Date: 20110922
Docket:
A-388-10
Citation: 2011 FCA 256
CORAM: SHARLOW
J.A.
PELLETIER J.A.
STRATAS
J.A.
BETWEEN:
TBT PERSONNEL
SERVICES INC.
Appellant
and
HER MAJESTY
THE QUEEN
Respondent
REASONS FOR
JUDGMENT
SHARLOW J.A.
[1]
In
2005, the Minister of National Revenue determined that 96 truck drivers engaged
by the appellant TBT Personnel Services Inc. in 2002, 2003 and 2004 were employees
of TBT during those years. On the basis of that determination, the Minister
assessed TBT for premiums payable under the Employment Insurance Act,
S.C. 1996, c. 23, and contributions payable under the Canada Pension Plan,
R.S.C. 1985, c. C-8, in respect of the 96 drivers.
[2]
TBT
requested a review of the assessments, which were confirmed. TBT then appealed the
assessments to the Tax Court of Canada. For reasons now reported as TBT
Personnel Services Inc. v. Canada (Minister of National Revenue - M.N.R.),
2010 TCC 360, the judge concluded that during the relevant period, 53 of the 96
drivers were employees of TBT but the other 43 drivers were not, and he ordered
the assessments to be varied accordingly.
[3]
TBT
has appealed the judgment relating to the 53 drivers who were held to be
employees of TBT, and the Crown has cross-appealed the judgment relating to the
43 drivers who were held not to be employees of TBT. At the hearing of the
cross-appeal, the Crown conceded that the judge had correctly determined that 4
of those 43 drivers were not employees of TBT.
[4]
For
the reasons that follow, I would dismiss the appeal of TBT with respect to the
53 drivers who were held to be employees of TBT, and allow the Crown’s cross-appeal
in respect of the other 43 drivers except the 4 drivers that the Crown has
conceded were not employees of TBT.
The legislation
[5]
TBT
must pay premiums under the Employment Insurance Act and contributions
under the Canada Pension Plan for any drivers who are its employees. The
determination as to whether that obligation arose in this case turns on the
following definitions (my emphasis):
Employment Insurance Act
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Loi sur l’assurance-emploi
|
5. (1) Subject to
subsection (2), insurable employment is
|
5. (1) Sous réserve du
paragraphe (2), est un emploi assurable :
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(a) 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;
|
a) l’emploi exercé au Canada
pour un ou plusieurs employeurs, aux termes d’un contrat de louage de
services ou d’apprentissage exprès ou tacite, écrit ou verbal, que
l’employé reçoive sa rémunération de l’employeur ou d’une autre personne et
que la rémunération soit calculée soit au temps ou aux pièces, soit en partie
au temps et en partie aux pièces, soit de toute autre manière;
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Canada Pension Plan
|
Régime de pensions du Canada
|
2. (1) In this Act,
|
2. (1) Les définitions
qui suivent s’appliquent à la présente loi.
|
…
“employment”
means the performance of services under an express or implied contract of
service or apprenticeship, and includes the tenure of an office.
|
[…]
« emploi » L’accomplissement de services aux termes d’un
contrat de louage de services ou d’apprentissage, exprès ou tacite, y
compris la période d’occupation d’une fonction.
|
[6]
In
the common law provinces of Canada, the phrase “contract of service” describes the
relationship between an employer and its employee, while the phrase “contract
for services” is used to describe the relationship that arises when one person engages
a self-employed person or an independent contractor to perform services. (The
corresponding terms in the Civil Code of Québec,
S.Q. 1991, c. 64, are « un contrat de travail »
and « un contrat d'entreprise » ; see articles 2085 and
2098).
[7]
It appears
to be undisputed in this case that the legal relationship between TBT and its
drivers is governed by the laws of Ontario, and thus the common law.
The Wiebe Door analysis
[8]
The
leading case on the principles to be applied in distinguishing a contract of
service from a contract for services is Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553
(C.A.). Wiebe Door was approved by Justice Major, writing for the
Supreme Court of Canada in 67112 Ontario Ltd. v. Sagaz Industries Canada
Inc.,
2001 SCC 59, [2001] 2 S.C.R. 983. He summarized the relevant principles as
follows at paragraphs 47-48:
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. 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.
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[9]
In
Wolf v.
