REASONS
FOR JUDGMENT
Lyons J.
[1]
J.J. Smith Cartage Co. Ltd., the appellant,
appeals from the determination of the Minister of National Revenue (the
“Minister”) that Mondel Samuel was employed under a contract of service in
insurable and pensionable employment with the appellant for the period from
September 30, 2011 to March 20, 2013 (the “Period”).
[2]
The sole issue is whether Mondel Samuel was an
employee of the appellant or an independent contractor during the Period.
[3]
Jerry Smith and Dawn Smith, his spouse,
testified on behalf of the appellant and Mondel Samuel, the intervenor,
testified on his own behalf. In general, the intervenor’s testimony was
more precise and reliable than Mr. Smith’s vague and generic testimony.
I. Facts
[4]
The appellant operated an appliance delivery
service in Toronto exclusively for Appliance Canada (“AC”) for approximately 25
years delivering appliances to customers of Leon’s Furniture. Mr. and Mrs.
Smith are co-owners of the appellant. He controlled the day-to-day operations
and made the major business decisions and she prepared correspondence, email,
managed finances, recorded invoices and prepared pay for the drivers. Mr. Smith
would go to Ottawa once or twice per month for discussions with AC.
[5]
During cross-examination of Mr. Smith by
respondent counsel, he said that there was a verbal agreement with the
intervenor from the outset that he was a sub-contracted driver and would make deliveries
in Ottawa and the surrounding areas. The Smiths said that he was the sole
driver who was left in charge, requiring no supervision. It ran smoothly except
for an incident with a stove.
[6]
The intervenor testified that in May 2009 he met
Andre Thomas, a driver, who introduced the intervenor to Mr. Smith. All three
met in a pick-up truck outside the intervenor’s residence in Ottawa. AC had
expressed interest in building a showroom in Ottawa. The intervenor said that
there was no discussion as to terms and conditions nor about driving a truck.
His physical condition was discussed. He was hired as an employee in July 2009 as
a “helper” at $100 per day and provided, as requested, his social insurance
number to Mr. Smith.
[7]
Late in June 2009, the intervenor commenced
part-time employment at the Ottawa Hospital – Civic Campus as a housekeeper
where he “overnights” and then works four days leaving him two days to work. In
August 2010, he obtained his driver’s licence. In January 2011, the appellant promoted
him to driver upon the departure of another driver. In October 2013, Mr. Smith
told him to “pack stuff and leave” and get out.
II. Position
[8]
The appellant argues that there was a contractor–subcontractor
relationship with the intervenor. Similar to the Toronto drivers, fees were
negotiated with the intervenor who was responsible for expenses, profits, risks
and damages associated with the delivery business. The appellant did not oversee
the intervenor’s activities as he had the flexibility to manage the deliveries for
AC.
[9]
The respondent argues that there was no common
intention and all the objective factors support the existence of an
employer-employee arrangement between the appellant and the intervenor.
[10]
The intervenor asserts that he was hired as an employee
and trained by the appellant, initially as helper then promoted to driver. He was
subject to the appellant’s control, was paid bi‑weekly at a rate of pay
set by the appellant and he did not provide any equipment except for work
boots.
III. Analysis
[11]
The test for determining whether a worker is in
a contract of or for services was considered by the Supreme Court of Canada in
671122 Ontario Ltd. v Sagaz Industries Canada Inc., 2001 SCC 59, [2001] 2
SCR 983 [Sagaz]. In enunciating the principle “whose business is
it?” Major J., at paragraph 47, states that:
47. … the central
question is whether the person who has been engaged to perform the services is
performing them as a person in business on his own account. …
[12]
The Court endorsed the approach of the Federal
Court of Appeal in Wiebe Door Services Ltd. v The Minister of National
Revenue (1986), 87 DTC 5025 (FCA) [Wiebe Door], which identified
objective factors. These factors comprise the level of control the employer has
over the worker’s activities, whether the worker owns the tools and provides
his or her own equipment, whether the worker hires his or her own helpers, the
degree of financial risk taken by the worker and opportunity for profit; and,
the degree of responsibility and management. No single factor is conclusive in
characterizing the objective reality of the parties’ relationship and that list
of factors is not exhaustive.
