2001-1404(EI)
BETWEEN:
ALAN SOMERVILLE OP VALLEY LOCKSMITH,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeal of Alan Somerville op Valley Locksmith (2001-1422(CPP)) on November 16, 2001,
at Vancouver, British Columbia, by
the Honourable Deputy Judge D.W. Rowe
Appearances
Agent for the Appellant: Kenneth A. Paterson
Counsel for the Respondent: David Jacyk
JUDGMENT
The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Sidney, British Columbia, this 25th day of January 2002.
|
"D.W. Rowe" |
D.J.T.C.C.
2001-1422(CPP)
BETWEEN:
ALAN SOMERVILLE OP VALLEY LOCKSMITH,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on common evidence with the appeal of Alan Somerville op Valley Locksmith (2001-1404(EI)) on November 16, 2001,
at Vancouver, British Columbia, by
the Honourable Deputy Judge D.W. Rowe
Appearances
Agent for the Appellant: Kenneth A. Paterson
Counsel for the Respondent: David Jacyk
JUDGMENT
The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Sidney, British Columbia, this 25th day of January 2002.
|
"D.W. Rowe" |
D.J.T.C.C.
Date: 20010125
Dockets: 2001-1404(EI)
2001-1422(CPP)
BETWEEN:
ALAN SOMERVILLE OP VALLEY LOCKSMITH,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Rowe, D.J.T.C.C.
[1] The appellant appealed from a decision - dated January 30, 2001 - issued by the Minister of National Revenue ( the "Minister") wherein the Minister decided contributions pursuant to the Canada Pension Plan (the "Plan") and premiums in accordance with provisions of the Employment Insurance Act (the "Act") were payable on the earnings paid to Mark Bourget (the worker) during the period of May 31, 1999 to April 7, 2000 because he was employed under a contract of service and therefore considered to have been an employee of the appellant operating under the name Valley Locksmith. The appellant also filed an appeal - 2001-1422(CPP) - from the decision issued by the Minister pursuant to the Plan and the parties agreed the result in the within appeal would apply.
[2] Alan Somerville testified he resided in Mission, British Columbia and operated a locksmith business - as a sole proprietorship - using the trade name Valley Locksmith, sometimes referred to as Fraser Valley Locksmith. He stated he became aware of a booklet - Exhibit A-1 - entitled: Employed or Self-Employed?, prepared by Revenue Canada with the intent it would be used by persons in the workplace in order to assist in determining the status of a worker having regard to the particular conditions of employment. After reading the booklet, he began checking off the appropriate responses in the spaces provided for that purpose. The appellant stated he agreed with certain assumptions of the Minister as set forth in paragraph 3 of the Reply to the Notice of Appeal (Reply), as follows:
(a) the Appellant operated a locksmith business;
(b) the Appellant employed Bourget to provide locksmith services to the Appellant's customers;
(c) in order to operate a locksmith business, the Appellant had to be licensed by the Ministry of the Attorney General of B.C. (the "Ministry");
(d) in order to provide locksmith services, Bourget was required to have two licenses:
i) a Security Employee License issued by the Ministry which licensed him as a locksmith in general; and
ii) a Security Employee Identification card which identified him as a locksmith working with a particular firm;
(e) in order to obtain the licenses referred to in paragraph (d) above, Bourget had to take courses, be subjected to a criminal record and security check and be bonded;
(f) the services provided by Bourget were generally performed on the various customers' premises, i.e., at business premises, residences or in vehicles;
(g) the Appellant provided Bourget with a company van, bearing the business name, which was stocked with materials;
(h) the Appellant paid for all the expenses of the van including insurance, repairs, etc., except for gas, which was paid for by Bourget;
(k) Bourget's regular remuneration was 50% of the labour charge but he was paid a higher percentage for work done on weekends or in the evening;
(l) Bourget was guaranteed to be paid a minimum amount of $80.00 per day if his commission was less than that amount;
(m) Bourget submitted an invoice to the Appellant and was paid his remuneration by cheque on a bi-weekly basis;
(n) Bourget provided his own hand tools, a cellular phone and a pager for which he was not reimbursed;
(o) Bourget performed the services personally;
[3] The appellant explained his business was comprised of a retail store - selling locks and security devices for commercial and residential premises - and a mobile locksmith service responding to customer demand. The services involved changing locks, securing premises, gaining access to locked vehicles and changing combinations on safes. Somerville stated Bourget first began working for him - at Valley Locksmith - in 1998, as an employee, subject to the usual source deductions from his pay cheque. In May, 1999, the appellant stated Bourget advised that he wanted to have the opportunity to perform work for other people and requested a change in the nature of their working relationship so he could provide ongoing services to Valley Locksmith as an independent contractor. Somerville agreed to that proposal and, whereas Bourget had attended at the store each morning prior to that and had worked as a full-time employee handling sales and service, he now telephoned the store each morning to determine whether or not his services were required during that day. The appellant would inform Bourget of the nature and location of any job and Bourget then travelled to the premises in order to perform the work. The agreement arrived at