Date: 19990719
Dockets: 98-337-UI; 98-338-UI; 98-339-UI; 98-58-CPP; 98-59-CPP; 98-67-CPP
BETWEEN:
ELIZABETH GOTTSCHALK,
OPERATING AS COMMUNITY OPTIONS,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Porter, D.J.T.C.C.
[1] These appeals were heard at Edmonton, Alberta on April 23, 1999. They were heard on common evidence, by consent of the parties.
[2] The Appellant appeals the various decisions of the Minister of National Revenue (the "Minister") dated December 8, 1997 which confirmed the assessments made against her with respect to Canada Pension Plan contributions and unemployment insurance premiums, plus penalties and interest relative to persons working in a senior citizens residence owned and operated by her through varying periods of time during 1995, 1996 and 1997.
[3] In particular the decisions from which the Appellant appeals, held that a number of workers including Aaron Pruden and Myrna Bezzola were all employed under contracts of service and were therefore employees during the times that they worked in 1995 and 1996 at the said senior citizens residence. Those decisions which form the basis of appeals 98-337(UI) and 98-67(CPP) were issued pursuant to section 93 of the Employment Insurance Act (the "E.I. Act") and subsection 27(5) of the Canada Pension Plan (the "Plan") and were based on paragraphs 3(1)(a) of the Unemployment Insurance Act (the "U.I. Act"), 5(1)(a) of the E.I. Act and upon paragraph 6(1)(a) of the Plan.
[4] Further in particular, the decisions from which the Appellant appeals, held that the employment of one Aaron Pruden with her for the period January 1, 1996 to March 3, 1997 was insurable and pensionable respectively under the E.I. Act and the Plan for the reason that she was employed under a contract of service and therefore was an employee (appeals 98-339(UI) and 98-59(CPP)).
[5] Further, in particular, the decisions from which the Appellant appeals held that the employment of one Myrna Bezzola with her for the period January 1, 1996 to March 3, 1997 was insurable and pensionable respectively under the E.I. Act and the Plan for the reason that she was employed by way of a contract of service and was therefore an employee (appeals 98-338(UI) and 98-58(CPP)).
[6] The latter four decisions were similarly issued pursuant of section 93 of the U.I. Act and subsection 27(2) of the Plan and were based respectively on paragraphs 3(1)(a) of the U.I. Act, 5(1)(a) of the E.I. Act and paragraph 6(1)(a) of the Plan.
[7] The established facts reveal that the Appellant during the periods of time in question operated, as a proprietorship, a group home for seniors called Community Options, in Edmonton Alberta. Aaron Pruden worked in the residence a great deal of the time in question. Myrna Bezzola worked there on a help out basis from time to time. Various other workers apparently worked at different times but there was no evidence forthcoming on their exact conditions of employment. The issue then, before the Court is whether the workers, including in particular Aaron Pruden and Myrna Bezzola, were engaged under contracts of service and were thus employees in insurable and pensionable employment or whether they were engaged by way of contracts for services and were thus independent contractors and not in insurable or pensionable employment; the onus of establishing that they were contracts for services falls upon the Appellant.
The Law
[8] 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, some of which have been cited by counsel, 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.
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."
[9] 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.
[10] 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."
[11] To this I would add the words of Decary, 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."
