|
Citation: 2004TCC25
|
|
Date: 20040212
|
|
Dockets: 2002-3040(EI)
2002-3039(CPP)
|
|
BETWEEN:
|
|
VAL WALDBAUER
O/P INDUSTRY WORKPLACE DEVELOPMENT,
|
|
Appellant,
|
|
and
|
|
|
|
THE MINISTER OF NATIONAL REVENUE,
|
|
Respondent.
|
REASONS FOR JUDGMENT
Porter,
D.J.
[1] These appeals were heard on common evidence by consent of the
parties, over a period of 3 days, September 8, 9 and 10, 2003 at Winnipeg,
Manitoba.
[2] The Appellant has appealed from the decisions of the Minister of
National Revenue (hereinafter called the "Minister") dated July 11,
2002 that the following individuals (hereinafter called the
"Workers") engaged by her for the periods specified were in both
insurable and pensionable employment under the Employment Insurance Act
(the "EI Act") and the Canada Pension Plan (the "CPP"),
namely:
|
Margaret Cotie
|
January 1, 2000
to July 23, 2001
|
|
David
Fitzsimmons
|
January 1, 2000
to February 18, 2000
|
|
Dianne Hamill
|
August 14, 2000
to June 15, 2001
|
|
Nikol Johnstone
|
January 10,
2000 to August 11, 2000
|
[3] The Appellant has also appealed from the decision of the Minister
dated July 11, 2002 to confirm an assessment dated October 25, 2001 in the
amount of $2,124.78 for CPP contributions and $1,523.18 for employment
insurance premiums, plus applicable penalties and interest for the period
January 1, 2001 to July 31, 2001 in respect of the employment of Margaret Cotie
and Dianne Hamill.
[4] The reasons given for the decisions of the Minister were:
[Workers] were employed under contracts of service and
therefore they were employees of yours.
[5] All the decisions of the Minister were said to be issued in
accordance with subsection 93(3) of the EI Act and subsection 27.2(3) of
the CPP and were based on paragraph 5(1)(a) and 6(1)(a)
thereof respectively.
[6] The evidence revealed that during the periods in question, the
Appellant carried on, as a sole proprietor, a business under the name of
Industry Workplace Development ("IWD"), in Winnipeg, Manitoba. Her
business was to provide training to ex-offenders and current ones, by which I
took it to mean people who had or were serving terms of imprisonment, to enable
them to secure employment in the workplace. The project which she administered
was funded from a number of different sources, one of which was Human Resources
Development Canada ("HRDC"). The funding provided by HRDC is the only
one that has relevance to these appeals. HRDC provided funding simply for the training
itself, namely the cost of the training facilities, offsite facilities,
equipment, furniture and fixtures, personnel, i.e. the trainers and operating
expenses for the classroom delivery. HRDC did not pay the administration costs
associated with the establishment of the program, e.g. the Appellant herself
and a secretary. These were funded by the other agencies.
[7] Funds were paid by HRDC in accordance with comprehensive proposals
submitted by the Appellant during each year of the operation. These in turn
were approved and attached to formal contracts. Before payment, various forms
confirming delivery of the programmes in accordance with the proposals and
contracts had to be filed with HRDC. This was so with respect to the training
personnel also, namely who they were and the hours they put in, had first to be
confirmed in writing whereupon the agreed amounts would be forwarded to IWD to
enable payment to be made to the training personnel.
[8] The Appellant set about to engage a number of trainers to deliver
the training, the subject of the contracts with HRDC. In this respect, she
engaged each of the Workers to do the training and deliver the programmes
during the periods set out above. She maintains that each of them was engaged
as an independent contractor under a contract for services. The
Minister, on the other hand, has decided that in fact they were employees
working under contracts of service. That is the issue in these appeals.
The Law
Contracts
Of Service/For Services
[9] The manner in which the Court should go
about deciding whether any particular working arrangement is a contract of
service and thus an employer/employee relationship or a contract for
services and thus an independent contractor relationship, has long been
guided by the words of MacGuigan, J. of the Federal Court of Appeal in the case
of Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025. The reasoning
in that case was amplified and explained further in cases emanating from that
Court, namely in the cases of Moose Jaw Kinsmen Flying Fins Inc. v. M.N.R.,
88 DTC 6099, Charbonneau v. Canada (M.N.R.), [1996]
F.C.J. No. 1337, and Vulcain Alarme Inc.
v. The Minister of National Revenue, (1999) 249 N.R. 1, all of which provided useful guidance to a trial
Court in deciding these matters.
[10] The Supreme Court of Canada has now revisited this issue
in the case of 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.,
[2001] S.C.J. No. 61, 2001 SCC 59, 274 N.R. 366. The issue in that case
arose in the context of a vicarious liability situation. However, the Court
recognized that the same criteria applied in many other situations, including
employment legislation. Mr. Justice Major speaking for the Court, approved the
approach taken by MacGuigan J. in the Weibe Door case (above), where he
had analyzed Canadian, English
and American authorities, and, in particular, referred to the four tests, for
making such a determination enunciated by Lord Wright in City of
Montreal v. Montreal Locomotive Works Ltd., [1974] 1 D.L.R. 161 at 169-70.
