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Citation: 2008 TCC 470
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Date: 20080825
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Dockets: 2007-1674(EI)
2007-1675(CPP)
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BETWEEN:
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OLTCPI INC.,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
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REASONS FOR JUDGMENT
Weisman
D.J.
[1] The Appellant, OLTCPI Inc., is in the business of providing
dieticians, social workers, and bulk purchasing of food and medical supplies
for its related company Leisureworld Inc., which owns nineteen licensed
facilities that provide long term care to senior citizens.
[2] Renu Arora is a Registered Dietician. In July 2005, she responded to
OLTCPI’s advertisement on the Dieticians of Canada website, which sought a
dietician for Leisureworld’s Lawrence Avenue facility in Toronto.
After being interviewed by Leisureworld’s Director of Nutritional Services, she
executed a standard-form “Consultant Agreement” with Ontario Long Term Care
Providers Inc. (“OLTCPI”) which specified that she would be an independent
contractor in her working relationship with it. She agreed to provide 82 hours
of service per month. This allowed her to devote one day per week performing
similar services for a licensed facility owned by Sodexho Extendicare, which is
in competition with OLTCPI. She filed her income tax returns as an independent
contractor for the period under review, and deducted all duly allowable
expenses.
[3] Her working relationship with OLTCPI ended on April 12, 2006 due to
her pregnancy, and she subsequently applied for maternity benefits under the Employment
Insurance Act
(the “Act”). These were granted, so the Respondent proceeded to assess
OLTCPI for arrears of premiums pursuant to the Act, and contributions
pursuant to the Canada Pension Plan
(the “Plan”), relying on subsection 5.(5) and Regulations 6.(g)
and 7
under the former, and Regulation 34.(1) under the latter. The Appellant
now appeals those assessments.
[4] Subsection 5.(5) and the three Regulations provide as follows:
5.(5) Regulations
to include persons in business
(5) The Commission may,
with the approval of the Governor in Council and subject to affirmative
resolution of Parliament, make regulations for including in insurable
employment the business activities of a person who is engaged in a business, as
defined in subsection 248(1) of the Income Tax Act.
6. Employment in any of the
following employments, unless it is excluded from insurable employment by any
provision of these Regulations, is included in insurable employment:
…
(g) employment of
a person who is placed in that employment by a placement or employment agency
to perform services for and under the direction and control of a client of the
agency, where that person is remunerated by the agency for the performance of
those services.
7.
Where a
person is placed in insurable employment by a placement or employment agency
under an arrangement whereby the earnings of the person are paid by the agency,
the agency shall, for the purposes of maintaining records, calculating the
person's insurable earnings
and paying, deducting and remitting the premiums payable on those insurable earnings
under the Act and these Regulations, be deemed to be the employer of the
person.
34. (1) 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 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.
[5] The following six issues accordingly require resolution:
1. Do
the above Regulations apply to workers who are independent contractors?
2. Was the Appellant an
employment or placement agency?
3. Did it place Ms. Arora in
employment with its client?
4. Did the Appellant or its
client remunerate Ms. Arora?
5. Was she under the
direction and control of the client?
6. Did
the terms and conditions on which Ms. Arora’s employment or services were
performed and the remuneration thereof was paid, constitute a contract of
service or were analogous to a contract of service?
1. Independent
Contractors:
[6] It was clearly the common intention of the parties that Ms. Arora be
an independent contractor in her working relationship with OLTCPI. She signed
three agreements to this effect during the period under review, and confirmed
her intention by filing her income tax returns as such.
[7] The question is whether or not Regulation 6.(g) under the Act,
quoted above, applies to independent contractors, which Ms. Arora may well be.
The answer is clearly in the affirmative. In Sheridan v. Canada, the Federal
Court of Appeal, in construing Regulation 12.(g) under the Unemployment
Insurance Act,
which is the predecessor to Regulation 6.(g) under the Act, found
that nurses, placed by the 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. I can see no material
difference between nurses and dieticians in this regard.
