Citation: 2010TCC250
Date: 20100507
Dockets: 2009-3686(CPP)
2009-3687(EI)
BETWEEN:
ON MASSE INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1]
The issue in these
appeals is whether Robert C. Caputi was engaged by the Appellant in a contract
of service or a contract for services during the period from November 10, 2008
to February 17, 2009 for the purposes of the Employment Insurance Act (the “Act”) and the Canada Pension Plan (the “Plan”).
The Respondent had determined that Robert C. Caputi was an employee of the
Appellant and therefore was engaged by the Appellant in insurable employment
for the purposes of the Act and pensionable employment for the purposes
of the Plan during the above period.
[2]
The
Appellant operated an animation production company and retained the services of
Robert C. Caputi as a texture artist to work on one specific project – the
short animated film “Ollie the Otter”. The work
was expected to take two to three months to complete. Robert C. Caputi knew when he started working on the
project that this was the expected time that his services would be required.
The period that he actually worked was only slightly over three months. He was
retained for only a short period of time and to only work on one specific
project.
[3]
Wesley Lui,
Director of Operations for the Appellant, and Robert C. Caputi testified during
the hearing. Both clearly stated that it was their mutual intention that Robert
C. Caputi would be retained as an independent contractor. Robert C. Caputi
stated that he understood that he would not be receiving the benefits that the
employees of the Appellant would be receiving. As well, his access to the
server of the Appellant was limited. Employees would have access to all files
on the server but Robert C. Caputi did not have access to all files. His access
was limited to those files that he needed to access to work on the Ollie the
Otter project. Robert C. Caputi would not be invited to all of the meetings of
employees to which employees would be invited. He would attend meetings related
specifically to the Ollie the Otter project.
[4]
Wesley Lui
also stated that Robert C. Caputi was treated as an independent contractor when
the Appellant claimed the Ontario Computer Animation and Special Effects Tax
Credit. If Robert C. Caputi would have been an employee, the Appellant could
have claimed a larger credit. Therefore the classification of Robert C.
Caputi as an independent contractor resulted in a smaller credit than if he
would have been an employee and clearly shows that the intention of the
Appellant was that Robert C. Caputi was an independent contractor.
[5]
The
Appellant and Robert C. Caputi entered into a contract on which it is stated at
the top that it is an “Independent Contractor Deal memo”. Robert C. Caputi
is identified in the document as a contractor. The agreement contemplates that
Robert C. Caputi will send invoices to the Appellant before he is paid. Robert
C. Caputi did send invoices for his services by e-mail.
[6]
The
question of whether an individual is an employee or an independent contractor
has been the subject of several cases. In 671122 Ontario Ltd. v.
Sagaz Industries Canada Inc., [2001] S.C.J. 61, 2001 S.C.C. 59 (“Sagaz”),
Justice Major of the Supreme Court of Canada stated as follows:
46 In my opinion,
there is no one conclusive test which can be universally applied to determine
whether a person is an employee or an independent contractor. Lord Denning
stated in Stevenson Jordan, supra, that it may be impossible to give a precise
definition of the distinction (p. 111) and, similarly, Fleming observed that
"no single test seems to yield an invariably clear and acceptable answer
to the many variables of ever changing employment relations ..." (p. 416).
Further, I agree with MacGuigan J.A. in Wiebe Door, at p. 563, citing
Atiyah, supra, at p. 38, that what must always occur is a search for the total
relationship of the parties:
[I]t
is exceedingly doubtful whether the search for a formula in the nature of a
single test for identifying a contract of service any longer serves a useful
purpose.... The most that can profitably be done is to examine all the possible
factors which have been referred to in these cases as bearing on the nature of
the relationship between the parties concerned. Clearly not all of these
factors will be relevant in all cases, or have the same weight in all cases.
Equally clearly no magic formula can be propounded for determining which
factors should, in any given case, be treated as the determining ones.
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.
[7]
In Royal
Winnipeg Ballet v. M.N.R., 2006 FCA 87, 2006 DTC 6323, the dancers and the
ballet company had a common intention that the dancers would be hired as
independent contractors. The Federal Court of Appeal reviewed the relevant
facts of that case as determined by the factors outlined in Wiebe Door
Services Ltd. v. M.N.R., [1986] 2 C.T.C. 200, 87 DTC 5025 (“Wiebe Door”).
