Date: 19981016
Docket: 97-780-UI,
97-84-CPP
BETWEEN:
CUSTOM AUTO CARRIERS LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
CHRIS RODGERS,
Intervenor.
Reasons for Judgment
Porter, D.J.T.C.C.
[1] These appeals were heard together on common evidence with the consent of the parties, at Edmonton, Alberta on June 17, 1998.
[2] The Appellant Custom Auto Carriers Ltd., (the "Company") appeals the decision of the Minister of National Revenue (the "Minister") dated February 6, 1997 that the Intervenor, Chris Rodgers, (the "driver") was employed under a contract of service and was thus an employee of the Company for the periods from January 1 to June 7, 1995 and from July 14 to November 1, 1995. The employment was thus determined to be "insurable" and "pensionable" under the provisions of paragraph 3(1)(a) of the Unemployment Insurance Act (the "Act") and paragraph 6(1)(a) of the Canada Pension Plan respectively, (collectively called the "legislation").
[3] The established facts reveal that the Appellant carried on an emergency tow truck business in Edmonton, Alberta and that during the periods in question it entered into certain arrangements with the driver to operate one of its tow trucks. The issue then is whether that arrangement was a contract of service and thus both insurable and pensionable employment under the legislation or whether it was a contract for services and not so included within the meaning of those terms.
[4] The Intervenor appeared and gave evidence in support of the position of the Minister.
The Law
[5] The manner in which the Court should go about deciding whether any particular working arrangement is a contract of service and thus an employer/employee relationship or a contract for services and thus an independent contractor relationship, has been clearly laid out by the Federal Court of Appeal in Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025. The test to be applied has been further explained by that Court in Moose Jaw Kinsmen Flying Fins Inc. v. M.N.R., 88 DTC 6099. There are, following these cases, numerous decisions of this Court, some of which have been cited by counsel, which demonstrate how these appellate guidelines have been applied. In the Moose Jaw Kinsmen Flying Fins Inc. case, above, the Federal Court of Appeal said this:
"[Analysis]
The definitive authority on this issue in the context of the Act, is the decision of this Court in Wiebe Door Services Ltd. v. The Minister of National Revenue, 87 DTC 5025. MacGuigan J. speaking on behalf of the Court, analyzed Canadian, English and American authorities, and, in particular, referred to the four tests for making such a determination enunciated by Lord Wright in City of Montreal v. Montreal Locomotive Works Ltd., [1974] 1 D.L.R. 161 at 169-70. He concluded at page 5028 that:
Taken thus in context, Lord Wright's fourfold test [control, ownership of tools, chance of profit, risk of loss] is a general, indeed an overarching test, which involves "examining the whole of the various elements which constitute the relationship between the parties". In his own use of the test to determine the character of the relationship in the Montreal Locomotive Works case itself, Lord Wright combines and integrates the four tests in order to seek out the meaning of the whole transaction.
At page 5029 he said:
...I interpret Lord Wright's test not as the fourfold one it is often described as being but rather as a four-in-one test with emphasis always retained on what Lord Wright, supra, calls "the combined force of the whole scheme of operations," even while the usefulness of the four subordinate criteria is acknowledged.
At page 5030 he had this to say:
What must always remain of the essence is the search for the total relationship of the parties.
He also observed "there is no escape for the trial judge, when confronted with such a problem, from carefully weighing all the facts."
...like MacGuigan J. we view the tests as being useful subordinates in weighing all of the facts relating to the operations of the Applicant. That is now the preferable and proper approach for the very good reason that in a given case, and this may well be one of them, one or more of the tests can have little or no applicability. To formulate a decision then, the overall evidence must be considered taking into account those of the tests which may be applicable and giving to all the evidence the weight which the circumstances may dictate."
[6] The nature of the tests referred to by the Court can be summarized as follows:
a) The degree or absence of control exercised by the alleged employer;
b) Ownership of tools;
c) Chance of profit and risk of loss;
d) Integration of the alleged employee's work into the alleged employer's business.
[7] I also take note of the further words of MacGuigan J., in the Wiebe case, above, where he approved the approach taken in the English courts:
"Perhaps the best synthesis found in the authorities is that of Cooke J. in Market Investigations, Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732, 738-9:
The observations of Lord Wright, of Denning L.J., and of the judges of the Supreme Court in the U.S.A. suggest that the fundamental test to be applied is this: "Is the person who has engaged himself to perform these services performing them as a person in business on his own account?" If the answer to that question is "yes", then the contract is a contract for services. If the answer is "no" then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors, which may be of importance, are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk be taken, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task. The application of the general test may be easier in a case where the person who engages himself to perform the services does so in the course of an already established business of his own; but this factor is not decisive, and a person who engages himself to perform services for another may well be an independent contractor even though he has not entered into the contract in the course of an existing business carried on by him."
The Facts
[8] Whilst many of the facts surrounding the arrangement between the Company and the driver are not in issue, some certainly are. There is thus an issue of credibility, which has arisen between them.
[9] The basic agreement between the Company and the driver was entered as an exhibit in the proceedings. It is a one page document with nine paragraphs, setting out the terms and conditions. It purports to be a rental agreement or lease of a 1998 G.M.C. 3500 tow truck, for which the driver would pay to the Company 60% of the total gross income arising from the use of the truck, with a minimum of $1,500.00 per month. This latter amount was to be paid whether or not the driver worked with the truck. In fact this amount was never invoiced and never paid.
[10] The agreement further provided for the driver to pay all taxes, Canada Pension Plan and Unemployment Insurancepremiums directly and made him responsible for any damage to the truck. It also provided the driver with a gas credit card, which was to be paid by the Company, specified that all cash receipts were to be turned into the Company, restricted riders in the truck to customers only and forbade any personal use of the truck. It allowed for work to be done for other employers or to be sub-contracted out to other drivers in the Company, but still required all invoices to be done in the name of the Company.
[11] Although stated to be a rental and a lease, all money, receipts and invoices were turned into or collected by the Company directly and then the driver was paid his share twice per month. The Company decided the prices to be charged for all calls which came through its dispatch but the driver was free to negotiate for whatever he saw fit for outside work, which still had to be invoiced through the Company or if for cash turned into the Company.
[12] The operating costs of the Company were paid by the Company, including gas, oil, ordinary maintenance and fair wear and tear items. The trucks bore the Company's name, and the driver wore clothing with the Company's name on it. The Company supplied a two-way radio for use in the truck.
[13] These foregoing facts were set out in the Reply to the Notice of Appeal as being relied upon by the Minister. They were agreed to by the Company and the driver. In issue were items 11 (k), (l), (m), (n), (o), (p), (q) and (x) which read as follows:
(k) Rodgers generally worked 7:00 a.m. to 7:00 p.m., and at schedules times was on call 24 hours a day;
(l) the Appellant scheduled Rodgers' hours of work and assigned specific times for him to be on call;
(m) Rodgers required the Appellant's permission to take time off;
(n) the Appellant required Rodgers to perform the services personally and Rodgers could not hire, dismiss or pay his own helpers;
(o) if Rodgers was away from work he did not have to find a replacement;
(p) if Rodgers was away from work, the Appellant would assign another driver to drive the tow truck;
(q) Rodgers was not free to decide which jobs he would work on;
(x) Rodgers could not work for another towing business while using the Appellant's tow truck.
[14] Ed Miller, the owner and Manager of the Company indicated in his evidence that the drivers were free to book on and off as they wished. The driver Rodgers as well as another driver Mark Albert, when they gave their evidence, indicated that they were on call 24 hours per day and Rodgers said he was expected to book on by 7:00 a.m. every day. Miller said that the drivers were free to take calls or not as they saw fit. The drivers seemed to indicate that whilst that was strictly so, it was frowned upon. I gleaned from the evidence that there was generally a not very subtle pressure by the Company upon the drivers to be available as much of the time as possible. Obviously the more the trucks were used the greater the return for the Company. Thus whilst the Minister's assumption that work hours were assigned and that the drivers needed permission to take time off was not strictly correct, that in practice was the way it worked out.
[15] Whilst the arrangement was said to be a rental, the driver said, and I accept his evidence on this point, that when he was sick the Company assigned another driver to his truck and just came and took it. Likewise the driver said, and again I accept his evidence, that upon another occasion the company took his truck away from him, sold it and he had no say in the matter. Apparently that did not work out and shortly after the same truck was returned to him. However this is not very consistent with a lease arrangement.
