Docket: 2007-1570(CPP)
BETWEEN:
JFJ AGENCY INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
____________________________________________________________________
Appeal heard on common evidence with the
appeal of
JFJ Agency Inc., (2007-1569(EI)) on January 14, 2008,
at Winnipeg, Manitoba.
Before: The Honourable Justice Wyman W.
Webb
Appearances:
|
Counsel for the
Appellant:
|
Ross A. McFayden
|
|
Counsel for the
Respondent:
|
Meghan Riley
|
____________________________________________________________________
JUDGMENT
The appeal in relation to the determination that
Michael Mooney was engaged in pensionable employment for the purposes of
the Canada Pension Plan during the period from January 1, 2002 to
February 14, 2006 is dismissed without costs.
The appeal in relation to the determination that Linda Casson
was engaged in pensionable employment for the purposes of the Canada Pension
Plan during the period from January 1, 2002 to March 31, 2005 is dismissed
without costs.
The appeal in relation to the determination that Bryce
Matlashewski was engaged in pensionable employment for the purposes of the Canada
Pension Plan during the period from January 1, 2002 to March 7, 2006 is dismissed
without costs.
The
appeals in relation to the determination that Maureen Purpur, Shawna‑Lynn
Skrudland and Karleen Small were engaged in pensionable employment for the
purposes of the Canada Pension Plan are allowed, without costs, and, for
these three individuals, the matter is referred back to the Minister of
National Revenue for redetermination and reassessment on the basis that
Maureen Purpur and Shawna-Lynn Skrudland were not engaged in pensionable
employment for the purposes of the Canada Pension Plan for the period
from January 1, 2004 to December 31, 2004 and that Karleen Small was not
engaged in pensionable employment for the purposes of the Canada Pension Plan
for the period from January 1, 2002 to December 31, 2002.
Signed at Halifax, Nova
Scotia, this 6th day
of February 2008.
“Wyman W. Webb”
Citation: 2008TCC83
Date: 20080206
Dockets: 2007-1569(EI) & 2007-1570(CPP)
BETWEEN:
JFJ AGENCY INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1] The Appellant has appealed the determination that Michael Mooney,
Linda Casson, Maureen Purpur, Shawna-Lynn Skrudland and Karleen Small were
engaged in insurable employment for the purposes of Employment Insurance Act
(“EI”) and that Michael Mooney, Linda Casson, Bryce Matlashewski, Maureen Purpur,
Shawna-Lynn Skrudland and Karleen Small were engaged in pensionable employment
for the purposes of the Canada Pension Plan (“CPP”) for certain
periods of time.
[2] The period in relation to the appeal of the determination for Maureen
Purpur and Shawna-Lynn Skrudland is from January 1, 2004 to December 31, 2004
and for Karleen Small the period is from January 1, 2002 to December 31, 2002.
At the commencement of the hearing, counsel for the Respondent confirmed that
the Respondent agreed that the appeals in relation to Maureen Purpur, Shawna‑Lynn Skrudland
and Karleen Small should be allowed as the Respondent agreed that these three
individuals were not engaged in insurable employment for the purposes of the EI
nor were they engaged in pensionable employment for the purposes of the CPP
for the periods referred to above.
[3] The remaining issue in this case is whether Michael Mooney, Linda
Casson and Bryce Matlashewski were engaged by JFJ Agency Inc. as employees or
independent contractors. The periods in question for Michael Mooney,
Linda Casson and Bryce Matlashewski are different for each individual and
while the determination for all three under the CPP has been appealed,
only the status of two of these individuals for the purposes of the EI
has been appealed.
[4] The relevant periods under appeal and the applicable statutes for the
appeals are as follows:
|
Individual:
|
Michael
Mooney
|
Linda
Casson
|
Bryce
Matlashewski
|
|
Period
under appeal:
|
January
1, 2002 to February 14, 2006
|
January
1, 2002 to March 31, 2005
|
January
1, 2002 to March 7, 2006
|
|
Applicable
Statute(s)
|
EI and CPP
|
EI and CPP
|
CPP
|
[5] For the purposes of the EI, the Respondent determined that Bryce Matlashewski
was not engaged in insurable employment with JFJ Agency Inc. on the
basis that he was not dealing at arm's length with JFJ Agency Inc. and
this determination has not been appealed. Bryce Matlashewski is Scott Johnson’s
nephew. Scott Johnson is the President of JFJ Agency Inc.
[6] JFJ Agency Inc. is a small business operating mainly in the province of Manitoba. It represents various suppliers of alcoholic beverages. Because of
provincial legislation all sales of alcoholic beverages in Manitoba must
be made to the Manitoba Liquor Control Commission (“MLCC”) who in turn will
sell the alcoholic beverages directly to consumers or to restaurants, lounges
and other businesses that sell such beverages to consumers. JFJ Agency Inc.
could not sell alcoholic beverages to customers and could only encourage customers
to order from the MLCC the alcoholic beverages sold by the suppliers
represented by JFJ Agency Inc.
