Date: 20000222
Docket: 97-2039-UI
BETWEEN:
STEVEN MARIC, O/A LES SERVICES DECOR LEXTRA ENR.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Charron, D.J.T.C.C.
[1] This appeal was heard at Montreal, Quebec, December 14, 1999, for the purpose of determining whether the assessment of March 29, 1995 issued to the Appellant was within the meaning of the Unemployment Insurance Act (sections 53 and 56), for the years 1993 and 1994, with regard to unpaid employee and employer unemployment insurance contributions with respect to two employees: Sven A. Kikals and Peter Maric. The amount of the assessment with respect to the said employees of the Appellant was established as follows: $454.68 in 1993 and $1,603.99 in 1994 for a total of $2,058.67.
[2] By letter dated November 12, 1997, the Respondent confirmed the assessment of March 29, 1995 stating that Peter Maric (the Worker) was an employee of the Appellant under a contract of service.
Statement of Facts
[3] The facts upon which the Respondent relied in making his decision are set out as follows in paragraph 6 of the Reply to the Notice of Appeal:
"(a) In 1993 and 1994, the Payor did not take any deductions relatively to the unemployment insurance premiums with respect to Peter Maric. (agreed)
On April 3, 1991, the Appellant registered a business under the name Les Services Décor Lextra. (agreed)
Steven Maric was the sole owner following the registered declaration. (denied)
The Appellant operated a residential maintenance and decor business. (agreed with judification)
The business operated all year long. (agreed with justification)
The Worker was the brother of Steven Maric. (agreed)
The Worker has not produced any income tax report since 1987. (does not know)
The Worker was employed to do wood works, to paint, to install doors and windows caulking and to install weather strips. (agreed with justification)
The Worker was working under the supervision of the Payor. (denied)
During the disputed periods, the Appellant also employed Sven A. Kikals. (agreed with justification)
Sven A. Kikals received directives form the Appellant or from the Worker. (agreed)
In 1993, the Worker received 5 cheques, two in January and February and three in November and December, from the Appellant for a total amount of $2,470.00. (ignored)
In 1994, the Worker received 6 cheques from June to October, from the Appellant, for a total amount of $13,410.00. (ignored)
On December 21, 1994, the Appellant and the Worker signed an independent contractor agreement. (agreed)
The agreement was signed after the disputed periods. (agreed with justification)."
[4] The Appellant admitted all of the facts alleged in the subparagraphs of paragraph 6 of the Reply to the Notice of Appeal, except those he disagreed with or said he had no knowledge of, as indicated in parentheses at the end of each subparagraph.
Testimony of Steven Maric
[5] On April 3, 1991, Steven Maric registered the name Les Services Decor Lextra to do house maintenance and private homes and declared he had no other partners, "being the sole owner of the company" (Exhibit R-1). Peter, the Worker, would go out with the Appellant, look at the job and come up with an estimate; then they would divide the work between themselves, do the job and divide the money. Steven denies being his brother’s boss. He and his brother divided the amount of the estimate in different percentage between themselves, as agreed before the beginning of the job. Each of them supplied his own tools, equipment, materials, insurance and transport (Exhibit A-1).
[6] The relationship between Steven and Kikals was quite different: basically the latter received his orders from the Appellant and the Worker Peter Maric and acted as a sub-contractor because he runs his own business. Kikals would make an agreement for a fixed amount of money to do certain parts of the work and, at times, would either give a budget price or, at the end of a job, would ask for a certain amount of money. He never knew the total price of the job. He would sort of do bits and pieces of the job when he was available. The Appellant had another employee before, whose name was Paul Desjardins, whom was hired by Steven after consultation with Peter: "We didn’t have work, we had to lay him off, I believe" says Steven; basically, both brothers thought about it and made such decision. Steven owned a van, financed through a bank, which he used to carry equipment, tools and people to work sites.
Testimony of Peter Maric
[7] Peter Maric is Steven’s brother. When working with his brother, the Appellant, Peter would go and see a job, make an estimate and divide it with him. In Court Peter filed a letter dated December 21, 1994 (Exhibit A-1), which bears his signature. He was responsible for the quality of the work he did. Sometimes he recruited clients whom he referred to his brother, but he never hired any employees. Sometimes, he received complaints which he took care of. Peter had his own car which he used to go to work and carry his equipment. He never made a loss when he worked with his brother.
