Citation: 2010 TCC 151
Date: 20100315
Dockets: 2009-2786(EI)
2009-2787(CPP)
BETWEEN:
MERCHANTS OF GREEN COFFEE INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Woods J.
[1] This is an appeal by Merchants of Green Coffee Inc.
(MGC) in respect of assessments for failure to remit premiums under the Employment
Insurance Act and the Canada Pension Plan. The
total amount assessed was slightly under $2,000.
[2] The question to be decided is whether Ms. Qian Duan
was engaged in pensionable and insurable employment when she provided
bookkeeping/accounting services for MGC.
[3] Both MGC and Ms. Duan take the position that Ms. Duan
was engaged as an independent contractor and not an employee.
[4] The relevant period is the 2007 taxation year, which I
was informed was the calendar year.
Background facts
[5] MGC is a small company based in Toronto that at
the relevant time was in the business of buying and selling coffee beans and
roasters. The company is owned by the Zavislake family and is managed by Mr.
Brad Zavislake.
[6] Brad Zavislake was not able to attend the hearing
because of illness. Testimony was provided by his father, Mr. Robert Zavislake,
who also represented MGC at the hearing.
[7] Ms. Duan provided testimony pursuant to a subpoena
issued by the respondent.
[8] Ms. Duan was born in China and came to Canada in 2004.
Beginning in 2005, she was hired by MGC pursuant to a government-subsidized job
training program. It appears that Ms. Duan was hired as a full-time employee
(Ex. A-4).
[9] At the time of this engagement, MGC was starting to
convert its accounting system to a more sophisticated computer program called
Business Visions. It appears that the conversion work done by Ms. Duan was
time-intensive because data had to be entered into the system from prior years.
[10] Ms. Duan taught herself how to use the Business
Visions software program and she followed accounting procedures which had been
prepared for MGC by a professional accountant (Ex. A-3).
[11] Upon completion of the job training program in May
2006, Ms. Duan and MGC entered into a written contract to continue her services
on a contract basis from July 2006 to the end of that year.
[12] The new arrangement was set up as an independent
contractor relationship and both parties intended this result. Ms. Duan was to
provide invoices and time sheets and would be paid $11 per hour. The contract
provided that Ms. Duan would determine the time required to complete the work
and she would determine her own work schedule. It was anticipated that the work
would involve approximately 2 days a week.
[13] The arrangement continued after 2006 and in fact it
continues to the present time. Apparently, the conversion is just now fully
complete.
[14] For 2007, which is the relevant period, Ms. Duan was
paid in the neighborhood of $15,000. Her rate of pay at that time was $17.50
per hour.
[15] Ms. Duan did not work for any other persons in 2007 and
attended school for part of the time.
Discussion
[16] Counsel for the respondent submits that this
arrangement has all the usual earmarks of an employment relationship: the
ability of MGC to control how the work is done, the provision of tools, a
computer, by MGC, and no opportunity for profit or loss. It is suggested that
the factor of intention should not be given much weight because the parties did
not have a good understanding of the difference between an employment and
independent contractor relationship.
[17] Mr. Zavislake submits that the Minister has
incorrectly characterized the relationship as employment by rigidly applying
the factors which have historically been used and not taking into account
modern methods of doing business.
[18] I agree with this submission.
[19] MGC and Ms. Duan had a clear understanding that they
did not want Ms. Duan to be an employee. Assuming that their relationship was
consistent with this understanding, it should be respected.
[20] The relationship was one in which Ms. Duan had significantly
more flexibility than is typical in an employment relationship. Ms. Duan
determined her own working hours and she took extended time off on one
occasion.
[21] In addition, Ms. Duan had much less job security than
a typical employment relationship because the work flow varied from day to day.
[22] Further, Ms. Duan had the opportunity to take on other
jobs because the work only required about 20 hours per week, on average.
[23] Ms. Duan was provided with a detailed list of
bookkeeping procedures. At first blush, this appears to give considerable
control to MGC. However, the purpose of these procedures was to protect the
financial interests of MGC. For example, it was required that any purchase over
$300 was to be made by Brad Zavislake. The fact that MGC had developed detailed
accounting procedures does not negate an independent contractor relationship in
the circumstances.
[24] Ms. Duan had little oversight from Mr. Zavislake. She
trained herself, and when a problem was encountered, she contacted the supplier
of Business Visions.
[25] As for tools and the opportunity for profit/loss, I
view these factors to be neutral in this case. A computer was provided by MGC
and there was no real opportunity for profit or risk of loss. This would be
common in many employment and independent contractor relationships.
[26] It is common for bookkeeping services to be provided
to small businesses on an independent contractor basis. I would expect that the
arrangement between MGC and Ms. Duan is typical of these arrangements.
[27] Finally, I would comment that several of the
assumptions made by the Minister as set out in the Reply were demolished by the
evidence. These are:
(g) the Worker reported to the Appellant on an ongoing basis to
provide information status of her work and if work needed to be redone;
(i) the Appellant provided on-the-job training to the Worker
when she began working for the Appellant;
(j) the Worker was required to attend meetings to discuss how
to handle issues;
(k) the
Worker was required to obtain the Appellant’s approval for time off;
(l) the Appellant provided the Worker with the facilities,
tools, equipment and materials (such as a computer, software, desk, phone,
stationary and calculators) at no cost to the Worker; [According to the
evidence, there was only a computer, software and desk provided to Ms. Duan.]
(n) the Worker’s name was listed on the automated company
telephone directory at extension 60;
(s) the Worker normally worked 10:00 am to 5:00 pm or 11:00 am
to 6 pm, Monday to Friday;
(y) the Appellant was responsible for resolving customer
complaints; [Ms. Duan did not interact with customers.]
(cc) the Worker did not charge the Appellant GST. [GST was not
required at Ms. Duan’s level of earnings.]
[28] In my view, the relationship that was agreed between
the parties should be respected in this case. Ms. Duan commenced her
relationship with MGC as an employee, but it is clear that the relationship
fundamentally changed once the government training program had ended.
[29] The appeal is allowed, and the assessments issued for
failure to remit premiums under the Employment Insurance Act and the Canada
Pension Plan should be vacated.
[30] Each party should bear their own costs.
Signed at Ottawa, Canada this 15th day of March 2010.
“J. M. Woods”
Email this Content