Date: 19990921
Docket: 98-212(UI)
BETWEEN:
DIMPFLMEIER BAKERY LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
JAMES KERR,
Intervenor.
REASONS FOR JUDGMENT
MacLatchy, D.J.T.C.C.
[1] This appeal was heard in Toronto,
Ontario on August 17, 1999.
[2] The Appellant applied to the
Respondent for the determination of the question of whether or
not James Kerr, the Worker, was employed in insurable employment
while engaged by the Appellant for the period from March 11, 1996
to March 11, 1997, within the meaning of the Unemployment
Insurance Act (the "Act") and the
Employment Insurance Act (the "Amended
Act").
[3] 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.
[4] The Appellant is a business
involved in the production and sales of baked goods, the
products, these being sold through a distribution network located
in various parts of Ontario. The Worker was hired by the
Appellant with a written agreement to sell and distribute the
Appellant's products. He was assigned a territory in this
written agreement and was required to service the territory four
days a week and paid on a commission basis. The Appellant had
other drivers who were termed employees who had to work five days
a week and were paid a set salary.
[5] The agreement between the
Appellant and the Worker restricted the Worker from selling the
products to hotels, restaurants, institutions and industries
without the written consent of the Appellant. The Appellant
reserved the right to allocate the products proportionately if
overall demand for the Appellant's products exceeded the
production capacity of the Appellant. The agreement also provided
that the Worker remove over age products from the customers'
shelves and to provide the Appellant with full distribution
details on a daily basis. The Worker had to maintain good
relations with the customers and ensure that the quality and
appearance of the Appellant's products were not impaired. The
Worker must adhere to and comply with "Performance
Standards" as set by the Appellant, which included the
wearing of a special red coat with the logo of the Appellant
embossed thereon. The Appellant provided the Worker with a truck
to deliver the products but deducted a rental fee of $100 per
week as well as the cost of gas from the Worker's
commissions. The Appellant maintained the vehicle insurance as
well as the maintenance and repairs. Presumably, the Worker could
have used his own vehicle but the cost would have been
prohibitive. Although the vehicle was rented to the Worker, it
was to be used for the delivery of the Appellant's products
only and was to be returned to the Appellant at the end of its
delivery use and could not be kept over night by the Worker
without specific permission.
[6] The Worker attended at the
Appellant's premises daily, obtained the truck and loaded the
products as laid out and prepared by the Appellant. He then went
out on his assigned route and delivered the products. He would
have a copy of the delivery invoice to return to the Appellant so
his commission on sales could be determined. Similarly, he would
credit the customer for products that were over aged as damaged
and the same was deducted from his sales commission. He delivered
the truck to the Appellant's premises and prepared his daily
accounting, which he was required to do. The Appellant's
office billed and collected from the various stores for the
products purchased. Any small independent outlet, if approved as
a customer by the Appellant, could pay the driver who in return
would be required to deliver those funds at the end of his
deliveries. The Appellant set the prices for the products.
[7] The evidence for the Appellant was
given by Mohammad Alli, the Operations Manager for the Appellant.
The Appellant is a bakery with over 200 employees and sells
its products mainly to the large retail grocery chains. The
Appellant bills and collects from these chains and sets the
prices for its products. Mr. Alli implemented the scheme of
independent contract drivers because it was believed by the
Appellant that such a move would improve the sale and delivery of
its products as well as possibly improving the income of the
drivers. Being independent, the Worker would work harder than
previously as a paid hourly employee. The chance to become an
independent driver was offered to all existing driver employees.
The differences between being an independent contract driver and
a driver employee were explained at length by Mr. Alli. On the
evidence given, it was difficult to see any substantial
differences.
[8] The employee drove and delivered
the products in a truck owned by the Appellant with the
"logo" of the Appellant in plain view for advertising
purposes. The employee was required to adhere to the performance
code determined by the Appellant and to wear a smock with the
company "logo" embossed on the front. The driver
delivered the products as pre-determined by the Appellant to the
various outlets in his set route. An invoice of delivery was
given to the store manager and a copy kept by the driver for
accounting purposes which was to be completed at the end of the
delivery day. A credit invoice was given to the store manager for
over-aged or damaged goods returned to the driver. Any account
paid in cash or cheque was to be accounted for by the driver at
the end of the day, as well.