The Federal Court of Appeal concluded that the relevant facts in that case did
not change the intended relationship between the dancers and the Royal Winnipeg
Ballet and that the dancers were independent contractors. Justice Sharlow of
the Federal Court of Appeal made the following comments in the Royal
Winnipeg Ballet case:
65. The judge chose the following factors
as relevant to the Wiebe Door analysis (it is not suggested that he
chose the wrong factors or that there are any relevant factors that he failed
to consider):
· The indispensable element of
individual artistic expression necessarily rests with the dancers. The RWB
chooses what works will be performed, chooses the time and location of the
performances, determines where and when rehearsals will be held, assigns the
roles, provides the choreography, and directs each performance.
· The dancers have no management or
investment responsibilities with respect to their work with the RWB.
· The dancers bear little financial
risk for the work they do for the RWB for the particular season for which they
are engaged. However, their engagements with the RWB are for a single season
and they have no assurance of being engaged in the next season.
· The dancers have some chance of
profit, even within their engagement with the RWB, in that they may negotiate
for remuneration in addition to what is provided by the Canadian Ballet
Agreement. However, for the most part remuneration from the RWB is based on
seniority and there is little movement from that scale.
· The career of a dancer is
susceptible to being managed, particularly as the dancer gains experience.
Dancers engaged by the RWB have considerable freedom to accept outside
engagements, although there are significant contractual restrictions (the need
for the consent of the RWB, and the obligation to hold themselves out as being
engaged by the RWB).
· Although the dancers bear many
costs related to their engagement with the RWB and their dancing careers
generally, the RWB is obliged to provide dance shoes, costumes, tights, wigs
and certain other necessary items.
· The dancers are responsible for
keeping themselves physically fit for the roles they are assigned. However, the
RWB is obliged by contract to provide certain health related benefits and
warm-up classes.
66. The control factor in this case, as
in most cases, requires particular attention. It seems to me that while the
degree of control exercised by the RWB over the work of the dancers is
extensive, it is no more than is needed to stage a series of ballets over a
well planned season of performances. If the RWB were to stage a ballet using
guest artists in all principal roles, the RWB's control over the guest artists
would be the same as if each role were performed by a dancer engaged for the
season. If it is accepted (as it must be), that a guest artist may accept a
role with the RWB without becoming its employee, then the element of control
must be consistent with the guest artist being an independent contractor.
Therefore, the elements of control in this case cannot reasonably be considered
to be inconsistent with the parties' understanding that the dancers were
independent contractors.
67. The same can be said of all of the
factors, considered in their entirety, in the context of the nature of the
activities of the RWB and the work of the dancers engaged by the RWB. In my
view, this is a case where the common understanding of the parties as to the nature
of their legal relationship is borne out by the contractual terms and the other
relevant facts.
[8]
Since the
facts in Royal Winnipeg Ballet were not sufficient to alter the
arrangement from that which was intended by the parties, unless the relevant
facts in this case, as determined by the factors as set out in Wiebe Door and Sagaz, would
more strongly indicate an employer-employee relationship than in the case of
the Royal Winnipeg Ballet, it seems to me that Robert C. Caputi would be
an independent contractor since both the Appellant and Robert C. Caputi clearly
had a mutual intention to create an independent contractor relationship.
[9]
With respect to the
control factor, the evidence in this particular case was that the amount of
control that the Appellant had over Robert C. Caputi would have been less than
the amount of the control that the Royal Winnipeg Ballet had over the
ballet dancers. In the Royal Winnipeg Ballet case, Justice Sharlow
described the degree of control that the Royal Winnipeg Ballet had over the
dancers as “extensive”. The dancers in the Royal Winnipeg Ballet case
would not have been allowed to set their own hours and were only allowed to
work for others with the consent of the Royal Winnipeg Ballet. As noted in the
above decision:
The RWB chooses what works will be performed, chooses the
time and location of the performances, determines where and when rehearsals
will be held, assigns the roles, provides the choreography, and directs each
performance.
[10]
Robert C. Caputi was able
to set his own hours of work, although within certain limits as he was part of
a team that was working on the Ollie the Otter project. He was also able to
work for other clients, but since he was working 40 hours per work on the
Ollie the Otter project, he did not have a lot of time to work for someone else.
He could either work at the Appellant’s premises or at his home, although most
of the time he worked at the Appellant’s premises. He would be required to
attend meetings related to the “Ollie the Otter” project. He was part of a team
that was working on this animated film and he was retained to perform certain
tasks. He was retained as a texture artist to work on certain parts of the
animated film.
