Citation: 2008 TCC 449
Date: 20080805
Docket: 2007-3696(EI)
2007-3697(CPP)
BETWEEN:
1327939 ONTARIO INC.
o/a GEMINI COMMERCIAL SIGN & LIGHTING,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Rip, C.J.
[1]
1327939 Ontario Inc.
operating as Gemini Commercial Sign and Lighting ("Gemini") has
appealed decisions of the Minister of National Revenue ("Minister") made
in accordance with the Canada Pension Plan ("CPP") and the Employment
Insurance Act ("EIA") that Daniel Mark was employed by
Gemini under a contract of service during the period January 1, 2003 to
December 31, 2004. As a result of the Minister's decisions, he assessed Gemini
on the basis that Mr. Mark was engaged during the said period in pensionable
employment pursuant to paragraph 6(1)(a) of the CPP and insurable
employment pursuant to paragraph 5(1)(a) of the EIA.
[2]
Gemini is of the view
that Mr. Mark was an independent contractor. The appellant was represented by
its President and sole shareholder, Iain Taylor, who said Gemini is in the
business of sign maintenance, sign installation, parking lot lighting
maintenance and some commercial electrical work, graphic design and application
of vinyl graphics.
[3]
Mr. Taylor recalled
that one day Mr. Mark, who had just finished high school and whose father did
some work for Gemini, asked him for a job. Gemini had other employees but there
was no more room for another full-time employee and Mr. Taylor did not
want to be in a position where he would have to lay-off Mr. Mark. Mr. Mark
told Mr. Taylor, the latter stated, that he did some work for his father but
his father was late in paying him even though his father charges clients for
his labour. Mr. Taylor testified that after thinking it over for a few days, he
hired Mr. Mark as a subcontractor to do work when he was busy. He insists that
Mr. Mark agreed to work as a subcontractor and would work when work was
available, i.e., on an "as needed basis". Gemini had purchased a
plotter cutter, "a machine that cuts graphics based on what the computer
tells it to cut". Mr. Mark would work with this machine as well as others.
[4]
Unfortunately, Mr.
Taylor stated, once he hired Mr. Mark, Mr. Mark was "too busy doing
personal things or something else". Mr. Taylor testified he constantly
telephoned Mr. Mark to come to work but he did not show up. Mr. Mark's
father did show up also expecting his son to be at work, said Mr. Taylor.
[5]
One afternoon, Mr.
Taylor recalled, he had a "long chat" with Mr. Mark. Some days Mr.
Mark would appear and other days he did not. Mr. Taylor said he told him this
was the reason he did not want Mr. Mark as an employee. At the end of 2004,
they parted company.
[6]
Mr. Mark's weekly hours
of work were erratic. Some weeks, Mr. Taylor said, he worked 25 hours, some
weeks 60 hours and some weeks 40 hours. "It depended on what he
wanted". Some days, according to Mr. Taylor, Mr. Mark did not work 10 to
12 days at a time.
[7]
Mr. Taylor reviewed the
Minister's assumptions of fact when he made his decisions under appeal. Mr.
Taylor agreed with the following:
(a) the Appellant operates a business which
make signs, refurbish signs, maintain signs and lighting maintenance and
installations;
(b) the Appellant's sole shareholder is Iain
Taylor;
(c) the Appellant's shareholder is also the
President of the corporation;
(d) the Appellant's shareholder controlled the
day to day operations of the business and made the major business decisions for
the business;
(e) the Worker was hired under a verbal
agreement;
(f) the Worker's duties included design
artwork and graphic layouts on computer and other related duties;
(x) the Appellant was responsible for resolving
clients' complaints.
[8]
He agreed with the
following assumptions with qualifications (in italics):
(g) the Worker performed his duties at the
Appellant's place of business and at the Appellant's clients' place of
business; and at his home.
(i) the Appellant also provided trucks to be
used to get to and from the work sites, at no charge to the Worker; He also
used his own vehicle for [other] work he chose to do.
(k) the Worker received directions from the
Appellant's shareholder; He also received directions from own clients and
father who he was subcontracted to.
(l) the Appellant's shareholder assigned all
the tasks and the priorities and deadlines; For any work I had asked him to
do, of course. Mr. Taylor said he had no control over other work done by Mr.
Mark.
(m) the Worker was paid an hourly rate on a
weekly basis, by cheque to his personal name; He did not work every day of
the week.
(o) the Worker was not paid vacation pay or
paid vacation; He was not an employee.
