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Citation: 2003TCC520
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Date: 20030902
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Docket: 2002-4469(EI)
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BETWEEN:
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JOESEPH TESIOROWSKI,
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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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REASONS FOR JUDGMENT
Somers,
D.J.
[1] This
appeal was heard in London, Ontario on May 26 and 27, 2003.
[2] The
Appellant is appealing from a decision made by the Minister of National Revenue
(the "Minister") that he was not employed by 1463863 Ontario Limited
o/a DSD Inc. (the payer) in insurable employment during the period at issue,
from November 4, 2001 to March 28, 2002, pursuant to paragraph 5(1)(a)
of the Employment Insurance Act (the "Act").
[3] Paragraph 5(1)(a) of the 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;
...
[4] The
burden of proof is on the Appellant. He must show on a balance of probabilities
that the Minister erred in fact and in law in his decision. Each case stands on
its own merits.
[5] In
making his decision, the Minister relied on the following assumptions of facts
which were admitted or denied:
(a) the Payer's
business is the year-round distribution of baked goods; (admitted)
(b) the Appellant
was hired as "independent distributor" under a written agreement; (denied)
(c) the Appellant
purchased baked goods and distributed them to cash accounts and national
accounts (house client) on a cash on delivery or charge basis; (denied)
(d) the Appellant
performed his duties in a territory assigned by the Payer; (admitted)
(e) the Appellant
was able to choose his hours and days of work; (denied)
(f) the
Appellant was able to establish his own clientele; (denied)
(g) the Appellant
was paid different percentage of commissions depending on the products
purchased; (denied)
(h) the Appellant
purchased his own inventory; (denied)
(i) the
Appellant paid for the lease of the vehicle and the gas to operate the
vehicle; (denied)
(j) the
Appellant was not required to wear a uniform; (admitted)
(k) the Appellant
was responsible for his own clients; (denied)
(l) the
Appellant could set his own prices, choose his own clients and was able to
control his expenses; (denied)
(m) the Appellant
was not paid any vacation pay nor statutory holidays; (denied)
(n) the Appellant's
pay was not tied into hours worked but products sold; (denied)
(o) the Appellant
was not supervised by the Payer. (denied)
[6] The
payer's business operated year round at the distribution of baked goods. The
payer started the business in the region in October 2001 as a result of the
closure of Lewis' Bakery.
[7] The
Appellant worked for Lewis' Bakery during a period of 21 years as an unionized
employee.
[8] The
payer decided to have independent distributors and offered such to the former
employees of Lewis' Bakery.
[9] According
to Mr. Kenneth Skellett, Manager of the payer, testified that approximately 21
former employees including the Appellant signed the agreement on October 31,
2001 to become independent distributors (Exhibit A‑1).
[10] However, the Appellant testified that he was not hired as an
independent distributor and during his cross-examination stated he applied to
become an owner-operator. He then added that he no longer wanted to be an
owner-operator because the Payer did not hold up to the agreement.
[11] Under the said agreement, the Appellant was assigned a territory to
distribute the baked goods.
[12] The Appellant testified that he did not buy the goods from the payer
and he did not have his own clientele. He said he was supervised by the payer
and had to answer to the payer if he lost a client.
[13] According to the Appellant, he worked regular hours, 6:00 a.m. to
3:00 p.m., 5 days a week and was paid $500 plus commission. The Appellant
deposited five copies of cheques in the amount of $500 each for the period from
February 26, 2002 to the end of March 2002. The commissions were not paid
except for the first two months.
[14] The Appellant denied that he was paid a different percentage of
commission depending on the products purchased and denied having purchased his
own inventory.
[15] He stated he submitted receipts for the purchase of gas and the
insurance premiums for the vehicle used to make deliveries. He added that he
did not own the vehicle.
[16] In cross-examination he stated that he used the same route established
in 1991 by Lewis' Bakery. There was no change in the route after the
transition.
[17] He admitted that he did not use a punch clock at the beginning or the
end of his day's work nor did he report to the manager. He wore a Lewis' Bakery
uniform which he had before the transition. He reported to the head office the
name of new customers.
[18] The Appellant admitted that he used a different truck from the one he
was driving while working for Lewis' Bakery.
[19] According to the Appellant, the Payer wanted him to be an
owner-operator and offered him and the other distributors help along the way by
guaranteeing a weekly payment of $500 until as he said "worked on our
own".
[20] He said he had a price list determined by the payer.
[21] Mr. Kenneth Skellett, the payer's manager since September 2001,
testified at the request of the Minister. This witness testified that he did
not work previously for Lewis' Bakery and the payer did not retain the Lewis'
name.
[22] The agreement (Exhibit A-1) was entered into by other distributors
including the Appellant. The Appellant worked for the payer from November 1st,
2001 to March 31, 2002 when the Appellant discontinued his employ as a
distributor without giving a notice contrary to the 60-day written notice in
the agreement.
