Date: 20010924
Docket: 1999-2626-EI,
2000-5096-CPP
BETWEEN:
3562710 MANITOBA LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasonsfor Judgment
Porter, D.J.T.C.C.
[1] This appeal was heard on the 9th of May, 2001 at Winnipeg, Manitoba.
[2] The Appellant has appealed from the decision of the Minister of National Revenue (the "Minister") dated March 11, 1999 that contributions under the Canada Pension Plan (the "Plan") were payable on earnings paid to Maurice James Charette (the "Worker") during the period January 1, 1997 to July 6, 1998 for the following reason:
"Maurice James Charette was employed under a contract of service and therefore he was an employee."
The decision was said to be issued pursuant to subsection 27.2(3) of the Plan and was based on paragraph 6(1)(a) thereof.
[3] The material facts reveal that the Worker was engaged by the Appellant to drive a taxi cab owned by the Appellant in and as part of the fleet of Duffy's Taxi Cabs ("Duffy's") in Winnipeg, throughout the period in question. The agreement between them was oral and never reduced to writing. The Appellant, represented by Barbara Dixon, its major shareholder, maintained that the arrangement was a contract for services with an independent contractor. The Minister, on the other hand, has decided that it amounted to a contract of service with an employee. That is the issue between the parties.
[4] The Minister had issued a similar decision under the provisions of the Employment Insurance Act (the "EI Act"). However, the Appellant did not pursue an appeal under that legislation as it was clear that the arrangement was covered under the special provisions of paragraph 6(e) of the Employment Insurance Regulations (Regulations) relating to taxi drivers. No such provisions, however, are contained in the Plan.
The Law
[5] The manner in which the Court should go about deciding whether any particular working arrangement is a contract of service and thus an employer/employee relationship or a contract for services and thus an independent contractor relationship, has been clearly laid out by the Federal Court of Appeal in Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025. The test to be applied has been further explained by that Court in Moose Jaw Kinsmen Flying Fins Inc. v. M.N.R., 88 DTC 6099. There are, following these cases, numerous decisions of this Court, which demonstrate how these appellate guidelines have been applied. In the Moose Jaw Kinsmen Flying Fins Inc. case, above, the Federal Court of Appeal said this:
"[Analysis]
The definitive authority on this issue in the context of the Act, is the decision of this Court in Wiebe Door Services Ltd. v. The Minister of National Revenue, 87 DTC 5025. MacGuigan J. speaking on behalf of the Court, analyzed Canadian, English and American authorities, and, in particular, referred to the four tests for making such a determination enunciated by Lord Wright in City of Montreal v. Montreal Locomotive Works Ltd., [1974] 1 D.L.R. 161 at 169-70. He concluded at page 5028 that:
Taken thus in context, Lord Wright's fourfold test [control, ownership of tools, chance of profit, risk of loss] is a general, indeed an overarching test, which involves "examining the whole of the various elements which constitute the relationship between the parties". In his own use of the test to determine the character of the relationship in the Montreal Locomotive Works case itself, Lord Wright combines and integrates the four tests in order to seek out the meaning of the whole transaction.
At page 5029 he said:
... I interpret Lord Wright's test not as the fourfold one it is often described as being but rather as a four-in-one test with emphasis always retained on what Lord Wright, supra, calls "the combined force of the whole scheme of operations," even while the usefulness of the four subordinate criteria is acknowledged. (emphasis added)
At page 5030 he had this to say:
What must always remain of the essence is the search for the total relationship of the parties.
He also observed "there is no escape for the trial judge, when confronted with such a problem, from carefully weighing all the facts."
... like MacGuigan J. we view the tests as being useful subordinates in weighing all of the facts relating to the operations of the Applicant. That is now the preferable and proper approach for the very good reason that in a given case, and this may well be one of them, one or more of the tests can have little or no applicability. To formulate a decision then, the overall evidence must be considered taking into account those of the tests which may be applicable and giving to all the evidence the weight which the circumstances may dictate."
[6] The nature of the tests referred to by the Court can be summarized as follows:
a) The degree or absence of control exercised by the alleged employer;
b) Ownership of tools;
c) Chance of profit and risk of loss;
d) Integration of the alleged employee's work into the alleged employer's business.
[7] I also take note of the further words of MacGuigan J., in the Wiebe case, above, where he approved the approach taken in the English courts:
"Perhaps the best synthesis found in the authorities is that of Cooke J. in Market Investigations, Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732, 738-9:
The observations of Lord Wright, of Denning L.J., and of the judges of the Supreme Court in the U.S.A. suggest that the fundamental test to be applied is this: "Is the person who has engaged himself to perform these services performing them as a person in business on his own account?" If the answer to that question is "yes", then the contract is a contract for services. If the answer is "no" then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors, which may be of importance, are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk be taken, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task. The application of the general test may be easier in a case where the person who engages himself to perform the services does so in the course of an already established business of his own; but this factor is not decisive, and a person who engages himself to perform services for another may well be an independent contractor even though he has not entered into the contract in the course of an existing business carried on by him."
