Accu-Tel Message Centres Inc. v. M.N.R., docket 98-1125-UI

Date: 19990928

Docket: 98-1125-UI; 98-184-CPP

BETWEEN:

ACCU-TEL MESSAGE CENTRES INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

O'Connor, J.T.C.C.

[1] These appeals were heard at Toronto, Ontario on August 11, 1999.

[2] Testimony was given by Stephen Riley, the owner and president of the Appellant, by Scott D. Meades (the "Worker") and by Gail Young, an officer with Revenue Canada.

[3] The following appears from the Reply to the Notice of Appeal in the UI appeal. The Reply in the CPP appeal is almost identical except that the references are to the Canada Pension Plan and pensionable employment:

10. The Appellant applied to the Respondent for the determination of the question of whether or not Scott D. Meades (the "Worker") was employed in insurable employment while engaged by the Appellant for the period from February 10, 1997 to September 17, 1997, within the meaning of the Employment Insurance Act (the "Act").

11. The Respondent informed the Appellant that it had been determined that 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.

12. In making his decision, the Respondent relied on the following assumptions of fact:

(a) the Appellant operates a call center involved in messaging, paging, faxing, voicemail and telemarketing;

(b) the Worker was hired by the Appellant to provide services in the field of telephone communications and computer messaging which included person to person telephone communications, computer messaging and data entry, paging dispatch, facsimile transmission, electronic voice mail messaging and telemarketing;

(c) the Worker performed the services on the Appellant's premises;

(d) the Worker was provided with office space by the Appellant and was also provided with a computer terminal and was connected to the Appellant's call answer software and phone system;

(e) the equipment provided to the Worker as mentioned in paragraph (d) had an approximate value of $250,000.00;

(f) the Worker and the Appellant signed a written agreement (the "agreement")

(g) per the agreement the Worker was hired by the Appellant for a period of one year;

(h) the Appellant posted and established a weekly work schedule which had to be met by the Worker and others who were performing similar services for the Appellant;

(i) if the Worker could not work a particular shift he could trade shifts with other Workers of the Appellant, with the Appellant's approval;

(j) the Worker was paid at the rate of $7.00 per hour;

(k) the Worker's rate of pay was determined by the Appellant;

(l) the Worker was paid on a bi-weekly basis, based on the actual hours he worked;

(m) the Worker provided the services on a full-time and on a recurring basis;

(n) the Worker was provided with training by the Appellant;

(o) the Worker was required to report to the Appellant fifteen minutes prior to the commencement of the Worker's shift;

(p) according to the agreement, the Appellant maintained the right to terminate the Worker at any time;

(q) according to the agreement, the Worker could not disclose any information to anyone regarding the Appellant business, during or after leaving is employment with the Appellant;

(r) the Worker did not incur any expenses in the performance of his duties;

(s) the Worker could not realise a profit or a loss as a result of performing the services of the Appellant;

(t) the time worked by the Worker was also controlled by the Appellant by means of a computer log on and log off system, and in addition the phone system recorded the line time per call;

(u) the Worker was dismissed by the Appellant before the end of the term of the agreement;

(v) the Worker was an integral part of the Appellant's business;

(w) the Worker did not represent, advertise or promote himself as self-employed;

(x) the Worker was employed by the Appellant pursuant to a contract of service;

[4] Mr. Riley testified to the effect that he acquired the Appellant company at the end of 1991 at which time all of the employees were truly employees and not independent contractors. In 1995 he determined that it would be much more efficient for the Workers to be involved as independent contractors and that this would produce a better relationship and ensure a higher quality of work. Consequently each Worker was asked to sign an agreement such as Exhibit A-2 wherein the Worker is called an independent contractor. Exhibit A-2 reads as follows:

CONTRACTEDWORKER AGREEMENT

BETWEEN: Accu-Tel Message Centres Inc.

AND: Scott Meades (Contracted Worker)

Scott Meades("Worker") agrees to provide services to Accu-Tel Message Centres Inc. ("Accu-Tel") as an independent contractor. The following proposal, upon Worker's acceptance, will become the contract governing such services.

Subject to the terms hereinafter set forth, Accu-Tel will retain Worker as an independent contractor and not as an employee, for a fixed term of twelve months commencing Feb. 10/97 and ending Feb. 9/98 to provide Services in the field of telephone communications and computer messaging which can include, but is not limited to the services outlined in Appendix "A" (the "Services"). Worker warrants that the Services will be of a professional quality and conform to generally accepted business and telecommunications standards and practices and they will be carried out to the satisfaction of Accu-Tel.

