98-212(UI)
BETWEEN:
DIMPFLMEIER BAKERY LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
JAMES KERR,
Intervenor.
Appeal heard on August 17, 1999 at Toronto, Ontario, by
the Honourable Deputy Judge W.E. MacLatchy
Appearances
Counsel for the Appellant: R.H. Parker
Counsel for the Respondent: L. King
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 Toronto, Ontario, this 21st day of September 1999.
|
"W.E. MacLatchy" |
D.J.T.C.C.
Date: 19990921
Docket: 98-212(UI)
BETWEEN:
DIMPFLMEIER BAKERY LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
JAMES KERR,
Intervenor.
REASONS FOR JUDGMENT
MacLatchy, D.J.T.C.C.
[1] This appeal was heard in Toronto, Ontario on August 17, 1999.
[2] The Appellant applied to the Respondent for the determination of the question of whether or not James Kerr, the Worker, was employed in insurable employment while engaged by the Appellant for the period from March 11, 1996 to March 11, 1997, within the meaning of the Unemployment Insurance Act (the "Act") and the Employment Insurance Act (the "Amended Act").
[3] The Respondent informed the Appellant that it had been determined that the Worker's engagement with the Appellant during the period in question was insurable employment for the reason that the Worker was employed pursuant to a contract of service.
[4] The Appellant is a business involved in the production and sales of baked goods, the products, these being sold through a distribution network located in various parts of Ontario. The Worker was hired by the Appellant with a written agreement to sell and distribute the Appellant's products. He was assigned a territory in this written agreement and was required to service the territory four days a week and paid on a commission basis. The Appellant had other drivers who were termed employees who had to work five days a week and were paid a set salary.
[5] The agreement between the Appellant and the Worker restricted the Worker from selling the products to hotels, restaurants, institutions and industries without the written consent of the Appellant. The Appellant reserved the right to allocate the products proportionately if overall demand for the Appellant's products exceeded the production capacity of the Appellant. The agreement also provided that the Worker remove over age products from the customers' shelves and to provide the Appellant with full distribution details on a daily basis. The Worker had to maintain good relations with the customers and ensure that the quality and appearance of the Appellant's products were not impaired. The Worker must adhere to and comply with "Performance Standards" as set by the Appellant, which included the wearing of a special red coat with the logo of the Appellant embossed thereon. The Appellant provided the Worker with a truck to deliver the products but deducted a rental fee of $100 per week as well as the cost of gas from the Worker's commissions. The Appellant maintained the vehicle insurance as well as the maintenance and repairs. Presumably, the Worker could have used his own vehicle but the cost would have been prohibitive. Although the vehicle was rented to the Worker, it was to be used for the delivery of the Appellant's products only and was to be returned to the Appellant at the end of its delivery use and could not be kept over night by the Worker without specific permission.
[6] The Worker attended at the Appellant's premises daily, obtained the truck and loaded the products as laid out and prepared by the Appellant. He then went out on his assigned route and delivered the products. He would have a copy of the delivery invoice to return to the Appellant so his commission on sales could be determined. Similarly, he would credit the customer for products that were over aged as damaged and the same was deducted from his sales commission. He delivered the truck to the Appellant's premises and prepared his daily accounting, which he was required to do. The Appellant's office billed and collected from the various stores for the products purchased. Any small independent outlet, if approved as a customer by the Appellant, could pay the driver who in return would be required to deliver those funds at the end of his deliveries. The Appellant set the prices for the products.
[7] The evidence for the Appellant was given by Mohammad Alli, the Operations Manager for the Appellant. The Appellant is a bakery with over 200 employees and sells its products mainly to the large retail grocery chains. The Appellant bills and collects from these chains and sets the prices for its products. Mr. Alli implemented the scheme of independent contract drivers because it was believed by the Appellant that such a move would improve the sale and delivery of its products as well as possibly improving the income of the drivers. Being independent, the Worker would work harder than previously as a paid hourly employee. The chance to become an independent driver was offered to all existing driver employees. The differences between being an independent contract driver and a driver employee were explained at length by Mr. Alli. On the evidence given, it was difficult to see any substantial differences.