MacGuigan J. concluded at page 5028 that:
Taken thus in context, Lord
Wright's fourfold test [control, ownership of tools, chance of profit, risk of
loss] is a general, indeed an overarching test, which involves "examining
the whole of the various elements which constitute the relationship between the
parties". In his own use of the test to determine the character of the
relationship in the Montreal Locomotive Works case itself, Lord Wright
combines and integrates the four tests in order to seek out the meaning of the
whole transaction.
At page 5029 he
said:
... I interpret Lord Wright's test not as
the fourfold one it is often described as being but rather as a four-in-one
test, with emphasis always retained on what Lord Wright, supra, calls
"the combined force of the whole scheme of operations," even
while the usefulness of the four subordinate criteria is acknowledged.
(emphasis mine)
At page 5030 he
had this to say:
What must always remain of the essence is
the search for the total relationship of the parties…
He
also observed:
There
is no escape for the Trial Judge, when confronted with such a problem, from
carefully weighing all of the relevant factors…
[11] Mr. Justice MacGuigan also said this:
Perhaps the best synthesis
found in the authorities is that of Cooke J. in Market Investigations, Ltd.
v. Minister of Social Security, [1968] 3 All E.R. 732, 738-9:
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 account?" If the answer to that question is "yes", then
the contract is a contract for services. If the answer is "no" then
the contract is a contract of service. No exhaustive list has been compiled and
perhaps no exhaustive list can be compiled of considerations which are relevant
in determining that question, nor can strict rules be laid down as to the
relative weight which the various considerations should carry in particular
cases. The most that can be said is that control will no doubt always have to
be considered, although it can no longer be regarded as the sole determining
factor; and that factors, which may be of importance, are such matters as
whether the man performing the services provides his own equipment, whether he
hires his own helpers, what degree of financial risk be taken, what degree of
responsibility for investment and management he has, and whether and how far he
has an opportunity of profiting from sound management in the performance of his
task. The application of the general test may be easier in a case where the
person who engages himself to perform the services does so in the course of an
already established business of his own; but this factor is not decisive, and a
person who engages himself to perform services for another may well be an
independent contractor even though he has not entered into the contract in the
course of an existing business carried on by him.
[12] In the case of Kinsmen Flying Fins Inc. case, above, the Federal Court of
Appeal said this:
... like MacGuigan J. we view the tests 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 the
weight which the circumstances may dictate.
[13] The nature of the tests referred to by the
Federal Court of Appeal can be summarized as:
(a) The degree or absence of control
exercised by the alleged employer;
(b) Ownership of tools;
(c) Chance of profit;
(d) Risk of loss;
In addition, the Court must consider the question of the
integration, if any, of the alleged employee's work into the alleged employer's
business.
[14] In the Sagaz decision (above) Major
J. said this:
…control is not the only factor to consider
in determining if a worker is an employee or an independent contractor…
[15] He dealt with the inadequacy of the
‘control test’ by again approving the words of MacGuigan J. in the Wiebe Door
case (above) as follows:
A principal inadequacy [with the control
test] is its apparent dependence on the exact terms in which the task in
question is contracted for: where the contract contains detailed specifications
and conditions, which would be the normal expectation in a contract with an
independent contractor, the control may even be greater than where it is to be
exercised by direction on the job, as would be the normal expectation in a
contract with a servant, but a literal application of the test might find the
actual control to be less. In addition, the test has broken down completely in
relation to highly skilled and professional workers, who possess skills far
beyond the ability of their employers to direct.
[16] He went on to say this:
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,
…([1952] 1 The Times L.R. 101) 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, …
(Vicarious Liability in the Law of Torts. London: Butterworths, 1967), 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.
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.
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.
[17] I also find guidance in the words of Décary
J.A. in the Charbonneau case (above) when speaking for the Federal Court
of Appeal he said this:
The
tests laid down by this Court ... are not the ingredients of a magic formula.
They are guidelines which it will generally be useful to consider, but not to
the point of jeopardizing the ultimate objective of the exercise, which is to
determine the overall relationship between the parties. The issue is always,
once it has been determined that there is a genuine contract, whether there is
a relationship of subordination between the parties such that there is a
contract of employment ... or, whether there is ... such a degree of autonomy
that there is a contract of enterprise or for services. ... In other words,
we must not pay so much attention to the trees that we lose sight of the forest.
... The parts must give way to the whole. (emphasis mine)
[18] I also refer to the words of Létourneau J.A. in the Vulcain
Alarme case (above), where he said this:
… These tests derived
from case law are important, but it should be remembered that they cannot be
allowed to compromise the ultimate purpose of the exercise, to establish in
general the relationship between the parties. This exercise involves
determining whether a relationship of subordination exists between the parties
such that the Court must conclude that there was a contract of employment
within the meaning of art. 2085 of the Civil Code of Quebec, or whether
instead there was between them the degree of independence which characterises a
contract of enterprise or for services….
