REASONS
FOR JUDGMENT
Woods J.
[1]
These appeals under the Employment Insurance
Act and the Canada Pension Plan relate to five individuals (“Workers”) who were engaged as telemarketers by
Greenshield Windows and Doors Ltd. (“Greenshield”)
during 2012.
[2]
Following a CRA trust account review of
Greenshield, the Minister of National Revenue (the “Minister”)
determined that the Workers were engaged in insurable and pensionable
employment. Greenshield disputes these decisions and takes the position that
the Workers were engaged as independent contractors.
Background
[3]
Greenshield is a small corporation based in
London, Ontario which is in the business of installing windows and doors.
[4]
As part of its marketing efforts, Greenshield
engaged telemarketers to generate leads for its business through cold calling.
All of the Workers were so engaged.
[5]
The calls were automatically generated by a
software program that the telemarketers accessed through computer terminals at
Greenshield’s premises. As I understand it, the telemarketers had to work in a
group in order to minimize dropped calls.
[6]
In respect of one Worker, Tarek Zabian, he approached
Greenshield about advertising by way of door hangers in addition to his
telemarketing services. Greenshield agreed with the proposal and arranged for
flyers to be printed which Mr. Zabian distributed.
[7]
Testimony at the hearing was provided on behalf
of Greenshield by its president, Guy Solomon. Testimony on behalf of the
Minister was provided by Danica Trapara, one of the Workers, who was
subpoenaed.
[8]
It would have been helpful to also have testimony
from Ryan Hayes, who was employed by Greenshield as head of marketing and
sales. Mr. Hayes had responsibility for the telemarketing function and he had
day-to-day contact with the Workers. My impression from the evidence as a whole
is that Mr. Solomon had limited direct knowledge of the day-to-day
administration of the telemarketing operation.
[9]
An adverse inference could be made against
Greenshield, who has the burden of proof, for failure to call a key witness
such as Mr. Hayes. I have not done so in the context of these informal appeals.
[10]
As a result, the best that can be done is to
make findings of fact based on the limited evidence that was presented.
[11]
In assessing the evidence, I have found that some
of Mr. Solomon’s testimony was not reliable. I viewed Mr. Solomon’s testimony
with the typical caution that should be given to self-interested testimony, and
Mr. Solomon’s testimony was not as forthright as it needed to be to be
reliable. In addition, much of Mr. Solomon’s testimony was not based on actual
knowledge. As for Ms. Trapara, I found her to be a forthright and credible
witness.
Applicable legal principles
[12]
The relevant legal principles for purposes of
these appeals were usefully summarized by my colleague Justice Hogan in Pareto
Corp. v. M.N.R., 2015 TCC 47. I have reproduced the summary below.
[9] Distinguishing
employment from an independent contractor arrangement can be challenging
because working conditions and relationships are unique to every workplace and
are constantly evolving.
[10] The
distinction turns on the following definitions of “employment”:
(a) Paragraph 5(1)(a)
of the EIA defines it as:
employment in Canada by one or more employers, under any express or
implied contract of service or apprenticeship, written or oral, whether the
earnings of the employed person are received from the employer or some other
person and whether the earnings are calculated by time or by the piece, or
partly by time and partly by the piece, or otherwise.
(b) Subsection 2(1) of the
CPP provides as
follows:
“employment” means the state of being employed under an express or
implied contract of service or apprenticeship, and includes the tenure of an
office.
[11] The leading case on this issue is Wiebe Door Services Ltd. v.
M.N.R. which was confirmed by the Supreme Court of Canada in 671122
Ontario Ltd. v. Sagaz Industries Canada Inc. The question is always whether
or not the person “is performing [the services] as a person in business on his
own account”. Sagaz summarizes the test enunciated in Wiebe Door
as follows:
In making this determination, the level of control the
employer has over the worker’s activities will always be a factor. However,
other factors to consider include whether the worker provides his or her own equipment,
whether the worker hires his or her own helpers, the degree of
financial risk taken by the worker, the degree of responsibility for
investment and management held by the worker, and the worker’s opportunity
for profit in the performance of his or her tasks.
It bears repeating that the above factors constitute a
non-exhaustive list, and there is no set formula as to their application. The
relative weight of each will depend on the particular facts and circumstances
of the case.
[Emphasis added.]
[12] In addition to these factors, the subjective intention of the
parties must also be considered. Where one can establish a common intent of the
parties with regard to the type of working relationship they wished to
establish, this intent must be considered in the Court’s analysis of the
foregoing factors.
[13] It is important to bear in mind, however, that the intention of the
parties is only relevant to the extent that it is reflected in the facts of the
case. The subjective intention of the parties is not determinative on its own.
Justice Mainville of the Federal Court of Appeal made the following
clarification in 1392644 Ontario Inc. o/a Connor Homes v. Minister of
National Revenue:
37 the legal status of independent contractor or of employee is
not determined solely on the basis of the parties[’] declaration as to their
intent. That determination must also be grounded in a verifiable objective
reality.
[14] Connor
Homes mandates a two-step analysis. First, the
intention of the parties must be ascertained in order to determine what kind of
relationship they wished to create. In the light of that intent, the second step
is to analyze the facts of the case to determine whether the expression of the
parties’ intent conforms to the objective reality of their relationship. In
this second step, the Court must apply the four Wiebe Door factors,
namely: (i) control, (ii) ownership of tools, (iii) chance of
profit and (iv) risk of loss, to determine whether the factual reality
reflects the subjective intention of the parties.
Analysis
[13]
In the analysis below, the following factors
will be discussed: intention of the parties, ability to control, tools and
equipment, opportunity for profit, and risk of loss.
A. Intention of the parties
[14]
Greenshield submits that it entered into written
agreements with the Workers and that the common intention was to enter into an
independent contractor relationship.
[15]
The Crown does not take issue with this
submission and I accept it. In light of this, the essential question in this
case is whether the “verifiable objective
reality” was consistent with the common
intention.
B. Ability to control
[16]
The control factor is often important in
determining whether a worker is an employee. The question to be decided is
whether Greenshield had the ability to control the manner in which the work was
done. Based on the evidence as a whole, I conclude that the control factor is
consistent with the parties’ intention of an independent contractor
relationship.
[17]
The telemarketing position did not require
specialized knowledge and it was often filled by students who wanted part-time
work. There was a very high rate of turnover, with approximately 50 percent of
telemarketers leaving within the first month.
[18]
As mentioned earlier, the work was done in groups.
Accordingly, weekly work schedules were prepared by Greenshield in accordance
with the telemarketers’ requests. There were two four-hour shifts each day, 10
to 2 and 5 to 9, with one 15 minute break.
[19]
It is likely that the telemarketers were
expected to notify Greenshield if they subsequently were not able to attend at
the scheduled time. I accept Mr. Solomon’s testimony that many telemarketers
did not do this.
[20]
In addition, since the work had to be performed
in groups Mr. Hayes or a senior telemarketer decided when they should take
their 15 minute break.
[21]
As for tracking hours worked, the hours had to
be tracked in some fashion because the Workers were paid partly on an hourly
basis and partly on commission.
[22]
The work entailed trying to obtain the consent of
homeowners to have an estimate prepared. Greenshield’s sales department would
then follow up. The Workers received minimal training for this. I accept Mr.
Solomon’s testimony that it did not make sense to invest time in training when
there was a high turnover rate.
[23]
The evidence reveals that Workers were given a
sample of a “pitch”
that they could use, but that they were not required to use it and they typically
developed their own techniques. It is likely that the Workers learned from each
other in this regard.
[24]
As for supervision, there was general oversight
and censure if Workers were doing personal activities on the job, but there is
no evidence that the Workers were told how to do their job. Ms. Trapara was
informed that Mr. Hayes could listen in on calls, but there is no evidence
that Greenshield could, or would, interfere with the manner in which pitches
were made.
[25]
The only meetings with Workers consisted of a 5
minute presentation at the start of each shift in which relevant information,
such as special sales promotions, were provided to the Workers.
[26]
When the evidence is considered as a whole, I
find that it is more consistent with Greenshield not having the ability to
control how the work was done. The Workers could choose their hours of work and
the manner in which the work was done. This factor favours an independent
contractor relationship.
C. Tools and equipment
[27]
Greenshield provided all the equipment that was
required for the job, in particular, a desk, a computer, and a headset.
[28]
Some of the telemarketers preferred to use their
own headsets.
[29]
Mr. Zabian used his own car to distribute the
flyers.
[30]
Mr. Solomon testified that each telemarketer
received $5 per month for the use of Greenshield’s facilities. This fact was
also assumed by the Minister and I accept that $5 per month was deducted from
the Workers’ pay.
[31]
Despite Mr. Solomon’s argument that the $5
charge was significant, I find that this fee was really window dressing and not
a significant factor.
[32]
Overall, I find the supply of equipment to be a
neutral factor. Although the equipment was supplied by Greenshield, I accept
Mr. Solomon’s testimony that the equipment had minimal cost to Greenshield. The
provision of tools and equipment is not a significant factor in these appeals.
D. Chance of profit and risk of
loss
[33]
The factor of chance of profit and risk of loss
looks to whether there is an entrepreneurial element to the job. In this case,
there is no greater entrepreneurial element than would be common with an
employed commission salesman. The opportunity that Workers had for increased
pay through commissions or working more hours was consistent with an employee
relationship. There was no material risk of loss.
[34]
This factor favours an employee relationship.
E. Conclusion
[35]
In weighing the evidence as a whole, I find that
the relationship between Greenshield and the Workers was consistent with their
common intention that the Workers be independent contractors.
[36]
The factor that dominates in this case is
control. The Workers were able to determine their own work schedules and their
own telemarketing pitches. In such a loose relationship, I find that the
Workers were engaged as independent contractors.
[37]
The appeals will be allowed, and the decisions
of the Minister will be vacated.
Signed at
Ottawa, Ontario this 20th day of March 2015.
“J.M. Woods”
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