Canada,
2002 FCA 96, [2002] 4 F.C. 396 (C.A.), and Royal Winnipeg Ballet v. Canada
(Minister of National Revenue - M.N.R.), 2006 FCA 87, [2007] 1 F.C.R. 35, this Court added
that where there is evidence
that the parties had a common intention as to the legal relationship between
them, it is necessary to consider that evidence, but it is also necessary to consider
the Wiebe Door factors to determine whether the facts are consistent
with the parties’ expressed intention.
Applying the relevant
principles
[10]
In
this case, the key question with respect to each of the 96 drivers is this:
did TBT
engage the driver as a person in business on his own account? For any driver
for whom the answer is yes, TBT is entitled to an order vacating the
assessments. For any driver for whom the answer is no, the assessments must
stand.
[11]
TBT
presented documentary evidence, the testimony of Mr. Tony Santos who is the
owner and operator of TBT, and the testimony of two drivers engaged by TBT pursuant
to written agreements, Mr. David Howson and Mr. Perry Lamers. The Crown
presented the testimony of another driver engaged by TBT, Mr. Brian Boddington.
[12]
The
judge made no adverse comments about the credibility of any of the witnesses.
For that reason, I have assumed that each of them was honestly stating his
understanding of the facts.
[13]
TBT’s
evidence was intended to persuade the judge to infer that all 96 drivers were
engaged by TBT on the same terms and conditions. The judge did not draw that
inference and in my view he could not reasonably have done so on the evidence.
There were written agreements between TBT and 43 of the 96 drivers, but there
was no evidence as to whether any of the other 53 drivers had agreed to the
same terms. Mr. Santos testified that he (and thus TBT) considered all of the
drivers to be self-employed. Mr. Howson and Mr. Lamers testified that they
intended from the outset not to provide their services as employees of TBT. However,
Mr. Boddington, who was engaged by TBT as a driver and did not sign an
agreement, testified that he considered himself to be an employee.
[14]
The
nature of the evidence led the judge to divide the drivers into two groups. One
group consisted of the 43 drivers who had signed an agreement with TBT. The
other group consisted of the 53 drivers for whom there was no evidence of a written
agreement with TBT. The judge considered the two groups separately. I see no
error in that approach, and I will do the same.
The 43 drivers who
signed an agreement with TBT
[15]
The
judge concluded that the 43 drivers who had signed an agreement with TBT were
not employees of TBT. That part of his judgment is challenged in the Crown’s cross-appeal.
[16]
The
evidence relating to these 43 drivers was provided primarily through the
testimony of Mr. Santos, who explained generally how the drivers were engaged
and the circumstances in which the agreements were signed. The agreements are
identical except for the named parties. Mr. Howson and Mr. Lamers were included
in this group, and gave evidence as to their own situation. (The evidence of
Mr. Boddington addressed only his situation, and as he was not one of the
drivers who signed an agreement, his evidence is not helpful in determining the
facts relating to the drivers who signed an agreement.)
[17]
During
the relevant period, TBT engaged drivers to provide services to its client Locomote
Systems Inc., the business of which included the transportation of steel
products. Locomote would pay TBT a fee based on mileage, and TBT would pay the
drivers a fee based on the same mileage but at a lower rate. The drivers did
not negotiate their rates of pay. The record does not disclose the terms of any
agreements between Locomote and its clients.
[18]
Locomote
is a corporation controlled and operated by the spouse of Mr. Santos. During
the relevant period, Locomote leased trucks from a related corporation,
Centinel Equipment Leasing Inc., and provided the leased trucks to the drivers
engaged by TBT.
[19]
Locomote’s
clients included steels mills such as Dofasco Inc. in Hamilton, Ontario.
Typically, the steel mills required Locomote to transport their steel products
to factories in Ontario and Quebec. That required specially
equipped trucks and drivers with specialized knowledge, experience and skill,
as well as the appropriate licences and professional credentials.
[20]
The
trucks that Locomote supplied to the TBT drivers were equipped with items
required to secure loads, such as tarps, chains, and binders. There is evidence
that some but not all drivers provided some equipment of that kind, although
the agreements did not require them to do so. No driver supplied his own truck.