[9] The driver attended in the early
hours of each morning, five days each week, to pick up his truck
and products for delivery to the various retail outlets in his
route area to ensure the products were available when the outlets
opened for business each day. The truck was owned and maintained
by the Appellant and was required to be returned to the
Appellant's premises at the end of the delivery day. The
driver was then required to prepare his daily report and account
for the products delivered and returned. A sales manager and a
supervisor were in attendance either on the premises of the
Appellant or in and about the various route districts to ensure
the Appellant's procedures were adhered to by all employees.
The driver did not set the price of the products and could not
negotiate with the managers of the retail outlets to raise or
lower prices if there was too much or too little products
remaining. All pricing was negotiated between the Appellant and
the retail outlets.
[10] The driver had to adhere to a certain
dress and conduct code - looking neat and clean and not at work
in gym clothing or in ripped or soiled jeans. They represented
the Appellant before the store owner/operator/manager and the
company could dictate these rules and regulations. These
standards had to be set by the Appellant, as their employees
would fall into bad habits if a standard was not set.
[11] The drivers were required to perform
their services in person and if they were not available to
perform their duties they were to notify the Appellant and a
supervisor would take over these duties until the employee was
available. The hours of employment could not be set as each route
was different; the driver worked until his route was completed
then performed his accounting procedures and left. The driver
could not deliver in another area than that prescribed by the
Appellant and was paid a wage plus a commission on sales in his
area.
[12] The driver employer was spoken to if
his conduct or behaviour did not meet the Appellant's
standard. If the Appellant was not satisfied with the standard of
work maintained by the employee, he would be terminated. Theft by
the employee would also be grounds for termination.
[13] Lastly, the driver employee was paid
vacation pay and was provided with some life and health insurance
benefits and was subject to deductions for income tax,
unemployment insurance and the Canada Pension Plan.
[14] James Kerr gave evidence that when the
Appellant implemented the independent contractor driver
opportunity, although he was told he need not become independent,
he was satisfied that because of his age and his length of
service with the Appellant that he was expected to become
independent or be terminated. His evidence was quite graphic.
Nothing really changed in his employment except the method of
receiving his wages. He operated within the same route structure
and delivered what was allocated to him by the company. He drove
the same truck owned by the Appellant although now he had a lease
payment and fuel deducted from his earnings. He was no
differently supervised than previously and if anything, he worked
longer hours.
[15] His time to attend at the
Appellant's premises was the same and the times to delivery
to the retail outlets did not change. He had no time to get new
customers or his regular customers would suffer. He believed he
must do his work personally or call the Appellant for a
replacement. He could not sell in any other area nor did he have
room in his vehicle for anyone else's products. In any event,
he was told he could not deal with the products of any
competitor. The pricing of products, the accounting at the end of
the day, the return of the truck each day, and the adherence to
the Appellant's procedures for conduct and appearance and all
other directions given by the Appellant remained the same. He
still received operations practice memoranda that were
distributed to the driver employees. He continued to wear the
coat provided when practical, weather permitting. Complaints, if
of a minor nature, he would handle them on the spot; otherwise,
complaints were handled by the company. He believed he could be
terminated at the behest of the Appellant at anytime.
[16] Another driver who became an
independent contractor by agreement, Tony Ucci, gave his
evidence to support his belief that he was no longer an employee.
He had a route outside of Metropolitan Toronto and was not
subject to the same supervision as if his route was within
Toronto.
[17] The question to be answered by this
Court is whether the driver employee became an independent
contractor after signing the independent contractor agreement or
did the driver remain engaged by the Appellant under a contract
of service. The Court was referred to the cases of Wiebe Door
Services Ltd. v. M.N.R. [1986] 3 C.F. 553, Moose Jaw
Kinsmen Flying Fins Inc. v. M.N.R., 88 DTC 6099 and M.N.R.
v. Emily Standing, 147 N.R. 238. The main theme running
through these cases is the manner of employing the four-fold test
to determine what type of relationship existed between the
parties and giving the weight to all of the evidence, which the
circumstances may dictate. The whole relationship, as evidenced
by the facts presented, must be examined to determine the reality
of the engagement. One or more of the tests may have little or no
applicability so the overall evidence must be considered.
