Docket: 2006-1960(CPP)
BETWEEN:
BRIGADIER SECURITY SYSTEMS (2000) LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
EDWARD BABIY,
Intervenor.
____________________________________________________________________
Appeal
heard on common evidence with the appeal of
Brigadier Security Systems (2000) Ltd. (2006-1961(EI))
on June 5, 2007 at Saskatoon, Saskatchewan
Before: The Honourable
Justice G. A. Sheridan
Appearances:
|
Counsel for the Appellant:
|
Doug
Agnew
|
|
Counsel for the Respondent:
|
Lyle Bouvier
|
|
For the
Intervenor:
|
The Intervenor himself
|
____________________________________________________________________
JUDGMENT
In accordance with the attached Reasons for
Judgment, the appeal is allowed, and the
decision of the Minister of National Revenue is vacated on the basis that Edward
Babiy was working as an independent contractor under a contract for services
with Brigadier and not engaged in pensionable employment for the period February 12, 2004 to
February 12, 2005.
Signed at Ottawa, Canada,
this 10th day of October, 2007.
"G. A. Sheridan"
Docket: 2006-1961(EI)
BETWEEN:
BRIGADIER SECURITY SYSTEMS (2000) LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
EDWARD BABIY,
Intervenor.
____________________________________________________________________
Appeal heard on common evidence with the
appeal of
Brigadier Security Systems (2000) Ltd. (2006-1960(CPP))
on June 5, 2007 at Saskatoon, Saskatchewan
Before: The Honourable Justice G. A. Sheridan
Appearances:
|
Counsel for the
Appellant:
|
Doug Agnew
|
|
Counsel for the
Respondent:
|
Lyle Bouvier
|
|
For the
Intervenor:
|
The Intervenor himself
|
____________________________________________________________________
JUDGMENT
In accordance with the attached Reasons for
Judgment, the appeal is allowed, and the
decision of the Minister of National Revenue is vacated on the basis that
Edward Babiy was working as an independent contractor under a contract for
services with Brigadier and not engaged in insurable employment for the period February 12, 2004 to
February 12, 2005.
Signed
at Ottawa, Canada, this 10th day of October, 2007.
"G. A. Sheridan"
Citation: 2007TCC526
Date: 20071010
Dockets: 2006-1960(CPP)
2006-1961(EI)
BETWEEN:
BRIGADIER SECURITY SYSTEMS (2000) LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
EDWARD BABIY,
Intervenor.
REASONS FOR JUDGMENT
Sheridan, J.
[1] The
Appellant, Brigadier Security Systems (2000) Ltd., is appealing the
determination of the Minister of National Revenue that Edward Babiy worked for
Brigadier as an employee. Mr. Babiy, who intervened in the appeals, supports
the Minister's determination. Brigadier's position is that Mr. Babiy was an
independent contractor and accordingly, that his work was not pensionable or insurable. The period under review is February 12, 2004
to February 12, 2005.
[2] Counsel referred
to the four-fold test for the determination of whether a worker is an employee
or an independent contractor as developed in Wiebe Door Services Ltd. v. Canada (Minister
of National Revenue) and applied
by the Supreme Court of Canada in 671121 Ontario Ltd. v. Sagaz Industries
Canada Inc.:
[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.
[3] In addition to
the consideration of control, ownership of tools, chance of profit and risk of
loss and the degree of integration, the Court may also take into account the
intentions of the parties.
Facts
[4] Brigadier
is in the business of selling, supplying
and installing electronic security systems for both homes and businesses. Mr.
Babiy began working as a salesperson with the company pursuant to a contract
dated March 27, 2002. His primary duties were to meet with customers to explain
and demonstrate Brigadier's security products. If a visit resulted in a sale,
Mr. Babiy was also responsible for completing the necessary paperwork and
returning it to the offices of Brigadier.
[5] Though well-experienced in sales, Mr. Babiy received training for which he received $70 per day;
for the first month, he was guaranteed $1,000 as an advance against the commissions
he would earn for each new contract. His remuneration also included a percentage
of the purchase price of any "extras" he could convince clients to
purchase at the time of the sale. However, if the client deferred that decision
until after Mr. Babiy had completed his paperwork, the entire value was
retained by Brigadier.
[6] Most of Mr.
Babiy's customers were "leads", people who had called Brigadier
regarding their interest in purchasing a security system. Brigadier assigned
the leads according to a "priority" list that ranked salespersons
according to their weekly sales success rate. The priority system was conducive
to sales, as it ensured that potential customers would get a call back before
they lost their enthusiasm for the idea. It also had the effect of keeping the
sales team motivated. If a salesperson refused a lead, his name went to the
bottom of the list, and the lead was offered to the next person on the priority
list.
