after having already
been paid.
[19]
Counsel for the Appellant relied
on the decision of Boyle J. in Domart Energy Services Ltd. v. The
Minister of National Revenue, 2007 TCC 585 (Domart).
In that case, the worker carried on business under the name Grubbs Oilfield
Services. At paragraphs 4 to 13, inclusive, the facts were stated as follows:
4 In
servicing its oilfield rental business' clients, Domart Energy uses two picker
trucks. Picker trucks are large, expensive trucks that have a boom crane
mounted on them suitable for delivering and picking up machinery and equipment
of the type and size that it rents out. One of Domart Energy's picker trucks is
owned by it and the other is retained by it from an arm's length third party,
McCallum Trucking Ltd. McCallum Trucking provides to Domart Energy the operator
of the picker truck which it provides. Picker trucks are expensive pieces of
equipment costing in the $400,000 range.
5 Prior
to the period in question, Domart Energy employed a private operator for the
picker truck that is owned by it. However, when its employed picker operator
left, Domart Energy had difficulty finding a new employee to take the job
despite its advertising and recruiting efforts.
6 Mr.
Wilfrid Flanagan approached Mr. Pavlis to offer the services of Mr. Flanagan's
business, Grubbs Oilfield Services, to operate Domart Energy's picker truck.
Mr. Pavlis was familiar with Grubbs Oilfield Services and with Mr. Flanagan's
predecessor business Skookum Inc. through which Mr. Flanagan had operated
previously. Domart Energy had been a client of both Skookum and Grubbs
Oilfield.
7 Grubbs
Oilfield Services carried on a number of transport-related services for
businesses in the oilfield exploration and development sector. In addition to
operating picker trucks, Grubbs Oilfield Services provided pilot trucking
services or piloting as well as hotshotting services. Pilot trucking, or
piloting, involves providing the lead small truck and driver or the rear small
truck and driver that accompany large, slow or dangerous transports. Grubbs
Oilfield Services provided pilot trucking services to Domart Energy regularly,
about twice a month, during the relevant period. When providing piloting
services, Grubbs Oilfield Services provided both the pilot truck and operator.
Hotshotting involves making small trucks available to make immediate deliveries
to the oilfield of replacement parts and accessories needed for the leased
equipment. Domart Energy did not use Grubbs Oilfield for hotshotting as it had
other arrangements in place. Grubbs Oilfield had a rate sheet that set out the
rates and terms for its piloting, hotshotting and picker operating activities.
Mr. Flanagan made a copy of this available to Mr. Pavlis for purposes of their
discussion. Mr. Flanagan was insistent to that he was not interested in being
Domart Energy's employee but that Grubbs Oilfield was willing to provide the
services as a contractor. Grubbs had its GST number, clearance letter for
workers' compensation, and its own liability insurance and provided these
documents to Domart Energy.
8 Domart
Energy was aware that Grubbs Oilfield had other clients and that Grubbs would
not be able to take each picker operator job offered. Grubbs had the option to
refuse work when called and Mr. Flanagan did.
9 Domart
Energy has been able to replace Grubbs Oilfield Services and Mr. Flanagan with
an employed picker operator since the period in question.
10 Mr.
Flanagan obtained and maintained his own Class 1 driver's license required to
operate a picker truck. Mr. Flanagan was a Certified Journeyman Crane and
Hoisting Equipment Operator which means he had the required provincial operator
license permitting him to operate the picker. These credentials were maintained
by Mr. Flanagan on his time and at his expense. In addition, Grubbs
Oilfield/Flanagan maintained the statutory log books for the picker truck and
for the crane.
11 Grubbs
Oilfield/Flanagan also bore the cost of highway traffic infractions. It was not
standard in the industry for a driver to be responsible for tickets and fines
in the way that Grubbs Oilfield Services had agreed to be.
12 Domart
Energy agreed to pay Grubbs Oilfield Services $45 per hour for Mr. Flanagan's
picker operator time. This significantly exceeded the hourly rate of $35 it had
previously paid its employed picker operators and that it was offering to
potential employee candidates. There was no written contract. Mr. Pavlis was
clear that, from their discussions, the increased rate reflected the fact this
was a contract rate and there would be no overtime, etc. paid. While Domart
Energy's strong preference was for an employed picker truck operator, Mr.
Pavlis on behalf of Domart Energy did expressly agree with Mr. Flanagan that
this picker truck operating would be done as part of Grubbs Oilfield Services
business.
13 Domart
Energy did not pay Grubbs anything additional for meal or hotel expenses,
holiday pay, sick leave or any other benefits. Domart Energy's employees,
including its employed picker operators, did enjoy a benefits package. Domart
Energy paid the invoice received monthly from Grubbs Oilfield at the agreed
rate together with GST.
