Toronto, Ontario
--- Upon commencing the Decision with Reasons on
Monday, October 27th, 2008 at 3:25 p.m.
JUSTICE WEISMAN: I have heard appeals
against decisions by the respondent Minister of National Revenue that the
Appellant is responsible for Employment Insurance premiums and Canada
Pension Plan contributions for a number of workers listed in Schedule B,
and I think I can now give you the number; yes. It looks like we are down
to 54, there being six people who are incorporated. So we are now talking
about 54 workers.
For clarity's sake, of the people listed
in Schedule B of the Minister's Reply, the appeal has been withdrawn with
reference to four, being Peter Bandi, David Mick, Surjit Purewal and Melissa
Schofield; and conversely, the appeals have been allowed on consent of the Minister
with reference to Renato Chiappe, Paul Wilfred Gascoigne, Jeyabalan Gunasingam,
Kamal Hamzic, Anton Milanov, and Mark Scanion. That brings me to 54.
For the record, notwithstanding the fact
that it came out rather late in the trial that all these workers are not
exactly equal because some were paid on an hourly basis if they work in the
city, and others were paid on a mileage basis because they were on the highway,
and some have expenses that others do not have, all counsel and representatives
have agreed that I am to treat them equally on the evidence I have heard.
The Minister, in making his assessments,
relied on Regulation 6(g) under the Employment Insurance Act and
Regulation 34(1) under the Canada Pension Plan. Starting with reference
to the Employment Insurance Act and whether these appeals should be
allowed or dismissed with reference to that, because there are quite different
considerations between the Act and the Plan, we have the first
issue as to whether or not the Act in 6(g) applies to independent
contractors. That is important, because many appellants assume that independent
contractors are free of employer contributions and only employees have to be
honoured with a payer's portion.
But there is jurisprudence that is quite
clear, and it is adverted to by Counsel for the Minister, a case called Sheridan
v. M.N.R., which is cited at [1985] F.C.J. No. 230 in the Federal
Court of Appeal. In construing the predecessor section to section 6(g),
which is 12(g), which has identical wording, it found that nurses placed by an
appellant agency in employment in hospitals which were its clients, were in
insurable employment, even though they had no contract of service either with
the agency or with the hospital.
In OLTCPI Inc. v. M.N.R.,
[2008] T.C.J. No. 359, I said I could see no material difference between
nurses and dieticians, and in the case before me, I can see no material
difference between nurses and these truck drivers.
The important issues in order to decide
whether the Appellant is responsible for employment insurance premiums, is
whether or not it fits into 6(g) of the Regulations, and that requires four
things: that it be a placement agency, and it was clearly admitted by
Mr. Murphy that, yes, the Appellant is an employment agency.
Next, there has to be a placement of
workers by the agency with its clients, and that again was admitted by the Appellant.
The third requirement is that these
workers be placed under the direction and control of the client of the
agency. That takes a little discussion, so I will dispose of the fourth
one before I go back to the third one.
There has to be remuneration by the
agency. In this case, it is admitted that it was the agency who remunerated
these drivers, and then the money, with a mark-up, was billed back to the
client.
As far as direction and control is
concerned, I have to differentiate between what happens before the worker
accepts the assignment, from the situation where the assignment is not accepted
at all. I raise that because in this case the evidence is clear that both
types of worker had this freedom to accept or reject assignments, in town or
out.
When you come to a placement agency, the Acts
talk about what happens once the worker is placed, which presupposes that they
accepted the placement. So, in all these cases in which the placements
were accepted and the trucks were driven, the question is: Did the client
have direction and control of these people who were placed with them and who
accepted the placement? The evidence that I have heard indicates that there
was direction and control. These drivers had to take a direct route to
their destination, and if they wasted gas, they were responsible at their own
expense for replacing it. They were told where and what to deliver.
The client owned the truck. This is
relevant not only to who owns the tools, but the jurisprudence seems to
indicate it is a matter of control, because if the client owns the truck, then
the client has the right as the owner to say how that truck is to be
used. It is a little different if the worker owns the truck. So the
fact that the client of the agency, the Appellant, owned the truck goes to
control and fortifies the conclusion that there was direction and control.
To summarize, there are four requirements
under Regulation 6(g) of the Employment Insurance Act. All four
have been satisfied by the Minister that indeed these truck drivers retained by
the Appellant, even though they may be independent contractors, are brought
into the scheme of the Employment Insurance Act by Regulation 6(g), and
therefore with reference to the 54 workers, I find that the appeal has to be
dismissed.
Let us see if it makes any difference
under the Canada Pension Plan. There is a difference, and I can
read what Regulation 34(1) says. It is a little lengthy:
"Where any individual is placed by a placement or
employment agency in employment with or for performance of services for a
client of the agency and the terms or conditions on which the employment or
services are performed and the remuneration thereof is paid constitute a
contract of service or are analogous to a contract to a contract of service,
the employment or performance of services is included in pensionable employment
and the agency or the client, whichever pays the remuneration to the
individual, shall, for the purposes of maintaining records and filing returns
and paying, deducting and remitting contributions payable by and in respect of
the individual under the Act and these Regulations, be deemed to be the
employer of the individual." (as read)
In other words, my function is to review
the evidence and see if the terms or conditions under which these truck drivers
were working constituted a contract or service or were analogous thereto.
In order to resolve this question, I must
examine the total relationship of the parties and the combined force of the
whole scheme of operations, and to this end, the evidence has to be subjected
to the four-in-one test laid down as guidelines by Lord Wright, in Montreal
City v. Montreal Locomotive Works Ltd. et al., and that is cited at [1947]
1 D.L.R. 161, and adopted by Justice MacGuigan in Wiebe Door Services
v. M.N.R., which is cited at (1986), 87 DTC 5025 in the Federal Court
of Appeal.
The four guidelines are the payer's
control over the worker; whether the worker or the payer owns the tools
required to fulfill the worker's function; the worker's chance of profit; and
risk of loss in his or her dealings with the payer.
Starting with the element of
control. In analyzing this case as it pertains to the Regulations under
the Employment Insurance Act, I found that there was clearly direction
and control and it is no different here, under the Plan, which indicates
that the truck drivers were employees.
As far as the tools are concerned, I note
that the main tool, the truck, was provided by the client of the Appellant, and
not the Appellant itself. But that mainly goes to control, as I have
already said, because he who owns the truck has the right to control how it is
to be used. It was argued today by the Minister that this truck was such an
important tool that that would weigh heavily in favour of, again, these people
being employees.
The problem is that there is a case called
Precision Gutters Ltd. v. M.N.R. in the Federal Court of Appeal, and Precision
Gutters is cited at [2002] F.C.J. No. 771, and it is a case where the
company was making eavestroughing, and the installers had their usual hammers,
or whatever, but a very large, very expensive machine that took raw aluminum
and formed it into eavestroughs and downspouts, that was owned and provided by
the payer. The Court of Appeal says:
"It has been held that if the worker owns the tools of
the trade which it is reasonable for him to own, this test will point to the
conclusion that the individual is an independent contractor even though the
alleged employer provides special tools for the particular
business." (as read)
I think that is exactly what we are
talking about. In this case, I have evidence that there were the usual
tools provided by the truck driver, such as his aids to navigation, maps and
GPS, safety goggles, safety boots, hard hats and gloves. So I think this
fits, as I said, into Precision.
We have here workers who are providing the
usual tools required, and that tends to point to their being independent
contractors. So control points to their being employees; tools points to
their being independent contractors.
Now we get to the chance of profit.
We have workers working in the city at $17 an hour, and we have workers driving
on the highways at some undisclosed sum per mile. I note, first of all,
these rates were not negotiated, which is something that independent
contractors normally do. They were set by the Appellant. That was the
testimony of the president. That non-negotiation of rates tends to indicate
that the person is an employee, but that is not the end of the chance of profit
story, because all these people, wherever they worked, in town or out, did not
have to work exclusively for the Appellant; they were free to go where they
could get the best money. And this, in fact, is why the Appellant pays 70
per cent of the benefit plans, as an incentive to have these people stay
loyal to the Appellant.
My conclusion from that is that both
categories of worker had an opportunity to profit from sound management.
They could choose to go wherever they could get the highest rate of
return. In the one case of Amir Kilic, the evidence is that he only had
20 per cent of his income from the Appellant. In his case, it was
very clear that he could profit by sound management. Therefore, on
balance, even though there is that one factor that tends to make it look like
these people could be employees, on balance the chance of profit factor
indicates that they are independent contractors.
Now we get to the risk of loss. This
is the main difference, if any, between people who work per hour in the city
and those who work per mile on the highway, in that the expenses are different
and therefore it may make a difference in the risk of loss. There were
these expenses the people on the highway incurred, navigational aids, maps and
GPS, safety goggles, boots and hard hats and gloves, and out-of-town expenses
for food and accommodation.
I note that the people in the city may
need some sort of a city map. I doubt that a GPS is as necessary in the
city as it is on the highway, but nevertheless, I guess this city is big enough
that a GPS would not be a completely useless instrument. So I find that
the expenses are comparable, except for the out-of-town expenses for food and
lodging incurred by those who are on the highways. Also, the drivers in and
out were responsible for minor damages to the truck and the cost of wasted fuel
if they took the wrong route and otherwise got lost.
But the evidence did not satisfy me that
these expenses were significant. There is a difference between fixed and
variable expenses, as the accountants here well know, and if one has fixed
expenses, they run on whether or not the person is working. The variable
expenses are only incurred when one is on the job. The only fixed
expenses that I see were these pieces of safety equipment, which did not add up
to a lot of money. The hotels and food were only incurred if they were on the
job on the highway and earning money. The number of times that there was
minor damages to trucks, I did not hear evidence that that was a significant
risk of loss.