[11]
In the case of Direct
Care In-Home Health Services Inc. v. M.N.R., 2005 TCC 173, Justice
Hershfield made the following comments in relation to control:
11 Analysis of this factor involves a determination of
who controls the work and how, when and where it is to be performed. If control
over work once assigned is found to reside with the worker, then this factor
points in the direction of a finding of independent contractor; if control over
performance of the worker is found to reside with the employer, then it points
towards a finding of an employer-employee relationship. However, in times of
increased specialization this test may be seen as less reliable, so more
emphasis seems to be placed on whether the service engaged is simply “results”
oriented; i.e. “here is a specific task -- you are engaged to do it”. In such
case there is no relationship of subordination which is a fundamental
requirement of an employee-employer relationship. Further, monitoring the
results, which every engagement of services may require, should not be confused
with control or subordination of a worker.
12 In the case at bar, the Worker was free to decline
an engagement for any reason, or indeed, for no reason at all. …
(emphasis added)
[12]
The arrangement with
Robert C. Caputi appears to be very similar to the arrangement described by
Justice Hershfield as Robert C. Caputi was assigned a specific task in relation
to the production of the animated film and engaged to do it.
[13]
With respect to the
ownership of equipment, the Appellant provided some of the tools that Robert C.
Caputi needed but Robert C. Caputi also supplied some tools. Robert C. Caputi
had a laptop at home that he would use. He needed to use the Appellant’s
computer system and software to integrate his work with the work of the other
individuals who were working on the film. In Royal Winnipeg Ballet the
dancers bore many costs but the Royal Winnipeg Ballet was obliged to provide
dance shoes, costumes, tights, wigs and certain other necessary items.
[14]
Robert C. Caputi was
hired personally to perform the services and therefore he would not have been
able to hire other workers to perform the tasks that were assigned to him. In
the Royal Winnipeg Ballet case, there was no discussion with
respect to whether or not the dancers could hire any helpers but it would seem
illogical to suggest that the dancers could hire any person to replace them in
the production.
[15]
With respect to the
degree of financial risk/opportunity for profit, Robert C. Caputi had
little financial risk. Wesley Lui stated that Robert C. Caputi was a very good
texture artist. If any work had to be redone it was generally because the
producers of the film wanted to make a change. In the Royal Winnipeg Ballet
case the dancers, as acknowledged by the Federal Court of Appeal, had little
financial risk.
[16]
With respect to the
opportunity for profit, the dancers with the Royal Winnipeg Ballet could
negotiate for additional remuneration, although most were paid in accordance
with a predetermined scale. In this case Robert C. Caputi was paid a set amount
per week as agreed upon by Robert C. Caputi and the Appellant. In Royal
Winnipeg Ballet the dancers were allowed to accept outside engagements
provided that they had the consent of the Royal Winnipeg Ballet and provided
that they held themselves out as being engaged by the Royal Winnipeg Ballet. In
this case, there were no such restrictions imposed on Robert C. Caputi in
accepting outside engagements.
[17]
In the Royal
Winnipeg Ballet case, the dancers did not have any management or investment
responsibilities with respect to their work with the Royal Winnipeg Ballet. In
this case Robert C. Caputi did not have any management or investment
responsibilities with respect to his work with the Appellant.
[18] As a result, I find that the relevant
facts related to the engagement of Robert C. Caputi by the Appellant as
determined by the factors as set out in Wiebe Door and Sagaz do not suggest more strongly an employer/employee
relationship than did the facts in Royal Winnipeg Ballet and since there
was clearly a mutual intention to create an independent contractor
relationship, Robert C. Caputi was an independent contractor and not
an employee of the Appellant during the period under appeal.
[19]
As a result, the
appeals from the decision of the Minister
of National Revenue, dated September 17, 2009, that Robert C. Caputi was engaged by the Appellant in
insurable employment within the meaning of paragraph 5(1)(a) of the
Act and pensionable employment within the meaning of paragraph 6(1)(a)
of the Plan are allowed, without costs, and the decision of the Minister
is varied to provide that Robert C. Caputi was an independent contractor and was not engaged by the
Appellant in insurable employment within the meaning of paragraph 5(1)(a)
of the Act and was not engaged by the Appellant in pensionable employment
within the meaning of paragraph 6(1)(a) of the Plan during the
period under appeal.
Signed at Toronto, Ontario, this 7th day of May, 2010.
“Wyman W. Webb”
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