Date: 19990407

Dockets: 97-851-UI; 97-95-CPP

BETWEEN:

DR. EFRAIM TSIMERMAN,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

and

LESLEY HAGAR,

Intervenor.

Reasons for judgment

(Delivered orally from the Bench in Toronto, Ontario, on November 5, 1998.)

Hamlyn, J.T.C.C.

[1] This is in the matter of Dr. Tsimerman, the Appellant and the Minister of National Revenue (the "Minister"), the Respondent and Lesley Hagar, the Intervenor. At trial the Intervenor withdrew her intervention and gave evidence on behalf of the Appellant.

[2] These are appeals that arise from a determination by the Minister that Lesley Hagar and Karen Berdugo were employees of the Appellant for the purposes of the Unemployment Insurance Act (the "Act") and the Canada Pension Plan for the period January 1st, 1994 to May 22nd, 1996.

[3] The Minister issued a Notice of Assessment dated August 6th, 1996 for failure to remit unemployment insurance with respect to these employees in the amount of $348.19 for 1995 and $268.53 for 1996 and Canada Pension Plan contributions in the amount of $307.66 for 1995 and $327.35 for 1996 and related penalties and interest. The assessment was subsequently confirmed by means of a Notice of Confirmation dated February 20th, 1997.

[4] The Appellant is a dentist who operated his own dental practice during the period in question. The Appellant had dental hygienists who provided services to patients. It is the status of these hygienists which is the basis of these appeals.

[5] The issues before the Court are threefold:

- Were the hygienists independent contractors or employees of the Appellant during the period in question?

- Were the hygienists engaged in insurable employment within the meaning of paragraph 3(1)(a) of the Act during the period in question?

- Were the hygienists engaged in pensionable employment within the meaning of subsection 6(1) of the Canada Pension Plan during the period in question?

[6] From the legislation, the Minister submits that the hygienists were engaged in insurable employment within the meaning of paragraph 3(1)(a) of the Act and the Minister also submits that the hygienists were engaged in pensionable employment with the Appellant within the meaning of subsection 6(1) of the Canada Pension Plan.

[7] In order to determine whether the hygienists were engaged in insurable employment or pensionable employment, it is incumbent upon the Court to review the common law tests in employment as they apply to the hygienists. And from those tests I will go through the following analysis, that is, the analysis to determine if a contract of service or a contract for service exists.

Control and Supervision

[8] The key question is who had the right to control the worker and the right to direct the worker? That is, did the right exist even though it may not have been exercised?

Profit and Losses

[9] The opportunity for profit and the risk of losses is based on the notion that in an employer/employee relationship, an employee does not generally incur expenses and does not bear any financial risk and has no chance of profit.

Ownership of Tools

[10] Generally, if the employer supplies the tools, it indicates control over the worker.

The Organization or Integration Test

[11] That is the analysis to determine the ultimate question, whose business is it? That is the combined forces of the whole scheme of operations is used to look to what conclusion. It is necessary to look at more than the surface relationship, to look at the intrinsic relationship between the parties. No single test is conclusive. All the evidence must be looked at.

[12] In looking at these tests it is also important that the Court look at the legislative background as well as the jurisprudential background. And I have had two cases referred to me today which are of particular interest.

[13] Specifically in relation to hygienists, in Bradford v. M.N.R., 88 DTC 1661, Judge Taylor of this Court reviewed the four tests in relation to a dental hygienist and concluded that she was an independent contractor rather than an employee of the dental practice where she performed her services.

[14] The Court stressed that the importance of the facts that she set and maintained her own work schedules and was not supervised by the dentist in question. The Court found a written contract existed between the parties to this effect and that barring evidence clearly to the contrary, effect should be given to the intent underlying this contract.

[15] The Court concluded, despite the requirement that a hygienist perform her services within the context of a licensed dental practice, the hygienist had sufficient control and independence of the dentist to constitute a contract for services.

[16] I have also had referred to me the case of Arthur v. Canada. It is an unreported case that was given to me this morning, [1995] T.C.J. No. 947, Tax Court of Canada, August 15th, 1995 by Judge Beaubier.

[17] There the Appellant, Donnalee Arthur, was a dental hygienist. Ms. Arthur provided services five days a week for two dentists. Ms. Arthur decided her own course of treatment, set up her own appointments, provided her own tools and purchased her own professional liability insurance.

[18] The Tax Court found that Ms. Arthur was an independent contractor. And Judge Beaubier stated at paragraph 12:

In the view of the Court, the Appellant is self-employed. That is what the parties intended. The supervisory restrictions are those of the parties' professional associations. However, they are nominal... The Appellant's risk of loss is small, but her profit is totally dependent on her practice.

[20] With that background I turn now to the significant facts of the case that I have heard this morning.

[21] The parties in their contractual agreements stated it was a contract for services. The dental hygienist was clearly identified as an independent contractor. Moreover, a reading of the contract would lead one to the conclusion that it was an independent contractor relationship, but the Court must look at all of the facts.

[22] The patient who had the services of the dental hygienist was billed through the dental office on a per hour basis. The rate per hour that the hygienist received from the dentist was based on a negotiated per patient basis and to arrive at a figure that would cover the terms of the contract. Other factors were considered to come to the negotiated result, including the doctor built into the hourly rate compensation for the use of his premises, his equipment, his receptionist and allocation for the reception area in the offices that he provided. All this was taken into account between the two parties where they arrived at the rate per hour that was due to the dental hygienist.

[23] The hygienist from the doctor's evidence was free to control her activities. She had no set hours. She was not supervised and not at all times was the dentist on the premises. There was no minimum and no maximum in terms of patients to be served or hours to be worked. The hygienist also saw other patients and those patients were not the patients of this particular Appellant doctor. She provided her own hand tools, such as scalers and she also provided her own uniforms.

[24] The doctor went on to say that no benefits were provided and that he provided no training for the hygienist. And he further stated the practice could exist without a hygienist, but in terms of the running of the business, he felt that it was a complimentary part of his business and better served his business ends.

[25] We also heard from one hygienist who was originally an Intervenor in this case and she stated from the outset, "I always thought I was running my own business, my own hygienist business". She said she could see as many or as few patients as she chose. She also stated that she provided services to other dentists in the same context and was completely in control of her own practice. She said she billed the dentists for the services that she rendered and that she provided her own liability and disability insurance and provided the tools that I referred to earlier in the evidence of the Appellant.

[26] In essence, the hygienist stated that the Appellant doctor did not control her with respect to how she provided her services.

[27] With that we go to an analysis of the case before the Court and I found the following:

- The hygienists were members in good standing with the College of Dental Hygienists of Ontario and, as such, were not permitted to perform services independent of a licensed dental practice. This fact did not mitigate the hygienist's ability to perform services as independent contractors.

- The hygienists entered into an agreement to provide dental hygiene services to the Appellant's patients. These were intended to be complimentary professional services. The hygienists were not bound to provide services solely for the Appellant's patients and were in fact providing services to other dental practices in the course of the agreement.

- The Appellant did not supervise or control the hygienists' work. The hygienist were responsible for booking their own appointments and controlled their own work schedule. Some of the hygienists' patients were referred to them by the Appellant but there were also other outside patients that came to them.

- The hygienists controlled their patient volume and controlled their remuneration and their profit making ability. The hygienists undertook a risk of loss in that they incurred expenses regardless of the volume of the patient services rendered.

[28] The Appellant did not undertake to provide employee benefits such as medical and life insurance, as far as I understand.

[29] The hygienists were required, by the terms of the agreement, to provide and pay for their own professional liability insurance and hand tools such as scalers. And quite clearly the Appellant did not provide professional training to the hygienists.

[30] Looking at the jurisprudential tests that the Federal Court of Appeal has directed this Court to examine, first under the heading of control and supervision. The hygienists were subject to a degree of control by the Appellant by virtue of the fact that they are required by law to perform their services in a licensed dental practice, hence the hygienists were not in a position to establish their own practice outside the confines of a dental practice. However, as pointed out in Bradford (supra) that fact does not automatically exclude the possibility that the hygienists were independent contractors.

[31] In terms of risk of profit and loss, the hygienists incurred business expenses, regardless of the volume of services provided. These expenses included equipment and professional liability insurance required by the hygienists in their agreement with the Appellant. Their profits were a direct function of the work volume that they chose to do and the schedule that they undertook.

[32] The Crown attempted to establish that there was an issue of bad debts and tried to establish how that would be met. But from the evidence of the hygienists and the Appellant doctor, bad debts appeared not to be an issue because in fact most of the payments for the hygienists' services come from insurance plans.

[33] In terms of ownership of tools. As I have stated, the Appellant provided both the premises and the major equipment associated with the hygienists' services but the hygienists were required to pay and supply their own small hand tools.

[34] The last test, integration into the Appellant's dental practice. I conclude the hygienists added to the value of the overall services provided by the dental clinic but they were not primary to its survival. Certainly, the Appellant could have provided dental services without a hygienist. I cannot conclude these services were integral to the Appellant's business. As such, I find in summary the hygienists were independent contractors rather than employees.

[35] Therefore, in terms of the conclusion, the hygienists engaged by the Appellant were not in insurable employment within the meaning of paragraph 3(1)(a) of the Act and they were engaged by the Appellant under a contract for service, with the result that the Appellant was not properly assessed pursuant to section 56 of the Act.

[36] The decision in relation to that case (unemployment insurance) is the appeal is allowed and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that the hygienists engaged by the Appellant were engaged under a contract for service.

[37] In relation to the Canada Pension Plan, the conclusion is the hygienists were engaged by the Appellant under a contract for service and were not engaged in pensionable employment within the meaning of the Plan as they were engaged by the Appellant under a contract for service; with the result that the Appellant was not properly assessed pursuant to section 22 of the Plan.

[38] The decision is the appeal (Canada Pension Plan) is allowed and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that the hygienists who were engaged by the Appellant were engaged under a contract for service.

Signed at Ottawa, Canada, this 7th day of April 1999.

"D. Hamlyn"

J.T.C.C.