|
Citation: 2003TCC866
|
|
Date: 20031126
|
|
Docket: 2002-2025(EI)
|
|
BETWEEN:
|
|
SHOW PROMOTIONS AND PERSONNEL INC.,
|
|
Appellant,
|
|
and
|
|
|
|
HER MAJESTY THE QUEEN,
|
|
Respondent.
|
REASONS FOR JUDGMENT
O'Connor,
J.
[1] This
appeal was heard at Toronto, Ontario on August 6 and 7, 2003.
[2] The
relevant facts and the issue arising therefrom are set forth in the following
paragraphs of the Reply to the Amended Notice of Appeal and of the Amended
Notice of Appeal and certain contracts between the Appellant (the
"Payor") and one, Raymonde Hamel (the "Worker").
REPLY:
…
8. The Appellant
appealed a ruling to the Respondent for the determination of the question of
whether or not Raymonde Hamel (the "Worker") was employed in
insurable employment, while engaged by the Appellant for the period from July
10, 2000 to September 29, 2001, within the meaning of the Employment
Insurance Act (hereinafter the "Act").
9. By letter
dated April 24, 2002, the Respondent informed the Appellant that it had been
determined the Worker's engagement with the Appellant, during the period in
question, was insurable employment for the reason that the Worker was employed
pursuant to a contract of service.
10. In making his
decision, the Respondent relied on the following assumptions of fact:
a) The Appellant
is involved in designing, staffing and managing sales marketing programs across
North America, at airports, in stores and at special events such as trade and
consumer shows;
b) The
Appellant's clients include major corporations such as the Canadian Imperial
Bank of Commerce ("CIBC"), Primus Canada, Volkswagen Audi, Citizens
Bank of Canada and AT & T (the "clients");
c) The Appellant
provides personnel who represent its clients in various types of sales and
marketing programs;
d) The Worker
was hired by the Appellant, during the period under review, to promote CIBC
Aerogold VISA credit card applications;
e) The Worker
performed the services for the Appellant at a booth operated by the Appellant
at Dorval International Airport;
f) The Worker
performed the services from 7:00 A.M. to 1:00 P.M., Mondays to Fridays,
and occasionally she worked weekends;
g) The Worker
was required to follow instructions, procedures and rules of conduct determined
by the Appellant;
h) The Worker
was required to perform the services personally for the Appellant; [the
Appellant denies this]
i) The Worker
was required to submit a CIBC Aeroplan VISA daily submissions' report
indicating the number of applications received during the day;
j) The Worker
was obliged by the Appellant to sign a Non-Competition Agreement;
k) The Appellant
could and did in fact terminate the Worker's services at anytime;
l) The Worker
was paid $20.00 by the Appellant for each application obtained, which fee was
adjusted based on the approval rate of the applications;
m) The
promotional booth, the furnishings, the equipment and the materials were
provided to the Worker by the Appellant;
n) The Worker
did not incur any expenses in the performance of her duties.
...
AMENDED NOTICE OF APPEAL:
…
7. The Worker
was able to determine the hours she worked by successfully bidding on those
hours against other subcontractors. The bid was awarded by the Appellant based
on demand and based on the contractor's sales performance.
8. The Worker
was successful in bidding for work shifts to promote CIBC Aerogold Visa credit
card applications at Dorval International Airport.
9. It was
standard practice that if the Worker did not wish to perform any contract on
which she had bid, it could be assigned to any other Worker who had executed
similar agreements with the Appellant. [Not "it could be assigned to"
rather "could be replaced by"]
10. The Worker
promoted the CIBC applications from a kiosk located in the airport, ... She was
free to determine her own sales strategy without interference. The only parameters
were that she follow the code of conduct and provide the correct product
information.
11. The kiosks are
owned by the Clients. The space on which the kiosks are located are leased by
the Appellant from the airport.
12. The Worker
incurred her own out-of-pocket expenses without reimbursement for clothes,
transportation and other incidentals.
13. The Worker was
paid commission based on sales results.
14. The Worker was
paid $20.00 by the Appellant for each approved application obtained. If
applications she submitted were not approved or accepted by the bank, the
Worker did not get paid.
15. Workers submit
daily submission sheets, from which a weekly log is created. Biweekly payments
are made based on a percentage of the applications obtained according to that
log. After the Appellant receives confirmation from the Client of the approval
of the applications, Workers are paid the balance owed. Workers then issue an
invoice as proof of payment.
16. The Appellant
terminated the subcontract with the Worker on October 1, 2001.
…
ISSUE
[3] The
issue is whether the Worker was employed in insurable employment within the
meaning of paragraph 5(1)(a) of the Employment Insurance Act (the
"Act").
Facts
[4] The
Worker and the Payor entered into certain contracts namely:
THE BASIC CONTRACT
Exhibit A-1 is the basic contract entered into between the Payor and the
Worker on July 23, 2000 and Exhibit A-2 is essentially the same contract
entered into on June 3, 2001. In these basic contracts, which were for a term of
one year from the dates thereof the Worker is referred to as "Talent"
and the Payor is referred to as "SPP".