[8] To this I would add the words of Décary, J.A. in Charbonneau v. Canada (M.N.R.),[1996] F.C.J. No. 1337, where speaking for the Federal Court of Appeal he said this:
"The tests laid down by this Court ... are not the ingredients of a magic formula. They are guidelines which it will generally be useful to consider, but not to the point of jeopardizing the ultimate objective of the exercise, which is to determine the overall relationship between the parties. The issue is always, once it has been determined that there is a genuine contract, whether there is a relationship of subordination between the parties such that there is a contract of employment ... or, whether there is ..., such a degree of autonomy that there is a contract of enterprise or for services. ... In other words, we must not pay so much attention to the trees that we lose sight of the forest. ... The parts must give way to the whole."
[9] With respect to the second aspect of the decision of the Minister, paragraph 6(g) of Regulations reads as follows:
"...employment of a person who is placed in that employment by a placement or employment agency to perform services for and under the direction and control of a client of the agency, where that person is remunerated by the agency for the performance of those services. SOR/97-31, s.1."
[10] In the case of Vulcain Alarme Inc. v. The Minister of National Revenue, (1999) 249 N.R. 1 in which the Federal Court of Appeal revisited the issue. Létourneau J.A. said this:
"... These tests derived from case law are important, but it should be remembered that they cannot be allowed to compromise the ultimate purpose of the exercise, to establish in general the relationship between the parties. This exercise involves determining whether a relationship of subordination exists between the parties such that the Court must conclude that there was a contract of employment within the meaning of art. 2085 of the Civil Code of Quebec, or whether instead there was between them the degree of independence which characterises a contract of enterprise or for services...."
He also said later in the same Judgment:
"A contractor who, for example, works on site on a subcontract does not serve his customers but those of the payer, that is the general contractor who has retained his services. The fact that Mr. Blouin had to report to the plaintiff's premises once a month to get his service sheets and so to learn the list of customers requiring service, and consequently the places where his services would be provided, does not make him an employee. A contractor performing work for a business has to know the places where services are required and their frequency just as an employee does under a contract of employment. Priority in performance of the work required of a worker is not the apanage of a contract of employment. Contractors or subcontractors are also often approached by various influential customers who force them to set priorities in providing their services or to comply with the customers' requirements."
And:
"... Although Mr. Blouin's income was calculated on an hourly basis, the number of hours of work were determined by the number of service sheets he received from the plaintiff. Mr. Blouin and his company thus had no guaranteed income. Unlike the technicians working as employees within the plaintiff's business, whose weekly salary was constant, Mr. Blouin's income fluctuated with the service calls. In fact, towards the end of his contract with the plaintiff Mr. Blouin was no longer doing the equivalent of forty hours a month as he was receiving few service sheets.
Further, Mr. Blouin, who used his own vehicle for work, had to pay the losses resulting from an accident in which he was involved and obtain another vehicle."
The Facts
[11] In deciding as he did, the Minister was said in the Reply to the Notice of Appeal signed on his behalf, to have relied upon the following assumptions of fact:
(a) the Appellant is in the business of providing taxi cab services;
(b) the Worker was hired as a taxi driver;
(c) the Worker worked a regular shift of 3:00AM to 3:00PM, Monday to Friday;
(d) the Appellant also employed another driver who drove the shift opposite to the Worker;
(e) the Worker received 50 % of the daily taxi earnings, net of G.S.T.;
(f) the Worker could not negotiate fares;
(g) the Worker notified the Appellant if he was going to miss a shift;
(h) the Appellant owned and provided the taxi;
(i) the Worker did not lease the taxi from the Appellant;
(j) the Worker could not use the taxi for personal use;
(k) the Appellant paid for all operating expenses;
(l) the Worker could not replace himself;
(m) the Worker reported to and was instructed by a dispatcher;
(n) the Worker was required to keep a record of the mileage he drove;
[12] Evidence was given by Barbara Dixon. She was the sole witness. She agreed with items 6(a), (b) (although she preferred the word "engaged" to the word "hired"); (c), (d) (again, she preferred the word "engaged" to the word "employed"); (e), (g), (h), (i), (j) (although she would not know if he did); (k), and (n).
[13] She disagreed with items (f), (l), and (m).
[14] I found Mrs. Dixon to be a straight forward and honest witness and have no hesitation in accepting her evidence in its entirety nor do I have any doubt that she genuinely believed the arrangement to be as she described it.