[19] I am further mindful that as a result of the recent decisions
of the Federal Court of Appeal in Wolf v. Canada, [2002] F.C.J. No. 375,
and Precision Gutters Ltd. v. Canada (Minister of National Revenue-M.N.R.),
[2002] F.C.J. No. 771, a considerable degree of latitude seems now to have been
allowed to creep into the jurisprudence enabling consultants to be engaged in
a manner in which they are not deemed to be employees as they might formerly
been. I am particularly mindful of the words of Mr. Justice Décary in the Wolf
decision (above) where he said:
In
our day and age, when a worker decides to keep his freedom to come in and out
of a contract almost at will, when the hiring person wants to have no liability
towards a worker other than the price of work and when the terms of the
contract and its performance reflect those intentions, the contract should
generally be characterised as a contract for services. If specific factors have
to be identified, I would name lack of job security, disregard for
employee-type benefits, freedom of choice and mobility concerns. (my emphasis)
[20] Thus, it seems to this Court that the pendulum has started to
swing, so as to enable parties to govern their affairs more easily in relation
to consulting work and so that they may more readily be able to categorize
themselves, without interference by the Courts or the Minister, as independent
contractors rather than employees working under contracts of service.
[21] In conclusion, there is no
set formula. All these factors bear consideration and as Major J. said in the Sagaz
case (above), the weight of each will depend upon the particular facts and
circumstances of the case. Many of the tests can be quite neutral and can apply
equally to both types of situation. In such case, serious consideration has to
be given to the intent of the parties. Thus is the task of the trial Judge.
The
Facts
[22] The Minister in the
Replies to the Notices of Appeal signed on his behalf, was said to have relied
on the following assumptions of fact (I have set out whether the Appellant
agreed or disagreed in parenthesis), namely:
(a) the Appellant was in
the business of designing a project to reintegrate unemployed ex offenders into
society through education and employment; (Agreed)
(b) the Appellant's business
was federally and provincially funded; (Agreed)
(c) the Appellant
controlled the day-to-day operation of the business and made all of the
business decisions including obtaining clients, setting deadlines and
schedules, hiring and firing staff, signing contracts and deciding the
direction of the business; (Disagreed)
(d) the Workers were hired
by the Appellant; (Agreed, subject to the word "hired" meaning no
more than "engaged") (They were screened by another Worker)
(e) Fitzsimmons was hired
as an instructor and his duties included classroom instruction, making
employment and education contacts for clients, and interviewing clients;
(Agreed) ("hired" meaning "engaged")
(f) Johnstone was hired as
an instructor and her duties included classroom instruction and finding
employment for the clients; (Agreed) ("hired" meaning
"engaged")
(g) Hamill was hired as an
employment counseling instructor and her duties inncluded interviewing clients,
computer training, job research and providing job search assistance; (Agreed)
("hired" meaning "engaged")
(h) Cotie was hired as an
education director and her duties included developing curriculum, researching
and developing classroom materials, helping to recruit clients, facilitating,
assessing, and counseling; (Agreed)
(i) Fitrzsimmons earned a
set wage of $9.50 per hour; (The amount was agreed but the Appellant - it was a
fee not a wage.)
(j) Johnstone earned a
set wage of $2,350 per program delivery based on $18,800 for a total of 8
program deliveries; (Agreed. The amount was agreed but the Appellant maintains
it was a fee not a wage. The Worker also left before completing 8‑programme
deliveries.)
(k) Hamill earned a set
salary of $32,000 per year; (The amount was agreed. The Appellant maintains it
was a fee not a salary and she in fact earned more than this.)
(l) Cotie earned a set
salary of $44,000 per year; (The amount was agreed. The Appellant maintains it
was a fee not a salary and she in fact earned more than this.)
(m) Cotie received vacation
leave; (The Appellant agreed that Cotie took leave and other instructors filled
in for her. I accept that.)
(n) the Appellant set the
Workers' pay rates; (Disagreed. The Appellant advised that she negotiated the
pay rates. I accept that.)
(o) the Workers were normally
paid on a bi-weekly basis; (Agreed)
(p) the Appellant paid the
Workers; (Agreed)
(q) the Appellant's office
hours of operation were 8:00 a.m. to 4:00 p.m., Monday to Friday; (Agreed)
(r) the Workers normally
worked from 8:00 a.m. to 4:00 p.m., Monday to Friday; (Disagreed)
(s) Fitzsimmons, Hamill
and Cotie were required to worked at least 37.5 hours per week; (Agreed)
(t) the Appellant
controlled the Workers' hours and days; (Disagreed)
(u) the Appellant kept
track of the Workers' hours; (Agreed)
(v) the Appellant retained
the right to control the Workers; (Agreed)
(w) the Workers reported to
the Appellant on a daily basis; (Disagreed)
(x) the Appellant
supervised the Workers; (Agreed) (The Appellant said her function was to ensure
that the standards of each contract were met.)