The Facts
[12] The assumptions of fact, upon which the Minister was said to rely in coming to his decisions, are set out in the respective Replies to the Notices of Appeal. They are to all intents and purposes the same in each case and are as follows (98-337(UI)):
"(a) the Appellant operates, as a proprietorship, a group home for senior citizens called Community Options or Community Life Options;
(b) the Appellant owns the group home and pays all of the related expenses including property taxes, utilities and repairs and maintenance;
(c) the Appellant provides furniture and all kitchen supplies and equipment for the group home;
(d) Aaron Pruden was hired by the Appellant to manage the group home and to ensure care was provided to the residents of the group home 24 hours a day;
(e) Aaron Pruden generally worked 24 hour shifts at the group home;
(f) Aaron Pruden was paid $70.00 per day by the Appellant;
(g) the Appellant allowed Aaron Pruden to arrange for a replacement for herself when she needed time off;
(h) the replacement workers for the 1995 and 1996 years, (the "Other Worker") were as follows:
1995 1996
Myrna Bezzola Myrna Bezzola
Chris Miller Joanne Kincaid
Susan Webber Laurette Lalonde
Taras Raulick Chloe Davis
Olga Christenson Evelyne Fagare
Laurette Lalonde Gloria Biggar
Susan Webber
(i) the Other Workers were hired to provide care to the residents of the group home;
(j) Aaron Pruden provided training to the Other Workers;
(k) Aaron Pruden and the Other Workers were required to record the days they worked;
(l) the Other Workers are paid $70.00 per day by the Appellant;
(m) the duties of Aaron Pruden and the Other Workers included:
(i) providing 24 hour a day care and supervision of the residents of the group home;
(ii) ensuring residents take prescribed medications;
(iii) supervising cooking and laundry done by the residents;
(iv) arranging medical appointment and arranging transportation to and from appointments;
(v) keeping daily records for each resident;
(vi) shopping according to a monthly budget supplied by the Appellant;
(n) neither Aaron Pruden or the Other Workers were required to supply any tools and equipment;
(o) neither Aaron Pruden or the Other Workers were required to incur any expenses in the performance of their duties;
(p) neither Aaron Pruden or the Other Workers had any financial interest or investment in the Appellant's group home care business;
(q) neither Aaron Pruden or the Other Workers had any independence to make decisions which would determine the financial success or failure of the Appellant's home care business;
(r) neither Aaron Pruden or the Other Workers were carrying on a home business for themselves;
(s) if a repair was required to the home, Aaron Pruden or one of the Other Workers were required to notify the Appellant;
(t) the Appellant did not allow the Other Workers to hire workers to replace themselves;
(u) the residents of the group home pay their fees to the Appellant;
(v) the services provided by Aaron Pruden and the Other Workers is integral to the operation of the Appellant's group home business;
(w) the Appellant paid Aaron Pruden and the Other Workers the amounts shown on the attached schedule A for the 1995 year and on the attached schedule B for the 1996 years." (Schedule A not attached)
[13] The Appellant, through her agent, admitted for the most part the above facts. She also gave evidence to the same effect. In particular she agreed with subparagraphs 10(a), (b), (c), (g), (h) (with some commentary), (m) to a varying extent, (p), (s), (u) and (w).
[14] She disagreed in whole or part with subparagraphs 10(d), (e), (f), (i), (j), (l), some parts of (m), (n), (o), (q), (r), (t) and (v).
[15] With respect to (d), she took issue with the word "hired" saying that Aaron Pruden was contracted and that she was there to provide services and not to manage the residence.
[16] With respect to (e), she generally agreed with it but maintained that the work was 24 hours per day and not a shift.
[17] With respect to (f), she said the amounts paid varied.
[18] With respect to h), she maintained that not all these workers were caregivers but she agreed that they all worked in some capacity at the residence.
[19] With respect to (j), she maintained Anna Pruden gave the other workers "orientation" not "training".
[20] With respect to (k), she said the workers were only required to record "the number" of days worked, not which ones.
[21] With respect to (l), she did not accept that they were all paid $70.00 per day.
[22] With respect to (m)(i) she took issue with the word supervision.
[23] With respect to (n), she claimed that Aaron Pruden and others were required to provide their own tools and equipment.
[24] With respect to (o), she claimed that Aaron Pruden and the other workers did incur expenses of their own and gave for example their travel for which she did not reimburse them.
[25] With respect to (q), she felt they did make decisions of this nature.
[26] With respect to (r), she maintained they were all carrying on their own businesses.
[27] With respect to (t), she claimed the workers could hire others to replace themselves.
[28] She denied that the services provided by Aaron Pruden or the other workers were integral to the operation of her business.
[29] It became clear from the evidence that up until 1994 the workers in question had provided their services as employees. As a result of an intervention by the Alberta Labour Relations Board relating to 24 hour shifts, and recommendations which came out of that process, the Appellant sought to set up different working arrangements with the people who worked in the residence. To this end she entered into a form of contract with Myrna Bezzola and with Aaron Pruden, separately, which purported to establish those workers as independent contractors. It is of course trite to say that the law looks at the substance of the arrangement and not simply the form. Nevertheless, if there is any ambiguity the Court should have regard for the clearly expressed intentions of the parties.
[30] Both Myrna Bezzola and Aaron Pruden gave evidence at the hearing of the appeals, as well as the Appellant herself.
[31] Myrna Bezzola in her evidence said that she considered herself to be an employee of the Appellant. She did not have a clear recollection of having signed the contract in question and I noted that indeed it purported to have been signed on April 1, 1997, backdated to April 1, 1995. Primarily, she worked at another seniors residence owned by the Appellant and it appears that she simply helped out from time to time at the 77th Street Residence, the subject of these appeals. Her position at the other residence was, she said, very similar to that of Aaron Pruden at the 77th Street residence, that is that she was the primary person there. She did not hold any particular certificates to do her work. She dealt in evidence with the hours of service she provided to the residents. She said she would replace broken items in the home and give the bill to the Appellant, that she did not incur any expenses on her own behalf and that she was paid at the time bi-weekly on the basis of $70.00 per day. She did not get paid except for the days she went to work. To some extent she could arrange her own schedule but if she did not go in on a day on which she was scheduled to work she was required to find a replacement. If that was another regular worker at the residence, that person would be paid by the Appellant. If it was an outsider she would pay that person herself and claim payment for the day from the Appellant at her own normal rate. She would have telephone contact with the Appellant apparently once per week or if anything particular came up in the home. The Appellant would visit the home approximately every two weeks when she would speak to the workers and the clients. At the outset the Appellant had outlined to her the duties she was expected to perform at the residence and from that point on she just got on with the job. That briefly summarizes the extent of her evidence.
[32] Aaron Pruden gave evidence which indicated that she very much considered herself to be an independent contractor whilst working at the residence. It was clear from her evidence that if she was not the manager, she was at the very least the primary worker at the residence. She termed her work as that of a caregiver. She had not filed her tax returns for 1995 or 1996, but intended on doing so through an accountant on the basis of an independent contractor.
[33] She indicated that she had the right not to accept clients as residents in the home and that she had in fact refused those with whom she did not consider she could deal very well.
[34] She hired her own replacements when she could not go in for any reason on days for which she was scheduled to work. She herself drew up the schedules and assigned tasks to other workers. She followed government standards in doing what she did in the home. She claimed to do contract work for other people but details of this were sketchy to say the least.
[35] She used her own sewing machine to help clients with modifications of their clothing. Most equipment used by clients however, was provided by government agencies. Clients brought their own furniture with them and thus it was simply kitchen and household equipment needed in the operation and this was provided by the Appellant. Sometimes though Mrs. Pruden said that she provided materials for projects she undertook on the premises. She also used her own vehicle to transport things she acquired for the home. I gleaned that this was simply upon the odd occasion and not a regular event. She did use her vehicle to do the grocery shopping for the home on a regular basis for which she was not reimbursed by the Appellant.
[36] All repairs to and maintenance of the premises, she said, were done at the expense of the Appellant. For instance, if they had a plumbing problem she would call a plumber, arrange for him to come in, contact the Appellant who then paid the bill.
[37] She agreed that if she wanted a client to leave, one who was already a resident she would have to discuss it first with the Appellant.
[38] She said that she had regular contact with the Appellant, approximately twice per week.
[39] She worked approximately 16 days per month.
[40] She agreed that the clients paid their fees directly to the Appellant.
[41] She herself did not carry liability insurance. She believed that everybody was covered under the Appellant's insurance.
[42] She too, when finding a replacement, would pay them out of the money she received from the Appellant. She would pay them on a daily basis but would pay them less than she would receive for that day.
Application of the Law to the Facts
[43] As indicated above the Court must consider the substance and not the mere form of the arrangements. I have some sympathy for the Appellant as to some extent she has fallen between two stools, that of the Alberta Labour Relations Board and Revenue Canada. The former told her that she could not have employees working in the manner and for the compensation they did over a 24 hour period. Hence, the recommendations to engage her workers as independent contractors and not as employees. This clearly she sought to do with the forms contracts she set up. It does not seem to the Court, however, that the actual working arrangements changed in any significant manner at all and thus reality did not follow intent.