by Somerville and Bourget required payment to Bourget of an amount based on 50% of the labour charges for each job done but excluded any sharing of revenue relating to parts or materials. Bourget submitted invoices - Exhibit A-2 - to Valley Locksmith, using the letterhead and logo of an entity called Guardian Locksmith. The invoice listed Bourget's own cell phone and pager numbers. The appellant explained that the system of pricing - to a large extent - depended on a determination made by the worker in the field depending on the circumstances with which he was confronted. Somerville stated it was not common practice to issue a firm price to a customer without undertaking a physical examination of the premises. There was a minimum charge - $45 - for any service call but Bourget was free to charge additional fees as he saw fit depending on the nature of the work performed on the site. In order to have constant access to Bourget's services, the appellant stated he agreed to pay him the sum of $80 per day - as a minimum - on a sort of retainer basis - and if Valley Locksmith did not require Bourget to perform any work then he was free to work for others. Somerville stated it was rare to impose any time limit on Bourget in reference to any service call and it would be done only at the insistence of a customer. Since Bourget was a licensed locksmith - and the appellant is not similarly qualified - the appellant did not exercise any control or supervision over his work and undertook no inspections of completed work. The working relationship permitted Bourget to take time off as he saw fit and Somerville stated he would locate a replacement locksmith or - on occasion - hire the services of a competitor in order to satisfy the needs of a customer. There were not many after-hours call-outs on an emergency basis but Bourget could be contacted via his own cell phone and/or pager and if he did attend at a site and perform the required service, the amount charged would generally be at a higher rate than if the same work had been done during regular hours. Generally, the customer would choose the type of lock to be installed and the labour charge would usually be the same unless additional time was required for the specific installation. In the event the actual work was done improperly, then Bourget was required to correct the problem at his own expense but if the trouble was caused by a faulty lock then Somerville and Bourget would arrive at a satisfactory amount to be paid for any further attendance at the premises. When a job was completed, Bourget would complete the Valley Locksmith invoice - a copy of which would be left with the customer - and that day or the next, would leave the other copy at the appellant's shop. As for Bourget's own invoices for services provided, he submitted them every two weeks and was paid regularly on that basis. Somerville agreed he would have exercised the right to approve of any worker proposed by Bourget as a replacement but the matter never arose. The tools required for performance of the worker's job included a van - owned by Valley Locksmith - that had been equipped with shelving, cabinets and an expensive key-cutting machine. Since Bourget had used the van when he had been on the regular payroll, it was agreed he could continue to do so because his own van was not similarly equipped. Bourget used his own hand tools including saws, drills and specialized tools such as picks which tend to be expensive. Bourget and Somerville agreed they were each to be responsible for the purchase and repair of their own tools. Somerville estimated the value of the van and equipment - including its own power source and electrical converters - to have been approximately $16,000. The van was insured by Somerville - operating as Valley Locksmith - at an annual cost of nearly $1,000 and there was also a liability policy pertaining to any claims arising from services provided through the business. Somerville also supplied Bourget with invoice books - in the name of Valley Locksmith - in order to bill customers but the worker paid for all costs pertaining to the use of his own cell phone and pager service. At least 95% of the required materials were delivered in the van and an agreement was reached whereby Bourget would pay for all fuel costs associated with operation of the van because he also used it to commute to and from work. Any bad debts arising the supply of service by Valley Locksmith through the actual performance of work by Bourget were absorbed by the appellant's business as well as any amounts relating to any guarantee concerning the quality of an installed product. Somerville stated that even though he had agreed to pay Bourget the sum of $80 per day - as minimum compensation - he never requested the worker to perform any other tasks or services. In accordance with their agreement, the appellant considered Bourget to have the ability to provide his services to others - including the occasion on which Bourget changed locks in an apartment complex - which served to confirm - in the appellant's mind - the reason the worker had wanted to change his earlier status from that of employee to independent contractor. During the relevant period, there was another qualified locksmith working at the Valley Locksmith premises and this worker had the status of an employee. Somerville stated it was only after a full review of the Revenue Canada booklet and following completion of all the sections therein and tallying up the results, that he and his accountant were able to arrive at the conclusion that Bourget would be providing his services to Somerville's business - after May 31, 1999 - as an independent contractor.
