Date: 20010611
Docket: 1999-1793-EI,
1999-1794-CPP,
1999-1932-CPP,
BETWEEN:
COMEAU'S SEA FOODS LIMITED,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
Reasonsfor Judgment
O'Connor, J.T.C.C.
[1] These appeals were heard on common evidence at Halifax, Nova Scotia on January 22, 2001. Subsequent to the hearing of the appeals, written submissions were provided by counsel for both the Appellant and the Respondent.
[2] Appeals 1999-1793(EI) and 1999-1794(CPP) relate to a ruling of the Department of National Revenue dated July 9, 1998, confirmed by the Minister of National Revenue (the "Minister") by letter dated January 7, 1999 that Daniel d'Entremont was engaged in pensionable employment and insurable employment with the Appellant during the period January 1, 1997 to July 9, 1998 in that he was considered to be employed by the Appellant under a contract of service for purposes of both the Employment Insurance Act and the Canada Pension Plan (CPP).
[3] Appeal 1999-1932(CPP) relates to a Notice dated January 15, 1998 whereby the Minister assessed the Appellant in an amount of $241,661.84 with respect to the period from January 1, 1997 to October 31, 1997 for failing to deduct and remit CPP contributions from amounts the Appellant paid to 146 fishermen, the names of whom appear in Schedule "A" to the Reply to the Notice of Appeal, who were engaged in providing services on the Appellant's four scallop vessels and one herring seiner and failure to remit the Appellant's share of the CPP premiums.
PREMINARY
(a) The Appellant and the Respondent agreed that this Court's determination with respect to these three Appeals would apply to all fishermen listed in said Schedule "A". It was further agreed that the Court's decision would also apply to the appeals in respect of the insurability and pensionability rulings involving Daniel d'Entremont (1999-1793(EI) and 1999-1794(CPP)).
(b) It was also agreed and confirmed in a pretrial conference with Judge Rip, T.C.J., that it would be unnecessary to elicit testimony from all 146 fishermen engaged on the Appellant's vessels during 1997. Rather the evidence tendered at trial from a sample of fishermen, would speak for the working relationship between the Appellant and all fishermen on the Appellant's vessels during the periods in question. It was submitted that there was sufficient and uncontradicted testimony to the effect that what took place on one scallop dragger was, generally speaking, the norm for what happened on the Appellant's other scallop draggers. Likewise, the testimony of two fishermen involved in herring seining as to the activities on the seiner was sufficient to evidence the working relationship between the Appellant and crew of the Lady Melissa II, the Appellant's herring seiner.
FACTS
[4] I find the relevant facts to be as follows:
(a) The Appellant is a corporation duly incorporated in 1959 under the laws of the Province of Nova Scotia.
(b) Its principal place of business is 60 Saulnierville Road, Saulnierville, Nova Scotia, where processing scallops and herring was carried out. It also operated several other plants in Nova Scotia which carried on operations other than processing scallops and herring.
(c) The vessels and equipment, including nets, draggers and electronic equipment, were all owned by the Appellant. The crew members owned their own shucking knives and personal gear such as gloves, boots and rain gear. In 1997 there were two crews for each of the four scallop vessels. The Appellant chose which crew would go where in collaboration with the captains and tried to treat the crews equally, considering some banks were more profitable than others.
(d) The vessels engaged in the scallop fishery were the Lady Comeau II, Lady Denise II, Lady Yvette II and Lady Lisa II. The vessel engaged in the herring operation was the Lady Melissa II. The Appellant's three new scallop draggers, the Lady Denise II, the Lady Comeau II and the Lady Yvette II are each worth 3.5 to 4 million dollars. The Appellant's herring boat, the Lady Melissa II and the other scallop dragger, the Lady Lisa II, are worth in excess of 2 million dollars.
(e) The Appellant had no written employment agreement with the various fishermen but did have a verbal arrangement with them whereby each of them was entitled to a share of the proceeds from the catch and whereby they all bore the responsibility for a share of the expenses in respect of each fishing trip. These arrangements are evidenced by various Settling Sheets submitted at Tabs 1 through 9 of the Joint Book of Documents, Volume 1. As appears from these Sheets, the Appellant would establish a value based on market conditions for the herring and the scallops. These values established the amount of the proceeds to be divided. The scallop fishermen with respect to each catch would be entitled to 60% of those proceeds and the Appellant 40%. The split of proceeds on herring was 40% fishermen, 60% Appellant. These percentages had been in place for many years prior to 1997 and generally followed industry practice. Further as can be seen from the Settling Sheets, the crew was responsible for its share of numerous expenses such as ice, groceries consumed on the voyage, fuel, and certain contributions made to the cook and the engineer. For greater detail reference is made to the Settling Sheets.
(f) The Appellant owns the species and quota fishing licenses and vessel licenses and consequently, is considered as the owner of the catch, notwithstanding that the fishermen are entitled to a large share in the proceeds of the various catches.
(g) None of the fishermen (sometimes referred to as "crew") was guaranteed to receive a minimum amount of earnings per trip, nor did any member receive any benefits such as bonuses, statutory holiday pay, overtime pay or vacation pay.
(h) The Captain of each vessel was the person who chose and retained the fishermen. The Captain was retained by the Appellant but only after consultation with the crew. Moreover, it was the Captain who determined when a vessel would sail although this was done in collaboration with Noel Dépres, the General Manager of the Appellant. The Captain chose where to fish on the Bank or area assigned to him. In most cases the Captain received cheques from the Appellant for the full amounts due to himself and the crew and the Captain paid the crew with his own cheques.
(i) The Appellant's primary business is fish processing and the Appellant purchases fish from fishers on vessels other than its own.
