Tax Court of Canada Judgments

Docket: 2004-671(EI)

BETWEEN:

DIRECT CARE IN-HOME HEALTH SERVICES INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

____________________________________________________________________

Appeal heard on January 11 and January 13, 2004 with the appeal of Direct Care in-Home Health Services Inc. (2004-672(CPP) at Ottawa, Ontario

Before: The Honourable Justice J.E. Hershfield
Appearances:
Agent for the Appellant:	Daniel V. Blais
Counsel for the Respondent:	Justine Malone, Geneviève Leveillé

____________________________________________________________________

JUDGMENT

The appeal is allowed and the decision of the Minister is vacated for the reasons set out in the attached Reasons for Judgement.

Signed at Ottawa, Canada, this 8th day of April 2005.

"J.E. Hershfield"

Hershfield J.

Docket: 2004-672(CPP)

BETWEEN:

DIRECT CARE IN-HOME HEALTH SERVICES INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

____________________________________________________________________

Appeal heard on January 11 and January 13, 2004 with the appeal of Direct Care in-Home Health Services Inc. (2004-671(EI) at Ottawa, Ontario

Before: The Honourable Justice J.E. Hershfield
Appearances:
Agent for the Appellant:	Daniel V. Blais
Counsel for the Respondent:	Justine Malone, Geneviève Leveillé

____________________________________________________________________

JUDGMENT

The appeal is allowed and the decision of the Minister is vacated for the reasons set out in the attached Reasons for Judgement.

Signed at Ottawa, Canada, this 8th day of April 2005.

"J.E. Hershfield"

Hershfield J.

Citation: 2005TCC173

Date: 20050408

Dockets: 2004-671(EI) 2004-672(CPP)

BETWEEN:

DIRECT CARE IN-HOME HEALTH SERVICES INC.,

Appellant,

And

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

Hershfield J.

FACTS

[1]      The Appellant appeals the Minister's determination under the Employment Insurance Act and Canada Pension Plan that Ms. A.B., a registered practical nurse (the "Worker"), was an employee of the Appellant as opposed to an independent contractor during the period January 2001 to December 31, 2002. This is the sole issue in this appeal.

[2]      The Appellant's business during this period was to provide home care/nursing services to home care clients of the Community Care Access Centres of Ottawa (the "CCAC clients") and to clients of its own whose families had engaged the Appellant to provide home care to a family member ("private clients").

[3]      The Appellant called two witnesses, Mr. Blais and Ms. Lavoi. Mr. Blais is the principal shareholder of the Appellant company and Ms. Lavoi is the Appellant's current director of nursing services. Prior to serving in this position Ms. Lavoi worked for the Appellant for six years as a registered nurse. She was a knowledgeable witness. While Mr. Blais testified extensively at the hearing, he did not have first hand knowledge of the day-to-day activities of the Appellant. As well, he relied heavily on his own conclusions drawn from his own answers to questions posed on a form used by the CRA in determining the status of the Worker. This aspect of the evidence was not particularly helpful but I did not find him unreliable in areas of his testimony that pertain to the general mode of the Appellant's operations much of which was corroborated by either or both of Ms. Lavoi and the Worker who was called by the Respondent.[1]

[4]      During the period under review the Appellant had engaged 30 or more health care workers to assist it in performing services for CCAC clients and private clients. By "engaged" I mean that it had a pool of health care givers (primarily registered nurses and registered practical nurses) under contract. The Worker was one such nurse. Her written contract (the "Agreement") with the Appellant appears to be a standard form of contract used by the Appellant to engage the services of its pool of workers. It identifies the Worker as a non-employee contractor and frames a working relationship that genuinely lends itself to the engagement of independent contractors which was the clear intention of the Appellant. Clauses 1 - 3 of the Agreement in particular illustrate this framework. They provide as follows:

1. Terms of Reference

The contractor agrees to perform services from time to time for Direct Care Health Services, thus, the parties mutually agree to enter into the following contract. The Services to be provided are specified under the Compensation section 2-a.

2. Compensation

Direct Care Health Services agrees to pay the contractor the following:

(a)        The amount of compensation will vary with the level of care provided. Each level of care has been identified with the appropriate compensation to the right. Therefore the caregiver will be paid according to the level of care and the maximum amount per hour as outlined below.

1. Care Level I                                         ___________

2. Care Level II                                        ___________

3. Registered Practical Nurse                    ___________ (checked)

4. Registered Nurse                                  ___________

5. Foot Care                                             ___________

An invoice/payment request is required before payment will be issued.

(b)        The contractor is not an employee of Direct Care Health Services and as such you are responsible for reporting your own income to Revenue Canada as well as paying your own CPP, EI, and Income Tax.

3. Relationship

During the course of this contract, the contractor shall not be an official representative nor a regular employee of Direct Care Health Services. This contract is an agreement that Direct Care Health Services shall maintain the contractor's name on our roster for specific services provided. There is no guarantee of regular hours of work provided by this contract. During the course of performing under this contract, the contractor shall abide by the Policies and Procedures of Direct Care Health Services set out in the Orientation Manual.

[5]      The Worker's testimony was to the effect that she accepted that she was not an employee on the basis that the Appellant required her to do so. To say she was and is indifferent to being designated an independent contractor versus an employee would be a fair reflection of her testimony on the point.[2]

[6]      The following is a summary of the evidence presented at the hearing:

-         when she first applied for work the Worker understood that she was subject to an initial probation period to satisfy the Appellant that she was suitable to join the pool of nurses under contract to the Appellant;

-         when she first started, the Worker received a procedures manual prepared by the Appellant for its workers. Nothing in her testimony however contradicted Mr. Blais' testimony that the manual dealt only with administrative procedures and gave no substantive direction as to how nurses were to perform their services with clients;

-         the Worker acknowledged that she accepted engagements under the Agreement on the basis of being paid on an hourly rate as set by the Appellant and that she received increases from time-to-time based entirely on the Appellant's internally established rate structures;

-         the Worker wore an identification badge for the first day or two of each assignment identifying herself as someone from "Direct Care";

-         the Appellant offered occasional in-service training sessions to its pool of workers. A guest speaker was usually invited to the sessions. The Worker often attended the sessions, regarding them as useful in terms of fulfilling the continuing education requirements of her nursing association (requirements she referred to as "Reflections"). Contrary to the testimony of Mr. Blais, to the effect that these sessions were intended for a wider audience to promote the Appellant's business, the Worker testified that in her experience these sessions were only attended by nurses under contract with the Appellant;

-         the Worker said she was afforded the choice of which engagements to take. She could say no to an engagement for virtually any reason. She was under no obligation to make herself available at any particular time or for any particular type of work. She could try an engagement for a day or two and decide then whether or not she wanted to continue. Mr. Blais confirmed that workers could turn down work for virtually any reason, such as: the client was a smoker, the client had a pet, the required hours were inconvenient or the location of the client's home was not convenient;

-         the Worker was expected, on a regular basis (every Sunday or Monday), to advise of her availability for the week and the type of engagement she was willing to take;

-         there was no restrictive covenant or non-compete obligation whatsoever either in the Agreement or in the Worker's understanding of the arrangement. A worker was not required to be available to service the Appellant's contracts and was free to provide similar services to other companies or clients directly;

-         once an engagement was accepted, the Worker confirmed that there was an expectation that it would be carried out on the basis accepted. However, it is clear from the Worker's evidence, as well as from the other witnesses, that temporary or permanent withdrawals from an engagement were acceptable. The Worker could not assign another worker to an engagement from which she was withdrawing, even temporarily;

-         from June 2001, when the Worker first contracted with the Appellant, the Worker's engagements were with terminally ill clients and varied in hours and duration. However, since October 2002 she has continuously served on a regular shift basis with one long-term CCAC client. The Worker's engagement with this client was regarded by her as a committed ongoing long-term engagement;