[4] In cross-examination, the appellant - Alan Somerville - acknowledged that the amount of revenue produced from the mobile locksmith service was greater than the in-store component flowing from sales and service. The other locksmith also did some work away from the shop but the majority of her work was done at the retail outlet. Operating as Valley Locksmith, the appellant stated he held a special license pursuant to provincial legislation. Each locksmith held a special license and also carried an identification card on which the name of the cardholder was set forth as well as the name of his or her employer. The appellant stated that - prior to May 31, 1999 - the worker had been an employee of Valley Locksmith earning $15 per hour and the usual source deductions had been taken from his pay cheques. Thereafter, Bourget submitted invoices to Fraser Valley Locksmith - Exhibit A-2 - and there was no Goods and Services Tax (GST) included in the amounts billed, although Valley Locksmith included GST and Provincial Sales Tax (PST) - if applicable - on its own invoices which were provided - by Bourget - to the customer. At one point during their working relationship, the appellant explained Bourget had been contemplating leaving Valley Locksmith and working for another locksmith company - Bell Locksmith Ltd. (Bell) operated by Somerville's former business partner - where he had worked earlier in 1997. Somerville stated he had sold his shares in that corporation to his fellow shareholder - Mr. Harder - and then started Valley Locksmith as a sole proprietorship. As it turned out, Bourget only worked for Harder's business for part of a day and Somerville wanted to retain the worker's services as a locksmith at Valley Locksmith. Prior to May 31, 1999, Bourget was paid a different rate for handling after-hours calls. During that earlier period, the appellant stated the worker had to perform work - as directed - but had the right to refuse after-hours work in which case another locksmith would be contacted to carry out the task. Somerville agreed there were some standard rates set for service such as the sum of $45 to change a residential lock or to attend at a location in order to unlock a car and that these prices for service were established by an association of locksmiths of which Valley Locksmith was a member. The appellant stated the worker could spend as much time on a job as required and could set an hourly rate to charge to a customer and then issue an invoice on that basis. Somerville stated he had attended - at night - to a particular site on an emergency basis and had attempted to resolve the problem but needed to send Bourget to the location the next day in order to finish the work satisfactorily. Due to the varying nature of the work to be performed, the hourly charge to the customer was subject to change. As much as possible, after-hours and emergency calls were forwarded to Bourget's cell phone but if he was not available then Somerville would receive the call and attempt to schedule the work for the next day when Bourget could attend at the site. Prior to May 31, 1999, the worker was not permitted to work for others but did have the right to reject work for a valid reason such as refusing to unlock a car in order that an intoxicated person could gain access and drive away. Somerville explained that all locksmiths - regardless of their working status - have to make on-site decisions as to which methods will be used in order to perform the necessary service. Somerville agreed he dismissed Bourget on April 7, 2000 - prior to the business being sold in June, 2000 - and acknowledged that a part-time worker - hired in April, 2000 - may have also provided some mobile service. Somerville stated that - prior to May 31, 1999 - he had never received any invoice for services from Bourget on Guardian Locksmith letterhead.
[5] In re-examination, Somerville stated the worker had to carry the security employee identification - as provided by Valley Locksmith - on the basis that he was an employee. The appellant explained that if Bourget had been self-employed, he would have been required to possess a Security License at an annual cost of $500. The license held by Valley Locksmith was issued by the Ministry of the Attorney General of the Province of British Columbia and it permitted Somerville - through his proprietorship - to operate a locksmith business but he had to employ a licensed locksmith and there was another person so qualified who worked - mainly - inside the store. When billing Valley Locksmith, the worker did not charge GST but - in Somerville's opinion - was not required to do so since his annual sales were less than $30,000.
[6] Mark Bourget testified he resides in Langley, British Columbia and is currently employed as a qualified locksmith. He completed his 30-week college course - including a practicum - early in 1995. During the practicum, he located two locksmith companies that were willing to take him on as a volunteer within the context of the curriculum and in 1996 began working for a Vancouver locksmith business. After a supervision period of two years, he received his Security Employee License, a photocopy of which is reproduced on the first of two sheets filed together as Exhibit R-1. In addition to the license, an identification card was required which identified the name of the appropriately licensed entity providing the service. In August, 1997 Bourget stated he went to work for Bell, a business operated by Somerville and Harder until they split up, after which he went to work - as an employee - for Somerville, operating as Valley Locksmith. Until May 31, 1999, he was paid at the rate of $15 per hour together with 60% of the amount of labour billed to a customer for work done after normal business hours. He agreed he could refuse work - if otherwise occupied - but did so rarely. Calls from customers were received by Somerville who set the rates to be charged for the service but Bourget stated he sometimes provided quotes to customers based on his own understanding of the situation and the nature of the work to be performed. The other locksmith was also an employee of Valley Locksmith but Bourget was unaware of any mobile service work ever performed by her. In the spring of 1999, Bourget stated Somerville had approached him about purchasing the Valley Locksmith business. Bourget then began considering various matters including financing, assessment of inventory and certain documents were prepared and steps taken in anticipation of concluding the purchase and sale, including the registration of the name Guardian Locksmith - as a trade name - to be used in the operation of his own business. He decided against buying Somerville's business and in the face of a reduction in available work for him to perform, approached Somerville in order to discuss a new working arrangement - which the appellant accepted - effective May 31, 1999. After that date, Bourget stated he was entitled to receive a 50-50 division of revenue on labour billed for service calls, increasing to a 60-40 division in his favour for work performed on calls beyond normal business hours. He would attend at the Valley Locksmith store - a 45-minute commute from home - in order to ascertain the nature of the work to be done since there was always at least one job waiting for him. Later in 1999, Somerville had agreed to pay Bourget a guaranteed sum of $80 per day but the amount flowing from the division of revenue attributable to labour was almost always in excess of that amount, although invoices #016-#020, inclusive, - within Exhibit A-2 - contained numerous entries for days billed at the guaranteed minimum rate. The invoices - on which he submitted his claim for payment every two weeks - had been issued on the letterhead of Guardian Locksmith, printed in anticipation of operating his own business under that name. Bourget stated he never held any Security License - either in his own name or under the trade name of Guardian Locksmith - and throughout his working relationship with Somerville had always carried the identification card stating he was an employee of Valley Locksmith. After two years of working as a locksmith, Bourget stated he finally received a license that no longer stated "locksmith working under supervision" and - instead - recognized him as a fully-qualified locksmith. His last invoices submitted - #025 and #026 - were directed to Bell Lock - at the same address as Valley Locksmith - since his relationship with Somerville had deteriorated at that point upon noticing - the previous day - that Somerville had a new locksmith working in the store. On April 7, 2000 Bourget stated Somerville informed him that their working relationship was terminated, following which he cleaned his tools out of the van and left. After the new arrangements had been agreed to on May 31, 1999, Bourget stated he paid for fuel costs - averaging $10 per day - for use of the van owned by Valley Locksmith and even before the $80 per day guarantee was in place - as of September, 1999 - it would have been difficult for him to lose any money since his total expenditures were only $22.50 per day and he only needed to bill out $45 in labour of which his 50% share could cover expenses. At some point in November, 1999, Bourget stated he had worked - one day - for the business operated by Harder and had given Somerville two weeks notice of his intention to leave but Somerville urged him to stay on. During the relevant period, Bourget stated he did one job for another entity - occupying about 3 hours - and Somerville had been aware of that service.
[7] In cross-examination by the agent for the appellant, Mark Bourget stated the college locksmith course had cost him approximately $5,000. He agreed that after May 31, 1999, his cheques from Valley Locksmith - in payment of services rendered - no longer indicated any source deductions had been taken. He agreed gasoline costs pertaining to the operation of the van would have amounted to between $2,500 and $3,000 per year. Bourget estimated his tools to be worth between $3,000 and $4,000, most of which had been purchased during the term of his course but others had been added from time to time, as needed. The new working relationship had come about because business had been slow and Bourget had thought it was fair to Somerville to change the arrangement to one of sharing revenue produced by his labour on the jobs performed. Pursuant to the new basis for payment, Bourget agreed he could earn more than his former amount of $120 - based on $15 per hour for an 8-hour day - or he could earn less - and in that sense there was a risk to the new method of payment for his services. While many jobs had a flat rate attached to them, Bourget agreed some jobs were charged in accordance with complexity but even then the amount billed to the customer was based on a $60 per hour labour rate established by Valley Locksmith. On the other hand, he did not have to pay any costs relating to any bonding policy while providing services for Valley Locksmith. He agreed he had done some work - at the request of his mother - for an apartment block and had also provided some services to another business in exchange for products. Even though Somerville did not insist that he attend at Valley Locksmith premises each day, Bourget stated he had never billed the minimum $80 fee on any invoice unless he had actually attended at the store that day. Bourget referred to a letter - Exhibit R-2 - dated May 11, 2000 - he had received from the Licensing Supervisor of the Ministry of Attorney General of British Columbia requesting that he return the security employee license in his possession because he was no longer employed by (Fraser) Valley Locksmith and Section 12 of the Private Investigators and Security Agencies Act (Security Act) [RSBC 1996] Chapter 374, required the immediate surrender of said license and identification card to his employer. Bourget stated he complied with the terms of the letter and sent in his license - to the Licensing Supervisor - and when he found another job, he re-applied for - and received - another license.
[8] Ken Paterson, C.A. - agent for the appellant - submitted the evidence indicated the appellant and Bourget had been involved in a joint venture subsequent to May 31, 1999. In carrying out jobs for entities or persons other than Valley Locksmith, Bourget may have been committing a breach of section 3 of Security Act but the intent of the legislation was to protect the public by regulating the locksmith and security industry and not for the purpose of governing the relationship between payors and workers involved in that field of endeavour. On all the evidence, Paterson submitted the appellant had complied with the jurisprudence and that the various tests - on balance - clearly established that Bourget had been providing services to the appellant as an independent contractor carrying on business on his own account.
[9] Counsel for the respondent submitted there was significant control over the worker because Bourget was required to carry - at all times - an identification card which certified that he was working for the appellant's business which - in turn - had been required to obtain a special security license pursuant to certain provisions of provincial legislation. Counsel pointed out that even before May 31, 1999, Bourget and Somerville shared revenue with respect to labour performed beyond normal working hours. After some point following May 31, 1999, the worker received an $80 per day guarantee from the appellant and the worker never had any real risk of loss. The main tools were the expensive van and special equipment owned by the appellant and the worker used tools - personal in nature - most of which had been obtained while taking his training. Counsel submitted the evidence clearly established that Bourget had never been in business for himself during the relevant period but had always been dependent on the appellant's proprietorship for generation of revenue and for the actual right to provide services as a locksmith under the auspices of the special license held by Valley Locksmith.
[10] In Wiebe Door Services Ltd. v. M.N.R., [1986] 2 C.T.C. 200, the Federal Court of Appeal approved subjecting the evidence to the following tests, with the admonition that the tests be regarded as a four-in-one test with emphasis on the combined force of the whole scheme of operations. The tests are:
1. The control test
2. Ownership of tools
3. Chance of profit or risk of loss
4. The integration test
Control:
[11] The evidence demonstrated the worker to have been a qualified locksmith capable of working on his own without supervision. The appellant did not possess sufficient qualifications or experience to monitor the quality of the tasks undertaken by the worker. However, the worker responded to work as assigned by Somerville, carried out his duties, and submitted Valley Locksmith invoices to customers in accordance with rates set by the appellant. The worker could work at his own pace - using his own judgment - and was not required to attend each day at the Valley Locksmith premises in order to earn the minimum payment of $80 per day.
Tools:
[12] The worker owned his own tools - valued at approximately $4,000 - but it is not unusual for qualified tradesmen to possess hand tools chosen personally in accordance with their own preference. In the within appeal, the main tool connected with the generation of revenue was the Valley Locksmith van equipped with shelves, inventory and key-cutting machine necessary to carry out the mobile service. Other than fuel costs, the appellant was responsible for all other expenses associated with the use of the vehicle during the course of business. The worker owned - and paid for - his cell phone and pager but that was his own personal choice and was not a requirement imposed on him by the appellant.