If this agreement is not formally extended according to the provisions below and Worker provides Services beyond said 12 month term, it shall be on a hourly basis only and may be concluded by Accu-Tel at any time without notice and without any obligation on Accu-Tel's part, except for payment for the Services already provided.

Nothing herein shall entitle Worker to or render Worker eligible to participate in any benefits or privileges from Accu-Tel.

Worker agrees to submit to Accu-Tel a schedule of available working hours one week in advance of the scheduled available working hours. Worker agrees and understands that while Accu-Tel will make its best efforts to accommodate the Worker's schedule of available working hours, Accu-Tel cannot guarantee inclusion of all the hours requested in this schedule.

For Worker Services and all other obligations assumed by Worker herein, Accu-Tel will pay Worker a gross hourly rate of $9.00 less an equipment user's fee of $2.00 per hour for a net hourly rate of $7.00, for the term of this agreement. Worker shall submit a statement of the hours devoted to Services under this agreement on a bi-weekly basis.

If Worker anticipates having an annual gross income in excess of $30,000.00 per year, then a G.S.T. number must be provided and G.S.T. charged.

Worker shall be responsible for all travel and other expenses, except as agreed upon in advance by Accu-Tel.

If in the course of Worker's Services hereunder, Worker receives proprietary information of Accu-Tel, or of Accu-Tel's customers relating to their business operations, equipment, or products, Worker will retain all such information in confidence and will not disclose it, either during or after the term of this agreement to competitors of Accu-Tel or any others.

Worker shall be free to provide services to others during the term of this agreement, provided that such services to others shall not interfere in any way with Services to be provided hereunder where time allocated by Worker to Accu-Tel shall take priority over any other situations in that Accu-Tel's scheduling requirements shall be met.

This agreement may be terminated forthwith by either party if the other breaches any of these terms and the breach is not remedied, if applicable, within 15 days of written notice thereof by the party not in breach. All paragraphs in this agreement relating to proprietary rights, disclosure and confidentiality will remain in effect following termination of this agreement.

The failure of either party to insist upon strict compliance with any terms, conditions or covenants of this agreement in any one or more instances shall be deemed to be a waiver by such party of any rights hereunder, including the right to require further strict compliance with such terms, conditions or covenants.

The above terms and conditions constitute the whole agreement and no other terms or conditions, expressed or implied, unless written into this contract will apply.

This agreement is subject to extension only by mutual written agreement.

______________________ _____________________

Contracted Worker Accu-Tel Message Centres Inc.

Accepted this 12 day of Feb, 1997.

Mr. Riley explained further that the Worker would periodically hand in available hours and that if the work so required the Worker would be retained during those hours. He stated that the Worker's work was a simple process, that the Worker was responsible for his work as per the agreement and that the Worker would invoice the Appellant on a weekly basis. Further, as set forth in the agreement the Worker's rate of pay was $9.00 per hour less a $2.00 charge for the Worker using the Appellant's equipment. He pointed out that there was no vacation pay and that the Worker was free to retain replacements if he could not be present during the hours assigned to him. He stated further that the Worker was free to work elsewhere and that in fact he had done so in another computer like operation and also did some construction work.

[5] Gail Young testified mainly as to facts that have to do with whether the Minister was estopped from making a determination of an employee's status after the Minister allegedly failed to reply in writing to certain questionnaires on employees completed by the Appellant. Actually she testified that the questionnaires in question were requested by the department as a result of an audit made of the Appellant. Mr. Riley denied that. Moreover she testified that she had advised Mr. Riley by telephone that the workers in question fit into the category of employees as opposed to independent contractors and stated that Mr. Riley said that he would look after matters on that basis. Counsel for the Appellant succeeded in establishing that Ms Young had no actual meetings with Mr. Riley and could have been talking to anyone on the telephone when she allegedly gave advice to Mr. Riley with the result that Ms Young's testimony should be ignored.