[16] The driver was able, according to the contract, to sub-contract with other drivers to drive his truck, as long as they were other drivers within the Company fold. It was not clear to me how that would ever happen as other drivers presumably had their own trucks to drive. It is also not clear to me whether in fact that did ever happen.
[17] The driver agreed that he could work for other tow businesses but that everything again had to be invoiced through the Company. The Minister's assumption 11 (x) is incorrect in this respect.
[18] The driver also generated business on his own. He was free to stop at accidents and break downs that were not yet called in, and take his own direct calls. Everything however had to be billed through the Company. In fact he fixed up a special carrier for motorcycles and on his own initiative and at his own expense promoted that, so that he generated for himself a number of motorcycle tows.
[19] The Company maintained that the driver would be responsible for n.s.f. cheques. The driver said he was never charged for these. I am not sure how significant this point is, although the parties dwelled on it. It may have been that there simply were no n.s.f. cheques.
[20] The driver registered his own trade name, C.C.R. Enterprises and operated under that name. Mark Albert, the other driver to give evidence, also did the same thing. Each said they were told to do so by the Company. Ed Miller said they were not told they had to do this. I accept the driver's evidence on this point that they were required to do so. Again it may have been done subtly. It was not done in writing, but I gleaned from the evidence that if they wanted to work for this company that is how it had to be.
[21] With regard to training, Ed Miller said that Rodgers came to him already experienced and did no training. The latter said that he rode along with another driver for about a week. Mark Albert said he rode along for three weeks. I do not think that much turns on this but clearly the Company, in my view, required its drivers to follow certain procedures, which needed to be learned, even if they had experience elsewhere.
Application of Tests
[22] Control: It is clear that the Company endeavoured to set up an independent contractor status with its drivers, ostensibly by leasing to them the trucks. However it was not a lease in the true sense of the word. No flat payment of $1,500.00 was ever paid by the driver to the Company, nor was he ever billed for this. He was required to turn over all his receipts. He was required to use Company invoices for all work with the truck, whether dispatched by the Company or independently obtained. All his fuel and maintenance costs were paid by the Company. The truck was simply taken from him on two occasions without his agreement. He operated always in the Company's name, with the Company sign on the truck and on his clothing. There were strong expectations as to his availability and how and when he worked. He was paid twice per month. There were restrictions on the truck against personal use and who could ride in it. The driver was free once dispatched to arrange the tow or other emergency service as he saw fit. He also could set his own prices for independently generated work but was required to charge the Company rate for anything that came through dispatch.
[23] I find there was a considerable amount of control exercised by the Company over the driver and I am inclined to the view that this made the arrangement more consistent with a contract of service than a contract for services, albeit there are some aspects which point in the other direction.
[24] Tools : The truck was provided by the Company, under the terms of what they called a lease. This was a sham in my view. It was not a lease in reality. Everything in the evidence pointed to the Company still very much in control of the truck. In reality it was an arrangement whereby the driver used the truck and was paid 40% of the gross income that he generated with it, rather than he paying 60% to the Company.
[25] He was also provided with a two-way radio . He provided his own tools and kit for getting into locked cars and he had his own scanner so he could find out about accidents and stalls more quickly. In reality the main piece of equipment, the truck, was provided by the Company, it remained under its control and was serviced by and insured by it. The Company had access to it and could take it when it saw fit. In my view this aspect of the test is also more consistent with an employer/employee situation than with a truly independent contractor.
[26] Chance of Profit and Risk of Loss: For the most part the driver had little to lose unless he damaged the truck through neglect. Ostensibly he might lose the $1,500.00 if he did not put the truck to work for a whole month. However this never occurred and he was never billed for this amount. I really have to wonder how genuine that arrangement was.
[27] The driver did go to the expense building his own motorcycle carrier and doing some advertising. This was an expense to him and he stood to gain additional revenue if that worked out. This amounted to an element of profit and loss but as I understood the situation, it was far from a major and regular part of his work.
[28] Although there was an element of chance of profit and risk of loss on the whole, the arrangement was not consistent with this but more with an employee being paid on a percentage basis and doing a little moonlighting in addition.