Chance of profit or risk of loss:
[13] After May 31, 1999 the worker and the appellant agreed to divide revenue derived from labour performed by the worker. The normal split was 50-50 but if money was earned by Bourget after normal business hours then he was entitled to retain 60% of the labour component. At a later point - probably September, 1999 - the parties agreed the worker would receive a minimum payment of $80 per day whether or not any work was performed. The worker was not required to perform any other services in order to obtain said payment although he chose not to bill for the guaranteed amount unless he had actually attended at the shop. The worker paid for fuel costs of the van but agreed to do so because he was permitted to use the vehicle to travel to and from work as well as for his personal needs. Although there were occasions following May 31, 1999 when the worker earned less from the new revenue-sharing payment basis than he would have earned at an hourly wage while being treated as an employee, that is not the appropriate test to be applied concerning the chance of profit or risk of loss. The worker conceded that even before the implementation of the $80 per day guarantee, he only needed to generate revenue of $45 per day in order that his 50% share would cover his daily costs relating to the performance of his work. All guarantees in respect of product were the responsibility of the appellant and the worker was reimbursed in accordance with an agreement between himself and the appellant on a case-by-case basis if the worker was required to re-attend at a premise due to a problem attributable to faulty equipment rather than his own workmanship. During those times when he was not required to perform a job for Valley Locksmith, the worker had the right to do work for others - as far as the appellant was concerned - but only did so on two occasions, one of which had been arranged by his mother, and another when he provided service in exchange for some products. The necessary bonding and liability insurance policies were paid for by Valley Locksmith as were all costs - other than fuel - pertaining to the van.
Integration:
[14] This test is one of the most difficult to apply. At page 206 of his judgment in Wiebe, supra, MacGuigan, J.A. stated:
Of course, the organization test of Lord Denning and others produces entirely acceptable results when properly applied, that is, when the question of organization or integration is approached from the persona of the "employee" and not from that of the "employer," because 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. We must keep in mind that it was with respect to the business of the employee that Lord Wright addressed the question "Whose business is it?"
Perhaps the best synthesis found in the authorities is that of Cooke, J. in Market Investigations, Ltd. v. Ministerof Social Security, [1968] 3 All. E.R. 732 at 738-39:
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.
There is no escape for the trial judge, when confronted with such a problem, from carefully weighing all of the relevant factors, as outlined by Cooke, J."
[15] The Supreme Court of Canada in a recent decision - 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59; 274 N.R. 366 - dealt with a case of vicarious liability and in the course of examining a variety of relevant issues, the Court was also required to consider what constitutes an independent contractor. An analysis of the decision of the Supreme Court of Canada as it related to that issue was undertaken by Joel Nitikman, a partner with Fraser Milner Casgrain LLP, Vancouver, British Columbia. In an article entitled 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.: Employee vs. Independent Contractor published in Canadian Current Tax December 2001, Volume 12, No. 3 at p. 30 Nitikman discussed the development of the jurisprudence in this field including Wiebe, supra, which followed the decision of the Privy Council in Montreal v. Montreal Locomotive Works Ltd. et al , [1947] 1. D.L.R. 161 (PC) at 169-70; aff'g [1945] 4 D.L.R. 225 (S.C.C.) At p. 31, Nitikman commented as follows:
The Supreme Court of Canada followed Montreal Locomotive, and specifically the four factors cited by Lord Wright, in a case involving almost identical facts, Regina Industries Ltd. v. Regina (City). In a more recent case, one not dealing with the employee vs. contractor issue but an issue similar to that in the Montreal Locomotive and Regina Industries cases, the Supreme Court of Canada referred to these two cases as merely "very special" cases dealing with constitutional issues. This foresaw the possibility that in a later case the Supreme Court of Canada might overrule the Montreal Locomotive four-factor test.
While stated to be true only in "some" cases, the essential feature of the Montreal Locomotive test as adopted in Wiebe was this: whose business is it? Is the worker carrying on his or her own business while working for the payor, or is the worker merely part of the payor's business. There have been many cases where the courts have missed this essential question and have focused on the four factors as if they were a test in and of themselves, but it is clear that they are (or should be) merely factors that could be used to determine the underlying issue: whose business is it?
This was confirmed in Geophysical Engineering Limited v. The Minister of National Revenue. The issue was whether a particular mining prospector was an employee of or engaged as a contractor by a certain mining syndicate. The Court of Appeal held he was not an employee and cited with approval the Market Investigations case that was later followed by the leading case of Wiebe Door. On appeal the Supreme Court upheld this decision and adopted entirely the judgment of the Court of Appeal. In my view, the Supreme Court in this case upheld the use of the Market Investigations case as the leading test in determining whether someone is an employee or a contractor.
In addition to the four factors in Montreal Locomotive, it is very often said that "integration" is an important factor, that is, is the worker integrated into the payor's business? However, it is clear that this is not a factor to be looked at but is really the whole issue: if the worker is integrated into the payor's business then the worker is not in business for himself. In answering this issue the courts have made it clear that it must be looked at from the worker's point of view rather than the payor's point of view, because of course from the payor's point of view everyone he hires is for purposes of his business. So again the issue comes down to this: from the worker's point of view is he in business for himself or is he merely part of someone else's business.
