Date: 20010409
Dockets: 2000-2935-EI, 2000-2936-CPP
BETWEEN:
SKYLINK AVIATION INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Lamarre Proulx, J.T.C.C.
[1] This is an appeal from the decision of the Minister of National Revenue (the "Minister") that Mr. Bernd Firnung, the worker, was employed in insurable employment while working for the Appellant for the period of June 24, 1998 to August 6, 1998, within the meaning of the Employment Insurance Act (the "Act"). The appeal is also from the Minister's determination that the worker's engagement with the Appellant, during the period in question, was pensionable employment pursuant to the Canada Pension Plan.
[2] The pleadings being the same in both appeals, I will refer only to the pleadings under the Employment Insurance Act.
[3] The facts described in the Appellant's Notice of Appeal are as follows:
1. Mr. Firnung was retained as a short term pilot qualified to operate a specific type of helicopter leased on short notice by the Appellant to an aircraft operator providing helicopter services to the Ontario government for fire fighting. Firnung was the pilot-in-command of the helicopter and subject to control and direction by neither the Appellant, the lessee-operator or the Ontario government as to how he operated the aircraft and performed the flights, provided he completed the assigned flights and complied with all applicable government regulations for aircraft operation and tender requirements.
2. Mr. Firnung supplied his normal pilot's equipment. None was supplied by the Appellant or the lessee.
3. Mr. Firnung was not paid a fixed hourly rate or salary as for an employee, but a standby fee per day and a substantial hourly rate for flying time with a guaranteed daily minimum of flying hours. As a result, he stood to make considerable extra profit if he was required to perform longer, or a greater number of flights during the period.
4. Mr. Firnung risked loss because, as a pilot qualified on and specializing in a particular type of helicopter, he was required to maintain a minimum number of flying hours in a year and pay for doing so himself if not performed as part of contracts, and also maintain his license, knowledge base, qualifications and testing at his own expense.
5. Mr. Firnung and the Appellant agreed to and signed a written contract providing for independent contractor status, and Mr. Firnung was not provided with any of the normal incidents of employment.
[4] The facts assumed by the Respondent are described at paragraph 9 of the Reply to the Notice of Appeal as follows:
a) the Appellant is a business which provides aircraft services to customers;
b) the Worker was hired by the Appellant as a pilot to provide fire fighting services to the Appellant's clients;
c) the Worker received direction from the Appellant's clients;
d) the Appellant retained the right to control the Worker while the Worker was performing services for the Appellant's clients;
e) the Worker's hours of work were determined by the Appellant's clients, based on the number of forest fires;
f) the Appellant provided the Worker with the helicopter to perform the services;
g) the Appellant was responsible to do all the maintenance and repairs to the helicopter; as well as provide the fuel for the aircraft;
h) the Worker was paid a flat daily rate by the Appellant;
i) the Worker was reimbursed for expenses incurred for travelling to remote locations.
[5] Mr. Alexander John Waldrum and Mr. Olavo Valadares testified for the Appellant. No one testified for the Respondent.
[6] Mr. Waldrum was a pilot with the National Defence. In 1996, after his retirement, he set up his own consulting business on international aviation and international contracting. He is a registered lobbyist with the Ontario government and with the Federal government. He began to work for the Appellant as a consultant in 1996. He has a vice-president title with SkyLink. He provides expertise on Canadian and international air regulations to the Appellant. He also participates in the management of the Appellant's fleet of airplanes. He works on a retainer of 10 days a month.
[7] Mr. Waldrum explained that the operation of the Appellant is three-part: a) it does brokerage respecting a number of air operating companies from around the world, mainly of eastern European countries; b) it operates its own fleet of aircrafts; and c) it does project management. For example, it puts together different companies for operating in an area, and the Appellant is the overall manager of the process.
[8] He explained that Heli-North Aviation Inc. was awarded a contract to supply helicopter transport services to the Ontario Ministry of Natural Resources for fire fighting operations in Northern Ontario from May 15 to August 2 1998. Heli-North needed a supplementary aircraft. It requested the Appellant to supply a Bell 212 helicopter. The agreement between Heli-North Aviation Inc. and SkyLink Aviation Inc., dated May 5, 1998, was produced as Exhibit A-1. The Appellant agreed to supply the Bell 212 helicopter for the Chapleau fire contract as per Heli-North Aviation Inc.'s agreement with the Ministry of Natural Resources at a price of $1,590 per flying hour, for a minimum of 160 hours plus an allowance to SkyLink of $9,000 for 80 days of crew accommodation, transportation and per diem for meals.