[8] The Court relied upon two decisions to like effect by the Supreme
Court of Canada. In R. v. Scheer Ltd.,
Spence J., per curiam, says: “I, therefore, am of the view that, at any
rate from 1946 to the present time, Parliament in its unemployment insurance
legislation has used the word ‘employment” to include a business, trade or
occupation and not solely to designate a master and servant relationship”. In
the result the Court held that those involved in barbering, hairdressing, or in driving a
taxi, were within the
extended scope of the phrase “insurable employment” whether or not they were
party to a contract of service.
[9] In Martin Service Station Ltd. v. Canada,
which involved taxi drivers, the Court gives its rational for the above finding
as follows:
… if conditions become such that those who
perform a given type of work find themselves unemployed, it is most likely that
those who perform the same type of work, although they be self-employed, will
also find themselves out of work because of the same conditions. It is mainly
to protect the latter against this risk of unavailability of work and
involuntary idleness that the Acts are extended. Whether they be self-employed
or employed under a contract of service, taxi drivers and bus drivers for
instance are exposed to the risk of being deprived of work.
[10] The above analysis does not apply to
Regulation 34.(1) under the Plan which involves determining whether the
terms or conditions on which Ms. Arora’s services were performed, and the
remuneration thereof was paid, was analogous to a contract of service. I will
discuss this subsequently.
2. Placement or Employment Agency:
[11] This phrase is defined in the Regulations
under the Plan, but not under the Act. Regulation 34.(2) under
the Plan provides as follows:
(2) For the purposes of
subsection (1), “placement or employment agency” includes any person or
organization that is engaged in the business of placing individuals in
employment or for performance of services or of securing employment for
individuals for a fee, reward or other remuneration.
[12] I have been referred to no jurisprudence
that suggests that any other definition should be applied under the Act.
[13] In my view, the Appellant clearly acted as a
placement or employment agency in placing Ms. Arora with Leisureworld’s Lawrence Avenue facility. Mr. David
Cutler, once President of OLTCPI, acknowledged that the Appellant earned
sufficient revenues on the spread between the amount it paid the workers it
provided to its client Leisureworld, and the amount it charged the client for
those same workers, that it was able to provide bulk purchasing of food and
medical supply free of charge.
[14] Despite the Appellant’s argument to the
contrary, this fact situation is not analogous to that in which a contractor
agrees to send personnel and equipment to a construction site to perform a
service under the supervision of a general contractor or architect. Further,
there is nothing in the above definition of a placement or employment agency
that says that the placing of workers in employment must be the sole function
of the agency.
3. Did
the Appellant place Ms. Arora with its Client:
[15] It is patently clear that the Appellant placed
Ms. Arora in Leisureworld’s Lawrence Avenue facility, as the whole purpose of
the advertisement it put on the Dieticians of Canada website was to fill its
client’s vacancy at that location.
4. Remuneration:
[16] Counsel for the
Appellant candidly acknowledged that the Appellant remunerated Ms. Arora,
thereby obviating the necessity for evidence in support of this criterion.
5. Was
Ms. Arora under the Direction and Control of the Client:
[17] Long term care facilities in Ontario are closely controlled by the
Ministry of Health and Long Term Care. There are specific standards and
criteria for dietary services, covering menu planning, food production, meal
service, nutritional care, food service supervisors, food handlers and
dieticians. There are also specific guidelines governing seven different
aspects of the dietician’s area of responsibility. In addition, Leisureworld
has its own “Clinical Dietician Job Description” which incorporates the
Ministry’s guidelines and goes further to add some of its own, including:
“Develops and conducts education programs for dietary and nursing
staff-conducting a minimum of 2 Inservices per year for staff; Provide resource
services for the facility; Participates in the Pharmacy and Therapeutics
Committee; Meets once per month with the facility Administrator”.