671122
The Supreme Court has now confirmed this analysis in 671122. Briefly, the issue was whether a particular company was vicariously liable in tort for the actions of another person. The Court determined, that this issue depended on whether that other person was an employee of the company or a contractor. The Court then went on to discuss the test for making this determination. It seems clear from the following passage that the Court did not regard this case as applying only in tort situation, but that it would be applicable even in tax or other cases:
Various tests have emerged in the case law to help determine if a worker is an employee or an independent contractor. The distinction between an employee and an independent contractor applies not only in vicarious liability, but also to the application of various forms of employment legislation, the availability of an action for wrongful dismissal, the assessment of business and income taxes, the priority taken upon an employer's insolvency, and the application of contractual rights... Accordingly, much of the case law on point while not written in the context of vicarious liability is still helpful.
After discussing the pros and cons of the initial "control" test, the later "four factor" test and the "integration" test, the Court finally held that in the main the key test is that set out in Market Investigations, ...: whose business is it:
Although there is no universal test to determine whether a person is an employee or an independent contractor, I agree with MacGuigan J.A. [in Wiebe] that a persuasive approach to the issue is that taken by Cooke J. in Market Investigations, ... The central question is whether the person who has been engaged to perform the services is performing them as a person in business on his own account. In making this determination, the level of control the employer has over the worker's activities will always be a factor. However, other factors to consider include whether the worker provides his or her own equipment, whether the worker hires his or her own helpers, the degree of financial risk taken by the worker, the degree of responsibility for investment and management held by the worker, and the worker's opportunity for profit in the performance of his or her tasks.
It bears repeating that the above factors constitute a non-exhaustive list, and there is no set formula as to their application. The relative weight of each will depend on the particular facts and circumstances of the case.
Thus, it is now clear that in determining the employee vs. contractor issue, the usual factors cited are not tests in and of themselves, but merely pieces of evidence that may be given more or less weight in a particular situation to determine whether the worker is simply part of the payor's business or really in business on his or her own account. (footnotes omitted)
[16] If the central question is whether the person who has been engaged to perform the services is doing so as a person carrying on business on his own account, then the other factors - or tests - as referred to in Wiebe, supra, still retain their value and relevance as an integral part of the overall process of determining the status of the worker. However, I would tend to agree with the assessment of Nitikman that the various factors have been liberated from the strict confines of their former categories even though the Federal Court of Appeal in Wiebe had clearly stated the tests were to be used on a four-in-one basis rather than merely adding up category wins, losses and ties in a numerical sense. In my view, there is now a distinction between viewing the various factors as tools to be used in determining the ultimate issue of status - the central question - and the former standard procedure of assigning the same significance to an analysis of the integration factor as to the other tests. At worst, it seems the integration factor should now occupy the position of primus inter pares and - at best - could be considered equal to the other tests only in an Orwellian context in which it is accepted that, although all factors are to be considered equal, some are obviously more equal than others. In order to arrive at the determination as to whether a person is in business on his own account, the tests concerning control, use of tools, chance of profit or risk of loss, now appear to be part of the requisite process of analysis, scrutiny, reduction and refinement - in order to respond to that question - and the former integration test has had assigned to it the role of repository of that distillate wherein the true status of the service provider is finally resolved.
