Tax Court of Canada Judgments

Date: 19980601

Docket: 97-1180-UI

BETWEEN:

DAVID ROGER GAGNON,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

LAMARRE, J.T.C.C.

[1] This appeal is from a determination by the Minister of National Revenue (the “Minister”) of a question raised under section 61 of the Unemployment Insurance Act (the “Act”). The determination is to the effect that the employment of the appellant with St. Martin De Porres Parish (the “payer”) during the period from July 1, 1995 to June 30, 1996 was not insurable as the appellant was not employed under a contract of service within the meaning of paragraph 3(1)(a) of the Act.

[2] In making his determination, the Minister relied on the assumptions of fact set out in paragraph 4 of the Reply to the Notice of Appeal, which read as follows:

(a) the Appellant was hired as a pastoral assistant by the Payor;

(b) the Appellant was hired under a contract arrangement for a specified period of time;

(c) the Appellant functioned independently based on his own work schedule;

(d) the Appellant was paid by the Payor based on a set contract fee;

(e) the Appellant submitted an invoice regularly to the Payor for services performed;

(f) the Appellant performed his services from his personal residence;

(g) the Appellant incurred expenses in the performance of his duties;

(h) in 1993, 1994 and 1995, the Appellant reported self-employed income and claimed expenses against his self-employed income, on his income tax returns:

(i) the Appellant was not provided with an office or equipment by the Payor;

(j) the Appellant had no set hours and could perform his work as he wished;

(k) the Appellant could co-ordinate and perform work without direction from the Payor;

(l) the Appellant could incur a profit or a loss as a result of performing the services for the Payor;

(m) there was no contract of service between the Payor and the Appellant.

[3] The agent for the appellant admitted only subparagraphs 5 (a), (g) and (h) above. He denied all the other allegations. He called as witnesses the appellant himself; Mr. Christian David McConnell, who actually replaced the appellant in his duties with the payer, and Mrs. Simone Rosengren, a Rulings Officer with Revenue Canada. Reverend Dan Hawkins, pastor at St. Martin De Porres Church, was called to testify by counsel for the respondent.

[4] The appellant was employed by the payer from the month of September 1994 through the end of June 1995 as a pastoral assistant in charge of Adult Faith Development. He received employment income from which deductions at source were made. His T-4 slip for the 1995 taxation year (Exhibit A-3) shows employment income before deductions of $2,500 and insurable earnings of $2,387. On July 1st 1995, he signed a written contract with the payer for a one-year period.

[5] According to the appellant, he requested a written contract as his responsibilities with the payer had increased: he had been asked to take on responsibilities as the music and liturgy coordinator for the church. He presented to the Pastoral Council of the Church a first draft contract (Exhibit A-1) which was signed by the pastor, Reverend Hawkins, and by one Pastoral Council member but was not accepted and therefore not signed by the Pastoral Council chair.

[6] This first draft contract was entitled “Contract of Employment” and enunciated the responsibilities of the appellant as a pastoral assistant. It also provided for compensation for the appellant at $2,000 per month for 12 months, including all statutory benefits and four weeks' paid holiday. The appellant was also allowed all statutory holidays which did not impede his ability to serve in his capacity as pastoral assistant. For statutory holidays that were marked by religious observances, the appellant would be allocated compensatory leave to be taken at another time. The appellant had to work 25 hours per week and had to report to the payer on his progress, which included setting out future plans and budgetary requirements, four months after the inception of the agreement and subsequently at least once a year. Furthermore, the appellant could not assign the benefit or burden of this agreement to any other person unless the payer gave its prior consent.

[7] The only changes made by the Pastoral Council to this first draft in order to render it acceptable to the Council were to change the title to “Contract for Services” and to remove the provision regarding payment for the four weeks' holidays. The appellant testified that he was reluctant to accept such changes as he did not want to be considered as a contractor but as an employee. He was however told that the payer would not hire him on any other conditions. He finally accepted and signed this agreement (Exhibit A-2).