[8] The employee drove and delivered the products in a truck owned by the Appellant with the "logo" of the Appellant in plain view for advertising purposes. The employee was required to adhere to the performance code determined by the Appellant and to wear a smock with the company "logo" embossed on the front. The driver delivered the products as pre-determined by the Appellant to the various outlets in his set route. An invoice of delivery was given to the store manager and a copy kept by the driver for accounting purposes which was to be completed at the end of the delivery day. A credit invoice was given to the store manager for over-aged or damaged goods returned to the driver. Any account paid in cash or cheque was to be accounted for by the driver at the end of the day, as well.
[9] The driver attended in the early hours of each morning, five days each week, to pick up his truck and products for delivery to the various retail outlets in his route area to ensure the products were available when the outlets opened for business each day. The truck was owned and maintained by the Appellant and was required to be returned to the Appellant's premises at the end of the delivery day. The driver was then required to prepare his daily report and account for the products delivered and returned. A sales manager and a supervisor were in attendance either on the premises of the Appellant or in and about the various route districts to ensure the Appellant's procedures were adhered to by all employees. The driver did not set the price of the products and could not negotiate with the managers of the retail outlets to raise or lower prices if there was too much or too little products remaining. All pricing was negotiated between the Appellant and the retail outlets.
[10] The driver had to adhere to a certain dress and conduct code - looking neat and clean and not at work in gym clothing or in ripped or soiled jeans. They represented the Appellant before the store owner/operator/manager and the company could dictate these rules and regulations. These standards had to be set by the Appellant, as their employees would fall into bad habits if a standard was not set.
[11] The drivers were required to perform their services in person and if they were not available to perform their duties they were to notify the Appellant and a supervisor would take over these duties until the employee was available. The hours of employment could not be set as each route was different; the driver worked until his route was completed then performed his accounting procedures and left. The driver could not deliver in another area than that prescribed by the Appellant and was paid a wage plus a commission on sales in his area.
[12] The driver employer was spoken to if his conduct or behaviour did not meet the Appellant's standard. If the Appellant was not satisfied with the standard of work maintained by the employee, he would be terminated. Theft by the employee would also be grounds for termination.
[13] Lastly, the driver employee was paid vacation pay and was provided with some life and health insurance benefits and was subject to deductions for income tax, unemployment insurance and the Canada Pension Plan.
[14] James Kerr gave evidence that when the Appellant implemented the independent contractor driver opportunity, although he was told he need not become independent, he was satisfied that because of his age and his length of service with the Appellant that he was expected to become independent or be terminated. His evidence was quite graphic. Nothing really changed in his employment except the method of receiving his wages. He operated within the same route structure and delivered what was allocated to him by the company. He drove the same truck owned by the Appellant although now he had a lease payment and fuel deducted from his earnings. He was no differently supervised than previously and if anything, he worked longer hours.
[15] His time to attend at the Appellant's premises was the same and the times to delivery to the retail outlets did not change. He had no time to get new customers or his regular customers would suffer. He believed he must do his work personally or call the Appellant for a replacement. He could not sell in any other area nor did he have room in his vehicle for anyone else's products. In any event, he was told he could not deal with the products of any competitor. The pricing of products, the accounting at the end of the day, the return of the truck each day, and the adherence to the Appellant's procedures for conduct and appearance and all other directions given by the Appellant remained the same. He still received operations practice memoranda that were distributed to the driver employees. He continued to wear the coat provided when practical, weather permitting. Complaints, if of a minor nature, he would handle them on the spot; otherwise, complaints were handled by the company. He believed he could be terminated at the behest of the Appellant at anytime.
[16] Another driver who became an independent contractor by agreement, Tony Ucci, gave his evidence to support his belief that he was no longer an employee. He had a route outside of Metropolitan Toronto and was not subject to the same supervision as if his route was within Toronto.
[17] The question to be answered by this Court is whether the driver employee became an independent contractor after signing the independent contractor agreement or did the driver remain engaged by the Appellant under a contract of service. The Court was referred to the cases of Wiebe Door Services Ltd. v. M.N.R. [1986] 3 C.F. 553, Moose Jaw Kinsmen Flying Fins Inc. v. M.N.R., 88 DTC 6099 and M.N.R. v. Emily Standing, 147 N.R. 238. The main theme running through these cases is the manner of employing the four-fold test to determine what type of relationship existed between the parties and giving the weight to all of the evidence, which the circumstances may dictate. The whole relationship, as evidenced by the facts presented, must be examined to determine the reality of the engagement. One or more of the tests may have little or no applicability so the overall evidence must be considered.
