Date: 20010409
Dockets: 2000-2935-EI, 2000-2936-CPP
BETWEEN:
SKYLINK AVIATION INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Lamarre Proulx, J.T.C.C.
[1]
This is an appeal from the decision of the Minister of National
Revenue (the "Minister") that
Mr. Bernd Firnung, the worker, was employed in
insurable employment while working for the Appellant for the
period of June 24, 1998 to August 6, 1998, within the
meaning of the Employment Insurance Act
(the "Act"). The appeal is also from the
Minister's determination that the worker's engagement
with the Appellant, during the period in question, was
pensionable employment pursuant to the Canada Pension
Plan.
[2]
The pleadings being the same in both appeals, I will refer only
to the pleadings under the Employment Insurance Act.
[3]
The facts described in the Appellant's Notice of Appeal are
as follows:
1.
Mr. Firnung was retained as a short term pilot qualified
to operate a specific type of helicopter leased on short
notice by the Appellant to an aircraft operator providing
helicopter services to the Ontario government for fire fighting.
Firnung was the pilot-in-command of the helicopter
and subject to control and direction by neither the Appellant,
the lessee-operator or the Ontario government as to how he
operated the aircraft and performed the flights, provided he
completed the assigned flights and complied with all applicable
government regulations for aircraft operation and tender
requirements.
2.
Mr. Firnung supplied his normal pilot's equipment. None was
supplied by the Appellant or the lessee.
3.
Mr. Firnung was not paid a fixed hourly rate or salary as for an
employee, but a standby fee per day and a substantial hourly rate
for flying time with a guaranteed daily minimum of flying hours.
As a result, he stood to make considerable extra profit if he was
required to perform longer, or a greater number of flights during
the period.
4.
Mr. Firnung risked loss because, as a pilot qualified on and
specializing in a particular type of helicopter, he was required
to maintain a minimum number of flying hours in a year and pay
for doing so himself if not performed as part of contracts, and
also maintain his license, knowledge base, qualifications and
testing at his own expense.
5.
Mr. Firnung and the Appellant agreed to and signed a written
contract providing for independent contractor status, and
Mr. Firnung was not provided with any of the normal
incidents of employment.
[4]
The facts assumed by the Respondent are described at
paragraph 9 of the Reply to the Notice of Appeal as
follows:
a)
the Appellant is a business which provides aircraft services to
customers;
b)
the Worker was hired by the Appellant as a pilot to provide fire
fighting services to the Appellant's clients;
c)
the Worker received direction from the Appellant's
clients;
d)
the Appellant retained the right to control the Worker while the
Worker was performing services for the Appellant's
clients;
e)
the Worker's hours of work were determined by the
Appellant's clients, based on the number of forest fires;
f)
the Appellant provided the Worker with the helicopter to perform
the services;
g)
the Appellant was responsible to do all the maintenance and
repairs to the helicopter; as well as provide the fuel for the
aircraft;
h)
the Worker was paid a flat daily rate by the Appellant;
i)
the Worker was reimbursed for expenses incurred for travelling to
remote locations.
[5]
Mr. Alexander John Waldrum and Mr. Olavo Valadares
testified for the Appellant. No one testified for the
Respondent.
[6]
Mr. Waldrum was a pilot with the National Defence. In 1996,
after his retirement, he set up his own consulting business on
international aviation and international contracting. He is a
registered lobbyist with the Ontario government and with the
Federal government. He began to work for the Appellant as a
consultant in 1996. He has a vice-president title with
SkyLink. He provides expertise on Canadian and international air
regulations to the Appellant. He also participates in the
management of the Appellant's fleet of airplanes. He works on
a retainer of 10 days a month.
[7]
Mr. Waldrum explained that the operation of the Appellant is
three-part: a) it does brokerage respecting a number
of air operating companies from around the world, mainly of
eastern European countries; b) it operates its own fleet of
aircrafts; and c) it does project management. For example, it
puts together different companies for operating in an area, and
the Appellant is the overall manager of the process.
[8]
He explained that Heli-North Aviation Inc. was awarded a contract
to supply helicopter transport services to the Ontario Ministry
of Natural Resources for fire fighting operations in Northern
Ontario from May 15 to August 2 1998. Heli-North needed
a supplementary aircraft. It requested the Appellant to supply a
Bell 212 helicopter. The agreement between Heli-North
Aviation Inc. and SkyLink Aviation Inc., dated May 5, 1998,
was produced as Exhibit A-1. The Appellant agreed to
supply the Bell 212 helicopter for the Chapleau fire
contract as per Heli-North Aviation Inc.'s agreement with
the Ministry of Natural Resources at a price of $1,590 per flying
hour, for a minimum of 160 hours plus an allowance to SkyLink of
$9,000 for 80 days of crew accommodation, transportation and
per diem for meals.