[9] The agreement was for May 22 to August 9. Two pilots were involved. The first pilot acted as a self-employed pilot.
[10] Mr. Waldrum explained that the Appellant as its competitors, when supplying helicopters on a short term basis, use both employed and independent pilots. He used the expression floater pilots and said that there are about 40 floater pilots who supply their services on a contractual basis and who move among various helicopter operators in Canada.
[11] In the witness's experience, there are differences between employed and independent pilots. Contract pilots can demand higher rates because of their experience and also because the assignments are usually for short term periods. Floater pilots are expected to provide their current Transport Canada medical certificate and pilot license. These costs are the pilot's responsibility and are only assumed by operators as a result of negotiations of the terms of a particular assignment with such a pilot.
[12] In the witness's view, there is a risk issue related to self-employment. The contract pilot works only for short periods of time and if he makes an error, the industry gets to know it very quickly. It is one thing to explain an error when you are an employee, it is another one when you are asking for a job. There is a risk in this and the contract pilot gets paid for that risk.
[13] Regarding employed pilots, the Appellant and other operators in Canada will assist those pilots in gathering the required flight time, the required training, the medical certification and defray the license fees.
[14] Exhibit A-6 is the contract between SkyLink and the worker. Mr. Waldrum did not negotiate the contract. Mr. Paul Kristopovich, the chief pilot of the company did that. Mr. Waldrum did not supervise the contract and he was neither involved with the remuneration of the employee. However, he stated that was he able to say that Mr. Firnung had to work 45 days on a continuous basis during daylight hours. It was a requirement of the contract that the aircraft had to be available and with a pilot every day of the period. The remuneration was $225 every day, and if the pilot flew, there would have been an additional fee of $30 per hour.
[15] The Appellant requires all its pilots to pass a test drafted by the chief pilot. The worker was required to pass that test (Exhibit A-7).
[16] Regarding the assumptions of fact made by the Minister, the witness admitted paragraph 9 a). Respecting 9 b), he stated that the fire fighting services were provided by Heli-North. He admitted 9 c) and added that that Heli-North, received its instructions from the Ontario Ministry of Natural Resources. It belonged to Heli-North to make sure that the aircraft was ready to fill the orders from the Ontario Ministry of Natural Resources. He denied 9 d). He admitted 9 e) and part of 9 g). The maintenance was done by SkyLink. SkyLink had at all times a technician qualified by the Government of Canada to sign the air worthiness of the airplane, but the fuel was provided by Heli-North. Regarding 9 h), the witness stated that above the flat daily rate, Mr. Firnung received an hourly rate per hour flown. The witness denied paragraph 9 i). However, the witness stated that the worker was paid a per diem by the Appellant and the hotel room was provided by Heli-North. The witness stated that actually, he believed that Heli-North made the arrangements for the hotel and that was reimbursed to Heli-North by the Appellant. The worker was flown from Vancouver to Chapleau and back to Vancouver at the Appellant's expense.
Cross-examination of Mr. Waldrum
[17] He stated that although he was a consultant, he was intimately involved in certain operations and not involved in others at all. In the particular case, he was not involved in the hiring of Mr. Firnung. He was the authority on the negotiation between Heli-North and the Appellant, although he was not the direct negotiator, he was actually the element of decision making. He has a decision making role in the company. He never met Mr. Firnung. He has talked to him on the phone and he knew him from his previous work in other areas. He can say quite a bit about his employment. Everything that Mr. Firnung did on the contract was reported back to the immediate contract supervisor and reported back to the witness.
[18] Counsel asked whether a company pilot would have had the same duties as Mr. Firnung? The witness answered in the negative, in the sense that Mr. Firnung acted strictly as a line pilot. The employed 212 pilots would do other things. However if the Appellant had sent a company pilot to do the job that Mr. Firnung had done, he would have performed it about in the same way. There may have been a slight difference and it may be more perception that it is reality, but a contract pilot would tend more to work having his own interest as a goal where a company pilot would tend more to work towards the interest of the company on whose payroll he is.
[19] At page 4 of Exhibit R-1, which is a questionnaire that has to be filled by the alleged employer, it is stated:
SkyLink delivered the 212 helicopter to Heli-North on May 19 using its own chief pilot, Louis Drapeau, to fly it. Mr. Drapeau took another assignment in mid-June. Since Firnung had flown for SkyLink in Yugoslavia two years previously and was certified for a Bell 212, SkyLink located and retained Mr. Firnung to complete the balance of the Heli-North lease from June 24 until August 3.
[20] Counsel for the Respondent referred to Exhibit A-2, and more particularly to the paragraph stating that:
Louis Drapeau, who will continue to be paid US$4,000/mth plus medical coverage, will start this contract. His cost can be billed to this contract as of 01 May 1998, until he returns to Belize.
[21] Counsel for the Respondent then asked the witness why he had mentioned earlier that an employee would get medical coverage but not a self-employed pilot. The answer was that Louis Drapeau, a self-employed pilot, had medical coverage as part of his contract because he was working outside Canada.
[22] The witness was not aware that Mr. Firnung had worked as an employee for SkyLink in 1996. He knew that he worked in Yugoslavia but he did not know whether he was then working as an employee.
[23] The witness explained that the chief pilot is the person who ensures that the technical competence of the pilots is maintained. He does all the check rides and administers the exams. He is basically the technical competence of the pilot corps. There is also an operations manager. That person will make sure that the airplanes are matched up with the pilots, that they get the proper equipment, that they get the proper maintenance and all that. These two persons work very closely together.
[24] Counsel for the Respondent referred to question 14 in the questionnaire produced as Exhibit R-1. The question was: "... describe the type of reporting system in place and how often these reports were required." The answer given was there was no reporting system in place between Mr. Firnung and SkyLink. The witness answered that he would clarify that. There was a report made to the Appellant for the duty hours. Mr. Firnung also reported his daily work to Heli-North because Heli-North would have to report back to the Ministry of Natural Resources.
[25] Exhibit A-6, Contract for services, is a mixture of a form contract and the actual contract between the Appellant and the worker. One page is signed by the worker.
[26] Mr. Waldrum stated that pilots may be hired as employees for very short periods. This will happen usually with young pilots.
[27] The second witness was Mr. Olavo Valadares. He is the Appellant's accounts manager. He has the overall responsibility of the accounting department for the aviation side. That was his responsibility in the period from May to September of 1998. Exhibit A-9 is the travel request from Mr. Firnung to SkyLink. The ticket was issued from June 24 to August 3. Mr. Firnung would get $225 a day. He would also get $30 per flown hour.
Argument
[28] Counsel for the Appellant referred to the decision of the Court of Appeal, Civil Division, in Massey v. Crown Life Insurance, [1978] 2 All ER 576, a decision written by Lord Denning and I quote at pages 579 and 580:
The law, as I see it, is this: if the true relationship of the parties is that of master and servant under a contract of service, the parties cannot alter the truth of that relationship by putting a different label on it. If they should put a different label on it, and use it as a dishonest device to deceive the Inland Revenue, I should have thought it was illegal and could not be enforced by either party and they could not get any advantage out of it, at any rate not in any case where they had to rely on it as the basis of a claim: see Alexander v. Rayson ([1936] 1 KB 169, [1935] All ER Rep 185). An arrangement between two parties to put forward a dishonest description of their relationship so as to deceive the Inland Revenue would clearly be illegal and unenforceable. On the other hand, if their relationship is ambiguous and is capable of being one or the other, then the parties can remove that ambiguity, by the very agreement itself which they make with one another. ...
...
It seems to me on the authorities that, when it is a situation which is in doubt or which is ambiguous, so that it can be brought under one relationship or the other, it is open to the parties by agreement to stipulate what the legal situation between them shall be. That was said in Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance ([1936] AC I, [1935] All ER Rep 259), in 1968 by MacKenna J. He said:
If it were doubtful what rights and duties the parties wished to provide for, a declaration of this kind might help in resolving the doubt and fixing them in the sense required to give effect to that intention.
So the way in which they draw up their agreement and express it may be a very important factor in defining what the relation was between them. If they declare that he is self-employed, that may be decisive.
[29] Counsel for the Respondent referred to the Privy Council decision Lee Ting Sang v. Chung Chi Keung and Shun Shing, [1990] J.C.J. No. 10 (Q.L.) and to the following excerpt at page 3:
Taking all the foregoing considerations into account the picture emerges of a skilled artisan earning his living by working for more than one employer as an employee and not as a small business-man venturing into business on his own account as an independent contractor with all its attendant risks. The appellant ran no risk whatever save that of being unable to find employment which is, of course, a risk faced by all employees, in particular, it is a risk faced by casual employees who move from one job to another, and such casual employees are specifically covered by the Ordinance.