-         in order for her to perform services for the Appellant, the Worker required a vehicle, gloves, stethoscope and a blood pressure pad. The vehicle was provided at her expense without allowance or reimbursement by the Appellant. The Agreement expressly provided that transportation to and from assignments was the responsibility of the Worker. While the Agreement provides that equipment and supplies are to be provided by the Appellant, the evidence is that such provision was not given effect. Supplies such as medical dressings and equipment as may have been required were supplied by CCAC or the families of private clients, while the stethoscope, gloves and blood pressure pad were provided by the Worker;

-         the Appellant's insurance covered the Worker for professional liability respecting work performed under her contract with Direct Care;

-         the Worker's function in attending to clients was to take vital signs, administer medication and to attend to the medical and health care needs of clients as prescribed by CCAC or by the physicians of private clients. That is, tasks to be performed by the Worker were structured by a third party with, in some cases, the input of the Appellant but almost always without the input of the Worker. The performance of those tasks was almost always the exclusive jurisdiction of the Worker once she was engaged by the Appellant to perform those tasks;

-         the Worker was largely unsupervised in the performance of her duties with a client. Once or twice per year or at the commencement of an engagement, a supervisor employed by the Appellant would attend with the Worker at a client's home. The Worker's testimony was clear that such attendances were not to supervise work but rather to assist and support her in areas of care that were not familiar to her. Although her assigned duties were dictated to her, she was left on her own in the performance of those duties;

-         the Worker prepared daily reports on forms provided by the Appellant, which were left, on a current basis, at the home of the client to ensure that the client's current status would be available to any other medical professionals attending to the client. Reports were then turned in to the Appellant as the entity responsible for the maintenance of the client records. A supervisor employed by the Appellant would review the reports. This, it seems, maintained the Appellant in a position to report, as would be required under its contractual arrangements, to CCAC or to the family or physician of private clients;

-         the Appellant's invoices that were used to bill CCAC and private clients were completed by the Worker and used by the Appellant to account to the Worker for her time. The invoice showed hours of work performed by the Worker (on behalf of the Appellant) and was verified by the client's signature. The invoice would be sent by the Appellant to the CCAC or private clients for payment of its fees. The Worker would be paid by the Appellant for the hours indicated on this invoice.

AUTHORITIES

[7]      I turn now to an analysis of case law. The leading case on the issue before me is 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983 ("Sagaz"). In that case the Supreme Court of Canada expressly approved the test set out by the Federal Court of Appeal in Wiebe Door Services Ltd. v. Canada (Minister of National Revenue), [1986] 3 F.C. 553. Writing for the Court, Major J. stated as follows at paragraphs 47 and 48:

[47] Although there is no universal test to determine whether a person is an employee or an independent contractor, I agree with MacGuigan J.A. that a persuasive approach to the issue is that taken by Cooke J. in Market Investigations, supra. 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. (emphasis added)

[48] 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.

[8]      Sagazwas followed by the Federal Court of Appeal in Wolf v. The Queen, 2002 D.T.C. 6853 ("Wolf"). All three appellate justices in the case delivered reasons concurring in result. Of particular importance to the present case are comments made by Justice Desjardins in respect of the "whose business is it" test which in my view is a rephrasing of the "central question" posed in Sagaz and comments made by Justices Noël and Décary in respect to the weight to be given to the parties' intentions. Justice Desjardins' comments in respect of the "whose business is it" test at paragraph 93 are to the effect of asking whether, from the worker's perspective, the worker has a business that stands independently from the business of the party engaging the services of the worker. As to the weight to be given to the parties' intentions Noël J.A. stated at page 6870, paragraph 122:

[122] ... In my view, this is a case where the characterization which the parties have placed on their relationship ought to be given great weight. I acknowledge that the manner in which parties choose to describe their relationship is not usually determinative particularly where the applicable legal tests point in the other direction. But in a close case such as the present one, where the relevant factors point in both directions with equal force, the parties' contractual intent, and in particular their mutual understanding of the relationship cannot be disregarded.

This view was echoed by Décary J.A. at paragraph 120:

[120] In our day and age, when a worker decides to keep his freedom to come in and out of a contract almost at will, when the hiring person wants to have no liability towards a worker other the price of work and when the terms of the contract and its performance reflect those intentions, the contract should generally be characterized as a contract for services. If specific factors have to be identified, I would name lack of job security, disregard for employee-type benefits, freedom of choice and mobility concerns.

[9]      In Poulin v. Canada, [2003] FCA 50 ("Poulin"), the Federal Court of Appeal was charged with determining whether the Appellant had engaged private health care providers as employees or as independent contractors. The FCA went through each of the well-established tests and concluded as follows at paragraphs 27 and 28:

[27] ... the tests developed by the courts to differentiate a contract of employment from a contract of services prove to be of little use in the particular context of this case. The services rendered to the applicant during 1999 and the conditions in which they were rendered reveal a supply of services that is as compatible with one resulting from a contract for services or of enterprise as it is with one emanating from a contract of employment. That being said, as our colleague Mr. Justice Décary noted in Wolf, supra, at paragraph 117, these tests are simply factors to be considered in the determination of what "is the essence of a contractual relationship, i.e. the intention of the parties". And as he also says, "one ends up in the final analysis, in civil law as well as in common law, looking into the terms of the relevant agreements and circumstances to find the true contractual reality of the parties": ibid., at para. 113.

[28] This leads me to examine the intention of the parties, in order to determine the overall relationship that they wished to maintain between themselves.

ANALYSIS

[10]     These authorities suggest two approaches to the resolution of a case like the present one. Firstly, applying the tests in Wiebe Door, if a clear classification of the worker is determinable, that is likely the end of the matter. Secondly, if a clear classification is not determinable by applying these tests, the existence of an independent worker's business and the intentions of the parties must be considered. I will begin the analysis then with the tests in Wiebe Door.

Control

[11]     Analysis of this factor involves a determination of who controls the work and how, when and where it is to be performed. If control over work once assigned is found to reside with the worker, then this factor points in the direction of a finding of independent contractor; if control over performance of the worker is found to reside with the employer, then it points towards a finding of an employer-employee relationship.[3] However, in times of increased specialization this test may be seen as less reliable, so more emphasis seems to be placed on whether the service engaged is simply "results" oriented; i.e. "here is a specific task - you are engaged to do it". In such case there is no relationship of subordination which is a fundamental requirement of an employee-employer relationship.[4] Further, monitoring the results, which every engagement of services may require, should not be confused with control or subordination of a worker.[5]

[12]     In the case at bar, the Worker was free to decline an engagement for any reason, or indeed, for no reason at all. She could leave a client and still be engaged with another more to her liking. She was free to do other work as and when she pleased. Moreover, although nursing care tasks were offered to her, there was no promise of that and she was not supervised in her performance of those tasks. Each task offered was a results oriented task from the Appellant's perspective. The fact that the Appellant could offer such tasks from time to time and to some extent monitor performance does not militate toward a finding of an employee-employer relationship. As in D & J Driveway, where there was not a sufficient relationship of subordination between the company and drivers to warrant a conclusion that a contract of employment existed, there is not a sufficient relationship of subordination in the case at bar to warrant a conclusion that the relationship of the parties is that of employee-employer. In D & J Driveway specific delivery tasks were available to drivers who could agree or refuse to make deliveries when called upon. When drivers agreed to make a delivery no control was exercised over the way in which they carried out their duty. Similarly in Wolf, Justice Desjardins noted that a link of subordination had not been created where the worker, a free-lance mechanical engineer hired on a one-year renewable contract, was assigned tasks over which the worker was the "master".[6] As in these cases, I do not see the Worker, in the case at bar, as being in a subordinate relationship with the Appellant as is required to find a contract of service. That is, the control test points toward a finding of an independent contractor relationship.

Tools and Equipment

[13]     The question to be asked in relation to this factor is who, of the employer or the worker, owns the assets or equipment that is necessary to perform the work. This factor points to a finding of independent contractor if it is the worker who controls the assets or equipment. Conversely, a finding of employee is likely if it is the employer who controls them.[7]

[14]     In this case, the Worker required gloves, stethoscope and a blood pressure pad. As well, as expressly provided in the Agreement, the Worker was responsible for transportation to and from assignments. To this end the Worker maintained a vehicle at her own expense.