[18] The Control Test. Did the
Appellant exert control over the Worker in the day-to-day
exercise of his duties? The evidence of the Operations Manager,
Mr. Alli, was that the Appellant no longer exerted any
control over the independent contractors after the agreement was
signed but the evidence heard by this Court did not support that
contention. The Appellant still required the drivers to come to
its premises, pick up their vehicle owned by the Appellant, load
their respective products and deliver them to the customers of
the Appellant within their respective route areas. The drivers
continued to be under strict supervision as to methods of
delivery, mode of dress, conduct before the public and method of
accounting at the end of the day. It may not have been necessary
to enforce the controls as the drivers had appeared to conform
without supervision. Nonetheless, the Appellant still had the
ability to enforce such controls if it felt it was necessary.
This Court heard that the business carried on is a customer
driven enterprise and as long as the driver understood that, the
Appellant's controls need not be enforced. Merely because the
controls were not actively enforced did not mean they would not
be enforced when needed.
[19] The drivers continued to drive the
Appellant's vehicles with its logo advertising. It would not
be financially viable to the driver to buy or rent a commercial
vehicle other than that of the Appellant. The driver's route
was such that he did not have time or available space to handle
other products than those of the Appellant even though they
supposedly could as long as those products were not in
competition with those of the Appellant. The trucks had to be
returned to the Appellant after the deliveries were completed and
could not be used for their personal business. It was clear that
if the Worker did not perform up to the Appellant's
standards, after warnings given, he would be terminated. The
business is customer oriented and the Appellant would have to
ensure that the customer is satisfied. Control was with the
Appellant.
[20] The Ownership of Tools.
The drivers used the Appellant's trucks and bread trays for
the deliveries and wore the coats displaying the Appellant's
logo or crest. No other tools were required. Space was provided
at the Appellant's premises for the drivers to prepare their
day end accounting for the Appellant and used whatever equipment
was provided for that purpose.
[21] The Chance of Profit or Risk of
Loss. The Appellant stated that if the Worker performed
quicker and more efficiently he would have more time for his
other ventures or if he could increase his sales he would make a
profit. Likewise, if he did not perform well he would suffer a
loss. There is some truth to this but such profit or loss is
negligible in the overall scheme as arranged. The Worker did not
invest in the Appellant and would not share in any of the profits
of the Appellant nor would he suffer any loss if the Appellant
lost income other than the possibility of losing his
employment.
[22] The Integration Test.
Whose business is it? Are the duties of the Worker an integral
part of the venture. In these circumstances, it is clear to this
Court that it was the business of the Appellant that was carried
on by the Worker and not his own business. Delivery of products
is an integral part of the business and that is all the Worker
did even though he was supposedly the sales front promoter of the
Appellant's products. The prices were set by the Appellant;
the amounts of delivery items were determined by the Appellant;
the collection of accounts was done by the Appellant. New
customer outlets were usually of the large retail chains and
these were negotiated by the Appellant. The business was that of
the Appellant's. The Worker was an adjunct of that business.
He was not in business for himself no matter how artfully the
agreement may have been worded.
[23] The parties can not create a
relationship between themselves by merely naming it. The
Appellant wanted the drivers to be independent contractors
because it was convinced such a move would improve sales and
would encourage the Workers to be more productive. Control was
maintained by the Appellant as though the Worker was an employee.
The Worker believed he was an employee notwithstanding the terms
contained in the signed agreement. Nothing changed as far as he
was concerned. This Court agrees with this view of the
relationship existing.
[24] In these circumstances taking all of
the evidence into account, this Court is convinced the
relationship between the Appellant and the Worker was that of
employer/employee and the Worker was engaged by the Appellant
pursuant to a contract of service. The Worker was engaged in
insurable employment within the meaning of paragraph
3(1)(a) of the Act and paragraph 5(1)(a) of
the Amended Act, for the period in question.
[25] The appeal is dismissed and the
decision of the Minister is confirmed.
Signed at Toronto, Ontario, this 21st day of September
1999.
D.J.T.C.C.
Email this Content