[15] The arrangement, as Mrs. Dixon described it, came about when her company purchased the cab in question in November 1996. She needed somebody to drive it. She spoke to Duffy's and they recommended the Worker to her. In order to form part of Duffy's fleet, she had to engage a driver acceptable to Duffy's and this worker was acceptable. The arrangement with Duffy's was to use their logo and their dispatch for which she paid a monthly fee, regardless of the use of the taxi.
[16] The Worker was hired to work from 3:00 a.m. to 3:00 p.m. Her understanding of the discussion was that he would be self-employed. After deducting G.S.T., he would receive 50% of the daily earnings of the cab and turn over the other 50%, together with the total G.S.T., to her. She had to trust him as there was no printout system on the meter. Her company paid all the expenses and maintenance costs on the cab. The Worker would be responsible for any damage caused to the cab by his own negligence and for any insurance deductible.
[17] The Worker would keep all his cash receipts in a special envelope, which she purchased from Duffy's. He could use money from this envelope for fuel and oil and would keep his receipts for these also in the envelope. On the outside of the envelope were listed each of the fares which he undertook. She had, however, no way to check up on the Worker and had to take him at face value. If he received cash for a trip with the meter turned off, she had no means of knowing. She did not know if that happened or not.
[18] Whenever the Worker could not drive, he would arrange for another driver. That driver would have to be part of Duffy's fleet of approved drivers. She would not necessarily know who was driving at any particular time.
[19] She said the Worker would get fares either through dispatch, for which she paid as part of her membership fee with Duffy's, directly off the street, or would receive direct calls over his cell phone.
[20] She would meet the Worker regularly to receive the envelope and the cash receipts.
[21] Those, really, are the salient facts as I understand them.
Application of the 4 Aspects of the Test to the Facts
[22] I first remind myself that it is not so much the label put upon any particular working arrangement by the parties as the real substance of the arrangement, with which the Court must concern itself. If parties choose a particular arrangement, it is not for the Minister or the Court to rewrite their arrangement. If the parties put a particular label upon an arrangement, the Court should give such due deference, in the absence of good reason to derogate from that choice of label. If, however, in reality the substance of the arrangement does not accord with the title put upon it by the parties, then it is the substance that must prevail.
[23] In actual fact, it is far from clear what label the parties put upon the arrangement in question as it was not reduced to writing. There is, however, some evidence that they intended to proceed on the basis of a contract for services. The evidence of Mrs. Dixon is to that effect and it is clear that she made no statutory deductions of the 50% of the receipts retained by the Worker.
[24] Control: I must remind myself when considering this aspect of the test that it is not so much whether actual control was exercised in any particular situation, that is important so much as consideration as to whether there was a right to control. The more competent professional and capable a worker may become, the less he or she may actually be supervised. However, it is the right to exercise some element of control that I must consider.
[25] The Appellant has indicated that much of what the Worker did was beyond the knowledge of Mrs. Dixon. She had to trust him. That, however, was the arrangement which she set up with him. She could have set up any other arrangement she chose so long as it was acceptable to Duffy's and the Worker. She, in actual fact, controlled the cab and could tell the Worker to present himself with the cab at any particular place or time. She set up the money arrangement with the envelopes, by which he was required to account to her. She had choices around the type of worker she installed in the vehicle. Whilst she did not direct him in his day-to-day driving, as he was a professional taxi driver and probably had more knowledge about how to do the job than she did. For her, it was an investment. For him, it was his work. The point, however, was that she could have given him this type of direction if she had so chosen. She owned the cab and could have terminated the arrangement at any time. She effectively had control even though she did not in practice exercise very much of it.
[26] This test, in my view, points more to a contract of service than a contract for services.
[27] Tools and Equipment: Clearly, in this situation the major tool was the cab itself along with the meter and the dispatch radio system and the envelopes. All of these were provided by the Appellant. All the Worker provided was his own cell phone. Clearly, the investment in this operation was principally that of the Appellant, not the Worker, who had no stake in it. He simply worked. This aspect of the test points to a contract of service.
[28] Profit and Loss: The driver worked for commission - 50% - after deduction of G.S.T. Out of the other 50%, the Appellant paid all the expenses. Clearly, the more he worked, the more the Worker made. However, that is not considered profit in the sense that the word is used in this situation. However, there was an element of entrepreneurial profit available to the Worker. The better he placed himself to find fares and the better service he offered, would all contribute to his success as would his relationship with the dispatch.
[29] However, with regard to loss, it seems the driver was at little risk except to the extent that he might carelessly damage the vehicle when he would be liable to at least pay the insurance deductible.
[30] There are elements of entrepreneurship in this situation. To that extent, this aspect of the test is somewhat ambivalent. Generally speaking, I am of the view that the test points far more to an employee working under a contract of service on commission than to a contract for services.