[13]
Recently in 1392644 Ontario Inc. (c.o.b.
Connor Homes) v Canada (Minister of National Revenue - MNR), 2013 FCA 85,
[2013] FCJ No. 327 (QL), the Federal Court of Appeal adopted a two-step process
in answering the central question enunciated in Sagaz and held that the
subjective intention of the parties is relevant but not determinative and the
parties intent “must be grounded in a verifiable objective reality.”[1] Mainville J. states at
paragraph 42 that:
42. … The first step of the analysis should always be to determine
at the outset the intent of the parties and then, using the prism of that
intent, determining in a second step whether the parties’ relationship, as
reflected in objective reality, is one of employer-employee or of independent
contractor. …
[14]
The Court clarified any uncertainty concerning
the use and weight to be given to the intention of the parties noting that
legal effect of the relationship determines the legal status and cannot be
decided solely on the declared intention of the parties.
A. Intention
[15]
Based on the evidence, I find that there was no
common understanding as to the nature of the relationship between the appellant
and the intervenor.
[16]
In his testimony, Mr. Smith spoke of the nature
of the relationship from the outset focusing on the intervenor as a driver.
However, the uncontroverted evidence is that he was hired as a helper and
promoted to driver sometime after. I reject Mr. Smith’s testimony that he
did not ask for a social insurance number upon meeting the intervenor.
[17]
I accept as plausible given his lack of
experience in deliveries, and notwithstanding his income tax filing, that the
intervenor’s intent was that he would be an employee. This is supported by the provision
of his social insurance number to Mr. Smith and his expectation of a T4,
similar to his previous employer, which I accept.[2] During the intervenor’s cross-examination
of Mrs. Smith, she admitted that the letter dated April 20, 2012, that she
signed but did not recall, states “I am writing this letter to confirm
employment for Mr. Mondel Samuel” and went on to note he had been working for
the appellant for over two years.[3]
I also note that when he joined the appellant he was a relatively new
immigrant. I am satisfied that the intervenor considered himself an employee.
[18]
I conclude that there was no common understanding
as to the nature of the relationship. Consequently, intention is not a relevant
factor in this appeal.
B. The Wiebe Door Test
[19]
Turning to the second step of the analysis to
ascertain objectively, based on the facts, whether the Wiebe Door and Sagaz
test has been met, the first factor is the determination of the level of
control the appellant had over the intervenor’s activities.
i. Control
[20]
It is established in the jurisprudence that the
authority or right of a payer to exercise control over a worker as to the work
and manner it is to be done that governs rather than the actual control.
[21]
While a couple of aspects in the arrangement in
the present case indicate less control by the appellant over the intervenor, many
other aspects of the arrangement show that the appellant had the right to exercise
substantial control over the intervenor through Mr. Smith, delegated to AC by
the appellant, while the appellant also maintained the ability and right to impose
consequences if directions were not followed.
[22]
The appellant maintained responsibility for the
delivery service as the contractor to AC. The intervenor’s weekly schedule, as
driver, was set by the appellant during the Period. Drivers are not guaranteed
work each day as the deliveries scheduled vary from week to week with the
driver on standby until the afternoon prior to the delivery day. Mr. Smith
received a daily call from AC as to the number of trucks needed the following
day for Toronto. He described the process of selecting drivers. I accept his
explanation of that process relating to the Toronto operation. Each day he
would inform the intervenor if he would be making deliveries. If so, the daily
“run sheet” was faxed to the appellant’s Ottawa warehouse.
[23]
The intervenor testified that he and Deveka were
required to be at the warehouse by 7:00 a.m. weekdays in order to make
deliveries between 8:00 a.m. to 5:00 p.m. They proceeded to AC’s warehouse and were
given the deliveries for the day with the time periods within which to make the
deliveries according to the run sheet. AC calls customers to give an
approximate delivery time. The intervenor had the flexibility to vary the route
and delivery time if he felt it necessary to deal with exigencies, such as
traffic, and would contact customers in such circumstances.