[15]     The Agreement also provides that the Appellant would provide the Worker "with supplies and equipment the Agency (Direct Care Health Services) feels is necessary to carry out the assigned work". However, the evidence indicates that this provision was not given effect, and that all supplies such as medical dressings and equipment were supplied by CCAC or the families of private clients. Here, then, we have a situation where some of the tools and equipment were provided by the Worker and the remainder by a third party. The Appellant did not provide the Worker with any tools or equipment other than the invoicing and patient reporting forms. While giving this factor considerable weight in a case as this is clearly not appropriate, it does not in any event point to the Appellant as the party having control over, or having made the investment in, the equipment necessary for the carrying out of the Worker's activities.

Risk of Loss/Opportunity for Profit

[16]     This factor examines the worker's potential of profit or loss. An independent contractor normally assumes the risk of loss and chance for profit resulting from the performance of work, while in the case of an employee it is the employer who bears that burden and has that opportunity.[8]

[17]     The Respondent argues that the Worker bears essentially no expenses and receives compensation fixed by an hourly rate and that this precludes the Worker from having any risk of loss or chance of profit. The Respondent also argues that the Appellant's carriage of the Worker's third party liability insurance points to an assumption of risk akin to that of an employer. Against these arguments are of course the standard arguments that hourly rate payments cannot be determinative of the nature of the relationship and that the insuring of independent contractors is as much in the interests of the party retaining their services as it is for an employer to insure the acts of employees. While the Appellant providing the insurance coverage reduces the Worker's risk of loss it cannot, in my view, be seen as an overriding factor in classifying the relationship particularly in cases such as this where the chain of liability puts the Appellant first in line contractually as the defendant in an action. The benefit to the Worker is incidental and of marginal relevance as a single factor.

[18]     As well, the Respondent argues that the Worker not negotiating her own pay rate increases, but rather accepting the compensation scheme as set by the Appellant, is not reflective of an activity carried out for profit. Against this, however, is the Worker's apparent satisfaction that her compensation rates were competitive. It seems to me she simply saw no reason to negotiate for more. This cannot deter from a finding that she was an independent contractor if other factors encourage that finding. Furthermore, in terms of risk, it is relevant that the Worker does not enjoy the type of job security that is normally inherent in employment. She has no: health insurance benefits, pension plan, union protection, assured hours, advancement structure or job security of any type. As noted earlier in these Reasons, Décary J.A. in Wolf, referring to factors indicating an independent contractor relationship, commented that: "If specific factors have to be identified, I would name lack of job security, disregard for employee-type benefits, freedom of choice and mobility".

[19]     In addition, the fact that the Worker was able to decline an engagement for any reason must not be overlooked. The Worker in that sense had control over how much money she could earn to an extent far greater than that exercised by most employees. The Worker could increase her earnings and chance of profit by accepting more engagements from the Appellant. On the other hand, since she was not assured any hours, she had a risk that some expenses such as vehicle expenses could exceed income. Of course many employees might be in similar circumstances so I would not put too much emphasis on this factor in characterizing the nature of the relationship.

[20]     While applying the tests in Wiebe Door on the basis discussed above justifies a finding that the Worker is an independent contractor, I will continue the analysis in light of the authorities cited above which in close cases have considered the issue from the perspective of whether the Worker is in business for her own account and from the perspective of the parties' intentions. [9]

Whose Business Is It?

[21]     In applying this test the central question is that posed in Sagaz which is whether the person who has been engaged to perform the service is performing the service as a person in business on his own account. While the answer to this question is said in that Supreme Court case to lie in the application of the four tests laid out in Wiebe Door there is a tendency to look at the worker's activity in isolation to see if it constitutes a business. If not, how can it be said that the worker is in business for his own account? Looking at the Worker's activity from the worker's perspective,[10] in the case at bar, may suggest that the Worker has no business per se. While trappings alone are not determinative of there being a business it is notable that in this case the Worker does not operate under a business name, does not have an office (home office included) or a list of clients, does not provide her own forms and prepares no separate invoices for her services. All of these factors point to there being only one business: that of the Appellant. Indeed the Worker herself does not profess to have a business except as might necessarily be inferred from her contractual arrangement as written and performed.