[31] Integration: The Appellant was clearly in business. The question is whether the Worker was also in business for himself or was he working for and as part and parcel of the business of the Appellant. One has to ask the question "whose business was it?" and that question has to be considered from the point of view of the Worker. He had no investment. He simply went to work and took a commission. He was not involved in the provision of that service nor did he deal with anybody else. He just did his job. He had to do it, if things had come down to the wire, in accordance with directions given to him by the Appellant. If he had left that engagement, he would have taken nothing with him; no goodwill, for instance. He would simply get a job somewhere else. There is, in this situation, not a sufficient degree of entrepreneurial independence on the part of the Worker from the business of the Appellant to say that he was in business for himself. In my view, this aspect of the test points far more clearly in the direction of a contract of service than to a contract for services.
Conclusion
[32] Counsel for the Minister relied on the case of Nadoryk (c.o.b. Duffy's Taxi 296) v. Canada (Minister of National Revenue - M.N.R.) [1996] No. 1708, a decision of my brother Judge Sarchuk of this Court, relating to another cab, part of the Duffy's fleet in Winnipeg. I quite frankly, see no distinguishing features in the case before me from that decision, nor am I able to depart from the logic expressed by Judge Sarchuk. It thus bears a great deal of weight upon my decision.
[33] Over and above that, when I stand back and look at the forest as a whole instead of the individual trees, I quite clearly see a picture of a contract of service and not a contract for services.
[34] In closing, I wish to bring to the attention of the Minister a matter of some concern to the Court. Mrs. Dixon, who as I say is without doubt a completely reliable and honest witness, gave evidence that, when she purchased this taxi, she approached officials at Revenue Canada (as it then was) and requested information as to how to deal with her situation. She was told that for employment insurance purposes, the driver would have to be treated as an employee and deductions made and remitted for employment insurance premiums on account of the special regulation relating to taxi drivers. She did this and has never changed that situation. She was lead to believe, however, that for Canada Pension Plan purposes that this was not the case as there was no special regulation similar to paragraph 6(e) of the Regulations. She thus, did not make the appropriate deductions. She is now being assessed for these, plus interest and penalties, which seems grossly unfair in the circumstances. That she should pay the contributions to the Plan is not in question. That she should pay penalties and interest simply goes against the grain and I would urge the Minister to reconsider that aspect of the assessment.
[35] In the result, the appeal is dismissed and the decision of the Minister is confirmed.
Signed at Calgary, Alberta, this 24th day of September 2001.
"Michael H. Porter"
D.J.T.C.C.
COURT FILE NO.: 1999-2626(EI)
STYLE OF CAUSE: 3562710 Manitoba Ltd. and M.N.R.
PLACE OF HEARING: Winnipeg, Manitoba
DATE OF HEARING: May 8, 2001
REASONS FOR JUDGMENT BY: The Honourable Deputy Judge M.H. Porter
DATE OF JUDGMENT: September 24, 2001
APPEARANCES:
Agent for the Appellant: Barbara Dixon
Counsel for the Respondent: Lyle Bouvier
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, CanadaCOURT FILE NO.: 2000-5096(CPP)
STYLE OF CAUSE: 3562710 Manitoba Ltd. and M.N.R.
PLACE OF HEARING: Winnipeg, Manitoba
DATE OF HEARING: May 8, 2001
REASONS FOR JUDGMENT BY: The Honourable Deputy Judge M.H. Porter
DATE OF JUDGMENT: September 24, 2001
APPEARANCES:
Agent for the Appellant: Barbara Dixon
Counsel for the Respondent: Lyle Bouvier
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
1999-2626(EI)
BETWEEN:
3562710 MANITOBA LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeal of 3562710 Manitoba Ltd. (2000-5096(CPP)) on May 9, 2001 at Winnipeg, Manitoba, by
the Honourable Deputy Judge Michael H. Porter
Appearances
Agent for the Appellant: Barbara Dixon
Counsel for the Respondent: Lyle Bouvier
JUDGMENT
The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Calgary, Alberta, this 24th day of September 2001.
|
"Michael H. Porter" |
D.J.T.C.C.
2000-5096(CPP)
BETWEEN:
3562710 MANITOBA LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeal of 3562710 Manitoba Ltd. (1999-2626(EI)) on May 9, 2001 at Winnipeg, Manitoba, by
the Honourable Deputy Judge Michael H. Porter
Appearances
Agent for the Appellant: Barbara Dixon
Counsel for the Respondent: Lyle Bouvier
JUDGMENT
The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Calgary, Alberta, this 24th day of September 2001.
|
"Michael H. Porter" |
D.J.T.C.C.