[5] The
following are pertinent provisions of these contracts, namely – either party
can terminate this agreement upon 14 days written notice without costs.
Notwithstanding anything to the contrary contained herein, in the event of a
material breach of the Talent's obligations herein, this Agreement can be
terminated without notice by SPP. Also the following excerpts provide further
details of these contracts.
1. Talent understands that
fees quoted to talent [sic] and agreed upon prior to an assignment are
final and non-negotiable. Talent is an independent contractor and not an
employee of SPP for any purpose. Talent, where applicable will provide SPP with
A Business & GST number. Talent invoices SPP for payment after each
assignment and is responsible for submitting payments for all federal,
provincial taxes, UIC contributions and other applicable deductions.
2. Talent understands that
all fees are negotiated solely with SPP and never directly with clients.
(Clients means companies, corporations, sole-proprietorships, organizations or
persons who use or are negotiating to use the services of SPP).
3. During the term of this
agreement and renewal, Talent shall not disclose any proprietary information,
private confidential affairs or trade secrets of SPP to any person or third
party other than for SPP's purposes, nor shall Talent use for any purpose,
other than those of SPP, any private confidential information or trade secret
Talent has or may acquire in relation to SPP's business.
4. Talent covenants and
agrees during the term of this agreement and for 12 months after its
termination, regardless of how that termination should occur, not to directly
or indirectly solicit business from any clients of SPP introduced to the talent
by SPP, nor with any other potential clients, exhibitors or companies that
Talent comes in contact with as a result of work performed by Talent for SPP or
SPP's clients.
5. Talent understands that
a booking is confirmed at the time of her/his acceptance of an assignment. No
cancellations are permitted. Talent agrees that funds may be withheld for any
cancellations which may cause damages or loss of income to SPP.
6. …
7. …
8. …
9. Talent agrees that
he/she has been given ample and sufficient opportunity to consult with
independent legal advice with regard to the meaning and effect of the terms and
conditions stated herein, as evidenced by his/her initials below.
…
10. This agreement expresses
the entire and final agreements between the parties with respect to all the
matters herein and supersedes all previous representations, statements and
promises. It shall not be altered, amended or qualified except by a memorandum
in writing signed by the parties hereto.
[6] Exhibit
A-2 is another version of the basic contract. It is substantially the same as
Exhibit A-1 with the following exceptions. The Payor is referred to in Exhibit
A-2 as SPP and the Worker is referred to as "Contractor". With
respect to termination, Exhibit A-2 states as follows:
…
The Term of This Agreement is one
year from the above date and if not terminated prior to that date is
automatically renewable for a further term of one year. Either party can terminate
this agreement at any time with or without notice.
[7] The
Worker and Payor also entered into Code of Ethics Agreements dated July 23,
2000 and August 20, 2001 (Exhibits A-3 and A-4), the essentials of which are
that the Worker will present herself in a well-groomed manner, wearing uniform
including photo I.D. badge and other airport security identification required
by the airport authority. The Code of Ethics Agreements also states that the
Worker states that "it is my responsibility as an independent contractor
to ensure that I comply with and adhere to all municipal by-laws and codes as
they relate to direct sales." The Code of Ethics also contain provisions
outlining how the Worker is to carry out her sales functions from the kiosks in
the airport.
[8] Other
agreements and documentation provide for confidentiality, non‑competition
and other matters between the Worker and the Payor, principally related to how
the Worker was to behave and carry out her duties.
SUBMISSIONS
[9] The
Appellant submits that the Worker was engaged under a contract for services,
i.e. as an independent contractor. Counsel for the Respondent submits that the
arrangement was a contract of employment, i.e., a contract of services.
ANALYSIS AND DECISION
[10] The basic criteria for determination of the issue in question are
control, ownership of tools, chance of gain, risk of loss and whether the
Worker was an integral part of the operations of the Payor. No one factor is
to govern and the entire relationship between the parties must be examined.
[11] The basic contracts signed by the parties are a prime consideration
but do not establish a presumption nor are they definitely determinative of the
issue. As stated, the entire relationship between the parties must be examined.
However, in Wolf v. Canada (C.A.), [2002] 4 F.C. 396, the Federal
Court of Appeal per Noël J.A. stated as follows:
...This was a case where the
characterization placed by the parties on their relationship ought to be given
great weight. In a close case such as the present one, where the relevant
factors point in both directions with equal force, the parties' contractual
intent, and in particular their mutual understanding of the relationship could
not be disregarded. As the parties considered that they were engaged in an
independent contractor relationship and as they acted in a manner consistent
with this relationship, it was not open to the Tax Court Judge to disregard
their understanding.