[7] Each of the above individuals was engaged by JFJ Agency Inc. to solicit
sales from various sources. Michael Mooney was engaged to increase the sales of
the brands represented by JFJ Agency Inc. to the licensee market including
restaurants and nightclubs. Linda Casson was engaged to increase sales of the
wine products represented by JFJ Agency Inc. Bryce Matlashewski was engaged to
increase sales to establishments attended by university age individuals. Each
individual received some training from JFJ Agency Inc. mainly in brand
familiarization.
[8] Each of the three individuals would set their own schedules. For each
individual, the amount that such person was paid was based on an estimate of the
commissions that would be generated by the expected sales of products arising
as a result of that person’s efforts. The only individual for whom there was a
written contract was Michael Mooney. The terms and conditions related to the
engagement of Linda Casson and Bryce Matlashewski were substantially the same
as the terms and conditions related to the engagement of Michael Mooney except
the amount of the remuneration was different for each individual.
[9] The contract with Michael Mooney is dated June 12, 2000. This contract
provided in part that the amount to be paid to Michael Mooney was $36,000
annually. Payments were to be made to him on the 15th and 30th
of each month. The contract also provided that he would be entitled to an
annual bonus based on a mutually agreed upon incentive and the amount was
described as “10% of annual”. During the period in question, Michael Mooney was
paid $36,000 per year and although he did receive some bonuses he never received
the maximum contemplated amount of the bonus.
[10] The agreement also provided that Michael Mooney would be reimbursed for
business fuel and regular vehicle maintenance. Shortly after he was retained, JFJ Agency
Inc. provided him with a van, as it was determined that his vehicle was not
reliable. The van that was provided by JFJ Agency Inc. to Michael Mooney was
prominently painted with advertising for one of the products represented by JFJ
Agency Inc.
[11] The agreement also provided that Michael Mooney would be entitled to
five weeks of paid holidays, and that he would maintain a home office with
computer capacity. Daily call sheets were to be submitted on the 15th
and 30th of each month. The requirement for the submission of call
sheets was applicable to all three individuals.
[12] Linda Casson was not provided with a vehicle and she received less
compensation than Michael Mooney. Linda Casson was paid $750 - $800 every two
weeks. The expectations for her time and potential sales were not as high as
they were for Michael Mooney. There was no indication of the number of weeks of
holidays to which she was entitled. Linda Casson was reimbursed for fuel and
maintenance costs in relation to the operation of her vehicle.
[13] Bryce Matlashewski was paid $120 per week. He was a part owner of a
renovated school bus that was prominently painted with advertising for a
product that was represented by JFJ Agency Inc. Either JFJ Agency Inc. or one
the companies that it represented paid to have the bus painted. Although it is
not entirely clear, it appears that JFJ Agency Inc. also reimbursed Bryce
Matlashewski for fuel and maintenance costs in relation to the operation of his
vehicle.
[14] Counsel for the
Appellant relied upon the decision of the Supreme Court of Canada in 671122 Ontario Ltd. v.
Sagaz Industries Canada Inc., [2001] S.C.J. 61, 2001 S.C.C. 59, in which Major J. of the Supreme
Court of Canada stated as follows:
46 In my opinion, there is no
one conclusive test which can be universally applied to determine whether a
person is an employee or an independent contractor. Lord Denning stated in
Stevenson Jordan, supra, that it may be impossible to give a precise definition
of the distinction (p. 111) and, similarly, Fleming observed that "no
single test seems to yield an invariably clear and acceptable answer to the
many variables of ever changing employment relations ..." (p. 416).
Further, I agree with MacGuigan J.A. in Wiebe Door, at p. 563, citing
Atiyah, supra, at p. 38, that what must always occur is a search for the total
relationship of the parties:
[I]t
is exceedingly doubtful whether the search for a formula in the nature of a
single test for identifying a contract of service any longer serves a useful
purpose.... The most that can profitably be done is to examine all the possible
factors which have been referred to in these cases as bearing on the nature of
the relationship between the parties concerned. Clearly not all of these
factors will be relevant in all cases, or have the same weight in all cases.
Equally clearly no magic formula can be propounded for determining which
factors should, in any given case, be treated as the determining ones.
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.
