REASONS
FOR JUDGMENT
V.A. Miller J.
[1]
Christina Menoudakis and John Menoudakis
operated a music school as sole proprietors from June 2006 until June 2013
under the name “Rockstar Music School & Concert Hall” (“Rockstar”) in
Bolton, Ontario. This appeal concerns five music teachers (the “Teachers”) who
were hired to teach at Rockstar. The Minister of National Revenue (the
“Minister”) reviewed the terms of the Teachers’ engagement and determined that
they were employed under a contract of service. In other words, the Minister
found that the Teachers were employees while engaged by Ms. Menoudakis. As a
result, it was determined that their employment was both insurable under the Employment
Insurance Act and pensionable under the Canada Pension Plan.
[2]
Christina Menoudakis has appealed those determinations.
It is her position that the Teachers worked for her as independent contractors.
[3]
The Teachers who were affected by the Minister’s
determinations were:
|
Teacher
|
Period
|
Instrument Taught
|
|
Ayesha Barboza
|
April 1, 2012 to June 30. 2013
|
Piano and voice
|
|
Joshua Marrocco
|
January 1, 2012 to June 30, 2013
|
Guitar
|
|
Ginevra Mormile
|
January 1, 2012 to June 30, 2013
|
Piano
|
|
Caitlin Nugent
|
January 1, 2012 to May 31, 2012
|
Piano and voice
|
|
Daniel Piatkowski
|
September 1, 2012 to June 30, 2013
|
Guitar
|
[4]
Although Caitlin Nugent intervened in the
proceedings, she did not appear at the hearing. The witnesses at the hearing
were:
a)
John Menoudakis, the Appellant’s spouse, who
represented the Appellant and testified on her behalf. For the most part, he
was a credible witness. However, where his evidence conflicted with that of the
other two witnesses, I have accepted the evidence of the other witnesses.
b) Both Ayesha Barboza and Daniel Piatkowski gave evidence under
subpoena from the Respondent. Ayesha Barboza was a voice and piano teacher at
Rockstar. During the period she worked at Rockstar, she was studying music at
the University of Toronto. I found her to be credible.
c)
Daniel Piatkowski was a guitar teacher at
Rockstar. He received his music training at Mohawk University and the Royal
Conservatory of Music. During the period he worked at Rockstar, he had two
other jobs - one of which was music related. I found that Mr. Piatkowski was
credible.
[5]
Both Christina Menoudakis and her spouse John
Menoudakis controlled the day to day business of Rockstar and made all the
major business decisions. When I wish to refer to both of them, I will refer to
them as Rockstar.
[6]
Rockstar operated a music school which provided
private music lessons during the school year. It catered to school children and
its business hours were Monday to Friday, 3:00 p.m. to 9:00 p.m. It closed
during the summer.
[7]
The school was located in a commercial building
and it consisted of a large room with a stage and four small classrooms. Each
classroom had a window which looked out into the large room and through which
parents could watch their children being taught.
Law
[8]
In order to determine whether the Teachers were
engaged as employees or independent contractors, the essential question that
must be answered is whether the Teachers were performing their services as
persons in business on their own account: 671122 Ontario Ltd v Sagaz
Industries Canada Inc [2001] 2 S.C.R. 983 at paragraph 47.
[9]
In 1392644 Ontario Inc v Minister of National
Revenue, 2013 FCA 85 (“Connor Homes”), the Federal Court of Appeal stated
that there is a two-step test which is to be used when deciding this question.
Under the first-step, the Court must determine the subjective intent of each
party to the work relationship. The second step of the test is to analyze the
work relationship between the Teachers and Rockstar with a view to ascertaining
whether their working relationship was consistent with their intention. The
factors from Wiebe Door Services Ltd v MNR, [1986] 3 FC 553 (FCA) are to
be used in this step of the test. Those factors include control, ownership of
tools, chance of profit and risk of loss.
Intention
[10]
John Menoudakis testified that it was Rockstar’s
intention to hire the Teachers as independent contractors and the Teachers had
been informed of this intention. It was his evidence that he told each Teacher
that they were each responsible for filing their own business name with the
government. He stated that each Teacher agreed and signed a “Music Teacher
Contract” (exhibit A-1) (the “Contract”) with Rockstar. Exhibit A-1 was signed
by Caitlin Nugent.
[11]
However, contrary to Mr. Menoudakis’ evidence, it
is my opinion that the Contract was not an agreement that the Teacher was
working with Rockstar as an independent contractor. Rather it was a non-competition
agreement. The Teachers who may have signed the Contract agreed that they would
not contact any of Rockstar’s clients with the intention of soliciting their
business.
[12]
Both Ayesha Barboza and Daniel Piatkowski stated
that they intended to work for Rockstar as employees. Both witnesses stated
that they did not sign and had never seen the Contract. They each testified
that they did not register their own businesses nor did John Menoudakis tell
them that they should register their own businesses. I believe both Ayesha
Barboza and Daniel Piatkowski.