[18] The Control Test. Did the Appellant exert control over the Worker in the day-to-day exercise of his duties? The evidence of the Operations Manager, Mr. Alli, was that the Appellant no longer exerted any control over the independent contractors after the agreement was signed but the evidence heard by this Court did not support that contention. The Appellant still required the drivers to come to its premises, pick up their vehicle owned by the Appellant, load their respective products and deliver them to the customers of the Appellant within their respective route areas. The drivers continued to be under strict supervision as to methods of delivery, mode of dress, conduct before the public and method of accounting at the end of the day. It may not have been necessary to enforce the controls as the drivers had appeared to conform without supervision. Nonetheless, the Appellant still had the ability to enforce such controls if it felt it was necessary. This Court heard that the business carried on is a customer driven enterprise and as long as the driver understood that, the Appellant's controls need not be enforced. Merely because the controls were not actively enforced did not mean they would not be enforced when needed.
[19] The drivers continued to drive the Appellant's vehicles with its logo advertising. It would not be financially viable to the driver to buy or rent a commercial vehicle other than that of the Appellant. The driver's route was such that he did not have time or available space to handle other products than those of the Appellant even though they supposedly could as long as those products were not in competition with those of the Appellant. The trucks had to be returned to the Appellant after the deliveries were completed and could not be used for their personal business. It was clear that if the Worker did not perform up to the Appellant's standards, after warnings given, he would be terminated. The business is customer oriented and the Appellant would have to ensure that the customer is satisfied. Control was with the Appellant.
[20] The Ownership of Tools. The drivers used the Appellant's trucks and bread trays for the deliveries and wore the coats displaying the Appellant's logo or crest. No other tools were required. Space was provided at the Appellant's premises for the drivers to prepare their day end accounting for the Appellant and used whatever equipment was provided for that purpose.
[21] The Chance of Profit or Risk of Loss. The Appellant stated that if the Worker performed quicker and more efficiently he would have more time for his other ventures or if he could increase his sales he would make a profit. Likewise, if he did not perform well he would suffer a loss. There is some truth to this but such profit or loss is negligible in the overall scheme as arranged. The Worker did not invest in the Appellant and would not share in any of the profits of the Appellant nor would he suffer any loss if the Appellant lost income other than the possibility of losing his employment.
[22] The Integration Test. Whose business is it? Are the duties of the Worker an integral part of the venture. In these circumstances, it is clear to this Court that it was the business of the Appellant that was carried on by the Worker and not his own business. Delivery of products is an integral part of the business and that is all the Worker did even though he was supposedly the sales front promoter of the Appellant's products. The prices were set by the Appellant; the amounts of delivery items were determined by the Appellant; the collection of accounts was done by the Appellant. New customer outlets were usually of the large retail chains and these were negotiated by the Appellant. The business was that of the Appellant's. The Worker was an adjunct of that business. He was not in business for himself no matter how artfully the agreement may have been worded.
[23] The parties can not create a relationship between themselves by merely naming it. The Appellant wanted the drivers to be independent contractors because it was convinced such a move would improve sales and would encourage the Workers to be more productive. Control was maintained by the Appellant as though the Worker was an employee. The Worker believed he was an employee notwithstanding the terms contained in the signed agreement. Nothing changed as far as he was concerned. This Court agrees with this view of the relationship existing.
[24] In these circumstances taking all of the evidence into account, this Court is convinced the relationship between the Appellant and the Worker was that of employer/employee and the Worker was engaged by the Appellant pursuant to a contract of service. The Worker was engaged in insurable employment within the meaning of paragraph 3(1)(a) of the Act and paragraph 5(1)(a) of the Amended Act, for the period in question.
[25] The appeal is dismissed and the decision of the Minister is confirmed.
Signed at Toronto, Ontario, this 21st day of September 1999.
|
"W.E. MacLatchy" |
D.J.T.C.C.
COURT FILE NO.: 98-212(UI)
STYLE OF CAUSE: Dimpflmeier Bakery Ltd. and M.N.R. and James Kerr
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: August 17, 1999
REASONS FOR JUDGMENT BY: The Honourable Deputy Judge
W.E. MacLatchy
DATE OF JUDGMENT: September 21, 1999
APPEARANCES:
Counsel for the Appellant: R.H. Parker
Counsel for the Respondent: L.King
For the Intervenor: The Intervenor himself
COUNSEL OF RECORD:
For the Appellant:
Name: R.H. Parker
Firm: Beard, Winter
Toronto, Ontario
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
For the Intervenor: