REASONS
FOR JUDGMENT
Hogan J.
I. Introduction
[1]
These are appeals from determinations made by
the Minister of National Revenue (the “Minister”) that for the years 2011 and
2012 Reginald Smith (the “Worker”) was not an independent contractor but
rather an employee of Herbert D. Settee (the “Appellant”) for the purposes of
the Employment Insurance Act and the Canada Pension Plan. The
appeals also cover the consequential assessments that followed the Minister’s
determination.
[2]
The Appellant argues that the Worker was an
independent contractor providing services to him in the course of a business
carried on by the Worker for his own benefit.
II. Factual Summary
[3]
The only witness to appear on behalf of the
Appellant was his son, Grant Settee, who worked with the Appellant in an
electrical contracting and repair business carried on under the trade name Dale’s
Electric & Desco Supplies. The witness testified that he was co-owner of
the business with his father. No evidence was produced to contradict this statement.
The Appellant did not appear in court.
[4]
The evidence shows that the Worker was hired as
an electrician under a verbal agreement. The Worker worked on average 20 hours
a week on a on-call basis, as needed by the Appellant.
[5]
The Appellant and his son obtained small
electrical contracts with residential or commercial property owners or tenants
in Selkirk, Manitoba. Generally, they were fixed-price contracts and included
labour and materials. The Worker would be called to work on the projects at a set
rate of $14.00 per hour. He did not participate in the negotiation of the terms
and conditions of the contracts with the clients. The Worker did not invoice
the Appellant for his services.
[6]
The Appellant and his son would drive the Worker
to the jobsites in a vehicle that belonged to them. The Worker would work
alongside them on the projects.
[7]
The Respondent accepts that it was the
Appellant’s intention that the Worker be self-employed, but argues that the objective
reality of the parties’ relationship does not support the Appellant’s intention
in this regard.
[8]
The Worker was paid $8,719 and $2,841 in 2011
and 2012 respectively.
III. Analysis
[9]
The case law is clear with regard to the legal
test that should be applied to determine whether an individual is an employee
or self-employed.
[10]
The leading case on this issue is Wiebe Door
Services Ltd. v. M.N.R.,
a decision 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 worker “is
performing [the services] as a person in business on his own account”. Sagaz summarizes as
follows the test enunciated in Wiebe Door and the factors that need to
be weighed in determining the nature of a work relationship:
47 . . . 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.
48 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.]
[11]
In addition to these factors, the subjective
intention of the parties also needs to 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.
[12]
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 in itself. Justice Mainville of the Federal Court of Appeal has
provided the following clarification:
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.
[13]
Connor Homes
further confirms that the analysis involves a two-step process. 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 objective
reality of the situation is reflective of the intent. 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.
[14]
From the evidence, it is clear that the
Appellant desired to employ the Worker as an independent contractor. It is not
entirely clear whether the Worker accepted this status. In any event the
parties’ characterization of their relationship is not determinative of the
issue. The parties’ intentions must also be consistent with the objective
reality of their relationship, which is determined through a balancing of, inter
alia, the following factors:
1.
The level of control the employer has over the
worker’s activities;
2.
Whether the worker uses his or her own tools;
3.
The degree of financial risk taken on by the
worker; and
4.
The worker’s opportunity for profit.
[15]
The above factors constitute a non-exhaustive
list. The relative weight of each factor will depend on the particular facts
and circumstances of the case.
Control
[16]
The clients were obtained by the Appellant. The
Appellant and his son would work alongside the Worker on the worksite. The
Appellant was responsible for the execution of the client contracts. I infer
from the evidence as a whole that the Appellant could tell the Worker what to
do to ensure that the work performed met with the approval of the Appellant’s
client.
Tools
[17]
The Worker had his own tools but, for the most
part, used tools and equipment belonging to the Appellant and his son. This
factor weighs in favour of an employee‑employer relationship.
Financial Risk
[18]
The Worker assumed little or no financial risk.
If there was a miscalculation in a quotation (with respect to the cost of the
materials or the hours required to complete the job), the loss would be assumed
by the Appellant and his son. This factor weighs in favour of an employee-employer
relationship.
Opportunity for Profit
[19]
The Worker was paid an hourly wage and there is
no indication that he could have profited beyond this. In the instances where
the Worker purchased materials, he would be reimbursed. Where he used his own
materials, he would be reimbursed or the materials would be replaced. Again,
there was no opportunity for profit beyond the hourly wage. This factor therefore
weighs in favour of an employee-employer relationship.
IV. Conclusion
[20]
On balance, the application of the Wiebe Door
factors favours a finding that the Worker was an employee. The Worker was not
in business on his own account.
[21]
For these reasons, the appeals are dismissed.
Signed at Ottawa, Canada, this 26th day of May 2014.
“Robert
J. Hogan”
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