Citation: 2013 TCC 177
Date: 20130531
Dockets: 2011-3019(EI)
2011-3018(CPP)
BETWEEN:
177398 CANADA LTD.,
appellant,
and
THE MINISTER OF NATIONAL REVENUE,
respondent.
REASONS FOR JUDGMENT
Jorré J.
Introduction
[1]
The appellant appeals
from decisions made by the Minister of National Revenue on July 12, 2011
that Bryan C. Rossiter was in insurable and pensionable employment of the
appellant during the six-and-a-half-year period from November 12, 2003 to
May 22, 2010 for the purposes of the Employment Insurance Act and
the Canada Pension Plan.
[2]
177398 Canada Ltd.
carries on business as Advantage Restoration Services, Advantage Plumbing &
Drainage Company and Advantage Septic Services. For convenience I shall refer
to 177398 Canada Ltd. as “Advantage”.
[3]
I wish to take this
opportunity to thank both counsel.
Facts
[4]
In making his decision,
the Minister relied on the following assumptions of fact:
a) the Appellant operated under the name of Advantage Plumbing
& Drainage;
b) the Appellant’s shares are owned equally by Frederik Van
Hunenstijn (“Frederik”) and his wife Ann Van Hunenstijn (“Ann”);
c) the Appellant was in the business of retail and wholesale
plumbing, specializing in disaster restoration;
d) the Appellant’s office was located in Coquitlam, British Columbia;
e) the Appellant operated year-round, Monday to Saturday from
8:00 a.m. to 6:00 p.m.;
f) Frederik controlled the day to day operations of the
Appellant;
g) the Worker is an experienced plumbing technician;
h) the Worker held a UCLI license as a Master Plumber from England;
i) the Worker began working with the Appellant in 2003;
j) the Worker and the Appellant signed a written agreement
regarding the working arrangement between the two parties in 2003 (the “First
Agreement”);
k) the First Agreement remained in force from 2003 to 2008;
l) on February 10, 2008, the Worker and the Appellant
entered into a second agreement (the “Second Agreement”);
m) the Worker was provided with business cards displaying the
Worker’s title and the Appellant’s business name;
n) the Worker provided his own hand tools;
o) under the First Agreement, the Worker was paid on a
commission basis at the rate of 28% of the aggregate gross sales;
p) under the Second Agreement, the Worker was to be paid 40% of
the aggregate gross sales;
q) the Worker opened a GST account in April of 2008;
r) the Appellant provided the Worker with the truck and the
heavy duty tools and equipment at no cost to the Worker;
s) the truck used by the Worker was equipped with a GPS so that
the Appellant could track the Worker’s time;
t) the Appellant provided the Worker with a cell phone and
pager at no cost to the Worker;
u) the Worker was required to answer to a supervisor’s dispatch
calls;
v) the Worker’s personal service was required;
w) the Worker could not hire a substitute or helpers;
x) the Worker did not have any significant capital investment
in his own business;
y) the Worker performed additional duties as a team leader for
which he received an additional $150.00 per week;
z) the Worker did not advertise his services;
aa) the Appellant provided extended medical and dental coverage
for all its workers;
bb) the Appellant covered the Worker’s medical and worker’s
compensation premiums and the Worker was covered under the Appellant’s
liability insurance; and
cc) the Worker filed a claim with employment standards wherein it
was ruled that the Worker was an employee of the Appellant.
Contractual Agreements
[5]
The first agreement between
Advantage and Mr. Rossiter is entitled “Exclusive Specific Service and
Brokers Contract”
and is dated November 12, 2003. Mr. Van Hunenstijn testified that he
had taken an employment contract previously drafted by counsel and modified it
himself to create this contract.
[6]
It uses the language of
an independent contractor and has some contract terms which are consistent with
an independent contractor, for example:
(a) Clause 4:
. . .
[Advantage] may hire [Mr. Rossiter] for specific projects or for provision
of specific services . . . . [Mr. Rossiter] may represent
himself as Service Technician but at all material times shall be an independent
contractor and specifically not an employee . . . .
(b) Clause 6 provides:
. . .
