Tax Court of Canada Judgments

Date: 19980814

Dockets: 96-1607-UI; 97-1851-UI; 96-67-CPP; 97-191-CPP

BETWEEN:

FIMRITE OILFIELD SERVICES LTD.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Rip, J.T.C.C.

[1] Fimrite Oilfield Services Ltd. ("Fimrite") appeals from determinations made by the Minister of National Revenue ("Minister") pursuant to the Canada Pension Plan ("CPP") and the Unemployment Insurance Act ("Act") that

a) Wes Miskulin ("Miskulin") was employed by Fimrite in pensionable employment within the meaning of the CPP and in insurable employment within the meaning of the Act during the period March 24, 1994 to August 31, 1994; and

b) that Beverly Headon[1], Rocky Pittman, Blain Dennis, Mark Cario, Christopher Head, Kieran Moore, Troy Fimrite, Derwin Wheeler, Kalvin Isele and Gary Kooll were employed by Fimrite in pensionable employment within the meaning of the CPP and in insurable employment within the meaning of the Act during the period January 1, 1995 and June 30, 1996.[2]

[2] The appeals were heard on common evidence.

[3] Wavell MacArthur Fimrite, President of Fimrite, testified on behalf of the appellant. Upon discharge from the Royal Canadian Navy, Mr. Fimrite homesteaded in Silver Valley, Alberta. He entered the oilfield industry to supplement his farm income. He had been employed by Imperial Oil as a seismographer in the Arctic, handling explosives and blasting holes in the seismic operation. He incorporated the appellant. The appellant carries on the business of oilfield servicing and more specifically, provides the services of industrial steam units, vacuum trucks and grass mowing services to corporations exploiting oilfields and to forestry corporations.

[4] During the relevant period Fimrite owned three steamers and three vacuum trucks and hired workers, who Mr. Fimrite referred to as "subcontractors", to operate them on its behalf. A steam unit is a truck mounted unit that produces steam to thaw frozen pipes, oil wells and gas plants. The system has a high pressure hot water wash used for to clean oil spills and to wash industrial buildings, gas plant facilities and "anything in the oil and gas industry". Chemical dispensers for emulsifiers and degreasers are attached to the units. Emulsifiers are used to break down the oil to facilitate the cleaning.

[5] Fimrite also owns vacuum trucks that are used to clean oil and other industrial spills or mishaps. The trucks are also used to haul dirty water and condensation and hazardous waste from gas well site and gas plant facilities. Anything that cannot be transported by conventional trucks are transported by the vacuum trucks. The truck tanks are licensed by the federal government and are inspected by government.

[6] The services of property maintenance, grass cutting, general trimming and maintaining of individual oil well leases and plant sites are necessary for the prevention of ground fires around wells.

[7] Mr. Fimrite estimated that the proportion of Fimrite's business income is about ten per cent from grass mowing and maintenance, 45 per cent from industrial cleaning and 45 per cent from vacuum trucks. While the cutting of grass is done during the spring, summer and fall, the steamer business is extremely busy during the extreme cold of winter. Fimrite operates 365 days a year, 24 hours a day.

[8] Fimrite performs services for about 75 to 80 different oil and gas companies and some forestry companies who contact Fimrite as the occasion requires, either when there is an oil spill or when there is a freeze-up. The hauling of fluids is "a little bit more regular" but that depends on how much a particular plant may be producing.

[9] The workers who are the subject of these appeals operated the various units. When Fimrite received a call from a client, Fimrite would get in touch with one of the workers who would proceed to the client's site. At the site the worker and the client would discuss and decide what work was to be performed and the worker proceeded to execute the job. After the work was performed the worker would prepare an invoice, have the client sign it and leave a copy with the client. In some cases, where disposal of wastes is involved, the worker and the client would determine the time required to complete the disposal and the time would be entered on the invoice. The worker would then deliver the waste to the disposal plant.

[10] Mr. Fimrite explained that Fimrite tried to have workers who would be able to operate both the steamers and the vacuum trucks because, in many jobs, the vacuum and steam trucks work together. It was convenient to have one person who could work on both trucks.

[11] The workers, according to Mr. Fimrite, were "skilled" since they had to be experienced in cleaning up an oil spill or "wash out" a gas plant facility. The work is dangerous. The workers were concerned with open flame combustion and chemical reactions. Therefore, they have to be trained and knowledgeable in working safely. The workers Fimrite hired, said Mr. Fimrite, were people who were experienced in the oilfield, who have been trained and had the necessary certificates to do the work.

[12] The workers were not supervised nor did they require supervision, according to Mr. Fimrite. The workers pay for courses to obtain their licences and pay to maintain the licences once the courses are completed. The only course that Fimrite paid for was a course with respect to working in confined spaces. This course, Mr. Fimrite explained, gives the workers training in how to rescue another worker from inside a tank or a berm.

[13] The agreement between workers and Fimrite was not in writing. Each contract was for a fixed term of one month. A Book of Documents submitted by the appellant includes a document entitled "Welcome!". The document explains to the worker the relationship that Fimrite hoped to establish between itself and the worker. The document states that the worker has:

. . . entered into a verbal contract agreement with Fimrite Oilfield Services Ltd. As a contractor, you are responsible for paying your income tax and CPP. As well, contractors are not covered by Unemployment Insurance. Each month begins a new contract. Contracts are complete the last day of each month. Contracts are paid upon completion of each contract (please drop your completed record sheets off at month end). Advances are available upon request.

Enclosed you will find:

F.O.S. Safety Manual

Contract Agreement

Safety Inventive Program

Monthly Record Sheets

Please read the safety manual carefully. If you have any questions, please ask.

Contractors are responsible for ensuring that all safety requirements are met and that your unit has all the required safety wear and equipment.

Certificates that are required to be kept up to date:

Confined Entry * WHMIS

Transportation of Dangerous Goods H2S Alive

Class 3 Operator's Licence Air Brakes

* Costs of Confined Entry Course are covered by F.O.S.

Periodic safety meetings are held to bring up any concerns that anyone has and to bring everyone up to date on any new procedures.

The monthly record sheet is for you to keep an on-going record of your invoiced hours as well as all shop time and detailed explanation of all shop time. Shop time should also be initialled by either Tex or Charlie. If you cannot get your time initialled daily, arrange to do so weekly.

[14] Each of the workers was given the "Welcome" document and a safety manual.

[15] The workers were attracted to Fimrite by word of mouth, according to Mr. Fimrite. He said that Fimrite never advertised for workers. "They came to us, and it was done sort of over a period of years. . . As the company grew, so did the number of workers retained by it."

[16] Fimrite obtained its work from word of mouth as well, according to Mr. Fimrite. He explained that he worked in the oil and gas industry for several years and "it just got to be known that we had the equipment . . . to do that type of work". He said he did very little soliciting. Doing well on the last job resulted in a further job, he declared.

[17] Work was allotted as follows: a client of Fimrite would phone Fimrite's office that it required services. If the client asked for a particular worker, Fimrite would contact that worker. If the worker was available, the worker would go to the client's site and perform the necessary service. Frequently the client would contact the worker the next day for another job or, on the same day, have the worker go to different sites to do other jobs once the first job was done. Fimrite did not have to approve this extra work but the worker had to keep Fimrite informed.

[18] Normally a worker was called when a job was available and the worker was qualified. Once Fimrite telephoned a worker, the worker would either go directly from his residence to the job site or go to Fimrite's shop to get the equipment and then go to the job site.

[19] In case of emergencies, if Fimrite could not find "the right guy" for the job, Mr. Fimrite would do the work or he would call a competitor.

[20] The workers were responsible for the maintenance and cleaning of the vacuum and steamer trucks. They serviced the trucks to keep them in good working order. The workers greased, fuelled and washed the trucks in Fimrite's shop.[3] The workers were paid for the time they performed these maintenance services. All other work was performed at the client's site.

[21] Fimrite permitted workers to keep a vacuum truck at his or her place of residence and when called, the worker could go directly to the job site. The steamers, on the other hand, were kept at Fimrite's shop since they had to be kept in a heated location. Infrequently, a worker who had the proper facility at home would be permitted to keep a steamer at home. None of the workers in these appeals kept a steamer at home. Mr. Fimrite's son, Troy Fimrite, purchased a vacuum truck on his own account and entered into an agreement with Fimrite for it to use the truck for a fee.

[22] The workers did not have to report to Fimrite's premises on a daily basis. Only in extremely cold weather were the steamer truck operators expected at the shop, usually at seven or eight o'clock in the morning, "because in those conditions we knew that all the steamers are going to be going somewhere". Mr. Fimrite also explained that when a worker went to a job site in extremely cold weather, he would remain on the site until the end of the day, at least, in case the problem recurred.

[23] As far as Mr. Fimrite was concerned, a worker could refuse to work on a particular job. This would happen when the worker was committed to a personal or a business matter. If a worker refused a particular job, he or she would lose the "spin-off work" that would be generated from the original call. Some of the workers worked for a competitor as well. Mr. Fimrite declared that the workers worked "primarily" for Fimrite but they were free to work for whomever they wanted.

[24] After the worker finished his work and had given the client the invoice for the work, the worker would bring the copy of the invoice to Fimrite's office. The invoice and the worker's time would be recorded by Fimrite's bookkeeper.

[25] The worker prepared the invoice based on Fimrite's prices; the worker was not permitted to negotiate prices with clients.

[26] Fimrite's bookkeeper received invoices from workers on a daily basis each evening. At the end of the month the bookkeeper compares the invoices against the worker's time sheets, totals their maintenance hours and their shop time and then subtracts any advances made to the worker during the month. Then a cheque would be prepared for the worker. A typical record of payment follows:

FIMRITE OILFIELD SERVICES

RR#1 Spirit River, Alberta

T0H 3G0

Contractor: TROY FIMRITE FOR THE MONTH OF JUNE 1996

   GST #894338649RT0001

To supply operator, vehicle and tools during the current month.

Worker's Compensation and Contractors Liability Insurance provided by Fimrite Oilfield Services.

DETAILS TOTAL

AS PER INVOICES CE 0.0 $ 0.00

OP 125.5 2,150.50

H 0.0    0.00

8 50.0    500.00

BONUS 0.0    0.00

0.0    0.00

TOTAL CONTRACT $2,650.00

REIMBURSEMENT    23.99

SUB TOTAL $2,674.49

LESS HOLDBACK $ 143.66

LESS COURSES $ 0.00

LESS ADVANCES $ 0.00

TOTAL PAYMENT $2,530.83

PAID IN FULL _______________ CHEQUE NO. ________

PREPARED BY: _______________

[27] A worker's starting salary was $10.00 an hour for shop time. If he required a helper, he was paid $13.00 an hour. The shop time includes the maintenance the worker was expected to perform on the trucks. The worker was paid $15.00 an hour for the time he was in the field. Thus, if a worker was working with a helper, he was paid $28.00 an hour, that is, the aggregate of $15.00 and $13.00. More experienced workers would be paid more. Workers also received extra pay for overtime; time in excess of 180 hours a month was considered overtime. Work performed on statutory holidays also warranted more pay. Also, if a worker had to work in a confined space, he would be paid an additional $2.00 an hour.

[28] Each job had a three-hour minimum; if a worker worked only one hour, he would bill Fimrite for three hours of work. Mr. Fimrite explained that if a worker completed a job quickly, he was available for other jobs. The invoiced hours could easily exceed the actual hours worked. For example, at the end of the day the worker's invoices may total 16 hours but his actual time is ten hours; the worker would be paid for 16 hours. (Fimrite itself would charge the client on a three-hour minimum. Travel time was included in the three hours.)