[8] According to the appellant, he was responsible to the pastor and all his work was done in consultation with him. This consultation took place on a weekly basis either in person or over the phone. He also said that he had to report on a regular basis to the Pastoral Council which is an advisory body providing advice to the pastor as well as to the liturgy and the personnel committees. The pastor, Reverend Hawkins, testified that there was no regular meeting period as they both had their own schedules and also because the appellant had another job with an Anglican church (the appellant had testified before that he could not work as a pastoral assistant in other churches because of the exclusivity and the time commitment required by the contract at issue, while Reverend Hawkins stated that the appellant was available to do some liturgical or musical work for others). Reverend Hawkins said that the appellant and he tried to meet once a month. He also indicated that the appellant was allowed to function on his own as he had confidence in the appellant's ability to carry out his duties. However, the appellant was asked to go to the Pastoral Council meetings to report on any problems that arose. The appellant himself testified that he did make two formal reports to the Pastoral Council and subsequently reported informally on an ongoing basis.

[9] As to the hours worked, Reverend Hawkins testified that the appellant had to give time sheets to the payer to indicate the number of hours he had put in so as to ensure that they would add up to whatever was specified in the contract. He said that the appellant was left on his own to discharge his duties. The appellant said that he worked between 15 and 30 hours a week. Sometimes it could be as many as 40 or 50 hours per week. He stated that he recorded all his activities as a professional would do. In addition, he pointed out that the payer wanted to ensure that he really worked the number of hours stated in the contract.

[10] The appellant submitted a series of invoices and time sheets to the payer during the period covered by the contract (filed as Exhibit R-1). These invoices bore the letterhead “Liturgy & Pastoral Ministry Consultants” with the personal logo of the appellant and were entitled “Billing for the contract with Saint Martin de Porres Parish, Nepean, Ontario”. The number of hours worked per week does vary from one invoice to another but the remuneration remains the same at $1,000 every two weeks. During the week of the 12th of February 1996, the appellant did not work but he indicated on his time sheet: “paid time off in lieu of overtime pay with approval of pastor”. The appellant said that he had to submit these time sheets in order to get paid by the payer.

[11] As for his work schedule, there were certain hours when the appellant was requested to perform his work at the church, for example if he had to be there for celebrations or for meetings or for rehearsals. The hours when he was required to be present at church varied from one week to another depending on the needs of the parish. Other than that, the appellant could work from his home. He could also take advantage of the secretary’s office at the church, where the photocopier was. However, in his testimony the appellant gave the impression that if he did not have to do work in the secretary's office, he preferred working at home. He explained that he had asthma symptoms caused by cigarette smoke and even if he complained, nothing was done to solve the problem.

[12] Although the appellant had previously stated that he did not have time to work as a pastoral assistant in other churches, he admitted that he was hired on a specific contract with the Elisabeth Bruyère Pavilion while he was working for the payer. He said that he was asked by the Elisabeth Bruyère Pavilion to co-ordinate a specific liturgy for which there were four or five rehearsals. He worked there in the evenings, when it would not interfere with his work for the parish. For this contract, he billed for fees on the basis of $35 an hour.

[13] The parish provided most of the equipment to the appellant: the piano and organ, some of the music and music stands and a number of accoutrements related to the liturgical ministries. The appellant provided his own music compositions and in some instances purchased music to provide enough copies for the choir because, said the appellant, the parish’s music budget was quite limited.

[14] The appellant declared self-employed income and claimed expenses against this income in his 1993, 1994 and 1995 tax returns. The appellant explained this was income from separate contract work outside the parish but did also say that the expenses claimed covered the music and other supplies he was required to buy for his work with the parish.

[15] Mr. Christian David McConnell testified only that he replaced the appellant in his work for the parish after the appellant’s departure in July 1996. He said he was hired on a contractual basis and that he was paid a bi-monthly flat rate for an average of 30 hours of work per week.

Analysis

[16] The question I must answer is whether, during the period at issue, the appellant was employed by the payer under a contract of service pursuant to section 3(1)(a) of the Act. To make this determination, the tests adopted in Wiebe Door Services Ltd. v. M.N.R.,[1] namely control, ownership of the tools, chance of profit and risk of loss as well as the test of integration or organization — i.e. whether the appellant worked for his own business or for the payer’s —, must be analyzed in order to define the total relationship between the parties.