[Mr. Rossiter] may refuse any work, project or services presented or
brokered by [Advantage].
(c) Clause 8 states there
is no guarantee as to the quantity or type of jobs offered.
[7]
Other contractual terms
seem incompatible with an independent contractor arrangement. For example,
under clauses 9 and 12, Mr. Rossiter is basically precluded from working
for any competitor of Advantage or from competing with Advantage. The only
person he can do work for is Advantage either directly or indirectly as set out
in the opening part of clause 9. Mr. Rossiter is also required to commit
himself to full-time performance of the contract. Clauses 9 and 12 read as
follows:
(a) Clause
9:
[Mr. Rossiter] may perform work related services
for other commissioned representatives of [Advantage] on a subcontract basis or
on a required basis providing authorization is first obtained from [Advantage].
[Mr. Rossiter] shall not, during the term of this agreement, become
employed, perform work or services, consultation or otherwise, own directly or
indirectly any plumbing or disaster restoration or related business or compete
directly or individually with [Advantage].
(b) Clause 12:
[Mr. Rossiter]
shall not, during the term hereof, or extension thereof, without further
consent of [Advantage], engage in any other business or occupation, or become a
director, manager or agent of any other company, firm or individual, in the
plumbing or restoration business and shall commit himself to full-time
performance of this contract with [Advantage].
[8]
At least according to
the contract, Mr. Rossiter was subject to a seemingly high level of
control.
Clause 11 says:
[Mr. Rossiter]
shall comply and carry out all directives given to it by the respective Directors
and designated authorities of [Advantage] and comply and carry out the by-laws
of [Advantage], acting at all times in the best interests of [Advantage]. [Mr. Rossiter]
shall comply with and follow all [Advantage]’s policies established from time
to time, whether written or otherwise in the performance of [Mr. Rossiter]’s
specific contractual duties.
[9]
Some of the other
provisions state:
(a) Advantage is to
provide Mr. Rossiter with the sufficient inventory of parts to complete
most jobs without additional purchases.
(b) Reasonable and
necessary parts not normally stocked and required for a specific job may be
purchased by Mr. Rossiter on Advantage accounts at suppliers approved by Advantage.
(c) Advantage is to supply
Mr. Rossiter with a suitable service truck and cover the costs of fuel,
maintenance, tires, insurance and lease payments.
[10]
On November 12,
2003, Mr. Rossiter also signed a letter addressed to Advantage “AND TO: Whom It May
Concern”, recognizing that he was an independent contractor. It provides:
I
am not an employee but contract independently per job.
You
act as a job broker only and do not control the work or fee or losses I may collect
or suffer. I completely control the jobs I take, the tools I use and work I do.
There
is no guarantee of work or salary or money I get, or any requirements regarding
people I might hire to do my work.
I
alone am responsible for paying my taxes and employment insurance and other
expenses or remittances.
I
am not entitled to an ROE and I am not an employee.
This letter is not signed by Advantage.
[11]
Advantage and Mr. Rossiter
entered into a new agreement entitled “Contractor Agreement” on
February 10, 2008. This replaced the 2003 agreement. Some of the terms
state:
(a) “The parties
understand and agree that [Mr. Rossiter] is not an employee of
[Advantage].”
They also agree that Mr. Rossiter shall perform the services as an
independent contractor.
(b) “[Mr. Rossiter]
may refuse any work or job presented . . . .”
(c) Advantage is to
provide Mr. Rossiter with the sufficient inventory of parts to complete
most jobs without additional purchases.
(d) Reasonable and
necessary parts not normally stocked and required for a specific job may be
purchased by Mr. Rossiter on Advantage accounts at suppliers approved by Advantage.
(e) Mr. Rossiter is
to supply all general tools and equipment necessary to perform the services but
he may rent specialty tools as required from Advantage.
(f) Advantage is to
supply a suitable service truck and pay the costs of fuel, maintenance, tires,
insurance and lease payments.
[12]
There are no clauses
like clauses 9, 11 and 12 of the 2003 agreement preventing Mr. Rossiter
from taking other plumbing employment or competing with Advantage. However,
schedule B of the 2008 agreement clearly stipulates that the service truck
provided may only be used for Advantage’s business, for example: “Under no
circumstances shall [Mr. Rossiter] use, or allow to be used, the service
vehicle for business other than [Advantage]’s business . . . .”
Calculation of the Compensation to Mr. Rossiter
[13]
Pursuant to both the
2003 and 2008 agreements, Advantage paid Mr. Rossiter a fixed percentage
of what I shall refer to as the “net selling price”. The net selling price is
equal to the price paid by the plumbing customer before the addition of
provincial sales tax and GST less certain deductions. The amounts deducted are
the costs of parts, materials and specialty tools rented by Advantage to Mr. Rossiter.
[14]
Under the 2008
agreement, Mr. Rossiter received compensation equal to 40% of the net
selling price. However, under that agreement, but not the 2003 agreement, Mr. Rossiter
also paid Advantage an amount equal to 10% of the net selling price for use of
the service vehicle, the truck. That 10% came out of the 40% with the result
that Mr. Rossiter received 30% of the net selling price.
[15]
Under the 2003
agreement, Mr. Rossiter received 28% of the net selling price and did not
pay for the use of the truck.
[16]
As a practical matter,
with respect to compensation the only difference between the 2003 and 2008
agreements was that, after accounting for the truck under the 2008 agreement, Mr. Rossiter
received 30% of the net selling price instead of 28%, a 2% increase.
[17]
While I am unable to
find a provision in either of the agreements with respect to this, in practice
the evidence showed one other deduction in the computation of the net selling
price. Where Mr. Rossiter needed assistance on a particular project and he
obtained help from employees of Advantage or from workers supplied by another
company through Advantage, Advantage would pay those costs and then deduct them
in the computation of what I have been referring to as the net selling price.
[18]
This can be seen in the
computations for the pay periods.
On these computations one can see that, in all deductions that are subtracted
from the total billings, the deductions include not only use of equipment,
parts and supplies but also hourly charges for labour. A 30% “commission” is
then computed on the net amount. “Commission” is the term used on the
documents.
[19]
I note that this
produces a very different result from that which would have occurred if Mr. Rossiter
had retained and paid other workers out of his compensation.
[20]
This is easily
illustrated. For example, under the arrangement between Advantage and
Mr. Rossiter, if the net selling price apart from any labour other than Mr. Rossiter’s
were $10,000, and if there was also $5,000 in wages paid in a project, what would
happen in the computation is the following:
|
Net selling price apart from labour
|
$10,000
|
|
Labour
|
($5,000)
|
|
Net selling price
|
$5,000
|
|
Commission: 30% x $5,000
|
$1,500
|
|
Amount retained by Mr. Rossiter
|
$1,500
|
[21]
If the practice had
been different and Mr. Rossiter had been obliged to pay for extra labour
out of his compensation, the result would be very different:
|
Net selling price
|
$10,000
|
|
Commission: 30% x $10,000
|
($3,000)
|
|
Cost of labour
|
($5,000)
|
|
Loss incurred by Mr. Rossiter
|
($2,000)
|
[22]
Advantage did the
computation of Mr. Rossiter’s commissions. Mr. Rossiter did not send
in invoices for his work to Advantage.
[23]
Mr. Rossiter was
not paid if he went out to a customer and gave an estimate that was turned
down. He received no additional payment if he had to go back and fix work he
had already done.
[24]
For a period of somewhat
less than a year in 2009, Advantage paid Mr. Rossiter what was referred to
as “team leader compensation” of $300 every two weeks. This was in recognition
of the phone calls that Mr. Rossiter would take from other plumbing
technicians who had various problems and needed his advice. No one else was
paid as “team leader”.
Mr. Rossiter’s Tax Returns
[25]
Unfortunately, Mr. Rossiter’s
tax returns were not in evidence. The Court only had the Canada Revenue Agency printouts
that show limited information, as follows:
|
Year
|
Type of Income
|
Approximate Amount
|
Note
|
|
2003
|
Employee
|
$2,500 (T4)
|
About $1,000 of other
income not from self-employment
|
|
2004
|
Self-employment
|
$37,000 gross:
$37,000 net
|
Shown as
commission income
|
|
2005
|
Employee
|
$55,500 (T4)
|
|
|
2006
|
Self-employment
|
$63,000 gross:
$57,000 net
|
Shown as
business income
|
|
2007
|
Self-employment
|
$66,000 gross:
$63,000 net
|
Shown as
business income
|
|
2008
|
Self-employment
|
$78,000 gross:
$75,000 net
|
Shown as
business income
|
|
2009
|
Self-employment
|
$80,000 gross:
$78,000 net
|
Shown as
commission income
|
[26]
It is not certain
whether the amount shown in 2003 relates to Advantage or not since Mr. Rossiter
started with Advantage in November 2003.
[27]
The year 2005 is shown
as employment income with a T4.
[28]
With respect to the
years 2006 to 2009, the gross income reported corresponds with T5018 contract
payment slips issued by Advantage, except for 2008 where the reported amount on
Mr. Rossiter’s tax return appears to be about $3,000 less than on the contract
payment slip.
GST
[29]
Mr. Rossiter
registered for GST on June 1, 2007. Advantage would calculate the GST on
the amount payable to Mr. Rossiter and provide a separate cheque for the
GST.
Tools
[30]
Mr. Rossiter provided
only a small fraction of the equipment used.
[31]
Mr. Rossiter was
required to provide his own small tools, and Advantage provided the service
truck together with parts and tools in the truck sufficient to do most routine
jobs. The service truck costs approximately $60,000 and carries about $10,000
to $20,000 worth of parts, fittings, pumps and equipment. The
service truck had Advantage’s name on the side.
[32]
Advantage also supplied
Mr. Rossiter with a mobile phone, a pager and business cards showing
Advantage’s name. These were supplied at no charge to Mr. Rossiter.
[33]
Advantage provided Mr. Rossiter
with a uniform and, although Advantage encouraged him to wear the uniform, it
was not mandatory. Mr. Van Hunenstijn testified that in general
Mr. Rossiter did not wear the uniform. Wearing a uniform was mandatory for
employees. Mr. Rossiter testified that he had to wear the uniform.
[34]
If Mr. Rossiter
needed other parts or equipment he would get it from Advantage. Advantage
equipment, such as an excavator, would be used when available; if Advantage did
not have the equipment, the Advantage office would arrange for the equipment.
Cost of the parts or equipment would be deducted by Advantage in the
computation of the net selling price and the commissions.
Labour
[35]
If on any given job Mr. Rossiter needed the help of other workers,
he could use Advantage workers or workers provided by a company such as Labour
Ready that were arranged for by Advantage. Mr. Van Hunenstijn also
stated that it was an option for Mr. Rossiter to hire someone directly
himself although they would have no paperwork on it because it did not go
through them; he believed that Mr. Rossiter had done that on rare
occasions.
[36]
I note that Mr.
Rossiter’s compensation arrangement with Advantage had a strong disincentive
against his hiring labour directly. Without any paperwork, labour he hired
directly would not be included in the various deductions made to the gross
selling price.
[37]
As I indicated in my
examples above, such non-deductible labour reduced the commission left for him
far more than if he obtained the labour through Advantage. Labour obtained
through Advantage would reduce his commission by 30%, whereas labour he hired
directly would reduce what he made by 100% of its cost since it was paid out of
his commission.
Other Facts
[38]
In 2006, Advantage gave
Mr. Rossiter the award for best overall performance.
[39]
There was general
agreement that Mr. Rossiter was a very good plumber.
[40]
Whether a call was
answered by a contractor like Mr. Rossiter or an employee, there would be
no apparent difference for the customer.
[41]
Mr. Rossiter chose
to participate in the company medical and dental plan. He was not obliged to do
so but employees were. Mr. Rossiter paid half the cost.
[42]
Advantage obtained a
special insurance rider so as to obtain insurance coverage for its contractors
including Mr. Rossiter.
[43]
Payment was collected
from customers at the end of each plumbing job, but if there was some issue
collecting, Advantage took care of it.