(y) the Workers attended
daily conferences and weekly staff meetings held by the Appellant; (Agreed)
(usually)
(z) the Workers were
required to notify the Appellant of any leave requirements; (Agreed)
(aa) the Workers were
required to complete activity reports; (Agreed)
(bb) the Workers could not
hire their own helpers or replace themselves; (Agreed)
(cc) the Workers performed
their services at the Appellant's premises; (Agreed)
(dd) the Appellant provided
the work location including an office and classroom; (Agreed)
(ee) the Appellant provided
all of the tools and equipment required including furnishings and audio visual
equipment; (Agreed)
(ff) the Appellant
provided all of the supplies and materials required; (Agreed)
(gg) the Appellant provided
liability insurance; (Agreed)
(hh) the Workers did not
have a chance of profit or risk of loss; (Disagreed)
(ii) the Workers were not
in business for themselves; (Disagreed)
(jj) wages paid by the
Appellant to Hamill and Cotie, for the period January 1, 2001 to July 31, 2001,
were as follows: (Agreed)
Hamill $8
8,877.13
Cotie $20,491.18
(kk) the Workers were
employed under a contract of service by the Appellant.
[23] Evidence
was given by the Appellant and by two of the Workers, namely Margaret Cotie
Dianne Hamill. I found the Appellant to be very dedicated to her work and
basically an honest person. However, with all due respect to her, her
presentation was somewhat chaotic which could also be said about the manner in
which she ran her business. She was handicapped in my view, by a little, but
incomplete, knowledge of the law, which placed her in a dangerous situation
from a business point of view, as she had not grasped the complete picture.
The Contracts with HRDC
[24] The
Appellant entered into 2 contracts with HRDC during the relevant periods of
time. The first contract dated April 18, 2000 funded a programme which ran from
mid-April 2000 to March 31, 2001 and the second ran from May 7, 2001 to
November 30, 2001.
[25] The
first contract ("Contract #1") provided funds in the amount of
$79,680.00, later enhanced to $86,680.00, to cover the additional cost of a
personal development instructor for the period January 15, 2001 to March 31,
2001. The costs covered under the contract were:
|
Onsite facilities
|
$ 2,250.00
|
|
Offsite facilities
|
$ 5,000.00
|
|
Equipment usage
|
$ 1,280.00
|
|
Furniture and fixtures
|
$ 830.00
|
|
Personnel
|
$73,800.00
|
|
Operating expenses for classroom delivery
|
$ 3,520.00
|
|
Total
|
$86,680.00
|
[26] The objectives
of this contract were "to provide young ex-offenders with the skills to
become good employees. To provide access to employment opportunities intended
to ensure participants are learning on the job and gaining work experience
while developing employment history. The training is designed to move the
participant into job readiness and to employment."
[27] The
contract itself recited the fact that it was proposed by the Appellant to carry
out the project (set out above) and that she had applied to HRDC for financial
assistance towards the cost of the project, for which she was eligible under
certain government initiatives and which HRDC was willing to make on certain
conditions.
[28] The
second contract ("Contract #2") dated May 7, 2001, was for all
relevant purposes the same, although the dates and amounts were different, and
the contract referred specifically to three positions being funded as follows:
|
Administrative wages
|
$73,181.81
|
|
1.
|
Executive Director
(should be Educational
Director
|
$27,500.00
|
|
2.
|
Employment Counselling
Director
|
$20,000.00
|
|
2.
|
Personal Development
Instructor
|
$23,375.00
|
|
|
Total wages
|
$70,875.00
|
[29] The
thrust of the evidence and submissions of the Appellant was that she was just a
conduit of money and that basically she was just an intermediary between HRDC
and the personnel involved in delivering the programme. From that, she went on
to conclude that HRDC required the personnel to be independent
contractors, as that is how they were funding them. That was a giant leap of logic
for her to take and is probably at the root of her misapprehension of what went
on in this matter.
[30] To
some extent, her rationale has a measure of truth to it, as undoubtedly if
(and I stress, if) she had built into her proposal the additional costs she
might have incurred by reason of engaging her personnel as employees, HRDC
would no doubt have included the same in the funding. It is after all HRDC who
would have made the initial ruling as to whether these people were employees or
contractors if they had been asked and thus, there is an element of simply
taking out of one government pocket to put into another. However, the situation
does not end there as there is the question of benefits being available to the
Workers in one scenario, but not in the other. Thus, there are third parties
involved.
[31] The
crux of the matter, however, is that HRDC had no relationship whatsoever with
the Workers who were directly in a relationship with the Appellant. HRDC simply
provided funding as proposed and requested by the Appellant, but that in itself
had no affect on the actual relationship between the Appellant and the Workers
and HRDC had no contractual relationship with the Workers, nor did it
constitute the Appellant in any way as its agent.
[32] I am
particularly fortified in my approach to this by Clause 15.4 in the agreements
which reads as follows:
15.4 The management,
supervision and control of the Project are the sole and absolute responsibility
of the COORDINATOR. The COORDINATOR is not in any way authorized to make a
promise, agreement or contract on behalf of the DEPARTMENT. The COORDINATOR
shall be solely responsible for any and all payments and deductions required by
law to be made including those required for Canada Pension Plan, employment insurance,
workers’ compensation and income tax and for adhering to the applicable
Provincial Standards Act. The parties hereto declare that nothing in this
agreement shall be construed as creating a legally binding partnership or
agency relationship between them."
[33] It
is clear from this clause that the obligation of HRDC was no more than to
provide funds and that the management of the project was the sole
responsibility of the Appellant. The Appellant was on notice that she would be
responsible for any payments of Canada Pension Plan and employment insurance
deductions and payments that might be due.
[34] Thus,
there is nothing in these contracts which, in my view, play any part in the
decision as to whether these Workers were employees or independent contractors.
This decision must be made on the basis of the factual situation surrounding
the relationships themselves.
The Contracts with the
Workers
[35] The
contracts entered into between the Appellant and each of the Workers were filed
as Exhibits A-1 to A-5 respectively. Each is somewhat different although there
are many similar clauses.
[36] The
first contract in time was with David Fitzsimmons (Exhibit A-3) dated November
26, 1999. From the evidence, I understood that this ran for 3 months from November
1999 to February 2000. Thus, it was entered into somewhat before the two
periods covered by the contracts with HRDC (Exhibits A-6 and A-7). The period
in question in this appeal relating to Mr. Fitzsimmons is January 1, 2000 to
February 18, 2000.
[37] It
is clear from the very wording of this contract that this Worker was engaged as
an employee. He is referenced to as such throughout and there is nothing in the
evidence before me that would in any way detract from this designation.
[38] The
second contract in time related to Margaret Cotie (Exhibit A-2) dated April 1,
2000. It appears to have been signed after the original proposal to HRDC was
signed by the Appellant but before the contract with HRDC itself was signed on
April 18, 2000. It corresponded to the moment in time when the Appellant was
advised by HRDC that her funding was being approved. Nonetheless, the evidence
revealed that Ms. Cotie worked for the Appellant prior to that time starting in
November 1999.
[39] Ms.
Cotie also entered into a second contract (Exhibit A-1) on the 7th
of May 2001 which was the same date that HRDC signed the second contract with
the Appellant, namely Exhibit A-7.
[40] Ms.
Cotie herself gave evidence about her situation as did the Appellant.
[41] The
first contract, Exhibit A2, set out the following relevant provisions:
...AND WHEREAS MARGARET
COTIE is an Education Director contracted to provide services to the Project
Manager.
...
1. The Education
Director agrees that he will faithfully, honestly and diligently serve
the Project Manager in the business of the Project Manager.
2. The Education
Director and the Project Manager acknowledge and agree that the relationship
between them is one of mutual trust and reliance.
3. The Education
Director shall not at any time disclose to any person, firm or corporation any
information concerning the business or affairs of the Project Manager and/or
the project which he may have acquired in the course of or incidental to
his employment with the Project Manager or otherwise whether for his
own benefit or the detriment or intended or probable detriment of the Project
Manager.
4. (a) The
Education Director agrees to perform all duties as assigned by the
Project Manager in a professional and diligent manner;
(b) The Education
Director shall report to the Project Manager and/or their
assigned representative;
(c) The
Education Director shall be responsible for duties as assigned within the
following parameters and which shall be further defined in discussion
and review from time to time and shall comprise the following services for
Education and Training to complete the specific delivery of eight (8) classroom
segments consisting of:
·
Development
of curriculum on an on-going basis;
·
Classroom
Instruction consisting of four-week segments for each program delivery with
first classroom date to be April 24, 2000 and eighth classroom ending March 23,
2001.
·
Related
administration and documentation;
·
Responsible
to the Project Manager and/or the Director;
·
Total
contracted services to be paid $44,000 comprising $40,000.00 for the eight (8)
classroom and related administration deliveries and $4,000 for the eight (8)
curriculum developments to include related upgrades and modifications.
5. The Education
Director agrees that all records, files, documents, tapes, equipment and the
like relating to the business of the Project Manager and prepared, used
or possessed by the Education Director shall be and remain the sole and
exclusive property of the Project Manager and upon termination of the Education
Director’s employment with the Project Manager the Education Director
agrees to immediately thereafter return to the Project Manager every copy of
all such records, files, documents, tapes, equipment and the like.
6. The Education
Director shall not on the termination for any cause whatsoever of his
employment with the Project Manager directly or indirectly engage in a line of
business the same as or similar to that now carried on by the Project Manager
or engage to work for any person, firm or corporation engaged in the same or
similar type of business, in the City of Winnipeg, Manitoba, for a period of 2
years from the time his employment with the Project Manager ceased, except with
the consent in writing of the Project Manager. (emphasis mine)
[42] Whilst
the first recital is perhaps somewhat ambivalent, I note that the Worker had to
"honestly and diligently serve the Project Manager", a clear
reference to an employee situation. Independent contractors do not
"serve", they provide a service.
[43] Clause
3 was a non-disclosure clause but included the words "incidental to
his employment" as opposed to "in the course of providing her
contract services".
[44] Clause
4 required the Worker to "perform all duties as assigned by the
Project Manager", as opposed to a contract to provide a specific
service in her own way. The Worker also had to "report to the
Project Manager" and "be responsible for all duties as assigned to
her". These again are all hallmarks of an employee not an
independent contractor.