[18] Further, Ms. Arora, who was a credible
witness, established that while no‑one directed and controlled how she
was to perform her specialized activities, the Lawrence Avenue Administrator
required her to perform audits and submit reports, which either were
cost-cutting measures, were the responsibility of others, or made others tasks
easier. She was required to prepare diet reports and supplement reviews for the
facility, documenting such matters as consistency, texture, pure diets, mixed
diets, renal diets, and calorie levels. While her mandate was mainly high risk
patients, the Director of Nursing required her to follow low and moderate risk patients
as well. Further, rather than submitting the usual invoice stating her hours
worked, she was obliged, on her own time, to document and submit to the
facility administrator a “Dieticians Site Visit Report” which accounted for her
activities for every minute of every day.
[19] When asked if the Director of Nursing could
tell her what to do, she replied: “I suppose not, they asked me to do things
for them. I did not know if I could refuse. I did not want to find out if it
could get me fired”.
[20] As to direction and control, I am satisfied
that the Administration of the Lawrence Avenue facility in which Ms. Arora
worked, had de facto control over her. Should it complain to OLTCPI that
she was insubordinate, did not comply with Ministry or facility guidelines, or
perform the extra-curricular tasks requested of her, OLTCPI, which had de
jure control, could dismiss her. Further, in my view, when one is afraid of
finding out what could happen if she disobeyed expectations that were beyond
her mandate, a relationship of subordination exists which is a constituent
element of control.
6. Analogous
to a Contract of Service:
[21] This determination, which is required by
Regulation 34.(1) under the Plan, obliges one to embark upon an
examination of the total relationship of the parties using the four-in-one
criteria for identifying a contract of service established in Wiebe Door
Services Ltd. v. M.N.R.,
namely control, ownership of tools, chance of profit, and risk of loss.
[22] I have already determined that the direction
and control factor indicates that the terms and conditions of Ms. Arora’s
working relationship with Leisureworld during the period under review were
analogous to those of a subordinate employee.
[23] So far as tools are concerned, the evidence
establishes that the only significant tool she was provided with was the Lawrence Avenue facility in which her
patients were resident, as well as an office equipped with a computer
containing her patients’ medical charts, histories and dietary requirements.
Ms. Arora provided only her vehicle to travel to the facility and her
expertise.
[24] This fact situation raises questions as to
whether facilities and expertise are tools. Starting with facilities, in Hennick
v. Canada
(“Hennick”) the payer, Royal Conservatory of Music, provided
office space and piano studios to its teachers. The Court says at paragraph 8:
“With regard to the second part of the [Wiebe Door] test, the ownership
of tools, the trial judge concluded, rightly in our view, that because the
respondent was conducting her classes most of the time at the intervener’s
premises, her status was more likely to be that of an employee”. This finding
can be contrasted with that in Wolf v. Canada (“Wolf”)
where a consulting engineer was required to work on the payer Canadair’s
premises so that he could interface with others there. The Court says at
paragraph 84: “In my view, the tools necessary for the performance of the work
of the appellant constitute a neutral factor. The appellant would have had to
work on the premises of Canadair with Canadair’s computer and archives whether
he was an employee or an independent contractor”. It seems to me that Ms. Arora
was similarly obliged to work at Leisureworld’s Lawrence
Avenue facility, because that is where her patients
were, as well as the computers containing their charts, histories, and dietary
requirements. Her vehicle
was necessary for her to reach the Lawrence Avenue
facility, but is a neutral factor in this fact situation since many employees
equally rely on their cars to reach their job site.
[25] So far as expertise is concerned, there are
two decisions of the Tax Review Board which hold that professional expertise
can be regarded as a tool. In Latimer v. M.N.R.,
the Umpire says: “…it should be recognized that although they may have more
application in a commercial or industrial situation, to the degree the
appellant’s professional skills could be regarded as ‘tools’, he was in
possession of these;”. In Brandes v. M.N.R.,
dealing with a film director, it was held that: “The appellant’s experience,
his intelligence, and his organizational abilities are his major tools”.