(p) the Appellant covered the Worker with
WSIB; Mr. Taylor says he was told by "people at WSIB" that it
would be in my business favour to cover anyone whether they were an employee or
subcontractor . . . from a liability standpoint.
(t) the Worker's hours of work were recorded
on timesheet; However, some hours were on Mr. Mark's timesheet, which was
basically a piece of paper torn out of a notebook. Mr. Taylor told him to keep
time on a "generic timesheet", that would have his name, hours and
job performed, for example.
(z) the Worker had to perform his services
personally; Agrees as to design, denies as to application.
[9]
Mr. Taylor denied the
following assumptions (explanations in italics):
(h) the Worker was provided with an office and
the required equipment by the Appellant, at no cost to the Worker; Gemini
never gave Mr. Mark an office, but did provide him with a computer when he
worked at its premises.
(j) the Worker reported to the Appellant's
shareholder on a daily basis;
(n) the Worker's rate of pay was determined by
the Appellant's shareholder; Rate of pay was agreed by both Mr. Taylor and
Mr. Mark.
(q) the Appellant's business hours were Monday
to Friday, 8:00 am to 5:00 pm; Mr. Mark showed up when he felt like it. . .
. There was no eight to five, Monday to Friday contract.
(r) the Worker's hours of work were the same
as the business hours and sometimes the week end; Working on weekends was
Mr. Mark's decision.
(s) the Worker's hours of work were determined
by the Appellant's shareholder; See paragraphs (q) and (r). Hours of work
were always an issue.
(u) the Worker was reimbursed by the Appellant
for any expenses that he had to pay in performing his services; Mr. Mark
never incurred expenses requiring reimbursement. If Mr. Mark required tools, he
used his father's tools.
(v) the Worker did not incur any expenses in
performing his services for the Appellant; Mr. Mark never incurred expenses
requiring reimbursement. If Mr. Mark required tools, he used his father's
tools.
(w) the Appellant's shareholder would decide if
work had to be redone and would cover the related costs; This was not always
true. Some work had to be redone. Gemini would "eat" costs incurred
on Mr. Mark's mistakes but as he gained experience cost was taken off his pay
cheque.
(y) the Worker wore a company shirt and coat; Would
wear his father's coat. There was no uniform. Gemini had distributed souvenir
"T" shirts and hats to customers and employees.
(aa) the Worker performed his services solely
for the Appellant; Mr. Taylor believes Mr. Mark worked for others as well:
father, friends.
[10]
With respect to assumption
at subparagraph (bb), that "the Appellant had the right to terminate the
Worker's services", this is a conclusion of law, not a fact. The
respondent ought not to include conclusions of law in assumptions of fact
relied on in assessing.
[11]
In cross-examination,
Mr. Taylor said it was up to Mr. Mark to decide if he wanted to perform any job
assigned to him and he could accept or reject the assignment. He acknowledged
that in a questionnaire sent to him by the Canada Revenue Agency, he replied
that Mark could have hired a third person to do his work. At Gemini's office,
Mr. Mark would be provided with all the tools, including a computer, required
to do his job. Sometimes Mr. Mark used his own vehicle "to go and score
out a job, take photographs . . .". Perhaps only once or twice did he work
for Gemini at home, Mr. Mark declared. He usually worked at Gemini's office, he
said.
[12]
All invoices for work
performed by Mr. Mark were sent to clients by Gemini.
[13]
According to Mr. Mark, when
he first discussed working for Mr. Taylor's company he had just completed high
school and had no idea of the difference between an independent contractor and
an employee and did not know the difference between a tax T4 form or T5 form.
He insisted that he never discussed any such relationship with Mr. Taylor. He
was never previously employed and "just wanted the money".
[14]
Mr. Mark had worked
with his father since he was 12 years old. His father carried on a business
similar to that of Gemini and to whom Gemini subcontracted work. Mr. Mark said
his father rarely paid him. However, his father would charge Gemini for the
hours Mr. Mark worked under contracts his father had with Gemini.
According to Mr. Mark, Mr. Taylor would deduct Mark's billing time and
rate, which exceeded $8 an hour, from his father's invoice and adjust the
invoice on the basis of Mr. Mark being paid at $8 an hour. I assume that Mr.
Mark worked for his father at the same time as he worked for Gemini. Mr. Mark
did say that in 2004 he worked only for Gemini.
[15]
When Mr. Mark started
to work for Gemini he was paid $8 an hour, the same rate his father was to pay
him. After a year he was paid $9 an hour. He had to do the work himself; he
could not hire a substitute, in his view.
