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Citation: 2004TCC564
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Date: 20040902
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Dockets: 2002-4573(EI)
2002-4574(CPP)
2003-312(EI)
2003-313(CPP)
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BETWEEN:
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PHILYP KOLYN,
NANCY KOLYN,
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Appellants,
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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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J.W. FERGUSON OP. BRACEBRIDGE TAXI SERVICES,
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Intervenor.
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REASONS FOR JUDGMENT
Little J.
A. STATEMENT
OF FACTS:
[1] J.W.
Ferguson Services Ltd. (the "Payor") operates a taxi business in the
town of Bracebridge, Ontario. The business is operated under the name of
Bracebridge Taxi Services.
[2] During
the period February 4, 2000 to October 24, 2001, the Appellant, Philip Kolyn,
drove a taxicab for the Payor.
[3] During
the period September 29, 2000 to March 3, 2002 the Appellant, Nancy Kolyn, drove a taxicab for the
Payor.
[4] The
Payor owns the taxicab license, the taxicab plus the sign and meter in the
taxicab, the taxi stand, the dispatch services and all office equipment and
supplies.
[5] During
the periods referred to above, each of the Appellants were advised by the
Payor's dispatcher to provide taxi services to customers
("Customers").
[6] Each
of the Appellants collected all of the monies received from the customers. The
taxi fare charged to Customers was determined by the meter in the taxicab or
the fare was based on a flat fee as determined by the Payor for a specific
trip.
[7] Each
of the Appellants paid the Payor 50% of the monies collected from the Customers
(Note: In calculating the 50% that belonged to the Appellants, each
Appellant was required to deduct the Goods and Services Tax ("GST")
plus the Employment Insurance Premiums and remit these amounts to the Payor.
[8] Each
of the Appellants also paid for the gasoline that was used in the operation of
the Payor's taxicab.
[9] The
Payor paid for all of the other expenses incurred in connection with the taxicab
including insurance, oil, regular maintenance and repairs plus regular washing
of the taxicab.
[10] The Payor prepared a four-week schedule for each of the Appellants and
the other drivers. This schedule showed mandatory days and hours of work plus on-call
periods for each of the Appellants.
[11] The Appellant, Philip Kolyn, was fired by the Payor on October 24,
2001.
[12] The Appellant, Nancy Kolyn, resigned on March 3, 2002.
[13] Following his termination, the Appellant, Philip Kolyn, applied for
benefits under the Employment Insurance Act and was initially denied any
benefits.
[14] By a letter dated August 28, 2002, the Minister of the National
Revenue (the "Minister") advised the Appellant, Philip Kolyn, that he
was not employed under a contract of service pursuant to paragraph 5(1)(a)
of the Employment Insurance Act. The Minister further informed the
Appellant that his arrangement with the Payor was insurable employment since he
provided services to the Payor as a taxi driver and therefore, the Appellant
was insurable pursuant to subsection 6(e) of the Employment
Insurance Regulations.
[15] By a letter dated August 28, 2002 the Minister advised the Appellant,
Philip Kolyn, and the Payor that it had been determined that the Appellant was
not employed under a contract of service pursuant to subsection 6(1)(a)
of the Canada Pension Plan (the "Plan").
[16] By a letter dated December 23, 2002 the Minister advised the
Appellant, Nancy Kolyn, that she was employed under a contract of service
pursuant to paragraph 5(1)(a) of the Employment Insurance Act.
The Minister further informed the Appellant that her arrangement with the Payor
was insurable employment since she provided services to the Payor as a taxi
driver and therefore she was insurable pursuant to subsection 6(e) of
the Employment Insurance Regulations.
[17] By a letter dated December 23, 2002 the Respondent informed the
Appellant, Nancy Kolyn, and the Payor, that it had been determined that the
Appellant was not employed under a contract of service pursuant to
subsection 6(1)(a) of the Plan.
B. ISSUES TO BE DECIDED:
[18] The issues to be decided are:
(a) Were each of the
Appellants engaged in insurable employment by the Payor during the periods
noted within the meaning of paragraph 5(1)(a) of the Employment
Insurance Act?
(b) Were each of the
Appellants engaged in pensionable employment by the Payor during the periods
noted within the meaning of paragraph 6(1)(a) of the Canada
Pension Plan?
C. ANALYSIS:
[19] The Employment Insurance Act reads as
follows:
5. (1) Subject
to subsection (2), insurable employment is
(a) employment
in Canada by one or more employers, under any express or implied contract of
service or apprenticeship, written or oral, whether the earnings of the
employed person are received from the employer or some other person and whether
the earnings are calculated by time or by the piece, or partly by time and
partly by the piece, or otherwise;
…
(2) Insurable
employment does not include
(a) employment
of a casual nature other than for the purpose of the employer's trade or
business;
[20] The Canada Pension Plan reads as follows:
6. (1) Pensionable employment is
(a) employment in Canada that is
not excepted employment;
…
(2) Excepted employment is
(b) employment of a casual
nature otherwise than for the purpose of the employer's trade or business;
Was There a Contract of Service Between
the Appellants and the Worker?
[21] The first issue to be decided is whether the Appellants were employed
"under any express or implied contract of service". Only if the
Appellants were employed under a contract of service will they qualify for
"insurable employment" and "pensionable employment".
[22] What constitutes a "contract of service" has been considered
by the Courts many times, often in the context of distinguishing the
relationship from a "contract for service". In other words, the Court
must determine if the Appellants were employees of the Payor or independent
contractors.
[23] An examination of what the Courts have held to
constitute a contract of service is required. The Courts have developed a test
focusing on the total relationship of the parties with the analysis centered
around four elements:
- degree of control and
supervision;
- ownership of tools;
- chance of profit; and
- risk of loss.