[9]
The agreement was for May 22 to August 9. Two pilots
were involved. The first pilot acted as a self-employed
pilot.
[10] Mr.
Waldrum explained that the Appellant as its competitors, when
supplying helicopters on a short term basis, use both employed
and independent pilots. He used the expression floater pilots and
said that there are about 40 floater pilots who supply their
services on a contractual basis and who move among various
helicopter operators in Canada.
[11] In the
witness's experience, there are differences between employed
and independent pilots. Contract pilots can demand higher rates
because of their experience and also because the assignments are
usually for short term periods. Floater pilots are expected to
provide their current Transport Canada medical certificate and
pilot license. These costs are the pilot's responsibility and
are only assumed by operators as a result of negotiations of the
terms of a particular assignment with such a pilot.
[12] In the
witness's view, there is a risk issue related to
self-employment. The contract pilot works only for short periods
of time and if he makes an error, the industry gets to know it
very quickly. It is one thing to explain an error when you are an
employee, it is another one when you are asking for a job. There
is a risk in this and the contract pilot gets paid for that
risk.
[13] Regarding
employed pilots, the Appellant and other operators in Canada will
assist those pilots in gathering the required flight time, the
required training, the medical certification and defray the
license fees.
[14]
Exhibit A-6 is the contract between SkyLink and the
worker. Mr. Waldrum did not negotiate the contract.
Mr. Paul Kristopovich, the chief pilot of the company
did that. Mr. Waldrum did not supervise the contract and he
was neither involved with the remuneration of the employee.
However, he stated that was he able to say that Mr. Firnung had
to work 45 days on a continuous basis during daylight hours. It
was a requirement of the contract that the aircraft had to be
available and with a pilot every day of the period. The
remuneration was $225 every day, and if the pilot flew, there
would have been an additional fee of $30 per hour.
[15] The
Appellant requires all its pilots to pass a test drafted by the
chief pilot. The worker was required to pass that test
(Exhibit A-7).
[16] Regarding
the assumptions of fact made by the Minister, the witness
admitted paragraph 9 a). Respecting 9 b), he stated
that the fire fighting services were provided by Heli-North. He
admitted 9 c) and added that that Heli-North, received its
instructions from the Ontario Ministry of Natural Resources. It
belonged to Heli-North to make sure that the aircraft was
ready to fill the orders from the Ontario Ministry of Natural
Resources. He denied 9 d). He admitted 9 e) and part of
9 g). The maintenance was done by SkyLink. SkyLink had at
all times a technician qualified by the Government of Canada to
sign the air worthiness of the airplane, but the fuel was
provided by Heli-North. Regarding 9 h), the witness stated
that above the flat daily rate, Mr. Firnung received an
hourly rate per hour flown. The witness denied
paragraph 9 i). However, the witness stated that the
worker was paid a per diem by the Appellant and the hotel
room was provided by Heli-North. The witness stated that
actually, he believed that Heli-North made the arrangements
for the hotel and that was reimbursed to Heli-North by the
Appellant. The worker was flown from Vancouver to Chapleau and
back to Vancouver at the Appellant's expense.
Cross-examination of Mr. Waldrum
[17] He stated
that although he was a consultant, he was intimately involved in
certain operations and not involved in others at all. In the
particular case, he was not involved in the hiring of
Mr. Firnung. He was the authority on the negotiation between
Heli-North and the Appellant, although he was not the direct
negotiator, he was actually the element of decision making. He
has a decision making role in the company. He never met
Mr. Firnung. He has talked to him on the phone and he knew
him from his previous work in other areas. He can say quite a bit
about his employment. Everything that Mr. Firnung did on the
contract was reported back to the immediate contract supervisor
and reported back to the witness.
[18] Counsel
asked whether a company pilot would have had the same duties as
Mr. Firnung? The witness answered in the negative, in the
sense that Mr. Firnung acted strictly as a line pilot. The
employed 212 pilots would do other things. However if the
Appellant had sent a company pilot to do the job that
Mr. Firnung had done, he would have performed it about in
the same way. There may have been a slight difference and it may
be more perception that it is reality, but a contract pilot would
tend more to work having his own interest as a goal where a
company pilot would tend more to work towards the interest of the
company on whose payroll he is.
[19] At
page 4 of Exhibit R-1, which is a questionnaire
that has to be filled by the alleged employer, it is stated:
SkyLink delivered the 212 helicopter to Heli-North on
May 19 using its own chief pilot, Louis Drapeau, to fly it.
Mr. Drapeau took another assignment in mid-June. Since
Firnung had flown for SkyLink in Yugoslavia two years previously
and was certified for a Bell 212, SkyLink located and retained
Mr. Firnung to complete the balance of the Heli-North lease
from June 24 until August 3.
[20] Counsel
for the Respondent referred to Exhibit A-2, and more
particularly to the paragraph stating that:
Louis Drapeau, who will continue to be paid US$4,000/mth plus
medical coverage, will start this contract. His cost can be
billed to this contract as of 01 May 1998, until he returns to
Belize.
[21] Counsel
for the Respondent then asked the witness why he had mentioned
earlier that an employee would get medical coverage but not a
self-employed pilot. The answer was that
Louis Drapeau, a self-employed pilot, had medical coverage
as part of his contract because he was working outside
Canada.
[22] The
witness was not aware that Mr. Firnung had worked as an
employee for SkyLink in 1996. He knew that he worked in
Yugoslavia but he did not know whether he was then working as an
employee.
[23] The
witness explained that the chief pilot is the person who ensures
that the technical competence of the pilots is maintained. He
does all the check rides and administers the exams. He is
basically the technical competence of the pilot corps. There is
also an operations manager. That person will make sure that the
airplanes are matched up with the pilots, that they get the
proper equipment, that they get the proper maintenance and all
that. These two persons work very closely together.
[24] Counsel
for the Respondent referred to question 14 in the
questionnaire produced as Exhibit R-1. The question
was: "... describe the type of reporting system in
place and how often these reports were required." The answer
given was there was no reporting system in place between
Mr. Firnung and SkyLink. The witness answered that he would
clarify that. There was a report made to the Appellant for the
duty hours. Mr. Firnung also reported his daily work to
Heli-North because Heli-North would have to report
back to the Ministry of Natural Resources.
[25]
Exhibit A-6, Contract for services, is a mixture of a
form contract and the actual contract between the Appellant and
the worker. One page is signed by the worker.
[26] Mr.
Waldrum stated that pilots may be hired as employees for very
short periods. This will happen usually with young pilots.
[27] The
second witness was Mr. Olavo Valadares. He is the
Appellant's accounts manager. He has the overall
responsibility of the accounting department for the aviation
side. That was his responsibility in the period from May to
September of 1998. Exhibit A-9 is the travel request
from Mr. Firnung to SkyLink. The ticket was issued from
June 24 to August 3. Mr. Firnung would get $225 a
day. He would also get $30 per flown hour.
Argument
[28] Counsel
for the Appellant referred to the decision of the Court of
Appeal, Civil Division, in Massey v. Crown Life Insurance,
[1978] 2 All ER 576, a decision written by Lord Denning and I
quote at pages 579 and 580:
The law, as I see it, is this: if the true relationship of the
parties is that of master and servant under a contract of
service, the parties cannot alter the truth of that relationship
by putting a different label on it. If they should put a
different label on it, and use it as a dishonest device to
deceive the Inland Revenue, I should have thought it was illegal
and could not be enforced by either party and they could not get
any advantage out of it, at any rate not in any case where they
had to rely on it as the basis of a claim: see Alexander v.
Rayson ([1936] 1 KB 169, [1935] All ER Rep 185). An
arrangement between two parties to put forward a dishonest
description of their relationship so as to deceive the Inland
Revenue would clearly be illegal and unenforceable. On the other
hand, if their relationship is ambiguous and is capable of being
one or the other, then the parties can remove that ambiguity, by
the very agreement itself which they make with one another.
...
...
It seems to me on the authorities that, when it is a situation
which is in doubt or which is ambiguous, so that it can be
brought under one relationship or the other, it is open to the
parties by agreement to stipulate what the legal situation
between them shall be. That was said in Ready Mixed Concrete
(South East) Ltd. v. Minister of Pensions and National
Insurance ([1936] AC I, [1935] All ER Rep 259), in 1968
by MacKenna J. He said:
If it were doubtful what rights and duties the parties wished
to provide for, a declaration of this kind might help in
resolving the doubt and fixing them in the sense required to give
effect to that intention.
So the way in which they draw up their agreement and express
it may be a very important factor in defining what the relation
was between them. If they declare that he is self-employed,
that may be decisive.
[29] Counsel
for the Respondent referred to the Privy Council decision
Lee Ting Sang v. Chung Chi Keung and Shun Shing,
[1990] J.C.J. No. 10 (Q.L.) and to the following excerpt at
page 3:
Taking all the foregoing considerations into account the
picture emerges of a skilled artisan earning his living by
working for more than one employer as an employee and not as a
small business-man venturing into business on his own
account as an independent contractor with all its attendant
risks. The appellant ran no risk whatever save that of being
unable to find employment which is, of course, a risk faced by
all employees, in particular, it is a risk faced by casual
employees who move from one job to another, and such casual
employees are specifically covered by the Ordinance.
Conclusion
[30] The
evidence has revealed that due to the particular circumstances of
the services to be rendered, the terms and conditions of work of
the worker point more towards the status of a contract for
services than a contract of service: a) the pilot was to stay in
a location outside the Appellant's usual places of business;
b) he had to be available for a number of continuous days and to
fly the Appellant's leased aircraft when he would be asked to
do it by lessee; c) the work was for a short duration; and d) the
work was not for the Appellant's general purposes.
[31] The short
duration of the work activity is a strong indicator of a contract
for services. Although the Appellant's witness stated that
the Appellant may hire young pilots as employees for short period
of times, because they tend to need training and the work
benefits, the short duration of this contract still point towards
a contract for services and not a contract of service. The same
could be said about the purpose for which the worker was hired.
He was hired for a very specific purpose and not for general work
with the company. It has to be noted that just before the worker
began his own activity, the job was done by a self-employed
pilot. There is no evidence that what he did was different from
what the worker in question did. The Respondent has done nothing
concerning that person.
[32] I cannot
find as in the Privy Council decision above that the picture
emerges of a skilled artisan earning his living by working for
more than one employer as an employee and not a small
business-man venturing into business on his own account as an
independent contractor with all its attendant risks. In that
decision their Lordships took into consideration that the
legislation concerning workmen's compensation was intended to
give a wide measure of protection to workers in the building
construction industry and to provide compensation for those who
would not ordinarily be expected to have taken out their own
insurance against the risk of accidental injury. I believe that
legislation of that nature has always been interpreted very
broadly.
[33] At any
rate, in this particular instance, we are dealing with
experienced pilots, a category of professional people who may for
their own reasons prefer to contract their services on a
self-employed basis rather than as employees. They prefer to have
that fiscal and entrepreneurial status. I have no evidence that
it is an arrangement that put forward a dishonest description of
the relationship between the Appellant and the pilots to use the
terms of the above mentioned decision in Massey v. Crown Life
Insurance Co.
[34] The
Appellant for its operations requires the services of employed
and self-employed pilots. The Appellant has a current staff
of pilots and it has also a list of names of independent pilots
that it may use on a need basis for specific purposes. As
mentioned by the witness for the appellant, the work in question
in this appeal could have been made by one of the staff pilots.
It was the Appellant's choice. I see no reason why the
Appellant would not have the right to do business with pilots who
agree to negotiate on the basis of contract for services unless
there would be evidence that it was for the purpose of
circumventing the law and unless there is clear evidence that the
services rendered are in the nature of employment services. This
was not the case in this particular instance and the contractual
agreement between the parties should not be disturbed.
[35] The
appeal is allowed.
Signed at Ottawa, Canada, this 9th day of April, 2001.
"Louise Lamarre Proulx"
J.T.C.C.
COURT FILE
NO.:
2000-2935(EI) and 2000-2936(CPP)
STYLE OF
CAUSE:
Skylink Aviation Inc. and M.N.R.
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
December 6, 2000
REASONS FOR JUDGMENT
BY:
The Hon. Judge Louise Lamarre Proulx
DATE OF
JUDGMENT:
April 9, 2001
APPEARANCES:
Counsel for the
Appellant:
Paul Trethewey
Counsel for the
Respondent:
Jocelyn Espejo-Clarke
COUNSEL OF RECORD:
For the
Appellant:
Name:
Paul Trethewey
Firm:
Tretheweay, Barrister & Solicitor
Toronto, Ontario
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-2935(EI)
BETWEEN:
SKYLINK AVIATION INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard together with appeal #
2000-2936(CPP)
on December 6, 2000 at Toronto, Ontario by
the Honourable Judge Louise Lamarre Proulx
Appearances
Counsel for the
Appellant:
Paul Trethewey
Counsel for the
Respondent:
Jocelyn Espejo Clarke
JUDGMENT
The
appeal from the decision of the Minister of National Revenue is
allowed and the Minister's decision is reversed, in
accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 9th day of April, 2001.
J.T.C.C.
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