[29] In the event of a breakdown of equipment during a job the worker would attempt to repair the equipment on site. If the repair required a mechanic or additional parts, a mechanic would be called to the site and make the repair. In some cases, Fimrite would send another vacuum or steam unit to the site and remove the damaged unit. When equipment did not function, the worker was not paid for time he lost during the breakdown of the equipment.

[30] Whether a worker did a particular job well or not was the client's decision. If the work was not done to the client's satisfaction, the worker would return to do the work over at his or her own expense until the client was satisfied. Mr. Fimrite recalled when Miskulin left a job site in a "mess" and did not complete the job, Miskulin had to return to the site and spend a full day cleaning up.

[31] When a worker wished to take a vacation or take time off for personal reasons, he was free to do so, said Mr. Fimrite. There was no formal work schedule. In the event of conflict between workers, Mr. Fimrite stated, "he would try to have the workers settle the time off between themselves." However, Fimrite wanted to ensure that not everyone was taking holidays at the same time. Ordinarily, if a vacuum truck operator, for example, wanted a long weekend off, he would make sure that another worker would "cover" for him.

[32] Mr. Fimrite stated that a worker had the right to hire an assistant. Mr. Fimrite said that this would normally happen if a worker required an additional person for safety purposes. Fimrite, not the worker, would pay for the extra help. Mr. Fimrite explained that Fimrite obtained many of its workers in this manner. "They would go out on a job with one or the other contractors as a helper on a couple of jobs, and then if they were capable and liked their work and did a good job, they would become contractors."

[33] As stated earlier, Fimrite provided the trucks to the workers. Mr. Fimrite stated that Fimrite's newest vacuum truck, purchased in 1998, cost $230,000.00. A steamer that was also acquired in 1998 cost approximately $160,000.00. This was the type of equipment that Fimrite provided to the workers. The workers provided all other tools for the job, such as hand tools, hard hats, safety goggles, boots and gloves, in addition to their certificates.

[34] The only meetings held with workers, Mr. Fimrite insisted, were safety meetings. These meetings were held approximately once a month. There were also meetings called "tailgate safety meetings" on job sites; these meetings were usually initiated by the clients, said Mr. Fimrite, particularly on gas plant sites. This safety meeting would be held so that the worker and the client could review the hazards of the job that may be expected during the performance of the work. The worker would be required to fill out and sign a safe work permit at the beginning of the job. At the end of the job, the worker would have to sign off with the client.

[35] During the first half of 1996, Fimrite learned that Revenue Canada was of the view that the workers were employees of Fimrite and therefore ought to make contributions in respect of the workers for purposes of the CPP and the Act. As a result, Mr. Fimrite said, Fimrite changed the method of payment to the workers: the workers were to be paid on an hourly basis for time actually worked. The workers were no longer being paid on the basis of job having a minimum of three hours. Many of Fimrite's most experienced personnel left. In the meantime, Fimrite's competitors, who had not been assessed by Revenue Canada, continued to pay their field personnel in the same way Fimrite had paid their workers during the period in issue, Mr. Fimrite complained.

[36] Just prior to the commencement of Mr. Fimrite's cross-examination, counsel for the respondent, with the consent of the appellant's counsel, produced as Exhibit R-1 a Book of Documents. The book contained various income tax returns as well as the usual questionnaires, including answers, forwarded to each of the workers and Fimrite. The book also contained a summary of answers to the workers' questionnaires prepared, I assume, by an official of Revenue Canada.