[26] A more modern view is expressed in Wolf,
where, at paragraph 82, the Court says:
This factor relates to who, of the employer
or the worker, owns the assets or equipment that is necessary to perform the
work. Traditionally, if the worker owns or controls the assets and is
responsible for their operation and maintenance, he would likely be considered
an independent contractor. On the other hand, if the employer owns the
equipment, the worker would likely be characterized as an employee.
[27] Tools, according to Wolf, are assets and equipment. The same
inference can be drawn from Precision Gutters Ltd. v. Canada, where the installers’
tools are described as “drills and bits, saws and blades, plyers, small
ladders, pry bars, measuring tapes, and hammers”. While neither decision
expressly rules out professional knowledge, experience, intelligence and
organizational abilities as tools, I know of no authoritative case since 1983
that considers them so. The tools factor is accordingly neutral.
[28] She also had no risk
of loss as the facility dietician. When asked what expenses she claimed on her
income tax return, she candidly admitted that her membership dues in the
various dieticians’ organizations, including personal liability insurance,
totalled only some $1,000 per annum. Her major deductible expenses involved her
motor vehicle, gasoline, oil, repairs, and insurance which amounted to
approximately $3,000 annually.
[29] So far as a chance
of profit is concerned, she did serve as dietician for two competing facilities
at the same time. This normally indicates that the worker is an independent
contractor. On the other hand, she was paid an hourly rate which was set by the
Appellant according to her experience. It was not negotiated, and was not calculated
by Ms. Arora to cover her fixed and variable costs of doing business, and
produce a profit. We have it on the authority of Hennick that this kind
of hourly wage does not a profit make. She was at liberty to find a replacement
if she was unavailable for her duties for any reason, and could theoretically
profit or lose depending upon what amount she was required to pay. In fact,
this occurred only once, and on that occasion Leisureworld found and paid the
substitute.
[30] There was a social
worker named Mary Vary who left Leisureworld and went into the placement agency
business on her own account. She staffed Leisureworld’s Almira and Brantford facilities and
subsequently expanded her business to accommodate other long term care
facilities as well. She billed Leisureworld for her services, was responsible
for them, hired her own employees, and could profit from sound management or
lose if business declined for any reason. This is far different from anything
Ms. Arora undertook in an entrepreneurial way. Accordingly, the absence of a
chance of profit also indicates that she was an employee during the relevant
period.
[31] While the common
intention of the parties was clearly that she be an independent contractor,
three of the four Wiebe Door criteria conclusively indicate that the
terms and conditions of her working relationship with Leisureworld were
analogous to a contract of service. The tools factor was neutral. In these
circumstances, the common intention of the parties is not given great weight.
[32] The Appellant has
failed to discharge the burden of demolishing the assumptions set out in the
Minister’s replies to its notices of appeal, which assumptions must be assumed
true as long as the Appellant has not proven them false.
[33] I have investigated
all the facts with the parties and the witnesses called on behalf of the
parties to testify under oath for the first time, and have found no new facts
and nothing to indicate that the facts inferred or relied upon by the Minister
were unreal, or were incorrectly assessed or misunderstood. The decisions of
the Minister are objectively reasonable. Ms. Arora was placed in Leisureworld’s
Lawrence
Avenue
facility by OLTCPI as a placement or employment agency, under the direction and
control in its client, and remunerated her. The terms or conditions on which
her services were performed and the remuneration thereof was paid were
analogous to a contract of service. She was accordingly in insurable employment
pursuant to Regulation 6.(g) under the Act, and in pensionable
employment pursuant to Regulation 34.(1) under the Plan.
[34] In the result, both
appeals will be dismissed and the determinations of the Minister confirmed.
Signed at Toronto, Ontario, this 25th day of August
2008.
Weisman
D.J.
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