[20]
In subsequent paragraphs, Justice
Boyle noted there was no set schedule for the work and Flanagan was called – on
occasion – for same-day work, although he also called the office to see if
there was work available. The worker was not required to report for work and
the times of the jobs were established by the clients and the worker was able
to select his routes, and could take breaks at his discretion. When another
person was needed to carry out the work on the picker truck, that individual
was an employee of Domart Energy.
[21]
At paragraphs 21 and 22 Boyle J.
continued as follows:
21 Before
turning to these criteria and considering them in the facts of this case, I
should note that it is both abundantly clear and conceded by the Crown that Mr.
Flanagan does indeed carry on a business under the name Grubbs Oilfield
Services. The Crown's position is that the work Mr. Flanagan does as picker
operator for Domart Energy is within the context of a separate employment
relationship. They do not dispute that the piloting work Mr. Flanagan's
business does for Domart Energy is done in the context of the Grubbs Oilfield
Services business Mr. Flanagan carries on. Nor does the Crown dispute that Mr.
Flanagan's Grubbs Oilfield Services does piloting and hotshotting work, and
perhaps other picker operator work, for persons other than Domart Energy as
part of its business. This aspect makes this particular case quite different
from many of the reported cases in this area and from most of the authorities
referred to by the Crown. In essence, the Crown's position is that Mr.
Flanagan's picker operator work constituted a separate employment activity from
his piloting work performed for Domart Energy in the same period and from his
services provided to others in the period. The contra view to the Crown's
position would be that Domart Energy was merely one of Grubbs Oilfield
Services' best and largest customers in the period in question.
The
intent of the parties:
22 It
is clear in this case that both parties intended the relationship to be that of
independent contractor. Mr. Flanagan carried on business as Grubbs Oilfield
Services and, prior to doing picker operating work for Domart Energy, did other
work for them and did work for other customers. Mr. Pavlis on behalf of Domart
Energy testified that, while he would have preferred to be able to hire Mr.
Flanagan as an employed picker operator, at Mr. Flanagan's insistence Domart
Energy knowingly and intentionally agreed to enter into an independent
contractor relationship with Mr. Flanagan's business Grubbs Oilfield Services
instead.
[22]
After analyzing the traditional
indicia referred as adopted by the Supreme Court of Canada in Sagaz, supra,
Boyle J. – at paragraph 29 – concluded as follows:
29 Based on the evidence in
this case I am satisfied that the provision of picker truck operator services
was an integral part of the Grubbs Oilfield Services business carried on by Mr.
Flanagan. There is no factual or legal basis to justify treating those services
used by Domart Energy as separate from Grubbs Oilfield's overall business
activities and characterizing them as being in the nature of the employment of
Mr. Flanagan by Domart Energy. This is a case of Mr. Flanagan providing the
services to Domart Energy in the course of an already established business of
his own. As set out in Market Investigations, this makes it an easier
case in which to apply the relevant tests.
[23]
The case of Lang v. Minister of
National Revenue, 2007 CarswellNat 2998 involved workers engaged in duct cleaning.
At paragraphs 35 to 40, inclusive of his judgment, Chief Justice Bowman, after an
extensive review of the jurisprudence and applying it to the particular facts stated:
35 I turn then to the question of the
status of the people hired to do the duct cleaning. Despite the temptation to
use Sir Wilfred Greene's method I shall endeavour to apply as best I can the
principles to be deduced from the Federal Court of Appeal's decisions.
36 I have considered this case on the
basis of four alternative hypotheses. They all lead to the same conclusion.
(a) Intent is determinative (Royal Winnipeg
Ballet).
(b) Wiebe Door
is all that is needed and intent need not be considered (Sagaz,
Wiebe Door
and Precision Gutters
Ltd.).
(c) The Wiebe Door
test does not point conclusively in any direction and so intent is a
tie-breaker (Wolf
and City Water
International Inc.).
(d) Common sense, instinct and a consultation with the
man on the Clapham omnibus.
37 If the law did not permit me to
look at anything but the Wiebe Door
test, standing by itself, then I would have to say that it pointed more to
independent contractor than employee. There was no supervision and no control.
The workers were picked and told to go to a particular house. If mistakes had
to be corrected the workers had to go back at their own expense and correct
their mistakes. They had a chance of profit and bore the risk of loss. They got
paid a percentage of the fee paid to Dun-Rite. If Dun-Rite did not get paid
neither did they. If Dun-Rite got plenty of orders their chances of increased
income were commensurately enhanced. If Dun-Rite chose not to hire a worker he
simply was not hired. If they did a good job their chances of getting hired for
the next job were enhanced. Ownership of tools points in neither direction. The
appellants supplied the vacuum equipment and the van and the workers supplied
the small tools.
38 If intent is determinative clearly
the workers were independent contractors. (Royal Winnipeg
Ballet) Both the appellants and the workers who were called as
witnesses regarded themselves as independent contractors. This is evident from
their oral testimony and from the fact that no employee benefits, no vacation
pay, and no job security were provided. The workers had to wait around until
they were contacted by the appellants or Monty Hagan. They could accept or
decline the job and they could take other jobs. They had no assurance that they
would be hired by Dun-Rite and they had no guarantee of being hired again after
the particular jobs for which they were hired were completed. These factors
bring them within the considerations enunciated by Décary J.A. in Wolf.
39 If we regard intent as merely a
tie-breaker (as stated in Noël J.A.'s judgment in Wolf
as well as in Malone J.A.'s decision in City Water
International Inc.), the same result would apply even if the Wiebe Door
tests pointed unequivocally in neither direction. While the law does require me
to look at the Wiebe Door
test it does not prevent me from looking beyond it in order to determine the
true relationship between the parties. If the Wiebe Door
test yielded an inconclusive result, a consideration of the parties' intent
clearly tips the scales toward an independent contractor relationship.
40 If I were to rely solely on my own
instincts and common sense I would say that quite apart from the Wiebe Door
test, quite apart from intention, workers who are called on to clean the ducts
of a couple of houses, paid a portion of the fee and then sent on their way do
not by any stretch of the imagination look like employees.
[24]
Returning to the facts in the
within appeals, it is evident Clark was not carrying on an existing business on his own
account. He did not have any licence nor was he registered for purposes of
collecting GST. He did not advertise his services to third parties. He did not
incur any liability in the course of providing his services. He did not have a
chance of profit nor did he run a risk of loss unlike the workers in Lang
who did not get paid unless Dun-Rite collected from the client. Unlike the
situation in Precision Gutters Ltd. v. Canada (Minister of National Revenue
– M.N.R.), 2002 FCA 207, I cannot find there are two businesses operating
here, one on the part of Titans and the other by Clark. In the Precision case,
the Federal Court of Appeal held the gutter installers were independent
contractors operating their own installation business and that Precision
Gutters operated another business as the manufacturer and that it negotiated
contracts with the customers, collected the fees, delivered the product to the
job site and issued payment to installation crews, either to one person who
paid the rest of the crew, or to multiple workers, but only after the
appropriate invoice(s) had been submitted. In the within appeals, the duct
cleaning business belonged to Titans and there was no separate function
performed by Clark that was sufficiently distinct to permit it to be identified
as another business entity. The clients were clients of Titans and it owned the
expensive truck and equipment. Throughout, Clark identified himself as a Titans worker by wearing the
clothing provided to him and by distributing business cards to advertise the
services provided by Titans. Pay cheques were payable to him personally. There
is no evidence that Clark undertook any activity or pursued any course of
action consistent with carrying on his own duct cleaning business.
[25]
The Appellant has failed to
demonstrate there was any intent on the part of Clark that he provide his
services as an independent contractor. In terms of utilizing “instincts and
common sense”, it is highly improbable that Clark with his limited literacy
skills would accept the status of subcontractor when his goal was to secure
regular employment that enabled him to earn a regular, fixed, amount rather
than to be subject to fluctuations in income because of insufficient revenue
generated by Titans from residential duct cleaning. He did not want to work on
any commission basis. It is clear what Titans wanted and it was determined that
Clark fit into its new business model in the manner – apparently – applicable
to the worker – Sanchez – who signed a written contract and was content to
provide his services as an independent contractor based on receiving payment at
a flat daily rate. He also provided some tools and managed his time so he could
work at other janitorial jobs to increase his income. Although it took some
time for the picture to emerge from the testimony, it appears Dodds provided
his duct cleaning services to Titans through his own corporation – the
cleverly-named Daffy’s Duct Cleaning Ltd. – and may have billed for his
services as Operations Manager through that company. Titans was owned by
Winston, Dodd’s brother-in-law and his spouse – Glenda – worked for Titans and
handled many of the administrative and dispatching duties. Writing the words “subcontract”
or “subcontractor” on the memorandum line of cheques does not constitute
confirmation of the status of a working relationship. There is no doubt that
Clark needed work and was content to receive the guaranteed income every two
weeks. He testified that – once or twice – he inquired about receiving “pay
stubs” and had discussed with Dodds the potential for deducting certain
expenses from his duct cleaning income. What they might have been under these
circumstances is better left to the imagination of someone engaged in creative
tax return preparation. The conduct of the parties throughout was inconsistent
with that of a business-to-business relationship and was consistent with that
of an employer and employee.
[26]
Based on the evidence and applying
the relevant jurisprudence, I conclude that the decisions of the Minister are
correct and both are confirmed. Both appeals are hereby dismissed.
Signed
at Sidney, British Columbia this 20th day of October 2011.
“D.W. Rowe”
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