(j) Prior to the CPP assessment for 1997, Canada Pension Plan contributions had been paid by each fisherman as self-employed.
(k) Noel Dépres, the General Manager of the Appellant, would call the Captains of the scallop vessels most mornings when they were at sea (most voyages lasted several days, usually 10) to check that everything was okay and he would let the Captains know if the Appellant wanted bigger or smaller scallops. There were five different banks for scallops. When the Captains are fishing, they send in a daily report of their catch shortly after midnight every day. The herring trips were on a daily basis conducted principally in the Bay of Fundy.
(l) The Department of Fisheries and Oceans ("DFO"), each year determines the quota for the industry and allocates that quota on a percentage basis to the various fishing companies. Further the DFO, the Appellant and the Captain determine what, where, when and how to fish. The Appellant has input as to which bank will be fished. The Captain has input once they are at the bank designated by the Appellant. It was up to the Captain to find the scallops within the area designated by the Appellant.
(m) I also accept as facts those set out in the Appellant's Post-Hearing Submission at paragraphs 161, 162, 167, 168 and 169, cited below.
SUBMISSIONS OF COUNSEL FOR THE APPELLANT
[5] I quote the following from the Appellant's Post-Hearing Submission:
8. Subsection 6(1) of the Canada Pension Plan, R.S.C. 1985, c. C-8, identifies what pensionable employment is and subsection 2(1) of that Act defines employment, for the purposes of that Act as meaning "the performance of services under an express or implied contract of service or apprenticeship ... (Book of Authorities, Tab 1)
9. The issue in the Appellant's appeal of the Canada Pension Plan assessment and the appeal of the Minister's determination regarding the pensionability of Mr. d'Entremont's services, and therefore all fishermen engaged by the Appellant, is simply whether the work performed by the fishermen is performed pursuant to a contract of service. If the fishermen are performing services pursuant to a contract of service then they are engaged in pensionable employment, pursuant to the Canada Pension Plan, thus triggering the requirement that the Appellant withhold Canada Pension Plan (occasionally referred to as "CPP") contributions from payments made to the fishermen and remit those withholdings along with the Appellant's share of contributions to the Receiver General for Canada. Prior to the 1997 assessment by the Respondent the same total CPP contributions were due, but they were remitted by the fishermen as contributions in respect up [sic] self-employed earnings.
...
11. Just as with the Canada Pension Plan, pursuant to paragraph 5(1)(a) of the Employment Insurance Act, S.C. 1996, c.23, a person is engaged in insurable employment if the employment is "under any expressed or implied contract of service". (Book of Authorities, Tab 2) If the fisherman is self-employed the provisions of the Employment Insurance Act do not apply to the earnings of the fisherman while engaged in self-employment. ...
12. Pursuant to section 2 of the Employment Insurance (Fishing) Regulations, SOR/96-445 (Book of Authorities, Tab 3) a person who is a "fisher" within the meaning of the Regulations is included as an insured person under the Employment Insurance Act. The effect is that the requirement to pay premiums and the entitlement to EI benefits does not depend on the determination of whether the crew is engaged in a contract of service or a contract for services.
13. The consideration of whether a fisherman is engaged under an express or implied contract of service is crucial to the determination of whether the fishermen are engaged in both pensionable and insurable employment for the purposes of Canada Pension Plan and the Employment Insurance Act. However, as the Appellant in this instance had deducted EI premiums during the period in question, the Minister did not assess on this issue. The determination of this Honourable Court with respect to the insurability of the fishermen will have no impact on either the Appellant or the Fishermen with respect to the withholding and remittance of EI premiums.
14. With respect to the issue of CPP contributions the impact is far different.
...
16. Further, this is not a case where the Minister has a discretion that the trier of fact must concern his or herself with usurping. An appeal of this nature is, in effect, a trial de novo. The question, common to all three appeals, is one of mixed law and fact. ...
[6] Counsel for the Appellant refers to the decision of the Federal Court of appeal in Moose Jaw Kinsmen Flying Fins Inc. v. M.N.R., 88 D.T.C. 6099. At page 6100 the Court stated as follows:
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 D.T.C. 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., [1947] 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".
115. An extensive body of jurisprudence subsequent to Wiebe Door has identified the "four-in-one test" as: ...
1.Control
2. Ownership of Tools/Equipment
3. Chance of Profit and Risk of Loss
4. The integration or organization test
[7] Counsel adds the following:
116. The Appellant submits that the Minister erred in determining that the Appellant, ... was an employer of the fishermen who formed the crews on the Appellant's vessels. The fishermen were self-employed individuals on the basis that they had a high degree of independence, a chance of profit and a real risk of economic loss. Decisions of the Tax Court of Canada in Murray v. M.N.R., [1987] 2 C.T.C. 2284, 87 D.T.C.559 (T.C.C.), ... (hereafter "Murray"), and Benjamin v. M.N.R. (February 2, 1998), 96-1303(UI) (T.C.C.), ... (hereafter "Benjamin"), together with the analysis adopted by the Federal Court of Appeal in Wiebe Door ... support the position of the Appellant.
117. The relationship between the crew members and the Appellant is very similar to that considered by Sarchuk J., in Murray where he held that a fishing Captain and crew members were independent contractors.
118. As in the case here, the Court noted in Murray that there was no employment contract between the company and the crew members. Nor were the fishermen guaranteed any form of minimum earnings. Further, each crew member shared in the proceeds of the catch on a predetermined basis
119. In reaching its conclusion that the Captain of the vessel and the crew members were independent contractors, the Court reasoned at paragraphs 15 through 17:
... The evidence clearly establishes that the crew hired by Cape Beale were all independent contractors. There is not a shred of evidence to support the proposition that Murray was treated any differently. In his capacity as master of the vessel his duties were not supervised by Cape Beale and Murray was totally and completely in control of the methods and means of doing his job; perhaps as a master of a vessel even more so than in other circumstances might be the case. There was no employment contract and there is no evidence that Murray was entitled to any fixed or ascertainable remuneration. Each crew member, including Murray, was paid on the basis of results. If they fished efficiently their earnings would likely increase. If weather or poor conditions or bad management or bad work disrupted their pattern they bore the brunt of the loss, or they bore a portion of the loss.
I see none of the incidences of a master/servant relationship in this situation. Furthermore, Revenue Canada itself distinguishes fishermen-employees from independent contractors. I refer to interpretation Bulletin IT-254R2, which although dealing with a totally different matter contains this comment in paragraph 1:
This Bulletin applies to "fishermen-employees" (members of the crew of a fishing vessel who are remunerated on a salary or wage basis as distinct from those entitled to a part of the profits on a share-of-the-catch basis with liability for expenses)...
120. In Murray, the Court unequivocally held that crew members who were part of a working arrangement almost exactly similar to the one at the Appellant, were not employees of the vessel owner.
121. The decision in Benjamin, ... is the most recently published decision from the Tax Court of Canada regarding the employment status of fishermen. The working arrangement between the fisher and the vessel owner was very similar to the arrangements in Murray and that of the Appellant. In this case, the Court characterized the parties as co-venturers. Judge Rowe applied the Wiebe Door test and was satisfied that the appellant was a self-employed individual even though the fisher:
(a) did not own any tools or equipment; and
(b) did not exercise control about where to fish; and
(c) did not pay for expenses such as groceries, fuel, bait, ice.
The consideration which was most important to the Court in determining that the fisher was self-employed was her chance to profit. The fisher's remuneration was based on 35% of the profits from the catch. ...
[8] Counsel then analyzes the fourfold test and I cite the following extracts from his written submissions:
Control ...
127. The nature of the fishing industry is such that the fishermen cannot have absolute control over all aspects of the work to be performed. For example, the fishing license restricts the species of fish to be caught and where and when the fish may be caught. Furthermore, because of the nature of fishing expeditions, it is also necessary for individual fishermen to organize themselves into a crew with a Captain. The process of fishing at sea also requires all members of the crew to make a cooperative effort. It is clearly not possible for each member of the fishing crew to retain all of the control over how he or she performs work. However, the work of the crew members is independent of the Appellant and they fish without direction or supervision by the company.
128. Justice Robertson of the British Columbia Court of Appeal held in Mark Fishing Co. v. U.F.A.W., [1972] 3 W.W.R. 641, 24 D.L.R.(3d) 585 (B.C.C.A.), ... (hereafter "Mark Fishing"), that fishermen were not employees and noted that the absence of control by crew members over where and when they would fish was not necessarily indicative of an employer/employee relationship. He recognized that the very nature of a voyage at sea means that a variety of decisions must be left to the Captain of the ship.
Counsel in particular referred to the following words of Justice Robertson:
There is one feature in the contracts here between the fishermen and the owners that inclines me particularly to the view that the former were not employees of the latter. It is the fact that, if there was a loss on a trip, there was incurred a "hole" bill that was charged to the crew in equal shares; this was a debt owing by each member of the crew to the owner or owners, and one that followed the member wherever he went; his liability to discharge it did not depend on his having profits out of which to do so on subsequent trips of a vessel of the same owner or owners. To me this appears to be inconsistent with the relationship of master and servant and consistent with the relationship of co-adventurers. [emphasis added]
129. The evidence demonstrated that the crew, and not just the Captain alone, have a significant role in determining the number of crew or the crew compliment. This is a significant decision which has a direct effect on their total remuneration. ... While generally all crew receive an equal share, with some positions such as cook, engineer, mate and Captain receiving greater amounts, the evidence demonstrated that new crew members were often brought in by agreement at less than full share.
...
2. Ownership of Tools
134. Self-employed individuals are often responsible for providing necessary tools and supplies used in the performance of services under a contract. However, it is important to note that courts have placed less weight on the ownership of tools simply because it can be fairly inconclusive depending on the nature of the services being performed.
135. Fishermen on vessels owned by the Appellant bear the responsibility of supplying or paying for some of the necessary tools such as shucking knives as well as their personal gear including gloves, rain gear, and boots.
136. ...
The courts have given this aspect of the legal test less weight in assessing work relationships. In today's market, as in other industries, participation in the fishing industry requires heavy investment in capital and modern equipment to keep pace with technological changes and other competitive pressures. The increasing sophistication and expense of fishing equipment means that it is impractical to require individual fishermen to contribute to the cost of the purchase price of the machinery or the vessel. Such involvement would require major capital investment by individuals carrying on business in an industry which is typically seasonal. ...
3. Chance of Profit or Risk of Loss
142. Self-employed individuals will generally have the opportunity to make a profit from the work performed, but conversely they also bear the risk of loss. Employees, on the other hand, are guaranteed to receive a payment for services performed and would not be entitled to any profit over and above the daily or hourly rate.
143. ...
(i) No guaranteed salary or remuneration
144. On the issue of chance of profit, the Appellant is clearly not an employer because crew members on its vessels do not have any guaranteed salary—they pay their share of expenses and they are entitled to their proportionate share of the proceeds from a catch. The remuneration received by the Appellant's crew members is entirely profit-based. The Appellant receives the "boat share" from the catch because it is the owner of the vessel and not because it is an employer of the fishermen. From its share the Appellant must pay expenses relating to its equipment and licenses.
...
[9] Counsel also refers to Klingner v. Mark Fishing Co. 1993 Carswell Nat. 726, 63 T.T.R. 83 wherein the Federal Court, Trial Division held that a relationship similar to that in these appeals was akin to a joint venture.
161. Here, the evidence demonstrated that the herring seiner would frequently return from a night's fishing with no catch. However, by agreement, settlement would be delayed until conclusion of a number of trips in order that the settlement would result in payment to the crew. The scallop draggers also had "broken trips". It is uncontradicted that the crew of a vessel forced to return from a trip early, thus making it an unprofitable trip, would discuss with the other crew whether the first crew could return to sea. There was agreement that the first crew would return to ensure a profitable trip. The expenses from sailing the first time are thus held over until the final settlement with respect to a trip. If it were not for the agreement reached between the two crews (without any involvement or input by the Appellant) then there would be a loss to the crew. However, because the crew among themselves agreed that they can return to fish until they have a full trip, they have in this way ensured that the negative balance in the equivalent of their whole account is offset by the value from a subsequent trip.
162. In the case of herring it is even more evident that a "hole" account is kept. The Court heard evidence that during the season the Lady Melissa sails every day but often returns without a catch. The expenses from each trip are held over until there is a sufficient catch and a settlement sheet is finally completed. The expenses from previous trips, where no settlements have taken place, are held over until a number of profitable trips.
...
4. Integration or Organization Test
...
166. If work performed by an individual is done as an integral part of the business, then this can be relevant to the determination if the person is an employee of the company. The work performed by an independent contractor will generally be necessary to the business, but not integral to it.
167. The fishermen must all possess personal fishing licences issued by DFO that must be renewed annually. The members of the crews who act as captain, mate and engineers must also have other specific training that must be renewed such as first and an [sic] MED (Marine Emergency Duties) certificates. The Appellant does not pay for nor reimburse the fishermen for the costs of these licenses and certificates.
168. Many crew members on the Appellant's vessels are also active in other aspects of the fishing industry - in areas unrelated to the Appellant. For example, a number of the crew on the herring seiner, the Lady Melissa are involved at various times of the year in the lobster fishery. As well, other crew on the scallop draggers and herring seiner are involved in cutting wood, owning and operating a sawmill, working on unrelated boats fishing for ground fish such as pollock, cod and haddock, and working for other inshore scallop boats not related to the Appellant.
169. The Appellant is not responsible for the training of any of the crew members. Each individual possesses necessary skills or receives training from other crew members as part of a team of co-venturers. Both in herring and scallops the members of the crew have specialized skill and knowledge relating to their fishery. This knowledge or skill is acquired by the fishermen themselves and is not provided by the Appellant.
170. In determining the level of integration of the fishermen in the business, it is also relevant that the Appellant does not pay the fishermen bonuses, vacation pay, statutory holidays or overtime.
...
Conclusion: Legal Test
175. A proper analysis of the relationship between the Appellant and fishermen working on its vessels in accordance with the four-in-on [sic] legal test results in a characterization of the fishermen as independent contractors or co-venturers. A proper application of the test cannot be made without consideration of the realities of the fishing industry and the fact that the fishermen and the Appellant share expenses and profits. This characterization is well supported by the vast majority of decisions from the Courts regarding the employment status of fishermen.
...
C. Administrative Practice
182. ... the approach used by the Minister's officers to determine whether a fisher is an employee or an independent contractor may be useful as an interpretive aid. There are various technical interpretations issued by Revenue Canada which overwhelmingly support a finding that the Appellant is not an employer of the fishermen.
183. As noted in the case of Murray ... discussed above, in Interpretation Bulletin IT-254R2 - Fishermen - Employees and Seafarers - Value of Rations and Quarters, dated May 26, 1980, ... ; the Minister distinguishes "fishermen-employees" from self-employed fishermen for the purposes of determining the application of employment benefit provisions and states:
1. This Bulletin applies to "fishermen-employees" (members of the crew of a fishing vessel who are remunerated on a salary or wage basis as distinct from those entitled to a part of the profit on a share-of-the-catch basis with liability for expenses) and to the officers and crew of any vessel other than a fishing vessel.
184. In technical interpretation 9419327, dated August 10, 1994 ... the Department states that it will generally consider a person to be a self-employed fisher person if:
· the person owns or rents a fishing boat;
· the person is a captain of a fishing boat; or
· the person is a shares man who gets a share of the catch.
[emphasis added]
...
186. A "Communique" dated September 6,1997 (see Exhibit AR-1, Vol. 3, Tab 26) reiterates that a fisher will be considered self-employed if the person:
a) participates in making a catch;
b) is not fishing for sport; and
c) meets at least one of the following conditions:
i) has ownership or leases the boat which is used to make the catch; or
ii) has ownership or leases specialized fishing gear (not including hand tools or clothing) which is used to make the catch; or
iii) is the holder of a species license, issued by the Department of Fisheries and Oceans, necessary to make the catch; or
iv) has a right of ownership to all or part of the proceeds from the sale of the catch and has a financial responsibility for all or part of the expenses incurred in making the catch. [emphasis added]
187. In the 1997 Fishing Income Guide (T4004) (Book of Authorities, Tab 15), it is noted that the income of a sharesman is the amount received after deduction of all trip expenses from the sale of a catch. Permitted deductions include amounts paid for personal fishing licenses, rubber gear, gloves and knives.
188. Based on the Minister's own published guidelines and interpretations, the fishermen who work on the Appellant vessels should be characterized as self-employed. Most importantly, the fishermen meet the "sharesman" condition required by the Minister. Each crew member is entitled to a share of the proceeds of the catch and is required to pay certain expenses for the fishing voyage.
SUBMISSIONS OF COUNSEL FOR THE RESPONDENT
[10] Counsel for the Respondent refers to the applicable laws and Wiebe Door. I cite the following extracts from his written submission analyzing the four tests.
The Control Test
20. The control test was the traditional common law criterion of an employment relationship. The test has been restated several times. In Wiebe Door Justice MacGuigan notes two restatements of the control test. The first is a statement of the test set out by Baron Bramwell in R. v. Walker (1858), 27 L.M.J.C. 207, quoted at paragraph 6 of the Wiebe Door decision.
It seems to me that the difference between the relations of master and servant and of principal and agent is this: A principal has the right to direct what the agent has to do; but a master has not only that right, but also the right to say how it is to be done.
21. The second is a statement of the test adopted by the Supreme Court of Canada in Hopital Notre-Dame de L'Esperance and Theoret v. Laurent et al., [1978] 1 S.C.R. 605 at 613, quoted at paragraph 6 of Wiebe Door:
... the essential criterion of employer-employee relations is the right to give orders and instructions to the employee regarding the manner in which to carry out his work.
22. Thus, the control test examines whether the alleged employer has the right to give orders and instructions to the employee regarding the manner in which the employee carries out his work. As noted by Justice MacGuigan, the test can break down in relation to highly skilled and professional workers, who possess skills far beyond the ability of their employers to direct. For this reason, the proper application of this test requires the court to focus on the alleged employer's right to give orders rather than on whether the alleged employer gives orders in fact. Thus, in Gallant v. Canada (Department of National Revenue), [1986] F.C.J. No. 330, Pratte J.A. states the following:
The distinguishing feature of a contract of service is not the control actually exercised by the employer over his employee but the power the employer has to control the way the employee performs his duties.
...
24. As stated in Scherrer v. Canada (Minister of National Revenue - M.N.R.), [1994] T.C.J. No. 966, October 27, 1994, unreported, at paragraph 15:
The degree of control exercised by the employer is one of the determining factors, and of course it varies, depending on the employment. The foreman in a plant exercises visible and obvious control over the employees under his or her direction. On the other hand, marine or airline companies can exercise only limited control over captains of vessels or pilots of aircraft. It would be unthinkable to have a supervisor sitting beside every one of them. And yet they are no less employees of the company that employs them. ...
25. Factors pointing to a relationship of subordination ought to be considered by the Court in applying the control test. In Chiasson et al. v- M.N.R. (February 23, 1990), 87-603(UI), there was no consultation with respect to the remuneration of the fishers, the beginning and end of the fishing period, the nature of the work and its duration, and fishers were obliged to participate in the preparatory work for the departure of the vessels. The Court held at page 9 that:
In these circumstances, it appears difficult to me to conclude that there is a joint venture when a single party has absolute control over all the operations relating to the planned initiative. Control over the work by one of the parties is so absolute and participation in the decision-making by the other party is so completely absent that it appears more plausible to believe, in applying this first test that the nature of the legal relationship between the fishing vessel owner and the deck hands is rather that of an employer who deals with his employees. ...
The Integration Test
26. The "organization" test was first set out by Lord Denning in Stevenson, Jordan and Harrison, Ltd .v. MacDonald and Evans, [1951] T.L.R. 101 at page 111. It is quoted in Wiebe Door atparagraph 3:
One feature which seems to run through all the instances is that, under a contract of service, a man is employed as part of the business, and his work is done as an integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it. ...
27. This test, employed by the Supreme Court of Canada in Cooperators Insurance Association v. Kearney, [1965] S.C.R. 106, asks essentially whether the alleged servant was part of his employer's organization. Bendel in Fleming, The Law of Torts (2nd ed. 1961), quoted in Wiebe Door at paragraph 11, uses a passage from an Ontario Labour Relations Board decision to explain the reason for the use of the integration test thus, at 382:
The essence of operating a business is holding out to a market society the availability of goods and services at the best possible price having regard to competing pressures exacted upon a particular market. It seems patently obvious to this Board that a particular business will not flourish in circumstances where growth is totally integrated with the operations of a particular customer. The essence of resolving and distinguishing the contractor from employee is his independence ... in instances where the driver's means of financial support is [sic] inextricably bound up with the respondent we are of the view that he cannot be considered an independent contractor. ...
28. In Wiebe Door, Justice MacGuigan states that the organization test produces entirely acceptable results when properly applied, that is, when the question of integration is asked from the point of view of the "employee" and not from that of the "employer". The reason for this perspective, states Justice MacGuigan at paragraph 16, is that "it is always too easy from the superior perspective of the larger enterprise to assume that every contributing cause is so arranged purely for the convenience of the larger entity". When the test is viewed from the point of view of the worker, it is plain to see that if the worker's business is totally integrated with the operations of the payor, the worker is not an independent contractor. According to Wiebe Door at paragraph 16, the question that must always be posed with respect to the organization or integration test is: "Whose business is it?" ...
29. With respect to the question "Whose business is it?", the Court in Chiasson, supra, relied on the following factors at page 10:
If the test is applied from the point of view of the fishermen, it seems clear to me that these fishing expeditions did not form part of a business that was operated collectively by all the deck hands of the same crew. For example, the deck hands did not participate in any way in the choice of their co-workers, nor obviously in the choice of their captain. Several of them were related to the captain. On an objective examination of the facts in the appeals with which we are concerned, it is quite obvious that the business for which the deck hands worked was truly that of the owner of the vessel. In my opinion, it cannot be seriously contended that the business in question was even partially that of the fishermen. The application of this third test decidedly supports the contention that the fishermen were employees.
...
32. Part of the "four-in-one" test involves determining who owns the tools necessary to carry on the undertaking being examined. As noted in Chiasson, supra, at page 9:
As we have seen, the vessel, the fishing gear and the tools were without exception the exclusive property of the owner of the vessel. If the application of this second test points in any direction, it would be towards the fishermen being employees. Indeed, one would normally expect these fishermen to make some kind of contribution towards the vessel if they were part of a joint venture,
33. With respect to the chance of profit or risk of loss, the mere fact that a worker is paid by the piece does not indicate that he is self-employed. In fact, payment by the piece is contemplated within section 5(1)(a) of the Employment Insurance Act. ...
34. In Chiasson, supra, at pages 10 and 11, the Court examined whether the share allocated after amounts were deducted from the fishers settlement sheets "amounted to a share of the profits from the fishing expeditions". The Court took into account that fact that the owner of the fishing vessels had to absorb the cost of such items as the depreciation of the vessel, the materials used for maintenance repairs, the fishing gear and tools, other than the electronic equipment. The Court held, at page 11, that the amount the crew members received was really based on "an arbitrary calculation, which can only be explained by the historical context." ...
APPLICATION OF THE EVIDENCE TO THE LAW
35. The Respondent submits that with respect to the control test, the following factors point to a contract of service between the Appellant and the fishers:
· The Appellant owns the vessels, the species licences, the boat licences and the major equipment used to prosecute the fishery. None of the fishers could prosecute the off-shore scallop and herring fisheries independently because they could not obtain the necessary licences to do so. The number of licences available are limited to those participants already engaged in the industry.
· The Appellant determines the price to be paid the fishers without input from the fishers. The fishers do not negotiate this price.
· The Appellant determined that there would be double crews without any input from the fishers.
· The Appellant determines which bank each vessel will go to.
· The captain may determine where to fish within a bank. Should the Appellant want a certain kind or quality of scallop, it may instruct the captain to move. If a captain is told to move by the, Appellant, he must move.
· The captains working on the Appellant's vessels are highly skilled and experienced fishers. This experience enables them to find the fish once inside the area designated by the Appellant. The fact that the captains of each vessel made independent decisions with respect to where to fish within the area designated by the Appellant does not point to a lack of control by the Appellant. Rather, this demonstrates the principle expressed in Scherrer, supra, at paragraph 15, that it would be unthinkable to have a supervisor sitting beside every captain of a vessel, and yet they are no less employees of the company that employs them.
· The nature of fishing is such that it would be impossible for the Appellant to direct the captain as to exactly where to go within a bank. However, it is clear that the Appellant has the right to control the captains and does so to a great degree, even going so far as to instruct them to move in order to satisfy the demand for a certain quality of product.
· The Appellant tells the captain when to leave and when to return. The captain must make this decision with regard to the safety of the crew only.
· Daily contact is maintained with the vessels.
· Where fishers do not want to fish in an area designated by the Appellant because it will result in a smaller settlement, they still believe they are obliged to go.
· Marcel Comeau stated that after the herring season, which is prosecuted by the fishers from late May to mid October, the fishers have the rest of the year to do whatever they wish. This would imply that they cannot do whatever they wish during the season itself.
36. The Respondent submits that with respect to the integration test, the following factors point to a contract of service between the Appellant and the fishers:
· The Appellant's scallop draggers and herring seiner form an integral part of the overall operation of the Appellant.
· The Appellant owns the boat and species licences and the vessels used to prosecute the fishery. The Appellant is required to pay a considerable amount for these licences and vessels. This would suggest that the Appellant does not consider the work performed by the fishers to be merely incidental to the Appellant's business.
· While the Appellant has several different operations, it is primarily in the business of fish processing. The fishers provide the very material used by the Appellant at their processing plants. By prosecuting the herring and scallop fisheries, the Appellant was able to control the timing, quantity and quality of fish arriving at their plants for production. This also better assured them that product would be available to process by the plant workers in their plants.
· The fishers have an ongoing relationship year after year with the Appellant. Sailing on the Appellant's boat takes priority over any other jobs during the season. Once again, the herring fishers were free to work elsewhere after the Appellant's quota was caught.
37. The Respondent submits that with respect to the ownership of tools, the following factors point to a contract of service between the Appellant and the fishers:
· The Appellant owned the major tools used in the work performed by the fishers: the vessels, the large fishing gear and the fishing licences.
· The Appellant was wholly responsible for any repairs to the vessels.
· The Appellant paid all of the insurance on the vessels.
· The Appellant owned the fish quota.
· The fishers only provided their own personal items such as oil clothes, gloves, boots and knives.
38. The Respondent submits that with respect to the chance of profit and risk of loss, the following factors point to a contract of service between the Appellant and the fishers:
· The crew was paid on a per pound basis which they did not negotiate with the Appellant. The evidence of the witnesses was that the price per pound had not fluctuated in 10 years. When the Appellant's quota increased in the year 2000, the Appellant dropped the price per pound paid to the fishers. The fishers had no guarantee of participating in any profit derived from increased quotas
· As a result of being required to share in the prosecution of the scallop fishery in less desirable areas, no fisher was given the opportunity to maximize his profit.
· The amount the fishers receive is really based on an arbitrary calculation, which can only be explained by the historical context.
· Other expenses were deducted in amounts that could only be explained in a historical context as they did not reflect their actual costs, such as the electronic equipment (i.e. radar and loran). Deduction of such expenses cannot be described as sharing in a loss.
· The system of remuneration used by the Appellant guaranteed that the fishers would never be in a loss situation. When a crew was forced to return from a fishing trip early, they were allowed to return to sea to continue fishing without having to "settle up" until their return from the second trip. By agreeing to broken trips and flexible times for settlement, which was not opposed by the Appellant, if there was any risk (which the Respondent still submits there was none), by this arrangement, the fishers with the Appellant have eliminated any risk of loss.
· None of the witnesses could remember an example of a fisher owing the company because his expenses had exceeded the amount he was paid for the catch.
· If there were a loss on a broken trip for a crew member who did not participate on the second trip, the crew would be responsible for the loss. Therefore, unlike the fact situation in Mark Fishing Co. v. U.F.A.W., 1972 Carswell BC 95, [1972] 3 W.W.R. 641, 24 D.L.R. (3d) 585, (B.C.C.A.), liability for the debt did not follow the individual fisher. ...
· Although the captain and crew can effect their remuneration by determining the number of crew or the crew compliment, the greatest factor with respect to their remuneration is the value of the catch they receive from the Appellant, a factor they have no input or negotiation on. The Respondent submits that the Appellant controls the value of the catch and makes choices based on a determination as to how the market will affect the Appellant's own profit interests. The fishers are not privy to this information and cannot, as would a self-employed fisher, respond to outside market demands by setting their own price.
· The Appellant has made reference to the increasing expenses and sophistication within the fishing industry and how it is impractical to require individual fishermen to contribute to the cost of the purchase price of the machinery or vessel. The Respondent submits that fishers who are self-employed do make this major financial/capital investment and claim their respective expenses such as loan interest, boat repairs, insurance, etc., and capital cost allowances on depreciable equipment in their operation. The case at bar differentiates between the risks and investment a self-employed fisher must undertake in contrast to the fishers that work for the Appellant.
· Any true risk of loss was that of the Appellant, as it was the Appellant who had sole responsibility for the financing of the vessels, insuring the vessels, and the investment in the licences. Further, the Appellant's processing plants would have been detrimentally affected by any significant loss of product, increasing the risk to the Appellant in other areas of the Appellant's business.
...
40. With respect to the total relationship of the parties, the Respondent submits that the fishers were in a relationship of subordination vis a vis the Appellant which would mitigate any true partnership or relationship of "co-venturer".
...
42. In section C of its submissions the Appellant has made reference to information releases produced by the Canada Customs and Revenue Agency, previously the Minister of National Revenue, regarding the employment status of fishers. The Appellant is correct in stating that these releases are not binding legal authority. They are an interpretative aid addressing some of the factors the Minister considers in making a determination on the employment status of a respective fisher.
...
44. In relation to the fishers under consideration and in response to the Appellant's submissions, the Respondent says that the fishers did not share in the catch but that their remuneration was determined according to an arcane, historically based formula. It must be noted that the formula did not calculate the profit or loss of the fishing venture.
ANALYSIS AND DECISION
[11] Subsection 6(1) of the Canada Pension Plan, R.S.C. 1985, c. C-8, identifies what pensionable employment is and subsection 2(1) of that Act defines employment for the purposes of that Act as meaning "the performance of services under an express or implied contract of service or apprenticeship". Just as with the Canada Pension Plan, pursuant to paragraph 5(1)(a) of the Employment Insurance Act, S.C. 1996, c.23, a person is engaged in insurable employment if the employment is "under any expressed or implied contract of service". The question thus becomes were the fishermen in these appeals employed under a contract of service or a contract for services.
[12] Based upon all the factors present in these appeals, I find that on a balance of probabilities the relationship that existed in these appeals was in each case one of a contract for services and not a contract of service. One cannot simply look at the ownership of the expensive vessels and conclude from that, that since the major tools (i.e. the vessels, fishing equipment and radar, etc.) were owned by the Appellant and only minor items and tools owned by the fishermen that therefore what existed were contracts of service. One cannot expect seasonal fishermen to contribute to the cost of or running expenses of such costly equipment as we have in this case. With respect to control, there are elements of control exercised by the Appellant but there was a considerable degree of independence of the Captain and crew when performing their services. In fact the Appellant chose the captains after consultation with the crews. It was the captains who retained the crew members and in most cases paid them by cheque after receiving the appropriate amount from the Appellant. Moreover, many of the aspects of control arise from the relationship of the DFO controlling the places to be fished and quotas of fishing. As to integration, the factors point in two directions. The fishermen in question were not totally integrated into the operations of the Appellant. The question that arises is whose business is it? Well it is obviously mainly the business of the Appellant but, the fact remains that the Appellant by sharing the proceeds of the catch, in effect, is sharing the proceeds of the business with the crew as a co-venturer. This I find to be a key element in ascertaining the nature of the relationship. I refer in particular to the following decisions:
Re Lunenburg Sea Products Ltd., Re Zwicker, [1947] 3 D.L.R 195 (N.S.S.C.)
Murray v. Canada, 87 D.T.C. 559 (T.C.C.)
Robinson v. Canada, [1991] T.C.J. No. 624 (T.C.C.)
Benjamin v. Canada, [1998] T.C.J. No. 153 (T.C.C.)
[13] The enactment of the Employment Insurance (Fishing) Regulations ("Fishing Regulations") is a tacit recognition that fishers (fishermen) are often considered to be independent contractors. The willingness to extend the benefits of the Employment Insurance Act (the "EI Act") to fishermen demonstrates a clear statement that people in this occupation would not otherwise benefit.
[14] The Fishing Regulations were enacted pursuant to subsection 153(1) of the EI Act, which provides:
153. (1) Notwithstanding anything in this Act, the Commission may, with the approval of the Governor in Council, make such regulations as it deems necessary respecting the establishment and operation of a scheme of employment insurance for self-employed persons engaged in fishing, including regulations
(a) including as a self-employed person engaged in fishing any person engaged in an activity or occupation related to or incidental to fishing; and
(b) including as an employer of a self-employed person engaged in fishing any person with whom the self-employed person enters into a contractual or other commercial relationship in respect of their occupation as a self-employed person engaged in fishing.
[15] This provision replaces former subsection 130(1) of the Unemployment Insurance Act (subsection 146(1) of the 1970-71-72 Act).