[6] The Worker testified that he had been interviewed by Kim D. Lowen, a manager of the Appellant. He also stated that prior to his initial assignment he submitted his available hours which at the outset were 7:00 to 12:00 in the evening on weekdays and weekends anytime. He testified that he only asked for a change in hours when he wanted some time off and that he got fellow employees to fill in for him on those occasions. He also stated that he had to request break time from two supervisors who were actually co-workers but who called themselves supervisors. He had to log in at the commencement of his work and log out at the end. He testified that he received two weeks training. He further testified that he did no computer work outside of the premises, that all of his work was done at the premises using the equipment of the Appellant and further that he never did any construction work during the period in question. He also testified that he requested a change in hours after he completed school to work during the daytime and that this request was not originally granted. He confirmed that he was not advised of any possible commissions he could earn should he increase the business of the Appellant. He was shown Exhibits R-1 and R-2 which are two memos of the Appellant and read as follows:

TO: THE STAFF

RE: CUSTOMER SERVICE

DURING THE PAST FEW MONTHS THERE HAS BEEN A SERIOUS DECLINE IN CUSTOMER SERVICE - 8 OR 9 RINGS PLUS 1 OR 2 MINUTE HOLDS HAVE BECOME COMMON PLACE. SO MUCH SO, THAT WE HAVE LOST 2 IMPORTANT CUSTOMERS RECENTLY TO POOR SERVICE (IE. RLP JOHNSON & DANIEL AND FREEWAY PAVING). THIS REPRESENTS A LOSS OF APPROX. $1,000/MTH IN REVENUE OR $12,000/YR. HOW WOULD YOU FEEL ABOUT LOSING $12,000/YR.? WOULD YOU BE UPSET? WHAT WOULD YOU DO ABOUT IT?

WE HAVE RECENTLY ADDRESSED THE ISSUE OF ABSENTEEISM AND BEING LATE AND NOW WE WILL ADDRESS THE GROWING ATTITUDE OF "CUSTOMER INDIFFERENCE". OUR PRIMARY FUNCTION IS TO "ANSWER THE CALL" - THIS MEANS WITHIN 4 RINGS WITH HOLD TIMES LESS THAN 30 SECONDS. WE BUILT OUR REPUTATION AND THIS BUSINESS BASED ON THESE PRACTICES. IT IS NOT OUR INTENTION TO ALLOW A FEW INDIVIDUALS WITH POOR WORK ETHICS TO DESTROY A REPUTATION BUILT BY OTHERS THROUGH CARE AND HARD WORK. A SENSE OF URGENCY IS IMPERATIVE.

STARTING IMMEDIATELY, WE WILL BE WORKING WITH AND EVALUATING EACH AND EVERY INDIVIDUAL INORDER TO REVERSE THE CURRENT SLIDE AND DRASTICALLY IMPROVE OUR "CUSTOMER SERVICE PERFORMANCE". OUR COLLECTIVE EFFORTS MUST BE FOCUSED IN THIS AREA WITH NO EXCEPTIONS. BAD ATTITUDES, ABSENTEEISM AND TARDINESS WILL FIND THEMSELVES REMOVED FROM THE "ACCU-TEL WORK SCHEDULE"

"S.M. Riley"

S.M. RILEY

PRESIDENT

JUNE 4, 1997

ATTN: ALL STAFF

RE: OPERATOR STATISTICS & CUSTOMER SERVICE

WE ARE HERE FOR THE SOLE PURPOSE OF PROVIDING "CUSTOMER SERVICE"

WHAT OUR "CUSTOMER" EXPECTS:

- LINES ANSWERED WITH THE FULL GREETING (AS STATED ON SCREEN)

- PHONE ANSWERED WITHIN 4 RINGS

- LESS THAN 30 SECONDS ON HOLD

- ASK CALLER IF THEY CAN "PLEASE HOLD"

- CORRECT NAME TELEPHONE # PLUS AREA CODE

- DETAILS OF MESSAGES SPELLED CORRECTLY

- PLEASANT & PROFESSIONAL VOICE ON THE PHONE

- QUICK RELAY OF MESSAGES TAKEN

- A SENSE OF URGENCY & COMMITMENT ON YOUR PART IS REQUIRED

IF ALL OF THE ABOVE CONDITIONS ARE MET, WE WILL NOT HAVE THE VOLUME OF CUSTOMER COMPLAINTS WE HAVE HAD OVER THE RECENT MONTHS. THE CUSTOMER IS PAYING YOU TO PROVIDE AN ACCEPTABLE AND PROFESSIONAL LEVEL OF SERVICE AND THEY ARE ENTITLED TO RECEIVE IT!

WHAT WE EXPECT FROM STAFF:

- IN ROTATION % - MINIMUM 95%

- LOST CALLS% - MAXIMUM 40%

- MESSAGE% - MINIMUM 50%

- COMPLETION% - MINIMUM 95%

- AVG. TALK TIME - MAXIMUM 6

- AVG. RING TIME - MAXIMUM 1.8

- AVG. HOLD TIME - MAXIMUM .6

THESE ARE THE STATISTICS BY WHICH YOU WILL BE JUDGED. WE ARE PRESENTLY RETRAINING & EVALUATING ALL OPERATORS. FOR THOSE WHO ARE HAVING TROUBLE IN ANY AREA PLEASE SPEAK TO KIM AT YOUR EARLIEST CONVENIENCE.

THANKING YOU IN ADVANCE FOR YOUR HARD WORK,

"Kim D. Lowen"

KIM D. LOWEN

MANAGER

[7] The Worker stated that he never rendered invoices although the Appellant did file a sample invoice as Exhibit A-4. There is no certainty that Exhibit was prepared by the Worker and the only initials thereon are "KL" which appear to be those of Kim Lowen, the manager of the Appellant. On cross-examination he confirmed that he was aware that no deductions were being made by the Appellant and that he did make application to the Department for a ruling and as a result of that the Department ruled that his status was one of an employee.

SUBMISSIONS:

[8] Counsel for the Appellant relies heavily on the wording of the agreement (Exhibit A-2) referring to the Worker as an independent contractor. He also states there was very little control. As to tools the Worker had to pay an amount to use the equipment. The Worker also had a chance of gain and a risk of loss. The greater the number of hours worked, the greater his rate of pay. In the event the worker was responsible for losses incurred by the appellant, the appellant reserved the right to demand reasonable reimbursement from the worker.

Moreover, the integration factor is not that important.

[9] Counsel also raises the principle of equitable estoppel. I quote from Counsel's written representations:

It is submitted that the principle of equitable estoppel is applicable to this case. By failing to issue a ruling after a lengthy period of time and despite requests as to the status of the matter by the appellant, Revenue Canada led the appellant to believe that its independent contractors were accurately classified as independent contractors. The appellant requested the ruling in good faith and the appellant relied upon this understanding and belief as to the status of the worker as a result of Revenue Canada's conduct. Since Revenue Canada was aware that the appellant was presently engaging independent contractors on this basis, it would be known to Revenue Canada that the appellant would rely upon the circumstances and continue to engage workers in the existing matter. By failing to provide a ruling in a timely manner, it was implied by Revenue Canada that the relationship in existence was appropriate. Revenue Canada cannot now insist on its strict legal rights and submit an adverse and costly ruling on the appellant on a retroactive basis.

In the event this appeal is not allowed, there will be seriously detrimental cost consequences to the appellant. In addition, because of its reliance on Revenue Canada's conduct, the appellant has been unable to participate in certain training initiatives offered to "employers" by Human Resources Development Canada. In the event this appeal is denied, the appellant will have suffered the loss of certain opportunities. The principles of equity should not permit such injustices to occur.

[10] Counsel for the Minister submits the agreement is not the end of the matter. She refers to the testimony of the Worker and the Exhibits and concludes when one looks at the entire relationship there was a contract of service. As to estoppel Counsel referred to Goldstein v. Canada, a decision of Bowman, J. of this Court, 96 DTC 1029 and concludes that no estoppel arose in this case by the mere fact of the Minister not replying to the questionnaire allegedly submitted by the Appellant.

ANALYSIS AND DECISION:

[11] It is apparent from the evidence that the Appellant desired its workers from and after 1995 to be independent contractors. This would be desirable in most cases as it relieves the enterprise from obligations to contribute to EI and CPP and make deductions. It is also true that the Worker went along with this by signing the agreement and realizing that no deductions were being made. Nevertheless one must look at the entire relationship between the parties. I acknowledge that the agreement must be looked at first as a starting point and then determine whether the evidence negates the provisions of the agreement which refer to the Worker as an independent contractor or infer that relationship.

[12] The tests of control, ownership of tools, chance of profit and risk of loss and integration are well known and well analyzed in Wiebe Door Services Ltd. v. Minister of National Revenue (F.C.A.) 1986 3CF 553.

[13] The degree of control was considerable as evidenced by the testimony of the Worker. The Worker initially submitted hours and those hours remained consistent with minor exceptions. I also believe the testimony of the Worker to be more credible than that of Mr. Riley, especially when there existed discrepancies in their testimonies.

[14] The tools and premises were owned by the Appellant although the Worker was charged a small amount for using the Appellant's equipment. The Worker had no chance of profit and his risk of loss would arise only if he damaged equipment. Further, the Worker was an integral part of the Appellant's operations. Therefore, based on all the evidence, I find that on a balance of probabilities there was a contract of service. Moreover, relying on Goldstein and several other decisions on that issue there was no estoppel against the Minister. Consequently the appeals are dismissed.

Signed at Ottawa, Canada this 28^th day of September, 1999.

"T.P. O'Connor"

J.T.C.C.