The other thing that was relevant to me
is that if one has the freedom to decline jobs, that surely cuts down their
risk of loss, because they can simply turn down those jobs that did not sound
like they were attractive because there was a long period out of town, and
therefore a lot of hotels and a lot of meals. So I did not find that there was
a significant risk of loss with either category of worker, and therefore the
risk of loss factor, in my view, indicated that these workers were employees.
Of course, the hourly workers had even less expenses and therefore even less
risk of loss.
I want to advert briefly to this right to
refuse assignments, which seems to be getting increasing attention and
importance in the jurisprudence. If one has the right to refuse an
assignment, the law seems to be that that indicates independence, as opposed to
subordination and control which indicates that the person is an independent
contractor. And, in addition, it goes to profit and loss. Again I
would refer you to Precision Gutters, where the court said:
"In my view, the ability to negotiate the terms of a
contract entails a chance of profit and risk of loss in the same way that
allowing an individual the right to accept or decline to take a job entails a
chance of profit and risk of loss." (as read)
That is the Federal Court of Appeal,
setting down the significance of one's right to turn down a job; it goes not
only to control, but to profit and loss.
That is the usual case, but the case
before me is a little different, and I have already talked about this, because
we are not dealing with people who accept or turn down jobs. We are
talking about people who have already accepted a placement, and so they are a
little different. If that is not clear, I can hope to make it clearer.
The Court of Appeal is mainly talking
about people who, when they are offered a job, either take it or do not.
But here we have people who have been placed by a placement agency, and they
have accepted that placement, which is what I was saying earlier, and in my
view that is a little different.
Under both Regulations 34(1) and 6(g)
there is an assumption that the placement has been accepted, and once accepted,
the question is whether the worker is under the direction and control of the
client. Here, except for those factors that I have talked about, the right to
refuse a project will mitigate expenses, but when it comes to the right to
refuse projects generally, it is excluded from this analysis. It does not
fit into the same category as Precision Gutters, because as I have said
more than once, the project has already been accepted when someone accepts a
placement by a placement agency.
Now we are in a position where the control
factor indicates that these people were employees, the tools factor that they
were independent contractors, the chance of profit that they are independent
contractors, and the risk of loss that they are employees. There are two
on one side and two on the other.
Which
brings us to The Royal Winnipeg Ballet v. M.N.R., [2006] F.C.J.
No. 339 in the Federal Court of Appeal. The Federal Court of Appeal
in Royal Winnipeg Ballet gives me direction as to what I am to do in
these circumstances. As I indicated in Logitek Technology Ltd. v. M.N.R.,
[2008] T.C.J. No. 309, while the common intention of the parties that a worker
be an independent contractor in their working relationship is not determinative
of its legal nature, Royal Winnipeg Ballet offers the following guidance
as to its relevance. It is paragraph 81 of Royal
Winnipeg Ballet:
"… what the Tax Court judge should have done was to take
note of the uncontradicted evidence of the parties' common understanding that
the workers should be independent contractors and then consider, based on the Wiebe
Door factors, whether that intention was fulfilled." (as read)
In this case, the Wiebe Door
factors are not determinative, and we have cases such as Wolf v. Canada
that offer guidance that the intention of the parties takes on greater
significance when the four-in-one or Wiebe Door factors do not produce
conclusive results. Wolf v. Canada, by the way, is [2002] 4 F.C. 396 in
the Federal Court of Appeal.
Here, we have very clear evidence that the
common intention of the parties is that these people be independent
contractors, which resolves the issue, because the Wiebe Door factors
are equivocal.
That leads to the conclusion that I have
to allow the appeals under the Canada Pension Plan, that the terms or
conditions under which these workers, both within and without the city, who
were working were not analogous to a contract of service.
Finally, I need to address myself to the
assumptions in the Minister's Reply in the Notice of Appeal. They present
difficulties which I have already alluded to, but quite often -- and to a
certain extent in this case, which is why I mention it -- the assumptions
may be true, but they are not probative of anything germane.
For instance, here we have assumption 9(d),
that Mr. Murphy is the sole shareholder. That is surely nothing that
can be rebutted by the Appellant, and I have seen many replies -- and this one
fits a good deal into the category of replies where you cannot rebut any of the
assumptions, because they are true; but they are not probative of the four Wiebe
Door factors or they do not go into whether or not this employment is
analogous, and that creates problems because the Minister can say, the
assumptions have not been demolished. I am afraid that is not good
enough.
In this case, I think the only assumption
that was really demolished was 9(n), having to do with the expenses, whether
the workers have expenses. All the rest of them, even though they were not
demolished, they were not conclusive. So I would think that I have heard
sufficient new facts, or the facts were not very sufficiently assessed or
correctly assessed by the Minister when he was dealing with known facts with
reference to the Canada Pension Plan, that I conclude that his decision
was objectively unreasonable, whereas under the Employment Insurance Act
I found it objectively reasonable.
That is all I have to say.
I appreciate your assistance. We
have a split result, which is quite unusual.
--- Whereupon
the excerpt concludes.
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