Also in Bradford v. M.N.R., 88 DTC 1661 Taylor, T.C.J. stated at page
11 of the decision :
The general principle
that commends itself to me arising out of this appeal and the recent
jurisprudence noted is that under a given set of circumstances within which
there are certain aspects of 'employee', some others of 'independent
contractor', and even others that are somewhat ambiguous, that the intentions
and objectives of the parties, if clearly and unequivocally stated and agreed
upon, should be a prime factor in the determination of the Court...
[12] With respect to control although there were various elements of
control related to how the Worker was to carry out her operations and how to
dress, in my opinion most of the provisions in the contracts and the way the
operations were carried out, in effect were more or less guidelines to the
Worker, not strictly proof of control. The Worker could choose her hours and,
in fact did so. Although specific shifts were established, the Worker had the
ability to choose the shifts she would work. The evidence is not conclusive as to
the degree of supervision or control. On balance however, the control test, in
my opinion, points to a contract for service i.e. an independent contract
relationship.
[13] With respect to supervision, counsel for the Appellant indicates that
it was not really supervision but rather coordination by co-workers, mostly
with respect to picking up the applications and arranging for their remittance
to the Payor for payment purposes.
[14] The conclusion is that although there were considerable guidelines and
restrictions some of these are normal and to be expected in a relationship of
this nature. Generally speaking the Worker was relatively unsupervised, i.e.,
uncontrolled and although it is a close call the aspect of control, or absence
thereof, favours the conclusion that there was an independent contract, i.e., a
contract for service as opposed to a contract of service.
[15] With respect to ownership of tools, the Worker furnished very little,
if any. The kiosk, signs and application forms were all furnished by CIBC. The
space for the kiosks was rented to the Payor and as mentioned the Worker
provided very little tools. Counsel for the Appellant submits that the skills
of the Worker are to be considered as tools but I do not agree with that
submission. In any event, the tools test is not as significant in an analysis
of a kiosk sale operation as it would be in an analysis of construction
contracts and other contracts involving physical work. In any event the tools
test points to a contract of service.
[16] With respect to chance of gain, it is clear that the more sales the
Worker generated the more she was paid i.e. more gain. Less sales meant less
gain. On balance, the chance of gain is an indication that the Worker was an
independent contractor. There was no fixed remuneration. If she did not make
sales she did not get any pay. In my opinion that is a strong indicator that
there was a contract for services, i.e, an independent contractor relationship.
[17] With respect to risk of loss, there was very little risk of loss for
the Worker. Admittedly she had certain expenses relative to clothes,
transportation and parking but these are certainly not clearly indicative of an
independent contractor relationship. Any one who goes to work has to bear
similar expenses. The conclusion is that the loss aspect points to a contract
of service i.e., an employee relationship.
[18] With respect to integration the question to be answered is whose
business was it and that is to be answered from the point of view of the Worker.
From a profit stand point the Worker fully realized that if her efforts were
successful and her skills proved themselves she would earn money. Her efforts
also produced advantages for the CIBC because applications and credit cards
being issued would provide future business and earnings for CIBC. Of course the
relationship between CIBC and the Payor must be considered, in other words, the
Payor stood to gain from CIBC through the efforts of the Worker in obtaining
applications for CIBC's Visa card. The integration test is not conclusive in my
opinion. When one examines the facts of the advertising, the type of kiosk, the
uniform worn by the Worker one would form the impression that the Worker was
probably working for CIBC. That perception by the public does not govern the
outcome but it should be considered as a factor in an analysis of "whose
business was it". The Worker was engaged by the Payor but the work she did
favoured not only herself via commission but also the Payor because CIBC paid
the Payor certain fees based on credit card applications submitted.
[19] Having considered all elements I believe that importance must be given
to the written contracts, which are structured in such a way to purposely make
the Worker an independent contractor with the benefits flowing to the Payor,
namely, no deductions and no contributions for Employment Insurance and Canada
Pension. On this issue, the fact that an arrangement is structured in
such a way as to best benefit the parties is not the end of the matter. The parties
are free to structure their arrangement as best suits their purposes. The
parties have freely chosen to label their relationship as one of an independent
contractor and as mentioned, that fact deserves consideration although not in
itself conclusive. (Note the above references to Wolf and Bradford.)
[20] Another factor that I consider quite significant is the aspect of
commission. It is unusual in a contract of employment for the Worker not to
have some assurance of being paid whether hourly, weekly, monthly or otherwise
or on the basis of piece work.
[21] In conclusion, as mentioned, some of the tests point one way and some
of the tests point another way but in my opinion on a balance of probabilities
I find that the Worker was engaged under a contract for services, namely, an
independent contract which is exactly what the contracts are labelled. In
applying tests especially the aspects of minimal control, the two-way
indication from the integration test, the wording of the basic contracts and the
aspect of the commission method of payment, in my opinion the Worker was
engaged under a contract for services. Consequently the appeal is allowed and
the determination of the Minister is vacated.
Signed at Ottawa,
Canada this 26th day of November 2003.
O'Connor,
J.
Email this Content