[24]
The delivery duties and routine consisted of
warming up and inspecting the truck, loading it, driving to delivery locations,
unloading and placing new appliances according to the run sheet, loading old
appliances, clearing debris, obtaining a customer’s signature, completing the
driver’s log and monitoring and reporting fuel usage. At the end of the day,
the drivers return to the AC warehouse.
[25]
Unless he had safety concerns, the intervenor
must deliver all appliances on the run sheet. Mr. Smith said the intervenor
could and did refuse to make certain deliveries. Mr. Smith had cancelled three
deliveries because of safety concerns relating to the elevator at a delivery
site.
[26]
The intervenor stated that Mr. Smith authorized Andre
Thomas to train him, including how to complete the log book for the Ministry of
Transport.[4]
Mr. Smith had also explained to him how to deal with certain appliances,
gave him the Appliance Canada Delivery Handbook 2012 detailing the procedures
for making deliveries and setting out delivery expectations and instructions to
be followed, including wearing AC’s apparel, and called the intervenor in the
evenings emphasizing that the Minto deliveries were a priority.
[27]
Conversely, Mr. Smith said that while the
intervenor was not expected to call him, he called to let Mr. Smith know what
was going on. Mr. Smith denied that he had authorized Andre Thomas to train the
intervenor, agreed that the intervenor had attended the Minto safety training
session, as required by Minto, and confirmed that he had provided the AC Handbook
to the intervenor. I accept the intervenor’s evidence and find that provision
of the Handbook with the detailed instructions, the training and wearing of AC
apparel indicate that the appellant exerted control over the intervenor’s activities
including the manner and the mode of delivering appliances.
[28]
The intervenor was required to keep in contact
with AC on its MIC system. In the event of problems, he said that the
“protocol” was that he call Mr. Smith for direction who then contacted the
AC customer service or he sometimes asked the intervenor to call AC in
instances where the truck broke down. If AC had concerns, it contacted Mr.
Smith. Mr. Smith explained that he did not use the MIC but needed to attend to
major problems; otherwise, the drivers operate on their own.
[29]
In Saindon v Canada (Minister of National Revenue – MNR), 2014 TCC 172, [2014] TCJ No. 135 (QL) [Saindon],
Hogan J. held that Saindon had exercised control over the truck driver that it
had provided to dispatchers of another company through a delegation of
authority to those dispatchers who dictated the work to the truck driver.
Saindon’s ability and power to discipline the truck driver for misconduct was a
manner in which control could have been exercised.[5]
[30]
Similarly, the appellant in the present case
exercised control over the intervenor by delegating authority to AC while
maintaining the ability to impose consequences if directions were not followed.
The intervenor was expected to follow AC’s run sheets, the instructions in the AC
handbook and remain in direct contact with AC’s customer service on the MIC
system. While I accept Mr. Smith’s evidence that the appellant did not use
the MIC system, he was in daily contact with AC and the intervenor, as noted,
and was contacted if there were problems.
[31]
One illustration involving the appellant’s
ability to impose consequences occurred when it unilaterally docked the
intervenor’s pay, without negotiation, for mistakenly removing a stove from a
customer’s premises due to a mix-up on the run sheet.[6] Another involved Mr. Smith
sending a replacement driver and helper for the remainder of the week after the
intervenor and Deveka were refused entry at the Minto work site because they
did not have proper work boots which had been stolen from the truck.
[32]
A measure of control was also maintained over the
intervenor’s pay. Mr. Smith claims that drivers’ fees were negotiated fluctuating
between $130 to $150 daily for normal deliveries, increasing to $225 for long
distance deliveries and higher rates where wholesale deliveries are made to a
floor of a condominium.[7]
He also negotiated an amount for garbage disposal or packing up cardboard for
the recycling plant which the intervenor claims started at $40; the intervenor
did these activities on days when deliveries were not being made. Mrs. Smith
verified with Mr. Smith the number of days the intervenor worked and the
negotiated rate of pay. Unlike other drivers, however, he was not required to
send invoices. Instead, he texted information to Mrs. Smith which she used to
prepare his bi-weekly pay for deposit into his Western Union account.