[15] The only individuals who testified during the hearing were Scott
Johnson, the President of JFJ Agency Inc., Michael Mooney, and Bryce
Matlashewski. Linda Casson did not testify during the hearing. There was
conflicting evidence with respect to the intention of JFJ Agency Inc. and
Michael Mooney in relation to whether he was retained as an employee or as an
independent contractor. While Scott Johnson indicated that each individual was
retained as an independent contractor, Michael Mooney testified that in his tax
return he reported this income as employment income. Linda Casson did not
testify and Bryce Matlashewski did not indicate whether he intended to be an
employee or an independent contractor and therefore there is no indication of
the intention of either Linda Casson or Bryce Matlashewski in relation to
this matter.
[16] Therefore I find that there was no common intent that these individuals
would be hired as independent contractors. With respect to Michael Mooney,
there is a serious concern arising as a result of the amount that he was paid.
The contract with him provided that he would be paid $36,000 annually. This is
greater than the small supplier limit under the Excise Tax Act (“ETA”)
yet there is no reference to GST in the contract. Michael Mooney had raised the
issue of GST with Scott Johnson who assured him that he did not need to
collect GST. This would be correct if Michael Mooney was an employee of JFJ
Agency Inc. but not if Michael Mooney was an independent contractor as the
total annual consideration for his services was greater than the small supplier
limit.
[17] If Michael Mooney would have been an independent contractor receiving
$36,000 or more each year, at some point he would have ceased to have been a
small supplier as defined in section 148 of the ETA and once he ceased
to be a small supplier, the consideration for his supply of services would no
longer have been excluded in calculating the GST payable in respect of the
supply (s. 166 of the ETA), he would have been required to register under
section 240 of the ETA, collect GST on the amount that he was paid
pursuant to section 221 of the ETA, file a return pursuant to section
238 of the ETA and remit the net tax pursuant to section 228 of the
ETA. The failure of JFJ Agency Inc. to address the GST issue raises
concerns with respect to the true intention of JFJ Agency Inc. when
Michael Mooney was retained.
[18] Counsel for the Appellant also relied on the case of Qureshi v. M.N.R.,
[1992] 1 C.T.C. 2370, 92 DTC 1150 in which the individual was found to be an
independent contractor. In that case the individual “primarily conducted
business in the maritime provinces as a sales manager and district sales manager”. As a
sales manager he would supervise field managers who controlled the sales
representatives who were selling encyclopedias door to door. The individual in
that case incurred expenses ranging from $11,870 in 1982 to $40,138 in 1984.
Tremblay J. made the following comments in that case:
The fact that
the company (either Collier or Grolier) paid office rent and provided basic
furnishings and telephone service (3.05), it has a fixed remuneration structure
by which the appellant was paid, had final approval of all sales (3.19), and
had the exclusive use of the appellant services (3.20) might suggest the
appellant was an employee. However, these facts are not important enough to
outweigh the absence of control on the appellant's conduct and the financial
risk that were closely related to most of the appellant's expenses for his
staff.
[19] In this case the only expenses incurred by the individuals for which
they were not reimbursed by JFJ Agency Inc. were the costs of their own
computer and cell phone and for Bryce Matlashewski, the cost of a staple gun
and tape. Michael Mooney confirmed that the computer that he acquired was
a home computer and therefore would have been used otherwise than in relation
to his activities for JFJ Agency Inc. It is not clear what percentage of the
time the computer was being used for activities related to JFJ Agency Inc.
Bryce Matlashewski stated that he was using a computer that was purchased
by his family. It is also not clear what percentage of time the cell phones
were used in relation to the activities that each individual was performing for
JFJ Agency Inc.
[20] In O’Connor v. M.N.R., [2006] T.C.J. No. 502, the
individual, who was engaged to arrange the sale of wines in Alberta, was
found to be an independent contractor. However in that case the individual was
paid based only on actual sales (as established by the Alberta Gaming &
Liquor Commission) and the individual “paid all his car expenses, his cell
phone, storage, accommodations and travel expenses” and therefore had a more
significant risk of loss than the individuals in this case.
[21] In B.L.R. Safety & First Aid Inc. v. M.N.R., [1992]
T.C.J. No. 785, sales representatives were found to be employees and not
independent contractors.
[22] The Supreme Court of Canada noted that “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 this
case, the Appellant has failed to establish that each of Michael Mooney, Linda
Casson and Bryce Matlashewski were in business for themselves. It seems clear
from the evidence that each of these individuals was in business for JFJ Agency
Inc.
[23] With respect to the test of control, each individual was free to set his
or her own hours and to determine which customers or potential customers would
be contacted at any particular time. However, any sales person would have some
flexibility in setting his or her own schedule as he or she would be dependent
on the customers and when the customers would be available to meet. The list of
existing customers and potential customers was prepared by JFJ Agency Inc. with
input from the particular individual to whom the list related. There was a
level of subordination because each individual was required to submit daily
call sheets before they were paid. As a result I find that the control test
does not strongly support either relationship.
