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Citation: 2004TCC155
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Date: 20040319
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Docket: 2003-2632(EI)
2003-2633(CPP)
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BETWEEN:
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WALTER ENDRES,
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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
MELISSA RUDDY,
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Intervenor.
REASONS FOR JUDGMENT
Woods J.
[1] Walter Endres appeals decisions of the Minister of National Revenue
under the Canada Pension Plan and Employment
Insurance Act that Melissa Ruddy was employed by
him while working at his Shell gas station and convenience store from April 1,
2001 to June 30, 2002.
[2] Ms. Ruddy and her fiancé, Robbie Godden,
worked at Mr. Endres' gas station and convenience store for approximately one
year as part of an arrangement designed to assist the couple in saving money to
buy the business. Mr. Endres was retiring from the business for personal
reasons and either had to find a buyer or shut the business down.
[3] An agreement was
entered into whereby Ms. Ruddy
and her fiancé would "operate" the gas station and convenience store
and then purchase the business when they had saved sufficient funds to pay
one-half of the purchase price. Ms. Ruddy referred to the agreement as an
option because it could be cancelled by either party on short notice. While
operating the business before the purchase, the couple were each to be paid a
monthly fee plus a commission, which was similar to remuneration that Mr. Endres
previously paid to employees. To assist with raising the necessary funds for
the purchase, the couple were provided with rent free accommodation on site and
they were required to deposit their savings in a bank account controlled by Mr.
Endres. After about a year, the couple decided against the purchase and
cancelled the agreement pursuant to its terms. These appeals concern Ms.
Ruddy's status while working at the gas station during the year that the
agreement was in force.
[4] It is not apparent from the record what
prompted the Minister to consider Ms. Ruddy's status under the Employment
Insurance Act and Canada Pension Plan but in any event the Minister
determined that Ms. Ruddy was employed by Mr. Endres. Mr. Endres appeals these
decisions.
[5] The appeals were heard together under
common evidence. Mr. Endres testified on his own behalf and Ms. Ruddy was
called as a witness for the Crown.
General Principles
[6] There are no bright
line tests for determining whether
a person is an employee or independent contractor and each case is determined
on its own particular facts. The general principles to be applied are described
by Major J. in the leading case, Sagaz Industries Canada Inc. v. 671122
Ontario Limited, [2001]
2 S.C.R. 983:
[47] … 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.
[7] The issue in this case is whether Ms. Ruddy
was carrying on business on her own account. Some of the testimony at the
hearing focussed on whether or not Mr. Endres continued as the owner of the gas
station during the term of the agreement. The implication from this line of
questioning seemed to be that Ms. Ruddy could not carry on a separate business
unless she and her fiancé owned the gas station. This is not the case and whether
Mr. Endres continued to own the gas station while Ms. Ruddy and her fiancé were
the operators is not determinative of these appeals. The proper question is
whether Ms. Ruddy acted with her fiancé as an independent operator or manager
of the gas station which clearly was owned by Mr. Endres during the relevant
period. The evidence in my view clearly establishes that she did carry on her
own business.
Control Factor
[8] The most important factor in this particular
case is the degree of control that Mr. Endres could exercise over Ms. Ruddy. It
is undisputed that Ms. Ruddy and her fiancé "controlled the day to day
operations" (Reply, paragraph 11(j)).
[9] The case for the Crown depends mainly on
various incidents of "control" being exercised by Mr. Endres. The
Crown submits that these incidents establish that Ms. Ruddy was in a
subordinate relationship. I disagree with this conclusion. Mr. Endres did at
times intervene in the conduct of the business but generally the couple
operated the business independently. There
was very little supervision of Ms. Ruddy's work. Mr. Endres came to the gas
station only to collect the cash every day or few days, except when he
volunteered his time on Sunday mornings to give the couple a break. Ms. Ruddy
and her fiancé could hire employees, and at times they arranged for others to
work in the gas station although these were special arrangements and the
workers were never paid in cash. On the couple's own initiative, they changed
the layout and shelving in the convenience store, albeit with Mr. Endres'
consent. The evidence as a whole tends to show that Ms. Ruddy and her fiancé
were in control of the operation, subject to oversight by the owner.