[7] Mr. Babiy was
also entitled to and did find his own clients, contacts he made through cold
calls, business connections, family or friends. One strategy for identifying
new clients that he found particularly effective was to set up a security
systems booth at home shows.
Analysis
[8] Based on the findings setout below, I am satisfied
that the evidence supports the conclusion
that Mr. Babiy was working as an independent contractor. His earnings depended
entirely on his commissions from selling Brigadier's basic product and as many
of the lucrative extras as possible. How he made such sales was left to Mr.
Babiy. He was his own master in terms of how and when he made sales. He met
with clients alone and relied on his own skill and judgment, the result of some
30 years in sales, to clinch the deal. As an incentive to purchase, Mr. Babiy
could offer "free" items but it was he who bore their cost if
ultimately Brigadier decided such an incentive was unwarranted. While he stood
to pay a fiscal price for his decision, there is no doubt Mr. Babiy was
free to accept or reject Brigadier's "leads". If he chose to, he
could arrange with another seller (as long as the substituted person had the
externally required certification) to cover an accepted lead, though again he
took the risk of losing the contact and the commission.
[9] Though his
contract (and his own good sense) obliged him to dress presentably for
customers, Mr. Babiy was not required to wear a company uniform. He was
required to carry and present photo ID showing that he was authorized to sell
the security products. This, however, had the mutually beneficial result of
inspiring confidence in the customers who were letting him into their homes.
Also mutually beneficial were the Brigadier business cards and magnetic car signs
that were made available to him, though in the case of the signs, Mr. Babiy
chose not to use them.
[10] Brigadier held
regular sales meetings geared to improving sales which Mr. Babiy and his
colleagues were expected, if not required, to attend. From time to time, Mr.
Babiy met with the sales manager to discuss his own sales performance. The
purpose of these meetings had more to do with motivating the sales team than
evaluating their work.
[11] While Brigadier
had office space available for Mr. Babiy and the other salespersons to use to
complete post-sales paperwork, there was no requirement that it be done there.
Brigadier's only concern was that the sale be finalized, an outcome equally
important to Mr. Babiy as his commissions were calculated on completed sales.
[12] Under his
contract with Brigadier, Mr. Babiy was to sell only Brigadier products to his
clients. He was free to work in other sales fields but was busy enough with his
work at Brigadier that he chose not to work elsewhere.
[13] Mr. Babiy
received no vacation pay, sick leave or medical coverage. This is in stark
contrast to others at Brigadier who were hired as "employees" and who
enjoyed a range of such benefits. Although Mr. Babiy had the impression that he
needed permission to take holidays, the evidence does not support that
conclusion. His belief in this proposition seems to have stemmed from his
reading of the Brigadier procedures manual (not in evidence) and from casual
conversations with a former colleague named Kevin. In my view, however, what
Mr. Babiy characterized as seeking permission was more in the nature of the
professional courtesy of giving notice of his intention to do so.
[14] All in all, I am
satisfied that Brigadier did not exercise control over Mr. Babiy.
[15] Not much was required
in the way of tools, in the normal sense of the word. Brigadier provided Mr.
Babiy with a demonstration kit, but he was liable for its replacement if it was
lost or damaged. Though not technically required (or for that matter, provided)
by Brigadier for the job, in a city like Saskatoon, a car was necessary to get to client meetings and
transport the kit. Mr. Babiy provided his own car and was responsible for its
expenses. Though Brigadier provided him with a cell phone, Mr. Babiy bore the
more significant expense of paying for its use.
[16] He incurred fuel
and maintenance costs to follow up on leads, though he had no guarantee of a
sale. He chose when and how much to offer as sales incentives, not knowing if
he would ultimately be reimbursed by Brigadier. He invested time and money
scouting for new customers, not knowing if it would pay off. In these
circumstances, he had a risk of loss. However, by harnessing his considerable
sales experience, taking advantage of sales opportunities and devising innovative
strategies, Mr. Babiy stood to profit from his efforts.
[17] Finally, there is
the question of intention. The contract he signed with Brigadier stipulated
that he was to work as an independent contractor. The contract is brief,
written in uncomplicated language. It is not credible that a man of
Mr. Babiy's intelligence and experience in sales would sign such a
document without being aware of its terms, or that he would simply leave to
chance whether he was self-employed or an employee. I am satisfied that he knew
he was described therein as an "independent contractor", understood
what that description entailed and willingly agreed to it. The contract accurately
documents the parties' intentions that Mr. Babiy was to work as an independent
contractor.
[18] For the reasons
set out above, the appeal is allowed and the decision of the Minister of
National Revenue is vacated on the basis that during the period in question,
Edward Babiy was working under a contract for services.
Signed at Ottawa,
Canada, this 10th day of October, 2007.
"G. A. Sheridan"
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