[37] Respondent's counsel, Miss Wong, referred Mr. Fimrite to the questionnaire completed by Blain Dennis, one of the workers. Attached to this questionnaire was a document with a Fimrite letterhead; this document described the requirements and obligations of Fimrite as well as the requirements and obligations of the worker. According to this document, Fimrite was to provide workmen's compensation and contractor's liability insurance as well as supply safety clothing and other equipment. Mr. Fimrite replied that Mr. Dennis at the time had been engaged as an employee. Mr. Fimrite denied that Fimrite ever paid workmen's compensation or liability insurance nor indeed did it ever supply safety clothing and equipment. Fimrite did, of course, pay for insurance on the vehicles it owned.

[38] Mr. Fimrite also acknowledged that Fimrite provided vacation travel to "exotic" locations for its workers. Mr. Fimrite described this as

"a plan that we put into place to give our contractors incentive to go out to work when it's 40 below and it's in the middle of the night, and we felt that by doing it in any cash basis wouldn't make any difference, because after the first pay cheque it's gone, and this was something that we also felt would give them a better perspective on their job, if they had an opportunity to get right away from the oil field and right out of the country. And we put this in, not as a -- we didn't do it as a formal thing into the contract. It was a just a verbal agreement, that if they did a good job and after they had worked -- we based 2,000 hours is approximately a year's work, and so it was just a bonus to -- that they could work toward, and if they stayed working for us for those number of hours and years, they'd become qualified. And we have had quite a few of the people go on those trips".

[39] From time to time, Fimrite engaged the services of its competitors, including Bob's Steaming and Cleaning ("Bob's"), a business owned by a person who had earlier worked for Fimrite. The owner of Bob's had purchased a steam truck and competed for business with Fimrite. However, Fimrite hired Bob's on a "fairly regular basis". Mr. Fimrite said Bob's is "our first call-in" when a competitor is called.

[40] Bob's was not paid in the same manner as the workers. Mr. Fimrite described a situation where Fimrite agreed to clean pipeline equipment and control weeds on farm land. This contract was performed, to a large degree, by Bob's. Fimrite and the client had agreed to the rate at which the work would be performed. The client paid Fimrite and then Fimrite paid Bob's for the work. In most cases, however, where Bob's was used, Bob's issued its own invoice to the client. Fimrite, said Mr. Fimrite, was merely the contact person for Bob's. Bob's work was not recorded in the books and records of Fimrite as was the work of the workers. Bob's was paid at its own rate schedule, not that of Fimrite. In some situations, however, Bob's did bill Fimrite and Fimrite billed the client. When other competitors were used, they also invoiced the client directly, not Fimrite.

[41] Mr. Fimrite stated since Fimrite started paying the workers on an hourly basis, Fimrite has hired a full-time foreman to visit sites to ensure work is performed in an acceptable manner. He also complained he now has some safety concerns because the workers' "attitude is not the same as before." Mr. Fimrite explained that at the time of trial, as before, workers are called to work when they are required. Mr. Fimrite also said he now fears that if he lays off any worker, that worker will not return to Fimrite; he or she will apply for unemployment insurance instead.

[42] Troy Fimrite, the son of Wavell MacArthur Fimrite, also testified. He worked for Fimrite during 1994, 1995 and 1996. He generally corroborated his father's evidence. He explained the procedure followed when he first went to a job site: he drove the truck to the site, met the client at the location, discussed the situation with the client, filled out the necessary permits and discussed safety factors with the client. Then, he proceeded to perform the service.

[43] Troy Fimrite also reviewed the safety requirements in the event of poisonous gas leaks or if an evacuation was necessary. He also described the difficulty working in a confined space. Troy Fimrite could not stress too much how carefully the work had to be performed. Each job was different and potentially dangerous and only a competent person could be entrusted to perform these jobs.

[44] Troy Fimrite confirmed that he could have refused a job if it was not safe, if he was too tired to travel or had personal commitments. He also agreed that he was not paid for time equipment could not be used, for example, if equipment were stuck in the mud and could not be extricated or if the equipment broke down.