[17] The instant case is a borderline case in which there are some features of a contract of service and some of a contract for services.

[18] So far as the control exercised by the payer over the work done by the appellant is concerned, though it was not exercised regularly it seems to me that the payer did to some extent have a right of control over the appellant's work.[2] While Reverend Hawkins testified that he did not meet regularly with the appellant, he however admitted, in speaking of the day-to-day operations, that he was the person in charge as far as church operations were concerned. He also said that the appellant, if he had any problems, would definitely report to him. Furthermore, Reverend Hawkins pointed out that he had asked the appellant to be present at Pastoral Council meetings to discuss any subject matter needing to be brought to the Council's attention. The contract also stipulated out that the appellant could not assign his duties to anyone without the prior approval of the payer. To this extent, the appellant meets the requirement of having been hired under a contract of service (see Dr. William H. Alexander v. Minister of National Revenue, 70 DTC 6006 (Ex. Ct.)).

[19] As for the work schedule, both the appellant and Reverend Hawkins testified that the appellant had to be present for certain events during the week. The days and hours of these events were determined by the church not by the appellant. According to the contract, the appellant had to work 25 hours per week to perform certain activities that were in fact organized by the church. Although the appellant had some latitude, the evidence was that he had to account for the number of hours he worked and for what he had done during those hours, if not he would not have been paid. For all practical purposes, the appellant acted on the payer's behalf in carrying out its duties to the church pursuant to a contract concluded between him and the payer. I would therefore conclude on the control aspect, even though there were some contradictions in the evidence, that the appellant met the conditions required in order to be considered as an employee.

[20] As for remuneration, the appellant was paid a regular fixed amount every two weeks even though he might work more than 25 hours a week. One invoice shows that he did not work for one period but was still paid his fixed salary in compensation for overtime he had done previously. According to the contract, he was compensated for statutory holidays. Furthermore, while the appellant was allowed to take four weeks' holidays without being paid, before doing so he had to obtain the approbation of the pastor by satisfying him that sufficient hours had been put in under the contract.

[21] With regard to equipment, the church provided most of it. The appellant had access to an office in the church and all the supplies were made available to the appellant with the exception of some pieces of music that he provided himself.

[22] With regard to the chance of profit and risk of loss, I do not find that there was either in the case of the appellant. He received a fixed salary and if he worked harder one week that was compensated for the next week by a lighter work load. As well, he was paid for statutory holidays.

[23] As to the integration of the appellant's activities into the payer's business, it is possible to see at first glance combined features of a contract of service and a contract for services, as the appellant seemed to have accepted the fact that he was self-employed even while working for the payer.

[24] The appellant had his own personal logo and billed the payer as a consultant. He reported self-employed income and claimed expenses against that income in the years 1993, 1994 and 1995. The appellant testified that he had another contract with Elisabeth Bruyère Pavilion. He billed on an hourly basis for this contract. For the year 1995, it seems, according to the T-4 slips provided by St-Martin de Porres Parish that the self-employed income reported all came from his salary from the payer.

[25] However, the payer did not use the appellant's services for a very specific contract but for general duties to be performed by him. The appellant was ultimately one pastoral assistant among others who contributed to the payer's activities.[3] In this sense, the appellant was acting not as a person operating a business on his own account but as an employee of the payer.

[26] Furthermore, it is not because the appellant designated himself as self-employed in his tax returns that he is to be considered as such in law. The fact that the invoices bore the letterhead "Liturgy & Pastoral Ministry Consultants" is not in itself determinative of the issue. The evidence revealed that the appellant had no choice but to send these invoices if he wanted to be paid. Besides, Reverend Hawkins was not very precise when asked to explain why the first draft presented by the appellant was changed in favour of the version that became the actual contract. He could not explain why the parish had previously considered the appellant as an employee and then suddenly decided that the appellant should be regarded as an independent contractor.

[27] Taking all these various features into account, I am of the view that the appellant has established on a balance of probabilities that he was employed under a contract of service during the period at issue and that his employment was accordingly insurable under the Act.

[28] The appeal is therefore allowed and the Minister's determination reversed.

Signed at Montréal, Quebec, this 1^st day of June 1998.

"Lucie Lamarre"

J.T.C.C.

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