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Citation: 2004TCC29
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Date: 20040130
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Dockets: 2003-904(EI)
2003-930(CPP)
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BETWEEN:
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DANIEL DODDS,
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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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and
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AM STONE DIRECT MARKETING INC.,
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Intervener.
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REASONS FOR JUDGMENT
MacLatchy,
D.J.
[1] These
appeals were heard on common evidence on December 8, 2003 at Toronto, Ontario
in the presence of both the Appellant and the Intervener.
[2] By
Notices of Assessment dated February 8, 2002, February 11, 2002, May 9,
2002 and May 13, 2002, AM Stone Direct Marketing Inc. (the "Payor")
was assessed for failure to remit employment insurance premiums and Canada
Pension Plan contributions in respect of approximately 124 workers, including
the Appellant (the "Workers" – See Appendix "A"), for the
period from January 1, 2000 to January 31, 2002.
[3] The
Payor appealed to the Respondent for reconsideration of the assessments, and
the Respondent varied the assessments by letter dated December 17, 2002.
The Respondent reduced the assessments concerning Alma Stone and George
Stone and confirmed the assessments regarding the other Workers.
[4] The
Appellant represented himself and gave evidence in a well‑prepared and
candid manner. Obviously, he had done a great deal of research concerning the
meaning of being an independent contractor or an employee. He received guidance
from the brochure dealing with that subject prepared by Canadian Customs and
Revenue Agency (CCRA). Having applied the tests suggested, he was of the strong
belief that he had been correct when he described himself as an independent
contractor in his dealings with the Payor/Intervener.
[5] The
Appellant described himself as a sales consultant engaged by the Payor to
manage their sales territory and bring fresh business to the Payor using his
skills in those fields. He had more than 20 years experience operating as a
sales consultant and territory manager relevant to sales. He could initiate
'cold' rolls and arrange to train prospective clients in the use of web sites
to track their sales. Although there never was any written agreement between he
and the Payor, there was a verbal agreement that he was engaged by the Payor to
sell and assist clients to use a web site as a business adjacent. He was to be
paid commission on his sales each month and could have a draw on future
commissions monthly. He agreed to devote his time and energies to sales of the
web sites prepared by the Payor as instructed by the Appellant and his
customer/client. He estimated that a 40-hour week was a reasonable allowance of
time to be devoted to the job although at times he would contribute more than
such an estimate in a particular week and would take time in compensation from
another week. He used the 40‑hour week as a benchmark and not as a strict
time frame for his marking hours. His hours were not recorded except by himself
in order to judge how effective his efforts had been on a particular sale.
[6] Evidence
was also given by George Stone the President of the Payor and his
straightforward testimony, in most respects, supported the evidence of the
Appellant. Both parties believed they had an arrangement between themselves
that created independency for the Appellant and that the Appellant operated his
own business and invoiced the Payor for his time and commission on sales that
the Appellant made. Both witnesses believed the Appellant was an independent
contractor and not an employee and it was not until the CCRA told them that the
Appellant was an employee that the Intervener must deduct EI and CPP from the
monies due the Appellant, that the Appellant decided he could not work under
those conditions and ended their relationship.
[7] The
classical tests recommended in Wiebe Door Services Ltd. v. M.N.R.,
87 DTC 5025, of control, ownership of tools, chance of profit and risk of
loss together with the entrepreneurial test were understood by the Appellant
and the representative of the Intervener.
[8] Control
– Both witnesses said there was little or no control exercised by the Payor
over the Appellant as the Appellant ran his own business and brought his skills
as a territory manager and sales consultant to the arrangement they had made.
The Payor did not have the qualifications necessary to control the Appellant.
When asked about reporting to the Payor, the Appellant replied there was no
requirement to report on a regular basis but only as was necessary to give
progress reports and for the Appellant to consult with the graphic and
production departments concerning their progress on the requirements off the
client. Each had to be current with how the work was unfolding for the benefit
of their client.
[9] The
Appellant made the contact with and entered into contracts with the client
without the necessity of any approval or co-signing by the Payor. Consultation
between the Appellant and the Payor was necessary in order that the particular
job could be priced and quoted to the client by the Appellant.