[29] Integration: This is always a difficult aspect of the test. Obviously without drivers the Company would have no business; thus from their perspective there was an integration aspect to the arrangement. It is from the point of view of the driver however, that I must look at the situation. The question is whose business was he operating, his own or that of the Company? It is true that he had a trade name and filed his income tax return as a self-employed contractor. This is indicative of his being in his own business. However he did not run his own finances. They were all run through the Company and he received his net percentage. He did not bear any of the principal expenses and had to, in effect, toe the Company line and follow Company policy. Everything he did in my view was integrated with the business of the Company.
Conclusion.
[30] It is perhaps trite to say that it is the substance of the arrangement and not the form, that the Court must consider in these situations. Although it purported to be a lease arrangement to an independent contractor in my view the lease aspect was a fiction and the Company retained effective control of the truck. With respect to how he worked with the truck, I am not of the view that the driver was shown to have had a sufficient degree of independence from the Company that one could come to the conclusion that he was an independent contractor. I appreciated that there was a certain animosity which existed between the driver and the Company, for whatever reason, and that I should accordingly be a little cautious about his evidence. It was however to a great extent backed up by the evidence of the second driver and on the whole I found it to be credible. I am of the opinion that the Company wanted, in form, to have an independent contractor relationship with its drivers but in substance wanted to keep control. In my view at the very least it has not met the onus cast upon it by law, to show that the decision made by the Minister was in error. In my opinion it was correct.
[31] In the result the appeals are dismissed and the decision made by the Minister is confirmed.
Signed at Calgary, Alberta, this 16th day of October 1998.
|
"Michael H. Porter" |
D.J.T.C.C.
COURT FILE NO.: 97-780(UI)
STYLE OF CAUSE: Custom Auto Carriers Ltd. and M.R.N. and
Chris Rodgers
PLACE OF HEARING: Edmonton, Alberta
DATE OF HEARING: June 17, 1998
REASONS FOR JUDGMENT BY: the Honourable Deputy Judge
Michael H. Porter
DATE OF JUDGMENT: October 16, 1998
APPEARANCES:
Counsel for the Appellant: Brian Baltimore
Counsel for the Respondent: Laura Pitcairn
For the Intervenor: The Intervenor himself
COUNSEL OF RECORD:
For the Appellant:
Name: Gregory J. Gartner
Firm: Felesky Flynn
Edmonton, Alberta
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
COURT FILE NO.: 97-84(CPP)
STYLE OF CAUSE: Custom Auto Carriers Ltd. and M.R.N. and
Chris Rodgers
PLACE OF HEARING: Edmonton, Alberta
DATE OF HEARING: June 17, 1998
REASONS FOR JUDGMENT BY: the Honourable Deputy Judge
Michael H. Porter
DATE OF JUDGMENT: October 16, 1998
APPEARANCES:
Counsel for the Appellant: Brian Baltimore
Counsel for the Respondent: Laura Pitcairn
For the Intervenor: The Intervenor himself
COUNSEL OF RECORD:
For the Appellant:
Name: Gregory J. Gartner
Firm: Felesky Flynn
Edmonton, Alberta
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
97-780(UI)
BETWEEN:
CUSTOM AUTO CARRIERS LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
CHRIS RODGERS,
Intervenor.
Appeal heard on common evidence with the appeal of Custom Auto Carriers Ltd. 97-84(CPP), at Edmonton, Alberta, by
the Honourable Deputy Judge Michael H. Porter
Appearances
Counsel for the Appellant: Brian Baltimore
Counsel for the Respondent: Laura Pitcairn
For the Intervenor: The Intervenor himself
JUDGMENT
The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Calgary, Alberta, this 16th day of October 1998.
|
"Michael H. Porter" |
D.J.T.C.C.
97-84(CPP)
BETWEEN:
CUSTOM AUTO CARRIERS LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
CHRIS RODGERS,
Intervenor.
Appeal heard on common evidence with the appeal of Custom Auto Carriers Ltd. 97-780(UI)), at Edmonton, Alberta, by
the Honourable Deputy Judge Michael H. Porter
Appearances
Counsel for the Appellant: Brian Baltimore
Counsel for the Respondent: Laura Pitcairn
For the Intervenor: The Intervenor himself
JUDGMENT
The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Calgary, Alberta, this 16th day of October 1998.
|
"Michael H. Porter" |
D.J.T.C.C.