[45] Clause
6 is of great importance in my mind as it restricted the Worker from engaging
in a similar line of work in the City of Winnipeg for a 2-year period "from
the time his employment with the Project Manager ceased". It is
very hard to imagine that an independent contractor engaged in his or her own
business would be likely to enter into such a restriction, else they be out of
business upon termination of the contract. Such a clause is much more
consistent with an employee situation.
[46] The
general thrust of the contract is that of a contract of service with an
employee. I take it from reading it that it was not custom prepared but simply
adapted from some other form available to the Appellant. Nonetheless, that is
how it reads.
[47] The
second contract with Mrs. Cotie (Exhibit A-1) dated the May 7, 2001 which
endured in the end, only until July 23rd, is somewhat different.
[48] In
the Heading, it refers to the Worker as being a "Service Provider"
and in the second recital as being "Self Employed" (in
capital letters) "to provide services to the Project Manager".
[49] Clauses
1, 2 and 3 are the same as in Exhibit A-2.
[50] Clauses
4 and 5 are virtually the same as clause 5 and 4 in Exhibit A‑2 with
simply the details of the duties being changed and the non-disclosure clause
being amplified. They still referred to information "acquired as a result
of his employment with the Project Manager" and required the Worker "to
perform all duties as assigned by the Project Manager."
[51] The
second clause 5 in the contract simply provided for "all records,
files, documents, tapes, equipment and the like relating to the business of the
Project Manager and prepared, used or possessed by the Service Provider"
to remain as the sole and exclusive property of the Appellant. Thus, anything
designed or produced by the Worker would belong to the Appellant. This again is
a hallmark of employment.
[52] Clause
7 has a similar restriction on engagement in any similar line of business.
Again this is not exactly consistent with in independent contractor being in
business for herself.
[53] The
third contract in order of date was the contract with Nikol Johnstone dated
April 1st, 2000 (Exhibit A-4). It lasted from January 10, 2000 to August 11,
2000. It contained identical provisions to those found in the contract with
Margaret Cotie of even date, except the services to be provided were somewhat
different in Clause 4. Otherwise, they were identical.
[54] The
last contract was with Diane Hamill dated August 14, 2000 (Exhibit A-5).
She worked from August 14, 2000 until June 15, 2001.
[55] The
wording in this contract was again somewhat different. The Worker is referred
in the title to being "the Employee".
[56] The
first recital reads:
AND WHEREAS the
"Employee" is a self-employed contracted employee of the Employer,
and is registered in the Province of Manitoba.
A greater contradiction in terms
might not be found. What this person was registered as in the Province of
Manitoba could be anyone’s guess.
[57] The contract
refers to "the employee" throughout.
[58] The
remaining clauses are to all intents and purposes the same as the other
contracts, save again the services to be rendered are different.
[59] I can
only say in summary that the general tenor of all these contracts is that of a
relationship between an employer and an employee working under a contract of
service rather than that of an independent contractor working under a contract for
services. The very title put upon the Worker in all cases except one
(Ms. Cotie’s second contract) is that of an employee. Whilst the title put upon
the relationship is not all encompassing, and the Court must look at the true
working relationship, there is nothing which assists the Appellant in her
appeals, in these written contracts. In fact, the evidence flowing from this is
very much against her.
Evidence of the Witnesses
[60] I
turn now to review the evidence of Ms. Waldbauer. Her evidence is replete with
the suggestion that she simply channeled funds and worked on behalf of HRDC to
engage workers and that HRDC was in control of everything. Again, I see this as
a total misapprehension by her of the relationship between herself and HRDC
and, in turn, between herself and the Workers.
[61] It is
clear to me that this was her program and she could obtain funds from various
government agencies to operate it, including HRDC. HRDC had a funding program
available and in order to access those funds the Appellant had to meet certain
criteria, including supplying details of the personnel, their contracts, the
hours the programmes ran, course material. She also had to submit audits to
verify how the funds were actually disbursed. This did not cause it to be an
HRDC operational program. Their role was simply a funding one and in order to
provide that funding, they needed to ensure that certain things were in place
and actually happening. They had no part of the operation. They had no direct
contact with either the Workers or the students. They simply needed to know
that their criteria were being met before they would advance funds to the
Appellant for her operation.
[62] Thus,
when the witness said HRDC approved two Workers as being independent
contractors, she is mistaken as that was not in fact the case. They approved
the form of contracts for funding purposes and the exact relationship between
the Appellant and the Workers was not their concern.
[63] Accordingly,
when assessing her evidence, I am disregarding any suggestion that HRDC had any
role to play in establishing the nature of the contractual arrangements with
the Workers. The Workers simply had to be acceptable to HRDC in the sense of
fitting their criteria for funding.
[64] The
Appellant disputed item 6(c) of the assumptions of fact relied upon by the
Minister. However, I find the Minister was correct.