[45] Case law is replete with litigants' attempts to convince the courts that, depending on their interest in the trial, a person is either an employee or an independent contractor. At the present time the leading Federal Court of Appeal decision is Wiebe Door Services Ltd. v. The Queen.[4]

[46] Traditionally, the courts have established a series of tests to determine whether a contract is one of service or for the provision of services. The more commonly used tests were:

a) the degree or absence of control exercised by the alleged employer,

b) ownership of tools,

c) chance of profit and risks of loss, and

d) integration of the alleged employees' work into the alleged employer's business.

[47] These tests and their importance today are discussed and analyzed by MacGuigan J. in Wiebe Door. According to MacGuigan J., the tests do not bear equal weight. The real test is a "four-in-one test with emphasis always retained on ... 'the combined force of the whole scheme of operations', even while the usefulness of the four subordinate criteria is acknowledged".[5]

[48] The essence of a relationship between a purported employee and employer is found in searching for the total relationship of the parties. MacGuigan J. refers with approval to the work of Professor P.S. Atiyah:[6]

[I]t is exceedingly doubtful whether the search for a formula in the nature of a single test for identifying a contract of service any longer serves a useful purpose.

... The most that can profitably be done is to examine all the possible factors which have been referred to in these cases as bearing on the nature of the relationship between the parties concerned. Clearly not all of these factors will be relevant in all cases, or have the same weight in all cases. Equally clearly no magic formula can be propounded for determining which factors should, in any given case, be treated as the determining ones. The plain fact is that in a large number of cases the court can only perform a balancing operation, weighing up the factors which point in one direction and balancing them against those pointing in the opposite direction. In the nature of things it is not to be expected that this operation can be performed with scientific accuracy.

This line of approach appears to be in keeping with what Lord Wright said in the little-known Privy Council decision on Montreal Locomotive Works. . . .

[49] At the end of the day one must ask the question "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 is "yes", wrote Cooke J.,[7] then the contract is a contract for service. If the answer is "no" then the contract is a contract of service. Cooke J. adds:

No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of consideration which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various consideration 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.

[50] The trial judge, MacGuigan J. concluded, must weigh all of the relevant factors. Each case must by scrutinized on its own facts. Each case has its own peculiarities that influence a trial judge. All the facts taken together will determine the relationship between the person who performs a service and the person who pays for the service.

[51] In the appeal at bar it is clear that the business carried on was that of Fimrite. Fimrite controlled which worker would perform a particular job and what price would be charged to the client. The worker had no discretion in choosing a job or charging a rate different from that directed by Fimrite. The machinery, the steamers and vacuum trucks, required to do the bulk of the job was Fimrite's property. The workers did provide some equipment, usually small tools, but without the equipment supplied by Fimrite, no job could be performed.

[52] The individual works were permitted to take on a helper, if necessary; Fimrite paid the worker an additional amount if a helper was hired; the worker did not absorb the total cost of hiring the helper.[8] The financial risks to the worker were minimal.

[53] The workers engaged themselves to work as Fimrite's employees. It is true they did not require supervision in performing their work but this was because the workers were highly trained and qualified personnel. They were employees of Fimrite.

[54] Mr. Fimrite took umbrage at the fact the appellant was forced to change the method of payment to the workers once Revenue Canada determined the workers were employees and, as a result, Fimrite lost some of its workers. Method of payment is only one of many factors that influence what the true relationship is between a provider of service and a user of the service. There is nothing to stop Fimrite from continuing to pay its workers as it had in the past, subject to withholding statutory amounts from pay. The true nature of the relationship between Fimrite and the workers should be compared to the relationship between Fimrite and the competitors it frequently hires. In the latter situation, for example, the competitor such as Bob's determines rates and is subject to absolutely no control by Fimrite and this is because the competitor is an independent contractor.

[55] The appeals are dismissed and the determinations of the question by the Minister are affirmed.

Ottawa, Canada, August 14, 1998

"Gerald J. Rip"

J.T.C.C.

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