[10] Counsel for the Crown submits that Mr.
Endres continued to make the major decisions for the business. For example, Mr.
Endres was asked during cross examination whether Ms. Ruddy and her fiancé had
the right to change gas prices. Mr. Endres admitted that he had to be consulted
on a decision of this nature. I agree that Mr. Endres did reserve important
decisions to himself but in my view the reservation of important decisions by a
business owner does not equate to control of the worker.
[11] The Crown refers as well to other incidents
of "control." Sometimes the "control" was exercised to
ensure compliance with Mr. Endres' contract with Shell Canada. For example, Mr.
Endres objected when a friend of Ms. Ruddy worked at the gas pump without
wearing the required Shell uniform. In other instances, the intervention was
necessary to ensure that the work was performed properly. For example, Mr.
Endres provided "instruction" to Ms. Ruddy as to how to properly
clean the floor of the convenience store and wipe windshields at the gas pump.
Mr. Endres also objected to the couple's purchase of hunting vests as new item
for sale in the convenience store and he required that the couple bear the cost
of this merchandise.
[12] Mr. Endres testified that, aside from the
hunting vest incident, he did not give orders as to how to do things but merely
gave suggestions for assistance. He indicated that in his judgment the
inexperienced couple should have sought more assistance from him than they did.
Ms. Ruddy on the other hand understandably considered that she should comply
with Mr. Endres' "suggestions" because he still owned the business.
[13] Regardless of whether these incidents were
suggestions or orders I find that they generally deal with issues of quality
control and do not establish that Ms. Ruddy's work could generally be dictated
by Mr. Endres. Controlling the quality of work is not inconsistent with an
independent contractor relationship. In this regard, Décary J. A. in Canada
v. Carbonneau, (1996) 207 N.R. 299 (F.C.A.) stated:
It is indeed rare for a
person to give out work and not to ensure that the work is performed in
accordance with his or her requirements and at the locations agreed upon.
Monitoring the result must not be confused with controlling the worker.
[14] Overall, I find that the evidence supports Mr.
Endres' testimony that Ms. Ruddy and her fiancé were generally free to operate
the gas station and convenience store in any manner they saw fit. I find that
Mr. Endres did not generally have the right to dictate what work Ms. Ruddy was
to perform and how it was to be done.
Other Factors
[15] As for the other factors referred to in Sagaz
Industries, opportunity of profit, risk of loss and ownership of tools, I
find that none of these
factors are significant in this case. Even if they were significant, I find
that they are consistent with an independent contractor relationship. Ms. Ruddy
had some opportunity for profit. Under the agreement she was paid a flat
monthly fee plus a commission. As for risk of loss, Ms. Ruddy and her fiancé
did sustain a loss from the hunting vest incident although the loss was
mitigated by their being able to exchange the goods for items for their
personal use. As for ownership of tools, the couple showed some responsibility
for equipment in changing the layout and installing some new shelving in the convenience
store. None of these factors are in my view of great significance but they
support the finding that Ms. Ruddy was not an employee.
Intention
[16] In addition to the traditional factors that
courts have looked at in determining whether there is an employment
relationship, recent Federal Court of Appeal decisions have also considered the
intention of the parties. In Wolf v. R., [2002] 3 C.T.C. 3 (F.C.A.) Mr.
Justice Noel stated:
… the manner in which the parties viewed
their agreement must prevail unless they can be shown to have been mistaken as
to the true nature of the relationship …
[17] Neither party referred to these authorities
in argument but the evidence on the intention of the parties in this case is
consistent with an independent contractor relationship. There is no reference
to an employment relationship in the agreement and no source deductions were
made by Mr. Endres, an experienced businessman familiar with paying
remuneration to employees. The cheques issued to the couple referred to their
pay as a "management fee," not salary or wages. As for how Ms. Ruddy
viewed the relationship, the initiative that she and her fiancé showed in
operating the business clearly shows that she did not view the relationship as
one in which Mr. Endres would dictate the terms of her work.
[18] For these reasons, I find that Ms. Ruddy
was not engaged in insurable or pensionable employment during the relevant
period. The appeals are allowed.
Signed at Ottawa,
Canada this 19th day of March, 2004.
J.M.
Woods J.
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