[33]
The intervenor disagreed that there was any
negotiation, said he accepted the rate of pay the appellant was willing to pay and
acknowledged in cross‑examination by appellant counsel to “no delivery,
no pay.” I am not convinced that there was a negotiation of fees similar to his
Toronto counterparts. I find it more probable that the intervenor accepted an
amount established by the appellant as in an employment arrangement.
[34]
Similar to an independent contractor, supporting
the appellant’s stance, the intervenor did not receive vacation pay, benefits, pay
for statutory holidays nor pay for sick days. When requesting leave
(ambiguously worded as a request for parental and vacation time), the appellant
did not object. It viewed this as the intervenor’s ability to refuse work as
long as he let the appellant know he was not available so that it could make
alternative arrangements for a replacement. It is undisputed in the evidence
that the appellant was responsible for finding a replacement driver which Mr.
Smith did on a number of occasions.
[35]
Mr. Smith said that the intervenor often said
that he had to go to his hospital job leaving scheduled deliveries for delivery
the next day in which case he would call AC. While I accept Mr. Smith’s
testimony that this occurred enabling the intervenor to exercise a level of control,
it is improbable it would have been often given the expectations of AC that
deliveries are to be made according to the run sheet.
[36]
The intervenor also testified that Mr. Smith
provided information and instructions to the intervenor via Joel and stated
that he was told by Mr. Smith that anything that Joel tells the intervenor to
do, that he should “just go ahead and do it” and he did. This is strong indicia
of control by the appellant.
[37]
Although there was less control by the
appellant over the intervenor in a couple of instances, there were many other instances
where the appellant had the right to exert substantial control over the
intervenor as to the work and how it was performed. I find that this factor weighs
more towards an employer-employee relationship.
ii. Equipment
and ownership of tools
[38]
A truck and a special dolly are essential for
the operation of the appellant’s delivery business. Evidence adduced is
uncontradicted that the appellant paid for and provided these items without
charge to the intervenor. In my view, this factor weighs significantly towards a
contract of services.
[39]
Respondent counsel referred me to the Federal
Court of Appeal decision in Livreur Plus Inc. v Canada (Minister of National
Revenue – MNR), 2004 FCA 68, [2004] FCJ No. 267 (QL), in which the
Court noted that “the most important, the most significant, and the most
costly” work tool was a crucial factor. Unlike the Toronto drivers who supplied
their own truck or leased one from Mr. Smith and paid their vehicle expenses,
vehicles were supplied to the intervenor plus all the operating expenses for the
vehicles were paid by the appellant during the Period without charge.[8] Significantly, this included fuel,
insurance and maintenance, relating to not only the delivery business but also
encompassed his personal use of the vehicles.
[40]
Additionally, the appellant provided, at no
charge, a special load-bearing dolly at a cost of $372. If damaged or lost, the
drivers would pay for the repair or replacement, though no such instance
occurred. I agree with the submission of respondent counsel that without a
truck and a dolly, there was no delivery business.
[41]
In terms of other tools, there was conflicting
testimony as to the provision of a drill, a hard hat, tie-down straps, socket
set and box cutters. Mr. Smith said that drivers were expected to supply and
maintain those items. The intervenor contends that his only expenditure was the
amount of $55 for steel-toe work boots. He said that both vehicles were
equipped with two types of dollies, hard hats and other tools such as a
Milwaukee until it was stolen from the truck; it belonged to the appellant or
Norman. Joel supplied box cutters. Even though Mr. Smith informed him that he
could not use the AC tools, he continued to access these at the warehouse.
[42]
Mr. Smith indicated that drivers were not
required to wear a uniform but AC gave the appellant apparel with the AC logo
for identification purposes. However, the intervenor said that he was informed
by Mr. Smith that he had to wear the clothing.
[43]
Given the specificity of detail by the intervenor
and the photos entered as exhibits at the hearing corroborating his testimony,
I accept and prefer the intervenor’s evidence relating to this factor.
[44]
For the foregoing reasons, this factor does not
support a contractor-subcontractor arrangement and tilts heavily in the
direction of an employer-employee relationship.
iii. Hiring
helpers
[45]
In accepting the intervenor’s more detailed testimony
that the appellant hired, fired, replaced and paid the helpers, I find the
evidence relating to this factor does not assist the appellant’s position.
[46]
Mr. Smith testified that it is important that
the driver and helper work together as it is a strenuous job. He claimed that the
intervenor hired Deveka, Al and Joel.
[47]
The intervenor denied hiring or recommending
Deveka and stated that it was a driver in Toronto who recommended Deveka. Mr.
Smith hired and later fired Deveka.[9]
The intervenor denied that he could hire anyone but did make recommendations
and stated he did not pay helpers but had relayed money to helpers that the
appellant sent to him. The intervenor introduced Akim to Mr. Smith. In
turn, Akim recommended Joel to Mr. Smith who hired both of them.
[48]
Helpers were also central to the delivery
business. I am unconvinced that the appellant would allow the intervenor to
hire helpers without Mr. Smith’s approval. It is more probable that when a
helper resigned or was unavailable, the appellant secured a replacement through
Mr. Smith, accepting that the intervenor could have made a recommendation.
[49]
The evidence on this factor tilts strongly
towards an employer-employee arrangement.
iv. Opportunity for profit and degree of financial risk
[50]
In my view, the intervenor had little, if any,
opportunity to profit and bore virtually no financial risk.
[51]
Respondent counsel argued that the concept of
“profit” necessarily requires a surplus of revenues over expenses and that in
an employment arrangement where a worker receives a set rate for services while
making no contribution to the expenses of the organization, there can be no
true “opportunity” for profit. Reliance was placed on the decision of TBT
Personnel Services Inc. v Canada, 2011 FCA 256, [2011] FCJ No. 1340 (QL) [TBT
Personnel Services], in which the Court held that since the operating
expenses were borne exclusively by the appellant, the intervenor could not
“profit” financially by operating the business more efficiently.
[52]
There was some variance on the evidence as to
the division of the proceeds from discarded appliances and conflicting evidence
relating to the fees for garbage disposal. Mr. Smith said that the proceeds are
divided between the driver and helper estimating that a driver can earn on
average $240 extra per week and he only pays for fees for garbage disposal when
he goes to Ottawa.
[53]
The intervenor contends that any amount of scrap
over $200 went to Mr. Smith as the owner and fees for garbage disposal were
always paid by the appellant. In cross-examination, the intervenor elaborated
indicating Mr. Smith gave him “strict instructions” that anything over $200
should be used for the fee for garbage disposal with amounts less than $200 be
shared between the driver and helper similar to the arrangement that had been
in place in working with Andre Thomas. I accept the intervenor’s evidence.
[54]
Albeit some deliveries were to new condominiums,
others entailed the removal of old appliances to be disposed of at a scrap yard
or dealer in used appliances. In doing so, the appellant incurred all the associated
operational costs (vehicle expenses, dolly and payment of helpers) as noted. If
the customer was not home, the appellant would pay the driver for “re-delivery.”
The intervenor’s sole expenditure is limited to his work boots.[10] I concur with the
respondent’s submission that since the appellant was responsible for all the
operational costs of the business, the intervenor was not in a position to
profit.
[55]
The argument by appellant counsel that the
intervenor had the risk of potential damage to appliances or equipment was
rejected by the Court in TBT Personnel Service.[11] The damage was considered as
being relatively minor compared to the largest financial aspect of the drivers’
work, namely the cost of the vehicle and its operation. The evidence adduced
was that property damage that was other than cosmetic was handled by AC and it
then calls Mr. Smith who passes the cost along to the driver who is given time
to pay if requested; damage was not an issue in Ottawa.
[56]
I find on this factor that the intervenor did
not have an opportunity to profit and bore virtually no financial risk, which
is indicative of an employer-employee relationship.
[57]
For the foregoing reasons and on the totality of
the evidence, I conclude that the intervenor was not in business on his own
account. He was an employee engaged by the appellant in an employment
arrangement under a contract of services in insurable and pensionable employment
within the meaning of paragraph 5(1)(a) of the Employment Insurance
Act and paragraph 6(1)(a) of the Canada Pension Plan.
[58]
The appeal is dismissed without costs.
Signed at Toronto,
Ontario, this 30th day of April 2015.
“K. Lyons”
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