[24] Each individual worked from their own home and would attend the offices
of JFJ Agency Inc. on a regular basis to pick up promotional materials or
deliver call sheets or attend meetings. This is not inconsistent with the
individuals being employees. In the modern workplace employees need not work at
the employers place of business and for sales persons, whether employees or
independent contractors, the nature of the work would require that they spend significant
amounts of time at the customers’ premises and not at their employer’s or
payor’s premises.
[25] There appeared to be three tools that were used by each individual – a
cell phone, a vehicle and a computer. Each individual paid for their own cell
phone but there was no evidence with respect to the percentage that the cell
phones were used in relation to their activities for JFJ Agency Inc. and the
percentage that the cell phones were used for personal calls. A vehicle was
provided by JFJ Agency Inc. to Michael Mooney and either JFJ Agency Inc. or one
of the companies that it represented paid for the painting of the bus used by
Bryce Matlashewski. Each individual was reimbursed for the operating costs of
the vehicles incurred while carrying on their activities. Michael Mooney used a
computer that was a family computer and hence used by other members of his
family and Bryce Matlashewski used a computer that was paid for by his family.
As a result I find that the ownership of tools, on balance, indicates an
employer/employee relationship.
[26] There was no indication that any of these three individuals hired their
own helpers or could have hired their own helpers. It seems logical that each
one of these individuals was hired personally to perform the sales tasks
assigned to that person and therefore these individuals would not be allowed to
hire helpers without the consent of JFJ Agency Inc.
[27] Each individual was paid a fixed amount. Only Michael Mooney indicated
that he received bonuses in addition to this fixed amount but receiving bonuses
is not inconsistent with being an employee. There was little if any opportunity
for profit above their fixed compensation. There was no risk of loss as JFJ
Agency Inc. never sought to recover any amount from an individual as an
overpayment if the commissions did not materialize as anticipated. The remedy
of JFJ Agency Inc., if the activities of the individuals did not generate the
sales that were contemplated, would be to fire the individual. This would be
the same situation for employees who do not produce and run the risk of losing
their jobs.
[28] The expenses incurred by the individuals were minimal and it is not
clear, with respect the cell phones, the actual amount that was incurred in
relation to the activities for JFJ Agency Inc. and the amount incurred for the
personal calls.
[29] There is an additional factor
in this case that indicates an employer/employee relationship. JFJ Agency Inc.
provided each individual with business cards that identified JFJ Agency Inc.
with its address and contact information. No copies of the business cards were
submitted into evidence. The President of JFJ Agency Inc. and two of the
individuals testified. Not one of these individuals introduced a copy of the
business cards after this issue had been raised by counsel for the Respondent
in her cross examination of the first witness. Therefore, I assume that the
business cards must have identified JFJ Agency Inc. with the name of each
particular individual and with no indication that such individual was not an
employee of JFJ Agency Inc. It seems logical to assume that any person who
received such a card with the name of the individual and with the address and
contact information for JFJ Agency Inc. would assume that the individual named
is an employee of JFJ Agency Inc. Since JFJ Agency Inc. supplied these cards to
these individuals, JFJ agency Inc. should accept that it was portraying these
individuals as its employees.
[30] As a result, I find that Michael Mooney, Linda Casson and Bryce Matlashewski
were employees of JFJ Agency Inc. and therefore engaged in pensionable
employment for the purposes of the CPP during the periods for each as
set out above and that each of Michael Mooney and Linda Casson were engaged in
insurable employment for the purpose of the EI during the periods for
each as set out above.
[31] As a result, the appeals in relation to the determination that
Michael Mooney, Linda Casson and Bryce Matlashewski were engaged in
pensionable employment for the purposes of the CPP during the periods
for each as set out above and that each of Michael Mooney and Linda Casson were
engaged in insurable employment for the purpose of the EI during the
periods for each as set out above, are dismissed without costs.
[32] The appeals in relation to Maureen Purpur, Shawna-Lynn Skrudland and
Karleen Small are allowed, without costs, and, for these three individuals, the
matter is referred back to the Minister of National Revenue for redetermination
and reassessment on the basis that Maureen Purpur and Shawna-Lynn Skrudland
were not engaged in insurable employment for the purposes of the EI and
were not engaged in pensionable employment for the purposes of the CPP
for the period from January 1, 2004 to December 31, 2004 and that Karleen Small
was not engaged in insurable employment for the purposes of the EI and
was not engaged in pensionable employment for the purposes of the CPP
for the period from January 1, 2002 to December 31, 2002.
Signed at Halifax,
Nova Scotia, this 6th day of February 2008.
“Wyman W. Webb”
Email this Content