[44]
Advantage paid for
Mr. Rossiter’s workman’s compensation coverage. Mr. Rossiter did not
have any business or professional insurance and did not have liability
insurance for his work.
Areas of Significant Factual Dispute
[45]
While the parties
generally dispute how to characterize most of the evidence, there are three
areas where there was a significant disagreement over the facts. They were:
(a) regarding the
intentions of the parties,
(b) whether or not Mr. Rossiter
turned down specific jobs and
(c) whether Mr. Rossiter
did plumbing work other than for Advantage during the period in issue.
Intention
Mr. Van Hunenstijn’s Testimony
[46]
Mr. Van Hunenstijn
testified that Advantage had about 25 employees and that when it started
out many years ago almost all the technical people were contractors like
Mr. Rossiter. During the period in issue in these appeals, the technicians
were a mixture of employees and contractors; since then Advantage has moved to
having exclusively employee technicians.
[47]
Mr. Van Hunenstijn
is the person who decided whether a technician would be an employee or a
contractor. To choose someone as a contractor, he would have to be satisfied
that the technician had experience, had good customer rapport and was good at
closing the deal and getting the business of the potential client.
[48]
He testified that
whereas employees were paid on the strict hourly basis, contractors could make
more by working longer, smarter and harder. However, contractors could also
lose out if it turned out that the potential client was not prepared to pay the
estimate and get the work done.
[49]
Mr. Van Hunenstijn
stated that contractors would make more than employees and estimated that
Mr. Rossiter made roughly 20% more than an employee of similar experience.
[50]
Unlike employees,
contractors could turn down calls and sometimes it was harder to get
contractors to take calls, for example on Friday afternoons.
[51]
Gradually, Advantage
put more incentive features into employee pay.
[52]
When asked why there
was a second contract with Mr. Rossiter, the 2008 agreement, Mr. Van
Hunenstijn responded:
A
Yeah, I think the other one was set for a five-year term, and you know, as
business goes on and time goes on, we decided to, you know, write a new
contract and, you know, we just tried to improve on the previous one, in terms
of the writing and the wording of the contract. But the intent and the
actual facts of what happened did not change from day to day. It wasn’t -- it
was a new agreement on paper, to carry on business as we were already doing.
[Emphasis added.]
[53]
For smaller jobs there
was suggested pricing and in later years this was shown on the invoices
although this pricing could be adjusted for special circumstances.
[54]
On larger jobs
Mr. Rossiter could provide estimates without office approval unlike
employees who would need approval for estimates on jobs over $1,000.
[55]
Employees would have to
rotate through the seven days of the week so that Advantage had seven-day coverage,
whereas contractors only worked on Saturdays and Sundays if they wanted to do
so.
[56]
Mr. Rossiter was
happy with his income and never questioned his status as a contractor.
[57]
He did not mind if
Mr. Rossiter did outside work as long as Mr. Rossiter did not use
Advantage’s equipment or parts.
Mr. Rossiter’s Testimony
[58]
Mr. Rossiter
trained as a plumber in England and had acquired quite substantial experience
there.
[59]
He was in Canada for quite a few years before working for Advantage. During those years he sold real
estate and, later, he was a chef.
[60]
His association with
Advantage came about because he responded to an advertisement that Advantage
had placed. Working for Advantage was the first time he worked in plumbing in Canada.
[61]
As far as he was
concerned, he was offered a job by Advantage and he was delighted to get the
job. Indeed, he enjoyed his work with Advantage.
[62]
He signed what he was
asked to sign at the start without reviewing it, and he was never given copies
of what he signed although he was told he would get copies. His understanding
was that he was an employee, that he had to be available for work and that he
was paid on a commission basis for doing work. He assumed that if you worked
for a company you were an employee.
[63]
The letter of
November 12, 2003 addressed to Advantage “AND TO: Whom It May Concern”, which
he signed, does not reflect his understanding of his agreement with Advantage.
[64]
When he started it was
his understanding that everyone was paid on commission.
[65]
He worked from Tuesdays
to Saturdays with Sundays and Mondays off. He was required to attend the weekly
sales meetings and would receive a reminder the night before the sales meeting.