[22]     One ought not, however, fall into the trap of thinking that only that which has the trappings of a "business" qualifies as such for the purposes of this analysis. I refer to paragraph 13 of D & J Driveway:

... It is important to guard against a reflex of thinking solely of a business corporation or an organized commercial undertaking when one is dealing with work which is done or services which are provided other than under a contract of employment. The examples of electrical, plumbing or building contractors immediately spring to mind in such a context. However, there is a whole range of services which are offered under a contract for services. In fact, article 2098 of the Civil Code of Quebec was very careful to place on an equal footing a "contract of enterprise" and a "contract for services" and to describe as a "contractor" the person who performs a contract of enterprise and a "provider of services" the person who carries out a contract for services.

[23]     Although the Civil Code of Quebec does not apply in this case, I nonetheless find the words of Letourneau J. instructive. In the present case, the Worker was free to accept or refuse or leave engagements as she pleased and was free to contract with agencies other than the Appellant, so long as she did not solicit the Appellant's customers for any work outside of the Agreement. In addition, the Worker provided many of her own tools and was free to perform her duties with no supervision. That is enough, in my view, to warrant a finding that the Worker had a business as did drivers in D & J Driveway. The Appellant and the Worker are two separate persons each with a distinct undertaking. The undertaking of the Appellant is to find clients, find contractors to perform the tasks required by the clients to be performed and coordinate the fulfilment of clients' needs. The performance of the tasks themselves is contracted out to workers whose undertakings are to perform such tasks as and when they agree.

[24]     While I believe this part of the analysis confirms and supports my earlier conclusion which is that the Worker in the case at bar is properly classified as an independent contractor, I will, for the sake of completeness, consider the parties' intentions.

Intentions

[25]     Although the parties' intentions should not be regarded as determinative, they can be helpful in a close case.[11] That is, if one were to conclude on a review of the evidence as a whole that this is a close case where the relevant factors point in both directions with equal force and that the mutual understandings of the parties must therefore be regarded and considered, how would this case be resolved?

[26]     I have no difficulty finding that the Appellant intended to hire the Worker as an independent contractor. This much is clear from the testimony of Mr. Blais and from the terms of the Agreement. As to the intention of the Worker, I begin by noting that it is not as easily discernible as that of the Appellant. The Worker's testimony seemed to indicate that the matter did not concern her. She seemed indifferent to the classification. As much as it might be said that she never really thought of herself as an independent contractor, it cannot be overlooked that she never took on the role performed by her thinking that she was an employee. To the contrary, she took on the role knowingly agreeing to the relationship intended by the Appellant. Moreover, I am compelled to find that she must have had at least some minimal intention to operate as an independent contractor in light of the fact that she agreed to an arrangement whereby she was not entitled to any employee benefits whatsoever and without the apparent protection of labour laws in terms of such benefits or job security. At the hearing she evidenced no concern as to seeking relief from this state of affairs knowing full well that it was, and is, the arrangement she willingly agreed to. Her intention was and is to carry on her undertaking as required under the Agreement.

CONCLUSION

[27]     Taking all factors into account then, it is consistent in this case to regard the Worker's undertaking as one engaged in for her own account as an independent contractor. Accordingly the appeals are allowed.

Signed at Ottawa, Canada, this 8th day of April 2005.

"J.E. Hershfield"

Hershfield J.

CITATION:

2005TCC173

COURT FILE NOS.:

2004-671(EI), 2004-672(CPP)

STYLE OF CAUSE:

Direct Care In-Home Health Services Inc. and The Minister of National Revenue

PLACE OF HEARING:

Ottawa, Ontario

DATES OF HEARING:

January 11 and 13, 2005

REASONS FOR JUDGMENT BY:

The Honourable Justice J.E. Hershfield

DATE OF JUDGMENT:

April 8, 2005

APPEARANCES:

Agent for the Appellant:

Daniel V. Blais

Counsel for the Respondent:

Justine Malone, Geneviève Leveillé

COUNSEL OF RECORD:

For the Appellant:

Name:

Firm:

For the Respondent:

John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada

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