Date: 19981016
Docket: 97-1196-UI
BETWEEN:
RITA RANDA,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Porter, D.J.T.C.C.
[1] This appeal was heard at Edmonton, Alberta, on June 16, 1998. The Appellant appeals the decision of the Minister of National Revenue (the "Minister") dated May 12, 1997 that the employment with her of one Loretta Lo Chung (“the Worker”) for the period March 1 to April 24, 1996, was insurable employment under the Unemployment Insurance Act (hereinafter referred to as the "Act"). The reason given for the decision was that:
"...Loretta Lo Chung was employed under a contract of service, and therefore she was your employee."
[2] The established facts reveal that the Worker carried out child care duties for the Appellant between the dates in question. The case revolves around some seven weeks during which the Worker cared for the one year old child of the Appellant at the latter’s home. The issue before the Court is whether in doing so, the Worker was employed under a contract of service or a contract for services. If she was engaged to work under a contract of service, such would constitute insurable employment under section 3 of the Act. If on the other hand she was engaged by way of a contract for services, that would not be insurable employment and she would not be entitled to claim unemployment insurance benefits and the Appellant would not be required to pay premiums.
The Law
[3] 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."
[4] 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.
[5] 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."
[6] Counsel for the Minister has also put before me two cases, from this Court which relate to the provision of child care services, namely Johnson v M.N.R, March 9, 1998, Docket # 97-517 (UI) a decision of Beaubier, T.C.J. and Mohr v M.N.R., November 27, 1997, Docket # 97-481(UI) a decision of Mogan, T.C.J. In each of these cases the worker was held to be in insurable employment. I noted that in the first of these cases the services extended over a period of seventeen months and in the second over a period of nearly three years.
[7] These then are the legal guidelines that I should bear in mind in deciding this issue.
The Facts.
[8] The assumptions of fact upon which the Minister relied are set out in the Reply to the Notice of Appeal as follows:
"(a) the Worker was hired as a child care worker for the Appellant's one year old child, (the "Child");
(b) the work was performed at the Appellant's residence;
(c) the Worker worked from about 7:00 a.m. to 5:30 p.m., Monday through Friday;
(d) the Worker's hours were determined by the Appellant;
(e) the Worker had to perform the services personally and could not hire someone to replace herself;
(f) if the Worker wanted time off, she was required to notify the Appellant who would arrange for a replacement Worker;
(g) the Appellant provided instructions to the Worker on caring for the Child;
(h) the Worker was not in business for herself;
(i) the Worker was not required to incur any expenses in the performance of her duties;
(j) the Worker was paid $400.00 per month by the Appellant;
(k) the Appellant was employed full time and is not in business for herself;
(l) the employment of the Worker was not casual employment."
[9] The Appellant, mother of the child the subject of the care services, gave evidence on her own behalf. Basically it could be said that she agreed for the most part with the assumptions of fact with some exceptions. However she amplified and explained them, so that the full situation could be laid out and understood. Specifically she agreed with items (a) to (d), (g) and (i), subject to explanation, (j) and (l). She disputed items (e), (f), (h) and (k). Her dispute was principally with the assertion that the Worker could not use a replacement and that the Worker was not in business for herself.
[10] I should say at this juncture, that I share the sentiment of Mogan T.C.J. expressed in the Mohr case (above), when he said:-
“... I might say however that I cannot imagine that when the legislation was originally introduced in the late 1940s or revised as it has been from time to time, that up until recently anyone would have thought of the casual work of a childcare person in the home as being insurable employment, giving rise to rights to unemployment insurance. We live in a society where laws and regulations are becoming overly intrusive in the lives of citizens. This is an area where one person who wants to expand her skills inquires about some form of assistance and triggers a whole series of ramifications, which suddenly put Shelley and the Appellant not only into an employer/employee relationship, but into one which gives rise to the need to withhold and remit unemployment insurance premiums and Canada Pension Plan contributions. It is an indication that we are an over-regulated society, but Judges do not make laws. They only interpret them and apply them to certain fact situations : what I am obliged to do in this case.”