The reminder would state that the meeting was mandatory.
[66]
With respect to the
second contract, he also stated that he simply signed what was put in front of
him.
[67]
He would start his
workday at a regular hour and call the dispatcher asking him to send him to his
first job. After each job, the dispatcher would send him to the next one. His
day would not end at a fixed time but could be quite variable depending on what
jobs there were and how long the last job might take to complete.
[68]
He was on call after
hours on certain nights. When asked whether this was required of him, he
responded that it was expected of him.
[69]
Mr. Rossiter
testified that he only refused one job, and that was because of the appalling
conditions he found in the crawl space where he would have had to work. He
phoned the office and explained; they said “that’s fine, drive away”.
[70]
However, he also
testified that, when the dispatcher would ask him to take a job that was very
far from where he was located, he would ask to be sent to a job that made more
geographical sense in relation to his location.
[71]
He testified that he
left his tax returns to his accountant.
[72]
At first Advantage used
regular invoices but later it used preprinted forms with fixed prices for
routine types of work. For the bigger jobs, he could do a price estimate
himself but still needed to get the approval of Advantage.
[73]
Advantage would tell
him which job to go and do but, because he was experienced, there was no on‑site
supervision. Very occasionally someone from Advantage might look in.
Did Mr. Rossiter Turn Down Jobs?
[74]
Amanda Cockroft and
Katie Panganiban testified. Ms. Cockroft was a dispatcher from October or
November 2009 until June 2010 at Advantage. She no longer works there.
Ms. Panganiban has been a dispatcher at Advantage from December 2008 to
the present.
[75]
Both testified that
employees were simply told where to go, whereas contractors had to accept the
job. Both stated Mr. Rossiter was difficult to deal with and often turned
down work as either too far to go to or as not paying him enough.
[76]
I previously indicated
that Mr. Rossiter testified that he did not turn down jobs with one
exception but that he did ask for work that made more sense in terms of
driving.
Did Mr. Rossiter Do Work Other Than With
Advantage?
[77]
Ms. Cockroft also
testified that she had received a call on May 20, 2010 from a woman who
was being sued by her landlord and needed proof of some plumbing work she had
had done one year earlier. The woman had responded to an advertisement in the
local paper for plumbing work and could not remember the plumber’s name but she
remembered that the truck had the name Advantage on it.
[78]
Advantage also brought
evidence of two printouts of computer screens showing on‑line
advertisements, one for “Bryan’s Plumbing” and the other for an “Experienced
Journeyman Plumber”. The first was in mid-May 2010 and the second in late March
2010.
[79]
Mr. Rossiter
agreed that the phone numbers on the two advertisements were his but said he
did not recognize the advertisements. He said that he knew nothing about the
Internet but his wife put Internet advertisements up for him from the time when
he was fired.
[80]
However, when looking
at the late March 2010 advertisement, he commented that his wife must have put
it up and that was probably why Advantage fired him.
[81]
Earlier in his
testimony, Mr. Rossiter said he did not have the time to do work other
than for Advantage and that he could not do such work because that would be
instant dismissal.
[82]
When asked how he knew
that outside work would lead to dismissal, he said that he knew because
Mr. Van Hunenstijn had told him that just after he started.
[83]
He also said that he
did plumbing jobs for friends while working for Advantage but stated that he
did not charge his friends.
Analysis
The Law
[84]
There have been
numerous cases on the distinction between an employee and an independent contractor.
In the recent decision of the Federal Court of Appeal in 1392644 Ontario Inc.
(Connor Homes) v. Canada (National Revenue), Justice
Mainville, writing for the Court, reviews the test for determining whether an
individual is an employee or an independent contractor in paragraphs 23 to 41
of that decision. He summarizes the analysis as follows:
36 However,
properly understood, the approach set out in Royal Winnipeg Ballet
simply emphasises the well-know principle that persons are entitled to organize
their affairs and relationships as they best deem fit. The relationship of
parties who enter into a contract is generally governed by that contract. Thus
the parties may set out in a contract their respective duties and
responsibilities, the financial terms of the services provided, and a large
variety of other matters governing their relationship. However, the legal
effect that results from that relationship, i.e. the legal effect of the
contract, as creating an employer-employee or an independent contactor
relationship, is not a matter which the parties can simply stipulate in the contract.