[16]
Mr. Mark agreed that he
was to start work at 7:00 a.m. but did not show up at work at that hour. He
said he was young and after a year at work, got depressed; he did not like the
job. Mr. Mark acknowledged that at the time he was not responsible.
[17]
According to Mr. Mark,
he never used his own vehicle for work. He did pay for gasoline once or twice
when he used a Gemini vehicle and he was reimbursed by Gemini. He did not work
for pay for anyone else, only for Gemini, he said. He did admit that he did work
for a friend, receiving material as consideration.
[18]
In Mr. Mark's view he
could not make any major decisions with respect to his work without Mr.
Taylor's approval nor could he turn down any job assigned to him unless it was
dangerous. He testified that he did not use his own tools when working for
Gemini although he did acknowledge that he used his father's tools such as
screwdrivers, voltage meters and "minor" tools. The bulk of the
equipment was provided by Gemini. However, Mr. Taylor was pressing Mr. Mark to
purchase his own tools because he "didn't want me wrecking his". In
the meantime he was spending his money on stereo equipment and car parts rather
than on tools he required at work
[19]
I have little doubt
that Mr. Taylor believed that Mr. Mark was not an employee of Gemini. After
all, Mr. Mark worked when he wanted, notwithstanding pleas to report to work by
Mr. Taylor. He acted as if he were his own boss. Mr. Taylor did not, or could
not, control Mr. Mark's hours of work. Also, Mr. Taylor was under the
impression that Mr. Mark was working for others as well as for Gemini. He
suggested, for example, that Mr. Mark did work for friends, on a barter basis,
and for his father.
[20]
However, it was Gemini
who owned the bulk of the tools used by Mr. Mark in his work. Mr. Mark did
have access to his father's equipment, including the family's computer, but his
use of this equipment appears to be minor. And the clients were Gemini’s
clients. Also, it was Mr. Taylor who assigned him the work. At the start of his
work at Gemini, it was Gemini who suffered the cost of having Mr. Mark's work
redone as result of defects in his work. Only in the second year of work was
the cost of "redoing" his work absorbed by Mr. Mark.
[21]
Mr. Mark's chance for
profit from his work at Gemini was slim. He worked — when he worked — for an
hourly wage, like any employee. He had no risk of loss; he had no investment in
the work he performed. That he may have worked for others, as well as for
Gemini, does not itself mean he was carrying on a business. It is not uncommon
for a person to be employed by more than one employer.
[22]
In 671122 Ontario
Ltd. v. Sagaz Industries Canada Inc.,
Major J. approved the reasons of MacGuigan J. in the Federal Court of Appeal
judgment of Wiebe Door Services Ltd. v. M.N.R.. Major J. referred
to the decision of Laurent v. Hôpital Notre-Dame de l'Espérance, where the
Supreme Court expressed the employer-employee relationship as follows:
"the essential criterion of employer‑employee relations is the right
to give orders and instructions to the employee regarding the manner in which
to carry out his work".
[23]
While Prof. Atiyah
criticized this criterion as wearing “an air of deceptive simplicity”, it does apply to
the appeals at bar. There is no written contract between Gemini and Mr. Mark to
permit me to review the precise terms of their relationship, if there were
precise terms, and, in particular, to examine the intention of each at the
beginning of the relationship. The viva voce evidence of the parties is
contradictory. Mr. Taylor says that when they got together, Gemini and Mr. Mark
entered into a contract whereby Mr. Mark was engaged as a subcontractor, an
independent contractor. Mr. Mark says he had no idea at the time what the term
independent contractor meant, even though Gemini had engaged his father as such.
This is probably true.
[24]
The evidence is that
Mr. Mark had just left high school and was looking for a job. He had done work
for his father who carried on the same type of business as Gemini. When he
first started working for Gemini, he said, he worked in maintenance, as he did
for his father. Later, he worked as a designer. Mr. Mark was not at the time he
was engaged by Gemini a worker who possessed skills beyond the ability of Mr.
Taylor to direct;
his ability was not at a level where he could work without supervision.
[25]
The fact that Mr. Mark
may have been lazy and irresponsible and reported to work when he wanted — and
may have done what he wanted — does not make him an independent contractor. He
was not in business on his own account. His work, such as it may have been, was
integral to Gemini's business. Mr. Taylor oversaw Mr. Mark as his worker
and tolerated Mr. Mark's lack of discipline. The balance of evidence suggests
that Mr. Mark was an employee of Gemini during the period in issue.
[26]
The appeals are
dismissed.
Signed at Toronto, Canada, this
5th day of August 2008.
"Gerald J. Rip"
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