[11] The Appellant explained the facts in her own way. She is and was a provincial government employee, working in Edmonton and living in Sherwood Park about twenty to thirty kilometers apart. In January 1996 her daughter was one year old and needed caring for whilst the Appellant went to work. She advertised in the local paper looking, she said, for home where she might leave her child, that is in the home of another person. She interviewed a number of people including Ms. Chung, who agreed to take the child and care for her in her own apartment in Edmonton. The arrangement was made on the basis that the Worker was operating her own day care home and would obviously be entitled to take in other children. Clearly the agreed sum of $400.00 per month is consistent with that arrangement as opposed to full-time employment. It works out to little more than $2.00 per hour.
[12] After the initial arrangement had been set up, the Worker called the Appellant to say that she was having some difficulty in her apartment and suggested the she look after the child in the Appellant’s home. There is some conflict in the evidence here but having listened carefully to the parties I find that the evidence of the Appellant is more credible than that of the Worker. The Appellant says that the Worker indicated that the arrangement at the Appellant's house would be short term while she, Ms Chung looked for some accommodation in Sherwood Park where she would then carry out her duties. I accept the Appellant's evidence on these points.
[13] In fact what happened, was that things got so bad for the Worker at her apartment that she moved into the home of the Appellant, again for a short term until she could find and set up in her own place in Sherwood Park. The agreement was that the sum of $200.00 would be taken off the $400.00 for services, as payment for the board and lodging.
[14] The initial arrangements contemplated by the parties, according to the Appellant, and again I believe her on this point also, was that if the Worker is not available at any time she had a friend in Sherwood Park, who would stand in for her. This was acceptable to the Appellant, and thus the services did not have to be performed personally.
[15] In the end, seven weeks after she started, Ms. Chung left to take up other work and so the original arrangement that she bargained for was never implemented, that is setting up a day care home in her own residence.
[16] The difficulty the Appellant has in dealing with this situation is that the original bargain was clearly made on the basis that Ms. Chung was in business for herself. Subsequently when she could not follow through with this, it was still her intention to do so. The actions of the Appellant were to assist her through a short-term difficulty, with a view to the original arrangement still being implemented. In fact, it never was because the Worker left.
[17] The worker then applied for unemployment insurance benefits in the following November. She apparently needed the time during which she had provided these services, in order to qualify for benefits and the wheels were then set in motion for an investigation leading to the Appellant being interviewed almost one year later. The Appellant was visibly upset and stressed by this whole affair.
Conclusion.
[18] I cannot conceive that the situation at hand could properly be categorized as insurable employment. It was an extremely short period of service. The services were originally contracted for on the basis of an independent contractor running her own home daycare. As a result of difficulties experienced by the Worker, the Appellant reached a temporary arrangement with the Worker in order to help her get established in her business. Out of the goodness of her heart she also provided some accommodation. The fees paid were clearly consistent with the Worker taking on a number of children in her own home as opposed to an employment situation. The Appellant did not ever contemplate having an employee. Had the situation continued as it evolved, for any length of time, maybe some different considerations would have applied. However, it endured for only seven weeks. I am not suggesting that a period of service of only seven weeks might not in general terms be categorized as employment, but rather that this arrangement, which was originally set up in a particular way and through force of circumstances materialized a little differently on a temporary basis, cannot be so defined.
[19] It was not contemplated by the parties that it be an employer/employee relationship or that there be any measure of control over the Worker. It was contemplated that the Worker would be setting up her own facilities to use. It was contemplated that the Worker would be making her own profit and risking her own losses in the setting up of the home daycare. Certainly what transpired was not a question of integration into any business of the Appellant.
[20] In the result I am not of the view that this short-term arrangement can be categorized as a contract of service. It was a stepping stone to the establishment of and independent business and thus more in the nature of a contract for services than a contract of service.
[21] The appeal is allowed and the decision of the Minister is vacated.
Signed at Calgary, Alberta, this 16th day of October 1998.
"Michael H. Porter"
D.J.T.C.C.