In other words, it is insufficient to simply state in a contract that the
services are provided as an independent contractor to make it so.
37 Because
the employee-employer relationship has important and far reaching legal and
practical ramifications extending to tort law (vicarious liability), to social
programs (eligibility and financial contributions thereto), to labour relations
(union status) and to taxation (GST registration and status under the Income
Tax Act), etc., the determination of whether a particular relationship is
one of employee or of independent contractor cannot simply be left to be
decided at the sole subjective discretion of the parties. Consequently, 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.
38 Consequently,
Wolf and Royal Winnipeg Ballet set out a two step process of
inquiry that is used to assist in addressing the central question, as
established in Sagaz and Wiebe Door, which is to determine
whether the individual is performing or not the services as his own business on
his own account.
39 Under
the first step, the subjective intent of each party to the relationship must be
ascertained. This can be determined either by the written contractual
relationship the parties have entered into or by the actual behaviour of each
party, such as invoices for services rendered, registration for GST purposes and
income tax filings as an independent contractor.
40 The
second step is to ascertain whether an objective reality sustains the
subjective intent of the parties. As noted by Sharlow J.A. in TBT Personnel
Services Inc. v. Canada, 2011 FCA 256, 422 N.R. 366 at para. 9, “it is also
necessary to consider the Wiebe Door factors to determine whether the
facts are consistent with the parties’ expressed intention.” In other words,
the subjective intent of the parties cannot trump the reality of the
relationship as ascertained through objective facts. In this second step, the
parties intent as well as the terms of the contract may also be taken into
account since they colors the relationship. As noted in Royal Winnipeg
Ballet at para. 64, the relevant factors must be considered “in the light
of” the parties’ intent. However, that being stated, the second step is an
analysis of the pertinent facts for the purpose of determining whether the test
set out in Wiebe Door and Sagaz has been in fact met, i.e.
whether the legal effect of the relationship the parties have established is
one of independent contractor or of employer-employee.
41 The
central question at issue remains whether the person who has been engaged to
perform the services is, in actual fact, performing them as a person in
business on his own account. As stated in both Wiebe Door and Sagaz,
in making this determination no particular factor is dominant and there is no
set formula. The factors to consider will thus vary with the circumstances.
Nevertheless, the specific factors discussed in Wiebe Door and Sagaz
will usually be relevant, such as the level of control over the worker’s
activities, whether the worker provides his own equipment, hires his helpers,
manages and assumes financial risks, and has an opportunity of profit in the
performance of his tasks.
Application of the Test
Subjective Intent
[85]
Clearly, Advantage
wanted to create an independent contractor relationship. Mr. Rossiter
states he understood he was becoming an employee.
[86]
The first agreement
uses the language of a contractor but many key terms are more consistent with
employment, notably: Mr. Rossiter’s commitment to full‑time
performance of the contract, the prohibition on competing directly or
indirectly with Advantage and the fact that Advantage provides the services
vehicle.
[87]
The fact that
Mr. Van Hunenstijn drew up the agreement does not change its actual terms.
[88]
On the other hand, the
letter Mr. Rossiter signed on the same day certainly acknowledges being an
independent contractor. However, the letter, not signed by Advantage, cannot
modify the contract and the letter is in some ways inconsistent with the
contract.
[89]
As a result, the intent
of the first contract is, overall, more consistent with a contract of
employment than an independent contractor relationship.
[90]
Mr. Rossiter’s
income tax returns were mostly filed on the basis of self‑employment
income although in one year, 2005, he reported his income as employment income. On the
other hand, Mr. Rossiter did not register for GST until June 1, 2007,
three and a half years after he started, even though his gross revenue was
above the small supplier threshold in 2004.
[91]
Mr. Rossiter’s tax
reporting as to his status is ambiguous for the period as a whole although
towards the end of the period it is more consistent with being an independent
contractor.
[92]
Mr. Rossiter did
not send invoices for his services to Advantage. Advantage calculated his
commissions.