[65] With
respect to items 6(r), (t), (u), (v), (w), and (x), it is clear to me from the
evidence that again the Appellant was in control of all of these matters. It is
true that the Workers set their own curriculum and courses but the Appellant
had the right to alter or change any of it. She held regular meetings with the
Workers, kept track of their hours (which she needed to do for classroom
instruction in order to receive her funding from HRDC), and required them to sign
in and out when teaching. Some of those matters are equivocal in their
meaning, as they may have occurred regardless of whether the Workers were
contactors or employees. Nonetheless, the Minister was correct in his
assumptions.
[66] I
also noted that the Workers, although they could trade off between themselves
on course delivery, could not bring any outsiders in to replace themselves.
[67] I
further noted that the Workers were paid every two weeks. Again, there is no
absolute significance to that, but it was the manner in which they were paid.
The Appellant called the payments "fees", but I find that somewhat
contrived. It is clear that in April of 2000 she received some form of
accountable advance from HRDC, upon their approving the funding, and she then
paid the Workers out of these funds.
[68] The
Appellant agreed, generally speaking, with the duties attributed to the Workers
by the Minister.
[69] On
the whole, with very little exception, I found the Minister’s assumptions of
fact to be correct. The interpretation to be placed on those facts is really
the issue in this case.
[70] Margaret
Cotie, in her evidence, said she started to work in the program in November
1999. The Program Director was John Hall, who originally hired her, left in
January 2000. She then became the Education Director, which meant she still did
4 weeks of education delivery plus 2 weeks of program development between the
4-week cycles.
[71] She
said in evidence, and I believe her, that she was presented with the contract
by the Appellant and she signed it without any discussion at that time about
it. That was Exhibit A-1, which came into being some considerable time after
she started her duties.
[72] She
agreed that in January 2000, she had had a discussion with the Appellant when
the latter had told her that it would be better for her, the Worker, if she was
self-employed rather than an employee as her cheque would be bigger and she
would be able to claim her expenses, use of a vehicle, repairs and meals
against her income, for tax purposes. She said Ms. Waldbauer also told her that
she, the Appellant, would find it easier administratively to do it that way.
She was asked to be registered as a small business proprietorship in Manitoba.
Ms. Cotie told the Appellant she knew very little about it and was assured that
she would receive some help from the Appellant.
[73] In
the result, Ms. Cotie did claim some expenses on her income tax return filed
for that year. However, she did not consider herself to be in business on her
own account and did not think of herself as running a business, when working
for the Appellant. She worked for nobody else during that time.
[74] In
her work as Education Director, she assisted the Appellant in putting together
the funding proposals and presenting them to HRDC. Her work was also subject to
review by the Appellant and if the latter did not like it, she, the witness,
had to change it. In fact, when it came to the education component, the witness
made it clear that she was very much under the control of the Appellant.
[75] I gleaned
from her evidence that sometimes she took work home to do but this was not her
general practice.
[76] Finally
in July 2001, when the witness wanted to take some time off, there was an
altercation between herself and the Appellant and Ms. Cotie left. They have had
an ongoing dispute about money.
[77] I
found the witness was very confused about her status while working for the
Appellant; and that confusion remained after she left. I had the sense that the
witness felt that the organization was in chaos from beginning to end. At the
end of the day, I came firmly to the conclusion that there was no meeting of
the minds between the Appellant and Ms. Cotie as to the exact nature of her
working relationship.
[78] Dianne
Hamill also gave evidence. She had seen an advertisement for a position and was
interviewed by the Appellant and Ms. Cotie together. She signed a contract,
Exhibit A-5, when she started. She said that the meaning of the contract to her
was that "she was an employee and the Appellant was the boss".
[79] Her
work was to do intake interviews with potential students. The forms she used
were provided by the Appellant. She worked regular hours from 8:00 a.m. to
4:00 p.m., hours set by the Appellant. She met regularly with the Appellant to
discuss students. She was shown what to do with students by the Appellant who
also sat in and observed her in her work.
[80] When
she did computer training for students, which was done offsite, she used space
and equipment booked and arranged by the Appellant.
[81] In
helping the students with job placements, she left me with the clearing
understanding that the Appellant was very involved in overseeing her work.
[82] She
said she was paid bi-weekly and curiously enough, she said, tax was deducted
from her pay cheques.
[83] She
said her hours were set by the Appellant and she was required to sign the log
book when she came to and left work.
[84] She
was shown some invoices which purported to be from her but said she never had
seen them before and they were not hers. In fact, her name was spelled
incorrectly, which tended to corroborate her evidence.
[85] She
said she was told by the Appellant that she was self-employed because that
would be easier, which meant she could set her own hours. She was also told by
the Appellant that it would have no bearing on her work and in fact was always
told when and where she should be working. She did, at the Appellant’s request,
register the name "Hamill Consulting" as a proprietorship in Manitoba.
[86] I
found that the whole idea of her being told that she was self-employed and
registering a proprietorship was a complete fiction. Over and above that, there
was nothing in the evidence of the witness to support the assertion that she
was self-employed. She herself considered at all times that she was an employee
working as such for the Appellant and taking direction from her. She had no
sense of being in business for herself. On the whole, I found the witness to be
quiet and impressive. I have not the slightest hesitation in accepting her
evidence.