The drivers did not bear any of the costs of operating the trucks (including fuel,
insurance, and maintenance). However, the drivers were responsible for any
damage to the trucks or related equipment caused by their negligence (except to
the extent the damage was covered by the insurance carried by Locomote or
Centinel). The drivers were also required to pay any tickets and fines for
which they were responsible.
[21]
Mr.
Santos testified that TBT did not supervise the work of the drivers. The
evidence of Mr. Howson and Mr. Lamers was to the same effect. Indeed, there is
no evidence that the drivers were supervised by anyone. However, there is
evidence that the drivers were highly skilled and experienced professional
drivers, suggesting that they would have required little supervision apart from
the necessary instructions for obtaining assignments (which I assume was
provided initially by TBT), and complying with the requirements of Locomote and
its clients.
[22]
The drivers’
assignments were managed by Locomote through its dispatcher. The drivers would
contact the dispatcher when they were available for work, and they would be
assigned to transport a particular load from one of Locomote’s steel mill
clients to one of the mill’s customers in Ontario or Quebec. The drivers determined
the days on which they were available for work, and could take time off when
they wished. This is consistent with the evidence of Mr. Santos that the
drivers were in high demand because of their special skills.
[23]
Dofasco
periodically conducted “compliance audits” to ensure that the credentials and
practices of the drivers provided by Locomote met a certain standard. It is not
alleged that this amounted to supervision of the drivers. It is not clear
whether any other clients of Locomote also conducted such audits. The record
does not disclose the purpose of the Dofasco compliance audits, but it seems
reasonable to infer that Dosfasco had legitimate business reasons for ensuring
the competence of the drivers who were responsible for transporting its
products.
[24]
The
single document in the record that provides evidence of a Dofasco compliance
audit indicates that Dofasco required the following:
a. the Dofasco
contractor health and safety handbook must be available and current;
b. the driver
must adhere to corporate safety rules and guidelines;
c. the driver
must have the required personal protective equipment and work clothing;
d. the driver
must adhere to corporate road rules and guidelines;
e. the driver
must adhere to site specific rules and guidelines;
f.
the
driver must meet fitness for work requirements;
g. the driver
must utilize the Dofasco standard crane signals;
h. the driver
must adhere to site specific safety rules;
i.
the
driver must be properly positioned while the truck is loaded;
j.
the
trailer must have a functional back up horn;
k. the driver
must secure the tarping system on the load.
[25]
The
compliance audit document also notes that failure to reach a 100% compliance
rating would result in a written non-conformance rating. A second
non-conformance rating within a year would result in a “final” written
non-conformance rating. A third non-conformance rating would “jeopardize any
future business with Dofasco Inc.”. I take this was a warning to Locomote that
its contract with Dofasco could be terminated if the compliance audits
disclosed three problems within one year with the credentials or practices of
one or more of the drivers provided by Locomote. I infer that any loss of
business suffered by Locomote would adversely affect TBT, and could lead to the
termination of the engagement of the driver or drivers who caused the
non-conformance rating.
[26]
Mr.
Santos engaged the drivers for TBT. He followed a checklist entitled “driver
qualification files – hiring procedure”. Most of the items of the checklist
appear to relate in some way to the professional credentials, experience and
driving record of the driver.
[27]
One
item on the checklist is entitled “Corporation”. Mr. Santos, in direct
examination, gave the following testimony relating to that item (transcript
page 30:17 – 31:25):
A.
|
…
Corporation is the corporation that they would supply me so that I could pay
them.
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Q.
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Let’s
just turn to the corporation. Why is that on the interview sheet?
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A.
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When
you are dealing with these types of drivers in the steel industry, they live
a hard life and they like to take a lot of time off. You sign these people up
for a year and you keep them working, but they do take a lot of time off. We
hire them within the corporation so that they can do what they want. If they
feel like working one week, they could work one week. If they don’t feel like
working, they don’t have to work. We hire them under a corporation so that we
can send them to several different places.
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Q.
|
What
if they don’t have a corporation? Do you still hire them?
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A.
|
Yes.
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Q.
|
How
do you treat them?
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A.
|
I
treat them as if they are self-employed. They sign a contract with me.
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Q.
|
Do
you ever hire somebody that that does not sign a contract, who for one reason
or another doesn’t get to sign a contract?
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A.
|
Yes.
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Q.
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Why
is that?