Testimony of Sven Kikals
[8] On October 7, 1992, Sven Kikals applied for a job with the Appellant, was interviewed by him and got the job. The Appellant hired and instructed him to do painting. Peter had nothing to do with his hiring. Sven Kikals would travel with Steve and Peter every morning, in the former’s van. The tools used by the workers were supplied by Steven and carried in his van. Sven says his boss was Steven and if Peter would give him instructions, he would say: “Steven wants us to do this”. Steven would always recruit clients and deal with complaints. Sometimes, when him and Peter were on the job and Steven was not there, Peter would inform complainants that they had to talk to Steven. Sven was never an employee of Peter Maric, the witness says. He only used the tools of the Appellant and so would Peter. The Appellant paid for all the materials used on the jobs and also paid the wages of Sven Kikals. Everything that concerned him was paid by Steven. At the end of December of 1994, Steven said: “Well, that’s it, there’s no more work”. After he finished working in 1994, Sven asked the Appellant if he could make the deductions because he wanted to collect unemployment insurance benefits. Steven replied that his accountant said it was impossible and would give him a raise later on instead. Sven stated that he demanded to get his separation slip and that Steven would not give it to him because “as far as he is concerned, I was (Sven) sub-contracting and I got paid for everything”. Sven took his case to Revenue Canada, Revenue Quebec, the "Normes du Travail" which ruled in his favour; the Appellant was forced to pay those deductions so that Sven could finally collect unemployment insurance benefits.
Counter-proof of Steven Maric
[9] On October 7, 1992, Sven Kikals filled out an application for employment by Les Services Decor Lextra Enr. (Exhibit R-3). Basically, the Appellant wanted him to be an employee and gave him an application for employment. However, this application did not materialize. The Appellant stated that from June to November 1994, that he hired Sven Kikals "as he wants to be an employee, so he starts asking for separation forms. He starts asking for vacation pay, which he never asked for in 1993 when he worked two months. But for some reasons in 1994, he decides he wants all this, so he changed his story" (page 66 of the transcript). He hired Kikals and paid for the deductions and the unemployment insurance premiums after he was sent a letter by Revenue Canada.
Other testimony of Sven Kikals
[10] In reply to Steven’s testimony, Sven Kikals denies ever thinking about being a sub-contractor because he just did not have the equipment. In 1993, Sven stated that he worked from September until December and in 1994, he worked from June until December; both periods of employment were full time.
Testimony of Jean-Louis Lussier
[11] Appeal officer for Revenue Canada, Jean-Louis Lussier spoke to both Steven and Peter. The Appellant said Peter was working as an independent worker.
New testimony of Steven Maric
[12] Steven Maric confirms that the tradename is registered in the Superior Court District of Montreal as it appears in Exhibit R-1.
Analysis of the facts in the light of the law
[13] It must now be determined whether the Worker’s activity is included in the concept of insurable employment: that is, whether there existed a contract of employment.
[14] The courts have developed four essential tests for identifying a contract of employment. The leading case in this area is City of Montreal v. Montreal Locomotive Works Ltd., [1947] 1 D.L.R. 161. These tests are as follows: (1) control; (2) ownership of the tools; (3) chance of profit; (4) risk of loss. In Wiebe Door Services Ltd. v. M.N.R. 87 DTC 5025, the Federal Court of Appeal added thereto the degree of integration. This list is however not exhaustive.
[15] The evidence showed that the Worker’s work was performed as follows:
On April 3, 1991, Steven registered a home maintenance business and declared that he had no other partners, being the sole owner of the company. (Exhibit R-1)
Peter would look at the job and make an estimate. Then, they would divide the work, do the job and divide the money.
Steven denies being his brother’s boss.
Steven says that everyone supplies his own tools, equipment, materials, insurance, and transport.
Steven says Kikals receives his orders from him and his brother.
The Appellant had another worker at one time, whose name was Paul Desjardins. Whenever they hired or fired an employee, they consulted one another and made their decision.
Steven owned a van which he used to carry equipment, tools and employees to work sites.
Peter claims that he is responsible for the quality of his work.
Peter sometimes refers clients to his brother.
Peter never hires employees.
When Peter receives complaints, he sometimes ensure they are dealt with.
Peter has his own car and uses it to go to work and carry his own equipment.
Kikals travels with Steven and Peter every morning in the latter’s car.
Kikals says the tools used to do the work were supplied by Steven and carried in his van.
Kikals says his boss was Steven. Sometimes, when Steven is absent Peter would tell him: “Steven wants us to do this”.
Kikals says Steven would always recruit clients and deal with their complaints.
Kikals never worked for Peter.
Kikals uses Steven’s tools all the times and so does Peter.
Steven paid for all the materials and Kikals’ wages.
When Steven laid off Kikals, in 1994, he denied him a separation slip, because, he said, he was a sub-contractor.
Kikals sued the Appellant so he could finally receive unemployment insurance benefits.
[16] It is incumbent on the Appellant to prove that the Worker carried out his work under his control, with his tools, had no chance of profit, no risk of loss and was well integrated. The Appellant proved the ownership of the tools, but denied having subordination over his brother, failed to even mention a chance of profit and the integration. He alleged that he divided the pay with his brother. He took the individuals to the work site. The Worker made no loss during his employment. Therefore, I conclude that the employment was not insurable, being of the nature of a contract for services or a joint enterprise.
[17] The appeal is allowed.
Signed at Ottawa, Canada, this 22nd day of February 2000.
"G. Charron"
D.J.T.C.C.