[44] It is clear that this business is that of the Appellant. The workers in question worked very much at her behest. Whilst, she did not in fact control the day-to-day operations it is clear that she was entitled to do so if she chose and to specify not only what they did but how they did it. In law it is this entitlement to exercise control which is all important, not the fact of whether or not in practice that control was exercised.
[45] It is also clear that all the basic household equipment was supplied by the Appellant. The workers did not attend at the residence as a plumber might have done, carrying all their tools and equipment, to enable them to do their job. It was all basically there. The small use made of the car and sewing machine does not seem to the Court to be particularly significant in the total order of things. The workers had no chance to make additional profit except by working more days. Similarly except to the extent that they, from time to time, hired their own replacements, and there is little evidence as to how often that happened, they had no risk of loss. There was no entrepreneurial aspect to their work in this respect. They did the agreed amount of work on their scheduled days and that was it. They had no financial stake in the success or failure of the business over and above that of any regular employee. There was also no substantive evidence of any of them doing similar work for any number of other homes
[46] With respect to the integration of the worker's work into the business of the Appellant, it seems to the Court that this was clearly the business of the Appellant and the workers worked there part of that business. I see no evidence of an independent business being operated by any of these workers.
Conclusion
[47] In the final analysis, when I consider all of the evidence and the various aspects of the tests laid down by the Federal Court of Appeal, it seems clear to me that although the Appellant sought to set up contracts for services with these workers, in actual fact, she did not do so except in name, and they remained employees working under contracts of service. I say that in particular with respect to the two workers Pruden and Bezzola. There was no evidence to contradict the decisions of the Minister with respect to all the other workers.
[48] In the result the appeals are dismissed and the decisions of the Minister and the assessments are confirmed.
Signed at Calgary, Alberta, this 19th day of July 1999.
"Michael H. Porter"
D.J.T.C.C.
SCHEDULE B
ELIZABETH GOTTSCHALK
AMOUNTS PAID
1996
AARON PRUDEN
January 1, 1996 1,120.00
January 15, 1996 l,050.00
February 1, 1996 1,120.00
February 15, 1996 1,050.00
March 1, 1996 1,050.00
March 11, 1996 1,050.00
March 30, 1996 1,050.00
April 11, 1996 1,190.00
May 1, 1996 770.00
May 14, 1996 l,050.00
May 31, 1996 980.00
June 15, 1996 1,050.00
June 30, 1996 1,000.00
July 15, 1996 910.00
July 15, 1996 450.00
July 31, 1996 1,050.00
August 15, 1996 1,000.00
September 1, 1996 1,000.00
September 15, 1996 1,400.00
September 30, 1996 1,050.00
October 15, 1996 1,000.00
November 1, 1996 500.00
November 15, 1996 420.00
November 30, 1996 630.00 22,940.00
MYRNA BEZZOLA
April 1, 1996 140.00
September 30, 1996 200.00
September 30, 1996 140.00 480.00
JOANNE KINCAID
May 1, 1996 140.00 140.00
LAURETTE LALONDE
January 15, 1996 280.00 280.00
SUSAN WEBBER
November 15, 1996 630.00 630.00
CHLOE DAVIS
October 15, 1996 420.00
November 1, 1996 420.00
November 15, 1996 210.00
December 1, 1996 210.00
December 1, 1996 70.00 1,330.00
EVELYN FAGARE
February 1, 1996 370.00
February 15, 1996 340.00
March 1, 1996 280.00 990.00
GLORIA BIGGAR
April 15, 1996 210.00
May 1, 1996 560.00
May 15, 1996 280.00
May 31, 1996 280.00
May 31, 1996 140.00
June 15, 1996 280.00
June 30, 1996 350.00
July 15, 1996 420.00
July 30, 1996 140.00
July 31, 1996 420.00
August 15, 1996 420.00
September 1, 1996 560.00 4,060.00
Total for 1996 30,850.00