[93]
The second agreement
does not have many of the terms consistent with employment found in the first
agreement. However, I note that it still provided for the bulk of the tools to
come from Advantage in the form of the truck and its contents. It also
continued to prohibit use of the truck for anything other than Advantage’s
business.
[94]
Nothing in the other
evidence apart from the second agreement suggests a change in contractual
intent at the time of the signature of the second agreement. Indeed,
Mr. Van Hunenstijn’s evidence, quoted above in paragraph 52, is that there
was no change of intent in writing the new contract.
[95]
To summarize, overall
the subjective intent is ambiguous.
The Objective Reality
[96]
Mr. Rossiter was a
very experienced plumber and little or no direct supervision was needed or
carried out. This is not uncommon for people with a high degree of skills even
when they are employees.
[97]
On the other hand,
Advantage had a high degree of, but not complete, juridical control. Only
Advantage could send him to jobs, although I accept that he could refuse
specific jobs and that he sometimes insisted on jobs at locations that were
geographically closer than what was first proposed. I accept that he avoided,
at least a few, jobs that might not pay well in favour of other jobs.
[98]
However, such behaviour
is not necessarily inconsistent with a senior, experienced employee.
[99]
With respect to tools,
Mr. Rossiter only had some small tools, as against the truck and the tools
and parts in it provided by Advantage. The investment was overwhelmingly that
of Advantage.
[100] It is also worth noting that there was no
suggestion that Mr. Rossiter owned his own service truck with similar
contents and, as a result, he could not, as a practical matter, carry out a
similar business. Without such a truck and its contents, at most, he could do
some very minor and simple work with the tools he owned, a poor use of his
experience and skills.
[101]
With respect to profit
and loss, there was very little risk of loss. He had little investment and,
given his experience, the worst that was likely was that if he underestimated
the time required he might earn less per hour than expected.
[102]
On the profit side, he
could earn more if he worked faster and longer but this is not dissimilar from
an employee on commission.
[103]
It is also worth
recalling that, apart from some ability to obtain “better” jobs than
those first offered, he operated like an employee in most respects. He went to
sales meetings, for example. In addition, customers would not know that he was
not an employee.
[104]
Towards the end of the
period in issue, Mr. Rossiter may have taken on a small number of plumbing
jobs privately that were not done for Advantage. However, the only evidence at
all on this are two advertisements in 2010 and the phone call received by
Ms. Cockroft in May 2010 regarding work in 2009 where the Advantage service
truck was used. If this were the case, and it is not necessarily that I make a
finding on the point, it would have been done in violation of his agreement
with Advantage given that the service truck was allegedly used.
[105]
The overall balance of
factors, especially ownership of the tools and the relatively high but not full
juridical control of the work, leads to the conclusion that the relationship
was one of employment.
[106] There remain two other matters to deal
with.
Estoppel
[107] Advantage made an argument that, in effect,
Mr. Rossiter was estopped at this point from asserting he was an employee.
Advantage accepted that there was no estoppel against the Crown.
[108]
Whatever argument might
or might not be made in an action between Advantage and Mr. Rossiter, it
is unnecessary for me to deal with it here insofar as the Crown is entitled to
bring out all the facts in respect of the issue before this Court.
Are the Decisions Too Late?
[109] Advantage raised a concern that decisions
in July 2011 going back to November 2003 went too far back and were unfair.
Advantage accepted that the Employment Insurance Act did not have a time
limit for these decisions.
[110]
The decisions are not
too late. I would note, however, that there is a three‑year limitation on
assessing employment insurance premiums pursuant to subsection 85(3) of the Employment
Insurance Act and a four-year limitation on assessments made under
subsection 22(3) of the Canada Pension Plan.
[111]
While not certain, it
would appear that at the first date of hearing, no assessment had yet been
made.
[112]
As a practical result,
it may be that premiums can no longer be assessed for much or most of the
period in issue.
Conclusion
[113]
For these reasons, the
appeals will be dismissed.
Signed at Ottawa, Ontario, this 31st day of May 2013.
“Gaston Jorré”
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