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A.
|
Because
there is such a shortage of these people in the steel industry that sometimes
these people will come to you and say, “It’s okay, Tony. Pay me as a
subcontractor. Pay me the gross amount and I will do my tax.
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Q.
|
That
is what they tell you?
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A.
|
That is what they tell me and they sign
a contract. Sometimes they don’t.
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[28]
Mr.
Santos was not cross-examined on this part of his testimony. It was apparently
accepted by the judge as an accurate expression of Mr. Santos’ understanding of
the hiring process, and his preference that TBT enter into a written agreement
with a corporation owned by a driver (sometimes referred to as an “incorporated
driver”), rather than the driver alone. Mr. Santos also testified that if a
driver had no corporation, he nevertheless would cause TBT to enter into a written
agreement with the driver personally, and he would also cause TBT to engage a
driver who did not sign an agreement.
[29]
The
agreements signed by 43 of the 96 drivers contain this clause:
The
Contractor represents and warrants that the Contractor hereby desires to
engage in the business as an independent contractor and is fully qualified
and adequately equipped to carry on such business. The Contractor agrees to
perform such transportation and ancillary services including loading and
unloading as required by the Company’s customers. The parties agree that the
relationship between the parties reflects a contract for service.
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The “Company” means TBT. The “Contractor”,
in the case of a driver who is an “incorporated driver”, is the driver’s
corporation, and otherwise it is the driver.
[30]
The
Crown admitted in its pleadings in the Tax Court that “incorporated drivers”
were not engaged by TBT under contracts of service. I assume that admission
flowed from the fact that in the case of an incorporated driver, it was the
driver’s corporation that undertook to provide transportation services through
the named driver, while the driver promised to “guarantee” the performance of
the corporation’s obligations. The assessments under appeal relate to 96
drivers who the Minister believed, at the time of assessment, not to be “incorporated
drivers”.
[31]
From
paragraph 49 of the judge’s reasons, it appears that he considered any driver
who had signed one of the 43 agreements in the record to be an “incorporated
driver”. On that basis, and in light of the Crown’s admission in the pleadings,
the judge concluded that TBT’s appeal should succeed with respect to those 43
drivers.
[32]
That
conclusion is based on a misapprehension of the facts, and cannot stand. Of the
43 drivers who signed agreements with TBT, only 2 were “incorporated drivers” –
Mr. Justin Nurse (1507978 Ontario Inc.) and Mr. W. Wood (2041435 Ontario Inc.).
In this Court, the Crown conceded that its cross-appeal should be dismissed in
respect of those two drivers. The Crown also conceded that its cross-appeal
should be dismissed in respect of Mr. Howson and Mr. Lamers, who testified that
they carried on business on their own account. Those concessions reduce to 39
the number of drivers who are the subject of the Crown’s cross-appeal.
[33]
As
a result of the judge’s approach to the 43 drivers (now 39) who had signed
agreements, he did not consider the legal tests to be applied in determining whether
they were employees of TBT. This Court could require a new hearing in the Tax
Court, or determine the matter de novo on the record. In my view, the
latter is more appropriate in the circumstances.
[34]
The
agreement signed by each of the 39 drivers contained a clause in which the
driver represented that he was an independent contractor, and another clause
expressing the driver’s agreement that he was not being engaged as an employee.
Those clauses suggest a common intention that the driver would be engaged as a
person carrying on his own business.
[35]
Such
intention clauses are relevant but not conclusive. The Wiebe Door
factors must also be considered to determine whether the contractual intention
suggested by the intention clauses is consistent with the remaining contractual
terms and the manner in which the contractual relationship operated in fact. My
analysis of the Weibe Door factors is as follows:
A.
The level of control TBT had over the worker's activities. As stated
above, TBT did not directly supervise the work of the drivers. In my view, this
is a neutral factor in the circumstances of this case. The drivers were highly
skilled professional drivers who probably would have needed little supervision
whether they were employees or self-employed.
B.
Whether the drivers provided their own equipment. The written agreements
did not require the drivers to provide their own trucks or bear any of the
costs of operating the trucks. Nor did they require the drivers to provide
their own tools or equipment. This favours the conclusion that the drivers were
employees.
C.
Whether the drivers hired helpers. The written agreements gave the drivers
the right to substitute another driver at their own cost, subject to certain
conditions. That is consistent with the drivers being self-employed. However,
there is no evidence that any driver ever exercised this right, which suggests
that this factor should be afforded little weight.
D. The degree
of financial risk taken by the drivers. The drivers bore no
financial risk related to any investment in trucks or equipment, or the cost of
operating or insuring the trucks. The only financial risk they bore related to
their contractual obligation to pay any fines they incurred as a result of breaching
traffic or safety rules, and to pay for any damage to the trucks or equipment
caused by their own negligence (except insured losses). It is not unusual for
employees to be required to pay their own fines for unlawful conduct. It is
more unusual, but not unheard of, to require employees to pay for damage to
property caused by their own negligence. However, those elements of financial risk
are relatively minor compared to what must be the largest financial aspect of
the drivers’ work, namely the cost of the truck and its operation. On balance,
I conclude that the facts relating to financial risk are more consistent with
the drivers being employees than self-employed.
E. The degree
of responsibility for investment and management held by the drivers. The drivers
bore no responsibility for investing in anything required to fulfil their
contractual obligations to TBT, or for managing their work to any extent not
required of an employee. They obtained their assignments from the dispatcher,
loaded the truck, transported the load, and unloaded the truck at its
destination. Even the invoices relating to the drivers’ work were prepared by
TBT. This favours the conclusion that the drivers were employees.
F.
The opportunity for profit. The drivers did not negotiate their rates of
pay. They could have earned more only by taking more assignments and avoiding fines
and damages. Since the operating costs of the trucks were borne by Locomote,
the drivers could not expect to benefit financially by operating the trucks
more efficiently. This favours the conclusion that the drivers are employees.
[36]
The
Wiebe Door factors on balance favour the conclusion that the drivers who
signed agreements with TBT were employees, clearly contradicting the intention
clauses in those agreements. I conclude, paraphrasing the words of Justice
Major in Sagaz, that the drivers who signed the agreements were not engaged
to perform services as persons in business on their own account (except, as
conceded by the Crown, Mr. Nurse, Mr. Wood, Mr. Howson and Mr. Lavers).
[37]
It
follows that I would dismiss the Crown’s cross-appeal with respect to Mr.
Nurse, Mr. Wood, Mr. Howson and Mr. Lavers, and allow it with respect to the remaining
39 drivers who signed agreements with TBT.
The 53
drivers for whom there was no evidence of a written agreement with TBT
[38]
As
to the 53 drivers for whom there was no evidence of a written agreement with
TBT, the judge said only this at paragraph 50 of his reasons:
I
am not prepared to recognize that the remaining 53 workers (other than Mr.
Howson) are independent contractors.
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There is a factual error in this statement. Mr.
Howson was one of the drivers who had signed an agreement with TBT, and he
should not have been named as one of the 53 drivers who did not.
[39]
Putting
that error aside, I interpret paragraph 50 of the judge’s reasons to mean that
he was not persuaded that any of the 53 drivers for whom there was no evidence
of a written agreement was self-employed. In my view, that conclusion was
reasonably open to the judge on the evidence.
[40]
Mr.
Santos gave general testimony about the business of TBT, the hiring of the
drivers, and their working arrangements, but his testimony fails to establish
what the contractual terms and working conditions were for each of the 53 drivers
who did not sign agreements
[41]
I
conclude that the judge made no error of law, and no palpable and overriding
error of fact, when he dismissed TBT’s appeal in so far as they related to the
53 drivers for whom there was no evidence of a written agreement. It follows
the assessments must stand in relation to those 53 drivers, and on that basis I
would dismiss TBT’s appeal.
Conclusion
[42]
For
these reasons, I would dismiss the appeal of TBT and allow the Minister’s
cross-appeal with respect to all of the drivers who signed agreements with TBT
except Mr. Nurse, Mr. Wood, Mr. Howson, and Mr. Lamers. I would set aside the
judgment of the Tax Court and, making the judgment that should have been made,
dismiss the appeal of TBT from the assessments dated August 17, 2005 under the Canada
Pension Plan and the Employment Insurance Act except with respect to
Mr. Nurse, Mr. Wood, Mr. Howson and Mr. Lamers.
[43]
As
the Crown has been substantially successful on the appeal and the cross-appeal,
I would award the Crown costs in this Court.
“K.
Sharlow”
“I
agree
J.D. Denis Pelletier”
“I
agree
David Stratas J.A.”