[24] This test was propounded by the Federal Court of Appeal in Wiebe
Door Services Ltd. v. M.N.R.
and accepted and expanded by subsequent cases. The Supreme Court of Canada also
considered the issues in 671122 Ontario Ltd. v. Sagaz Industries
Canada Inc.
Speaking for the Court, Major J. stated:
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.
[25] Accordingly, Major J. considered the central question to be determined
is "whether the person who has been engaged to perform the services is
performing them as a person in business on his own account or is performing
them in the capacity of an employee".
[26] The requirement to take a holistic approach in examining the four
tests has been emphasized by the Federal Court of Appeal on past occasions:
… we view the test as being
useful subordinates in weighing all of the facts relating to the operations of
the Applicant. That is now the preferable and proper approach for the very good
reason that in a given case, and this may well be one of them, one or more of
the tests can have little or no applicability. To formulate a decision then,
the overall evidence must be considered taking into account those of the tests
which may be applicable and giving to all the evidence that weight which the
circumstances may dictate.
Similarly, Major
J. stated in Sagaz:
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.
[27] Before applying the facts of the present case to the principles set
out above, it should be noted that the Minister's determination that the Worker's
employment was pursuant to a contract of service is subject to independent
review by the Tax Court. No
deference to the Minister's determination is required.
[28] As stated above, the Wiebe Door test can be divided into four
categories.
Control
[29] Mr. Justice MacGuigan said in Wiebe Door:
The traditional common-law criterion of the employment
relationship has been the control test, as set down by Baron Bramwell in R.
v. Walker (1858), 27 L.J.M.C. 207, 208:
It seems to me that the difference between
the relations of master and servant and of principal and agent is this: A
principal has the right to direct what the agent has to do; but a master has
not only that right, but also the right to say how it is to be done.
[30] In other words, the key aspect of "control" is the
employer's ability to control the manner in which the employee carries
out his or her work; thus the focus is not on the control that the employer in
fact exercised over the employee. Examples of this ability include the power to
determine the working hours, defining the services to be provided, and deciding
what work is to be done on a given day.
[31] Each of the Appellants testified that they were under the control of
the Payor. The Appellants said that they reported to work at the Payor's office
as per the monthly schedule prepared by the Payor. The Appellants also
testified that they would pick up customers as directed by the Payor's
dispatcher. The Appellants also said that in the town of Bracebridge, less than
5% of all the customers would result from being flagged down on the street.
Under these circumstances, how could it be said that the Appellants had the right
to control the manner in which the work is carried out? The Payor
clearly determined the Appellants' hours of work and the Payor determined what
should be done by each of the Appellants on a given day.
[32] I have concluded that under the control test, the Appellants were
clearly under the control of the Payor.
Ownership of Tools
[33] The Payor owned the taxicab, the taxicab license, the taxicab sign,
the office equipment and supplies, the dispatch equipment, the meter and the
radio and all of the supplies and pieces of equipment. The Appellants paid the
Payor 50% of all fares received for the use of the taxicab. The Appellants also
paid for the gasoline that was consumed during the shift. The Appellants also
collected and remitted the GST that was paid by the customer and the Appellants
paid the Payor the employment insurance premiums applicable. The Payor paid the
insurance premiums, oil and all repairs and services on the taxicab. The
Minister adopted the position that the Appellants were leasing the vehicle from
the Payor.
[34] In my view, the arrangement that the Payor dictated to retain the
services of the Appellants was not a lease but was a form of employment with
the Appellants paying a commission to the Payor equal to 50% of all fares less
the deductions specified. I therefore find that the Payor owned the
"tools" that were used in this situation.
Chance for Profit and Risk of Loss
[35] In an employee/employer relationship, it is the
employer who bears the burden of profit and the employee does not assume a
financial risk.
[36] In this situation the Appellants and the Payor shared the gross
revenues on a 50-50 basis (less the specified deductions noted above) and the
Payor paid for the vehicle maintenance and repairs plus insurance. Other than
paying for gasoline, the Appellants incurred no expenses personally. Under this
arrangement it cannot be said that the Appellants had any risk of loss.
Integration
[37] In Canada v. Rouselle et al., Hugessen J.
made the following comments on the integration test:
[25] The judge did not mention
the factor of "integration" as such. Clearly in light of the case law
cited above, it was not essential for him to speak of it. However, if he had
considered it, it is apparent that, from the employee's standpoint, the latter
were not in any way integrated into the employer's business.
[26] Their comings and goings,
their hours and even their weeks of work were not in any way integrated into or
coordinated with the operations of the company paying them. Although their work
was done for the company's business, it was not an integral part of it but
purely incidental to it.
In other words, the question
is:
The observations of Lord
Wright, of Denning L.J., and of the judges of the Supreme Court in the U.S.A.
suggest that the fundamental test to be applied is this: "Is the person
who has engaged himself to perform these services performing them as a person
in business on his own command?"
[38] Based on the evidence that was presented the
Appellants were not performing the services for the Payor as a person in
business on his own account.
Conclusion
[39] On the evidence that was presented the
Appellants were controlled by the Payor, the Payor owned the tools, the Payor
had the chance of profit and risk of loss and the Appellants were integrated
with the business of the Payor. I have therefore concluded as follows:
1. Each
of the Appellants were engaged in insurable employment by the Payor during the
periods noted within the meaning of paragraph 5(1)(a) of Employment
Insurance Act; and
2. Each
of the Appellants were engaged in pensionable employment by the Payor during
the periods noted within the meaning of paragraph 6(1)(a) of the Canada
Pension Plan.
[40] The appeals are allowed, without costs.
Signed at Vancouver, British Columbia, on
this 2nd day of September 2004.
Little
J.
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