[13]
In the Reply to Notice of Appeal, the Minister
assumed that Joshua Marrocco was Christina Menoudakis’ nephew and that he
considered himself to be self-employed. John Menoudakis agreed with these
assumptions of fact.
[14]
The Minister also assumed that Caitlin Nugent
and Ginevra Mormile considered themselves to be employees. Rockstar did not
bring evidence to rebut these assumptions.
[15]
The majority of the Teachers and Rockstar did
not share the same intention with respect to their work relationship.
Second Step
A. Control
[16]
Mr. Menoudakis testified that neither he nor the
Appellant supervised the Teachers. They didn’t tell the Teachers how to teach.
However, the test is not whether they supervised the Teachers but whether they
had the right to do so: Gagnon v Minister of National Revenue, 2007 FCA
33 at paragraph 7. Rockstar did not have to instruct the Teachers on how to
teach because it only hired Teachers who were proficient in music and in
playing certain instruments. They required no supervision in how to perform
their duties.
[17]
The students were Rockstar’s students. Rockstar
assigned the students to the Teachers and made the work schedule for the
Teachers at a time that the Teachers were available. If students had to reschedule
a lesson, they contacted Rockstar to arrange the new schedule. There was
evidence that Mr. Menoudakis told the Teachers to have more interaction with
the parents of the students with a view to “selling” the lessons to them. I
have inferred from this evidence that Mr. Menoudakis was asking the
Teachers to promote Rockstar’s business.
[18]
Either the Appellant or Mr. Menoudakis was
always present when the school was open. They recorded when the Teachers were
present and their hours of work. The Teachers were required to inform Rockstar
if they were going to be absent for a scheduled class. They could not send a
replacement teacher. Ayesha Barboza stated that she never missed a scheduled
class. However, there was one occasion when she called Mr. Menoudakis to see if
she could miss a dress rehearsal. Mr. Menoudakis refused her request; he told
her that it would be inconvenient because there were numerous students.
[19]
Generally, Rockstar required the Teachers to
teach “rock” music and to prepare the students for the year-end concert. Mr.
Menoudakis stated that the Teachers were supposed to teach music which accorded
with the name of the school. However, if a student wanted to learn another
style of music, the Teacher could teach it.
[20]
I have concluded that Rockstar exercised control
over the Teachers. It set their work schedules albeit at a time they were
available. Rockstar generally told the Teachers what style of music to teach.
The Teachers had to get permission to be absent and could not send a
replacement. The evidence showed that even when a Teacher requested time off Mr.
Menoudakis exercised the right to refuse the request. Mr. Menoudakis even
instructed the Teachers on how they were to interact with the students’
parents.
[21]
It is my view that the control factor indicates
that the Teachers were employees.
B. Ownership of Tools
[22]
Rockstar provided the classrooms, pianos,
keyboards, microphones, music books, amplifiers and music stands. The Teachers
who taught guitar and voice used their own instruments. Mr. Menoudakis testified
that many of the Teachers used their own laptops to obtain songs. However, this
was not a requirement of their work relationship. It was a choice that the
individual teachers made.
[23]
The test for tools in the circumstances of this
case is whether the Teachers were required to supply the tools necessary to
operate a business of supplying music lessons to a school: Lippert Music
Centre Inc v The Minister of National Revenue, 2014 TCC 170 at paragraph
23. The evidence showed that the Teachers were not required to provide their
own instruments or sheet music or laptops. Mr. Menoudakis stated that he plays
the guitar and most guitar instructors prefer to use their own guitars. It was
not shown that the guitar teachers were required to use their own instruments.
[24]
It is my view that ownership of tools factor supports
the conclusion that the Teachers were employees.
C. Chance
of Profit
[25]
The Teachers were required to provide their
services personally. They could not hire an assistant or replacement and thus
subcontract their work. They were paid $7.50 per half-hour session. Their rate
of pay was not negotiated but was determined by Rockstar. They were paid every
two weeks by cheque.
[26]
Rockstar determined the number of students which
would be assigned to each Teacher. It is clear that the Teachers had absolutely
no chance of profit in the entrepreneurial sense. They were paid a flat fee per
half hour. The Teachers had no client base. The students and their parents were
the clients of Rockstar.
[27]
This test also supports the intention of the
majority of the Teachers to be employees.
D. Risk of Loss
[28]
The Teachers did not invest in the business of
supplying music lessons. Those Teachers who used Rockstar’s instruments had no
financial risk whereas those who used their own instruments had a minimal
financial risk. It was limited to the cost of their guitar and laptop.
[29]
All things considered, I conclude that the facts
with respect to financial risk are more consistent with the Teachers being
employees than being independent contractors.
[30]
It is my view that an analysis of the Wiebe
Door factors supports the Teachers’ intention to be employees. The
Appellant’s intention that the Teachers were independent contractors is not
consistent with the evidence presented at the hearing.
[31]
For these reasons, I dismiss the appeals.
Signed at Ottawa, Canada, this 23rd day of October 2015.
“V.A. Miller”
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