[23] According to the agreement, the Appellant had to provide his own
vehicle with the appropriate insurance. The Appellant paid for the upkeep and
gasoline consumption of the vehicle.
[24] Since the Appellant did not have the funds to buy a vehicle it was
leased by a person by the name of Terry Dumas but the charges were paid by the
Appellant as indicated in Exhibit R-1.
[25] The Appellant did not have to wear a uniform during the distribution
of the baked goods.
[26] Mr. Kenneth Skellett admitted that there was a price list for some of
the payer's clients being the national account. As for the other clients the
Appellant could establish his own price list.
[27] There were no paid vacations or statutory holidays and the hours of
work were not recorded. There was no supervision of the distributor.
[28] In cross-examination, Mr. Kenneth Skellett said that the truck in
question was leased by Terry Dumas, but the payer billed the Appellant for the
lease payments, insurance charges and fuel as indicated in Exhibit R-1.
[29] The Appellant himself cross-examined Mr. Skellett by referring to
paragraph 4 of the Reply to the Notice of Appeal.
[30] The witness testified that most of the drivers, including the
Appellant, of Lewis Bakery signed the agreement (Exhibit A-1). According to
this agreement the Appellant was not hired as an employee.
[31] He stated that the Appellant put in signed orders of purchase and he
was billed accordingly as it appears in Exhibit A-1.
[32] The witness did not keep a record of the hours worked, not knowing the
time of day the Appellant worked.
[33] The manager admitted there were different prices; one for the national
account and the other set by the Appellant himself. He stated that the
Appellant was allowed a subsidy to help him get started as an owner‑operator.
[34] He said that the route covered by the Appellant was profitable to the
latter.
[35] A contract of service necessarily implies that the employee works for
the profit of the employer. The essential characteristics of a contract of
service include features involving the nature of the services to be provided;
fixed periodic wage; pre-arranged working hours and specific directions as to
the work to be done.
[36] In determining whether the parties have established an
employer-employee relationship, the total relationship of the parties must be
considered. The test to be used to distinguish a contract of service from a
contract for services is a four‑in‑one test with emphasis on the
one combined force of the whole scheme of operations.
[37] Case law consistently admits four basic factors in distinguishing a
contract of service from a contract for services.
[38] In the case of Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025,
the Federal Court of Appeal enumerated the four basic tests:
1. The degree of control.
2. Ownership of tools.
3. Chance of profit and risk of loss.
4. Integration.
[39] Control: Mr. Skellett said that he had no control on the hours.
The Appellant decided on his own his hours of work. If the Appellant had an
appointment elsewhere he was free to go. Once the Appellant came in to work at
9:00 a.m. without any objection on the part of the Payer.
[40] The Appellant established his own clientele. However the Appellant
used the same route as he followed with his former employer Lewis' Bakery.
There was no supervision by the payer. Under this criteria, there was no
employee‑employer relationship.
[41] Ownership of tools: The Appellant had his own vehicle which he
chose and leased through some other person because his credit was not good, but
he had to pay for the lease of the truck, for the upkeep, the insurance
premiums, gasoline and other expenses. The accountability of these expenses was
done through the payer (Exhibit R-1). On this criteria we can conclude that the
Appellant was an independent contractor.
[42] Chance of profit and loss: The payer paid the Appellant $500 on
a weekly basis, in order to help him get started (Exhibit R-1 indicates the
sales, commissions, etc.).
[43] The Appellant ordered the products from the payer. He was invoiced and
had to pay for the products ordered. The Appellant could establish his own
price list except for the national account. Some products the payer allowed a
right off as for other products the Appellant had to assume the loss for bad
returns.
[44] The evidence has shown that the Appellant could make a profit or
suffer a loss. On this criteria the Appellant should be considered as an
independent contractor.
[45] Integration: The Appellant bought his products and sold them at
a profit or loss; he decided the price list to his clients.
[46] The Appellant applied for a GST number, which indicates his acceptance
of being an independent contractor. The Appellant admitted in his testimony
that he applied to become an owner-operator. He said he no longer wanted to be
an owner-operator because the payer did not respect the terms of the agreement.
According to the Appellant the payer owed him $1,300 which he claimed in another
Court.
[47] The Appellant, according to this criteria, was not integrated into the
payer's business. He was acting as an independent contractor.
[48] The intentions of the parties were incorporated in the agreement
signed on October 31, 2001.
[49] Considering the evidence as a whole the Appellant was not engaged by
the payer in insurable employment pursuant to paragraph 5(1)(a) of the Act.
[50] The appeal is dismissed and the decision of the Minister is confirmed.
Signed at Ottawa, Canada, this 2nd day of
September, 2003.
Somers,
D.J.
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