Application
of the Various Factors to the Evidence
[87] Whilst the necessity of reviewing a number of the
factors which, prior to the Sagaz case (above), were called the
four-in-one test plus an integration test, is somewhat diminished by that case
it is still perhaps a useful exercise to go through.
[88] Title: It must still be clearly understood
that even where the parties choose to put a title on their relationship, if the
true nature and substance of the arrangement does not accord with that title,
it is the substance to which the Court must have regard. Having said that, it
is also fair to say that where the parties truly choose a particular method of
setting up their working arrangement, it is not for the Minister or this Court
to disregard that choice. Due deference must be given to the method chosen by
the parties and if on the evidence as a whole there is no substantial reason to
derogate from the title chosen by the parties, then it should be left
untouched. The Wolf and Precision Gutters cases (above) very much
substantiate that proposition.
[89] In
the case at bar, however, it is very clear that the Appellant and the Workers
did not have any clear meeting of the minds on the true nature of their working
relationship, let alone the titles to be put upon them. The written contracts
only add to the confusion, but on balance tilt towards an interpretation of
contracts of service not contracts with independent contractors.
In my view, there is no deference to be accorded to the Appellant’s own
individual choice. What she set up with the Workers was very much a fiction.
[90] The
contracts on the whole were very much contracts by the course, akin to payment
by the piece. The Workers were, generally speaking, paid every 2 weeks
although there is some evidence that the Appellant was late paying at times.
[91] Clearly, there was a conversation about no
deductions. I am not at all confident that the Workers understood the
implications of this. All too often an employer will say to a worker that no
statutory deductions will be made and the worker will be called a contractor.
That simply does not make such worker a contractor as opposed to an employee.
[92] The title put on the arrangement by the Appellant,
as such, does not indicate to me at all that this was necessarily an
independent contractor arrangement.
[93] Control: As this aspect of the test has been traditionally
applied, it has been consistently pointed out that it is not the actual control
so much as the right to control that is important for the Court to consider.
The more professional and competent a person is or the more experience they
have in their field, the less likely there is to be any actual control, which
creates difficulty in applying this test. Indeed as Major J. pointed out in the
Sagaz case (above), there may be less control exercised in the case of a
competent professional employee than in the case of an independent contractor.
Nonetheless, it is another factor to be weighed in the balance.
[94] In this case, I find that there was a great deal
of control exercised by the Appellant over the Workers. I sensed from both the
manner in which she presented her evidence and the evidence of the workers that
her approach was very much hands-on and she left little to the Workers. They
might devise a curriculum or do other planning, but she was always there to
oversee it or change it if she did not agree with it. To be fair to her, much
of this was no doubt driven by her desire to make sure the funding would keep
coming from HRDC. Nonetheless, she exercised a considerable degree of control
over the Workers. Her assertion that it was HRDC exercising their control is
simply not factual as HRDC had no direct relationship with the Workers.
[95] This factor strongly favours an interpretation of
contracts of service with these Workers working as employees, not independent
contractors.
[96] Tools and Equipment: Although the odd bit of work
was done at home, the facilities and equipment, classrooms and materials were
all provided by the Appellant. The Workers had virtually no investment in
equipment that they used. This factor also strongly favours an interpretation
of employees working under contracts of service.
[97] Profit and Loss: I am of the view that there
was absolutely no entrepreneurial element to the work undertaken by the
Workers. They had no opportunity for making anything other than the payment
contracted for each course, and they stood to lose nothing. They had no
financial investment to lose. They were simply paid for their work.
[98] This factor also, in my view, strongly calls for
an interpretation of employees working under contracts of service.
[99] Integration: This is the aspect of the test which has been
most often criticized. The question to be asked is "whose business is
it?" That must be asked from the point of view of the worker, not the
employer as from the latter’s point of view it will always look like its
business. In other words, were there two businesses here or one?
[100] The Workers did nothing to indicate that they were
in business for themselves. They were simply told by the Appellant that they
would be treated as self-employed, so they could have bigger cheques and it
would administratively be easier for her. None of them had any other contracts.
They worked solely in the organization set up by the Appellant. There is not a
shred of evidence in my view, to support the contention that they were in
business for themselves. Indeed, their contracts restricted them from being in
such business if they left the Appellant, which is hardly the mark of persons
in business for themselves. Everything they did was clearly done in the course
of the business of the Appellant.
Conclusion
[101] When I consider the words of Major J. in the Sagaz
case (above), that the central question is whether the person, engaged to
perform services, is performing them as a person in business on their own
account, particularly when I look at the factors outlined above, I am
overwhelmingly of the view that there was only one business here, namely that
of the Appellant. Everything points to the Workers working in and for the
business of the Appellant. Their services were fully integrated into it. To be
told that they were self-employed and would have no statutory deductions was
not sufficient to change that.
[102] When I look at the forest as a whole and not just at
the individual trees, I am well satisfied on the evidence that the Workers were
each working as an employee in insurable and pensionable employment under
individual contracts of service.
[103] Accordingly, the appeals are dismissed and the
decisions and assessments of the Minister are confirmed.
Signed at Calgary, Alberta, this 12th day of February
2004.
Porter,
D.J.
Email this Content