[16] In Silk v.Canada (Unemployment Insurance Act Umpire) [1982], 1 F.C. 795 (F.C.A.), the Umpire had to determine whether a regulation enacted pursuant to former subsection 146(1) of the Unemployment Insurance Act was ultra vires and invalid in that it prescribed a different qualifying period than that provided in the Unemployment Insurance Act. The Federal Court of Appeal found that the section did not authorize the setting up of a more restrictive scheme than that provided by the Unemployment Insurance Act. Thurlow C.J. stated in his interpretation of former subsection 146(1):
The submission put forward in support of the Regulation, as I understand it, was that the Commission was authorized by section 146 of the Act to establish and had established a separate and distinct system of unemployment insurance for persons engaged in fishing who would otherwise not be eligible to receive benefits.
[...]
What paragraph (a) appears to me to intend is that regulations may be made for "including as an insured person" a fisherman notwithstanding that he is not an employee of any other person. When such a regulation has been made the fisherman is to fall within the definition of and be treated as an insured person under the Act notwithstanding that he is not an employee. In consequence he will have to pay premiums.
The effect of paragraph (b) is similar. Under it regulations may be made for including as an employer a person with whom the fisherman has a contractual or commercial relationship in respect of his occupation as a fisherman, notwithstanding the fact that the person to be included as an employer is not an employer at all. In consequence that person too will have to pay premiums.
It is apparent from reading these paragraphs that the regulations to be made are not merely to be regulations that treat the fishermen as insured persons within the meaning of the Act but to include them in the unemployment insurance scheme established by the Act for employed persons.
[17] The Supreme Court of Canada, [1983] 1 S.C.R. 335 (S.C.C.) later confirmed the Federal Court of Appeal's reasons and McIntyre J. stated:
Before the enactment of s. 146, fishermen were not eligible for unemployment insurance benefits. It is clear from the words of the provision that its purpose was to extend the application of the Act to fishermen.
[18] I should add that if these Appellants were to be found to be employees in such a situation where they were clearly being remunerated solely on a percentage of the catch, then it is not clear to whom the Fishing Regulations would ever apply.
[19] Further the administrative practices of Revenue Canada detailed in Appellant's submissions clearly indicate that fishermen who share in the proceeds of the catch are not employees. Moreover the fishermen in these appeals received no fixed remuneration, vacation pay, etc.. Also when not fishing on the Appellant's vessels they could and did take other employment. Further, in my opinion, sharing in the proceeds of the catch is not payment by the piece.
[20] The Scherrer & Chiasson decisions are distinguishable from the facts in these appeals. The cases cited by counsel for the Appellant are more persuasive.
[21] For all of the above reasons the appeals are allowed, without costs.
Signed at Ottawa, Canada, this 11th day of June 2001.
"T. O'Connor"
J.T.C.C.
COURT FILE NO.: 1999-1793(EI), 1999-1794(CPP)
and 1999-1932 (CPP)
STYLE OF CAUSE: Comeau's Sea Foods Limited v.
The Minister of National Revenue
PLACE OF HEARING: Halifax, Nova Scotia
DATE OF HEARING: January 22, 2001
REASONS FOR JUDGMENT BY: The Honourable Judge T. O'Connor
DATE OF JUDGMENT: June 11, 2001
APPEARANCES:
For the Appellants: Roderick H. Rogers
R. Dan Harasemchuk
Counsel for the Respondent: John P. Bodurtha
Caitlin A. Ward
COUNSEL OF RECORD:
For the Appellant:
Name: Roderick H. Rogers
Firm: Stewart McKelvey Stirling Scales
Halifax, Nova Scotia
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
1999-1793(EI)
BETWEEN:
COMEAU'S SEA FOODS LIMITED,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard together on common evidence with the appeals of
Comeau's Sea Foods Limited (1999-1794(CPP)) and (1999-1932(CPP))
on January 22, 2001 at Halifax, Nova Scotia, by
the Honourable Judge Terrence O'Connor
Appearances
Counsel for the Appellant: Roderick H. Rogers
R. Dan Harasemchuk
Counsel for the Respondent: John P. Bodurtha
Caitlin A. Ward
JUDGMENT
The appeal is allowed, without costs, and the decision of the Minister is vacated in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada this 11th day of June 2001.
|
"T. O'Connor" |
J.T.C.C.
1999-1794(CPP)
BETWEEN:
COMEAU'S SEA FOODS LIMITED,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard together on common evidence with the appeals of
Comeau's Sea Foods Limited (1999-1793(EI)) and (1999-1932(CPP))
on January 22, 2001 at Halifax, Nova Scotia, by
the Honourable Judge Terrence O'Connor
Appearances
Counsel for the Appellant: Roderick H. Rogers
R. Dan Harasemchuk
Counsel for the Respondent: John P. Bodurtha
Caitlin A. Ward
JUDGMENT
The appeal is allowed, without costs, and the decision of the Minister is vacated in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada this 11th day of June 2001.
|
"T. O'Connor" |
J.T.C.C.
1999-1932(CPP)
BETWEEN:
COMEAU'S SEA FOODS LIMITED,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard together on common evidence with the appeals of
Comeau's Sea Foods Limited (1999-1793(EI)) and (1999-1794(CPP))
on January 22, 2001 at Halifax, Nova Scotia, by
the Honourable Judge Terrence O'Connor
Appearances
Counsel for the Appellant: Roderick H. Rogers
R. Dan Harasemchuk
Counsel for the Respondent: John P. Bodurtha
Caitlin A. Ward
JUDGMENT
The appeal is allowed, without costs, and the assessment of the Minister is vacated in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada this 11th day of June 2001.
|
"T. O'Connor" |
J.T.C.C.