Conclusion
[30] The evidence has revealed that due to the particular circumstances of the services to be rendered, the terms and conditions of work of the worker point more towards the status of a contract for services than a contract of service: a) the pilot was to stay in a location outside the Appellant's usual places of business; b) he had to be available for a number of continuous days and to fly the Appellant's leased aircraft when he would be asked to do it by lessee; c) the work was for a short duration; and d) the work was not for the Appellant's general purposes.
[31] The short duration of the work activity is a strong indicator of a contract for services. Although the Appellant's witness stated that the Appellant may hire young pilots as employees for short period of times, because they tend to need training and the work benefits, the short duration of this contract still point towards a contract for services and not a contract of service. The same could be said about the purpose for which the worker was hired. He was hired for a very specific purpose and not for general work with the company. It has to be noted that just before the worker began his own activity, the job was done by a self-employed pilot. There is no evidence that what he did was different from what the worker in question did. The Respondent has done nothing concerning that person.
[32] I cannot find as in the Privy Council decision above that the picture emerges of a skilled artisan earning his living by working for more than one employer as an employee and not a small business-man venturing into business on his own account as an independent contractor with all its attendant risks. In that decision their Lordships took into consideration that the legislation concerning workmen's compensation was intended to give a wide measure of protection to workers in the building construction industry and to provide compensation for those who would not ordinarily be expected to have taken out their own insurance against the risk of accidental injury. I believe that legislation of that nature has always been interpreted very broadly.
[33] At any rate, in this particular instance, we are dealing with experienced pilots, a category of professional people who may for their own reasons prefer to contract their services on a self-employed basis rather than as employees. They prefer to have that fiscal and entrepreneurial status. I have no evidence that it is an arrangement that put forward a dishonest description of the relationship between the Appellant and the pilots to use the terms of the above mentioned decision in Massey v. Crown Life Insurance Co.
[34] The Appellant for its operations requires the services of employed and self-employed pilots. The Appellant has a current staff of pilots and it has also a list of names of independent pilots that it may use on a need basis for specific purposes. As mentioned by the witness for the appellant, the work in question in this appeal could have been made by one of the staff pilots. It was the Appellant's choice. I see no reason why the Appellant would not have the right to do business with pilots who agree to negotiate on the basis of contract for services unless there would be evidence that it was for the purpose of circumventing the law and unless there is clear evidence that the services rendered are in the nature of employment services. This was not the case in this particular instance and the contractual agreement between the parties should not be disturbed.
[35] The appeal is allowed.
Signed at Ottawa, Canada, this 9th day of April, 2001.
"Louise Lamarre Proulx"
J.T.C.C.
COURT FILE NO.: 2000-2935(EI) and 2000-2936(CPP)
STYLE OF CAUSE: Skylink Aviation Inc. and M.N.R.
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: December 6, 2000
REASONS FOR JUDGMENT BY: The Hon. Judge Louise Lamarre Proulx
DATE OF JUDGMENT: April 9, 2001
APPEARANCES:
Counsel for the Appellant: Paul Trethewey
Counsel for the Respondent: Jocelyn Espejo-Clarke
COUNSEL OF RECORD:
For the Appellant:
Name: Paul Trethewey
Firm: Tretheweay, Barrister & Solicitor
Toronto, Ontario
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-2935(EI)
BETWEEN:
SKYLINK AVIATION INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard together with appeal # 2000-2936(CPP)
on December 6, 2000 at Toronto, Ontario by
the Honourable Judge Louise Lamarre Proulx
Appearances
Counsel for the Appellant: Paul Trethewey
Counsel for the Respondent: Jocelyn Espejo Clarke
JUDGMENT
The appeal from the decision of the Minister of National Revenue is allowed and the Minister's decision is reversed, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 9th day of April, 2001.
|
"Louise Lamarre Proulx" |
J.T.C.C.
2000-2936(CPP)
BETWEEN:
SKYLINK AVIATION INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard together with appeal # 2000-2935(EI)
on December 6, 2000 at Toronto, Ontario by
the Honourable Judge Louise Lamarre Proulx
Appearances
Counsel for the Appellant: Paul Trethewey
Counsel for the Respondent: Jocelyn Espejo Clarke
JUDGMENT
The appeal from the decision of the Minister of National Revenue is allowed and the Minister's decision is reversed, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 9th day of April, 2001.
|
"Louise Lamarre Proulx" |
J.T.C.C.