[10] The Appellant had his own skills that he brought to the working
arrangement between he and the Payor. He may not have had much knowledge about
the internet business and web sites but when he came to the Payor, he spent 2
to 3 months learning the business and the technical aspects of the business so
that he could teach his clients how to use a web site and to get the most from
having such a site. The Appellant stated this was not training but on the job
learning that he did on his own.
[11] The hours worked by the Appellant were his own business – none were
mandated by the Payor. He worked when and how he wished so long as he was
effective at his job and brought clients' business to the Payor.
[12] The Appellant was asked who he reported to at the Payor's and he
indicated it was the son of the Intervener's witness. He indicated that this
was not a requirement and was to share information concerning a clients
business – a sharing of information and ideas as well as the profitability of
each project for the Payor and the Appellant.
[13] The Appellant acknowledge that he used the Payor's business cards and
letterhead in order to open doors to get business for himself, as the Payor's
name was well known in the Appellant's sales area.
[14] The Appellant was not given any vacation time nor vacation pay and
took time off from his efforts as he saw fit. He did not have a sales
expectation given to him by the Payor. He set his own targets for quantum of
business.
[15] The element of control is important to the relationship between an
employer and his employee. It is used to order when, where and how the employee
is to perform his work. This was clearly not in evidence in the arrangement
between the Payor and the Appellant.
[16] Ownership of Tools - The Appellant's evidence was that he
operated out of his own home office or from his vehicle or at the office of the
client. At home he had his own office space and equipment including desk,
telephone, fax machine, copier and computer and his own paper and other
necessary office supplies. He had his own vehicle – for which he received no
reimbursement; and, his own cell phone. If he went to the office of the Payor
he could use a desk, if any, a telephone and other office equipment, as needed,
free of charge. No specific office was arranged or assigned to him. Although
office equipment was made available to him, it was essential that he have his
own office and equipment available to him at all times.
[17] Chance of Profit – The Appellant operated strictly on a
commission basis, paid for by work he brought to the Payor. He covered his own
expenses from his commissions and all other costs for operating his own
enterprise. According to the Appellant, he could do business with others at the
same time as working with the Payor but he felt that for his own success and in
fairness to the Payor he should devote his full efforts to bringing in business
for the Payor.
[18] Risk of loss – During the time period in question, the
Appellant had deductions made from his commissions for bad debts or shortfalls
for one reason or another. He was not too clear on these items as they were not
substantial enough to worry about. His own expenses could be most important
relative to the profitability of his business.
[19] Integration – Whose business was it? As viewed from the
perspective of the Appellant, the business was his own venture and he could
have run his business with other persons or companies as well as that of the
Payor. His expertise was as a sales consultant and territorial management
consultant. It was a separate entity and not just part of the business of the
Payor. When the CCRA instructed the Payor to make source deductions from the
monies due to the Appellant, he gave his notice that that was not what he had
bargained for with the Payor and accordingly left his engagement with the
Payor.
[20] This Court has considered the evidence presented to it and has applied
such to the tests recommended by the various higher Courts and has reached the
conclusion that the arrangement between the Payor and the Appellant, during the
period in question, was not one of employer/employee. The Appellant operated as
an independent contractor.
[21] It is accepted that the parties cannot necessarily define their
arrangement by merely stating that it is one of independence. It
still must be viewed by examining the whole of the arrangement existing between
the parties. The tests above are a helpful tool to assist the Court to reach a
reasoned judgment of the arrangement existing but the Court must examine all of
the evidence submitted to it, give such evidence its proper weight in the
circumstances and based on that information reach its conclusion. The intention
of the parties to their arrangement can be and should be taken into
consideration when reaching its conclusion.
[22] In these circumstances, the Court is convinced that the Appellant
operated pursuant to a contract for services with the Payor during the period
in question.
[23] These appeals are allowed and the decisions of the Minister are
vacated.
Signed at Toronto,
Ontario, this 30th day of January 2004.
MacLatchy,
D.J.
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