[17] In the within appeal, when one asks the question, "whose business is it?", the nature of the work performed must also be examined within the context of the particular licensing provisions governing the worker and the appellant as individuals performing services within the security industry. The worker had previously been an employee of Bell - a corporation - in which Somerville had been a shareholder. Bourget then chose to follow Somerville to the new business, Valley Locksmith and worked there as an employee until May 31, 1999. At that point, the worker and Somerville decided to change the structure of their working arrangement and the appellant took some care to determine the probable status of Bourget pursuant to their new relationship. In the appellant's view, after having done his homework and filling out all the spaces in the Revenue Canada booklet - Exhibit A-1 - Bourget would be providing services to Valley Locksmith within the context of his own business. Bourget submitted invoices - every two weeks - to Valley Locksmith and used letterhead of Guardian Locksmith, a trade name he had registered in earlier contemplation of purchasing the locksmith business from the appellant. The premises were owned by Somerville and the business comprised of a retail store - staffed by another locksmith - and the mobile service - featuring a fully-stocked van with necessary key-cutting equipment - was owned by the appellant. Calls from customers were directed to Valley Locksmith's number in the telephone directory and were forwarded automatically to the cell phone or pager of the worker after normal business hours. The appellant - through Valley Locksmith - belonged to a trade association and, as a member, abided by a general rate structure to be applied in most situations. The worker, although he was entitled to a division of revenue generated from his own efforts, received no share from the sale of locks, parts, or other devices utilized in the course of an installation at a residence or commercial premise. A significant matter to be considered is the type of licensing issued during the relevant period as it applied to both the worker and the appellant. The nature of the Security Employee License - Exhibit R-1 - held by Bourget was such that his ability to carry on the trade of locksmith was void unless accompanied by a valid security employee identification card - second page of Exhibit R-1 - issued by a licensed security business. The appellant - operating as Valley Locksmith - held such a license for which he paid an annual fee of $500. When the working relationship was terminated, the Licensing Supervisor of the Ministry of Attorney General by letter - Exhibit R-2 - demanded that Bourget return the security employee license in his possession because he no longer worked for the appellant's licensed security business. I concur with the submission of the appellant's agent that the relevant provincial legislation was not designed with a view to governing working relationships but it is still important to recognize that the ability of Bourget to earn revenue as a locksmith - during the relevant period when he was still subject to supervision - was wholly dependent on his status as an employee with Valley Locksmith. The worker did not possess the necessary license to operate a business on his own at that point in his career. An arrangement by which remuneration is based on revenue-sharing, with or without any guarantee of a daily minimum amount does not - without more - transform someone into an entrepreneur.
[18] The within appeal illustrates the difficulties faced by individuals who attempt to define the nature of their working relationship. Often, troubles arise because the parties do not appreciate they cannot - on consent - merely assign a status to themselves with the intent that it will serve to govern their future working relationship. In the case of The Minister of National Revenue v. Emily Standing, 147 N.R. 238, F.C.A., Stone, J.A. at pp.239-240 stated:
... There is no foundation in the case law for the proposition that such a relationship may exist merely because the parties chose to describe it to be so regardless of the surrounding circumstances when weighed in light of the Wiebe Door test.
[19] The within appeal concerned the same issue as that dealt with by a Rulings Officer who had determined the status of the worker to have been that of an employee. That ruling was then confirmed by the Minister who communicated the decision to the appellant. Initially, the appellant and his agent - a Chartered Accountant - had taken the time to complete the questions contained in the booklet and then undertook a sort of overall tally in order to come to the conclusion that - on balance - Bourget was an independent contractor. I commend them for their efforts. As often stated in these sort of cases, there is no easy way out and distinctions are often extremely subtle. Sometimes, the parties are mistaken from the outset as to the relevant status of the worker providing the service. Other times, the parties have attempted - in good faith - to amend an existing relationship with the intent the mechanics of the new regime will alter the former status of the worker. As time progresses, the original intent relating to that putatively transformed relationship may continue but the real underlying structure - as observed in the normal course of business operations - may also remain unchanged - in any significant manner - as was the case in the within appeal. Notwithstanding some modification to the pay structure and working conditions, it still remained the appellant's business and the worker provided services to that business pursuant to a contract of service.
[20] Having regard to all of the evidence and applying the relevant jurisprudence, I have concluded the decision of the Minister is correct and the appeal is hereby dismissed. As agreed by the parties at the outset, appeal 2001-1422(CPP) is also dismissed.
Signed at Sidney, British Columbia, this 25th day of January 2002.
|
"D.W. Rowe" |
D.J.T.C.C.
COURT FILE NO.: 2001-1404(EI)
STYLE OF CAUSE: Alan Somerville op Valley Locksmith
and M.N.R.
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: November 16, 2001
REASONS FOR JUDGMENT BY: the Honourable Deputy Judge D.W. Rowe
DATE OF JUDGMENT: January 25, 2002
APPEARANCES:
Agent for the Appellant: Kenneth A. Paterson
Counsel for the Respondent: David Jacyk
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
COURT FILE NO.: 2001-1422(CPP)
STYLE OF CAUSE: Alan Somerville op Valley Locksmith
and M.N.R.
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: November 16, 2001
REASONS FOR JUDGMENT BY: the Honourable Deputy Judge D.W. Rowe
DATE OF JUDGMENT: January 25, 2002
APPEARANCES:
Agent for the Appellant: Kenneth A. Paterson
Counsel for the Respondent: David Jacyk
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada