Tax Court of Canada Judgments

Docket: 2004-480(CPP)

BETWEEN:

BONNIE JEAN WATSON A PROPRIETORSHIP o/a BONNIE'S CLEANING SERVICES,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Appeal heard on common evidence with the appeal of

Bonnie Jean Watson A Proprietorship

o/a Bonnie's Cleaning Services (2004-481(EI))

at Regina, Saskatchewan, on December 13, 2004

Before: The Honourable Justice G. Sheridan
Appearances:
Counsel for the Appellant:	Kerry R. Chow
Counsel for the Respondent:	Christina Cheater

JUDGMENT

The appeal is allowed and the decision of the Minister of National Revenue is vacated on the basis that Ms. Johnson was performing cleaning services through Bonnie's Cleaning as an independent contractor and was not engaged in pensionable employment within the meaning of paragraph 6(1)(a) of the Canada Pension Plan for the period August 21 to August 29, 2002 in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada this 15th day of February, 2005.

"G. Sheridan"

Sheridan, J.

Docket: 2004-481(EI)

BETWEEN:

BONNIE JEAN WATSON A PROPRIETORSHIP o/a BONNIE'S CLEANING SERVICES,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Appeal heard on common evidence with the appeal of

Bonnie Jean Watson A Proprietorship

o/a Bonnie's Cleaning Services (2004-480(CPP))

at Regina, Saskatchewan, on December 13, 2004

Before: The Honourable Justice G. Sheridan
Appearances:
Counsel for the Appellant:	Kerry R. Chow
Counsel for the Respondent:	Christina Cheater

JUDGMENT

This appeal is allowed and the decision of the Minister of National Revenue is vacated on the basis that Ms. Johnson was performing cleaning services through Bonnie's Cleaning as an independent contractor and was not engaged in insurable employment pursuant to paragraph 5(1)(a) of the Employment Insurance Act for the period August 21 to August 29, 2002 in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada this 15th day of February, 2005.

"G. Sheridan"

Sheridan, J.

Citation:2005TCC134

Date: 20050215

Dockets: 2004-480(CPP) 2004-481(EI)

BETWEEN:

BONNIE JEAN WATSON A PROPRIETORSHIP o/a BONNIE'S CLEANING SERVICES,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

REASONS FOR JUDGMENT

Sheridan, J.

[1]      The Appellant, Bonnie Jean Watson, operating as Bonnie's Cleaning Services, appealed decisions of the Minister of National Revenue dated May 30, 2003 that Holly Johnson was engaged in pensionable[1] and insurable[2] employment for the period August 21 to 29, 2002. The appeals were heard on common evidence, the grounds of appeal being that Ms. Johnson was engaged with Bonnie's Cleaning as an independent contractor under a contract for services. This case is a little unusual in that the period under appeal is just over a week. Ms. Johnson left Bonnie's Cleaning suddenly because of a serious family illness.

[2]      Ms. Watson[3] testified on her own behalf. I found her to be a very credible witness who gave her evidence in a clear, concise and consistent manner. Ms. Johnson was called as a witness by the Respondent and was straightforward, if somewhat vague on details, in the presentation of her evidence.

[3]      During the period August 21 to 29, 2002, Bonnie's Cleaning was in the business of providing cleaning services in residential and commercial properties in Moose Jaw, Saskatchewan. Bonnie's Cleaning evolved from Ms. Watson's success as a self-employed individual cleaning homes: at a certain point, she had acquired such a number of happy clients that she needed the assistance of others to keep up with the demand. She established herself as a sole proprietorship known as Bonnie's Cleaning. Although she continued to perform cleaning services herself, as the sole proprietor of Bonnie's Cleaning, she took on the additional tasks of finding and maintaining clients, recruiting cleaners to perform the services, collecting payment from clients, paying cleaners for their services, providing the cleaning equipment, and all the paperwork typically associated with running a business. In addition to cleaning homes, Bonnie's Cleaning provided commercial cleaning services, particularly at construction sites. For those jobs, Bonnie's Cleaning was required by the clients to rent specialized equipment such as scaffolding or industrial vacuums.

[4]      In August 2002, Holly Johnson answered an advertisement placed by Bonnie's Cleaning and met with Ms. Watson. As a result of their discussions, it was agreed that she would undertake certain client contracts starting August 21, 2002. Contrary to the Minister's assumption[4], both Ms. Watson and Ms. Johnson testified that Ms. Johnson signed an agreement entitled "Sub-Contract Agreement"[5] according to which she was to be paid at a rate of $8.00 per hour and in which Ms. Watson noted[6] Ms. Johnson's working preferences as follows:

Hours Requested:          "40"

Days Preferred:             "Mon-Fri"

Starting Time:                "5 AM"

Ending Time:                  "3 PM"

[5]      In considering the issue of whether on a particular set of circumstances a working relationship is governed by a contract of service an (employer/employee) or a contract for services (independent contractor), the Court must be guided by the "four-in-one" test as enunciated by the Federal Court of Appeal in Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025:

a)        The degree or absence of control exercised by the alleged employer;

b)       Ownership of tools;

c)        Chance of profit and risk of loss;

d)       Integration of the alleged employee's work into the alleged employer's business.

According to MacGuigan, J., the four-in-one test has at its essence "...the search for the total relationship of the parties". In reaching this conclusion, MacGuigan, J. put the emphasis on what Lord Wright called "the combined force of the whole scheme of the operations". Thus, there is no magic in any one of the four factors; the nature of the relationship will depend entirely on the facts found by the Court in any particular case.

[6]      In concluding that Ms. Johnson was an employee of Bonnie's Cleaning, the Minister relied on certain assumptions; the onus of disproving those assumptions rests upon Ms. Watson. Applying the Weibe Door criteria to the evidence presented, I am satisfied that Ms. Watson has discharged her evidentiary burden. In addition to presenting her oral evidence in an entirely credible manner, she provided supportive documentary evidence prepared contemporaneously with the events described.

a)        The degree or absence of control exercised by the alleged employer

[7]      The Minister made the following assumptions which appear in paragraph 8 of the Minister's Reply:

g)          [Ms. Johnson] told [Ms. Watson] when she was available for work;

h)          [Ms. Johnson] could turn down a job offered by [Ms. Watson];

i)           [Ms. Johnson] could work for others in the same industry;

j)           [Ms. Johnson] was not supervised;

[8]      Before considering the remaining assumptions, I must say that I am at a loss as to why these assumptions propelled the Minister to conclude that Ms. Johnson was an employee; in my view, they are clear indicia of Ms. Johnson's status as an independent contractor. As for Ms. Watson, she admitted the above assumptions and generally speaking, those that follow. She took issue not so much with their factual accuracy but rather the legal conclusions the Minister drew from them.

[9]      In paragraph 8 the Minister further assumed:

k)          [Ms. Johnson]'s performance was monitored through feedback from [Bonnie's Cleaning]'s client;

l)           on residential jobs, [Ms. Johnson] was paired with a more experienced worker or she worked with [Ms. Watson];

m)         on commercial jobs, [Ms. Johnson] could work with 2 or 3 other workers of [Bonnie's Cleaning];

...

r)           [Bonnie's Cleaning] set [Ms. Johnson]'s rate of pay;

s)          [Ms. Johnson] was paid $8.00 per hour;

t)           [Bonnie's Cleaning] required [Ms. Johnson] to submit a timesheet detailing hours worked and duties performed at each client's premises;

u)          [Ms. Johnson] submitted the timesheet to [Bonnie's Cleaning] at the end of each week;

...

x)          [Ms. Johnson] was required to correct deficiencies or substandard work without pay;

y)          [Bonnie's Cleaning] had liability insurance with a $500 deductible;

z)          if [Ms. Johnson] caused damages that were:

(i)          less than $500, the worker was required to pay for the damages; and

(ii)         more than $500, the worker was required to pay the first $500.

[10]     In respect of assumptions (k) to (z) set out above, I find the following: because it was with Bonnie's Cleaning that the client had made its initial contact, and because Ms. Watson herself could not be physically present at every cleaning site, it was to be expected that Ms. Watson would "monitor" a worker's performance through feedback from clients. Rather than indicia of "control" or "supervision", it is a testament to the good stewardship that made Bonnie's Cleaning so successful. Although Bonnie's Cleaning "set" the rate of pay, the rate was based as what the client would pay. Further, the rate was mutually agreed to, along with the other conditions under which she would perform cleaning services, following Ms. Johnson's discussion with Ms. Watson on August 21, 2002. Ms. Watson's evidence was that she had had trouble finding anyone willing to accept early (5:00 a.m.) morning cleaning work and was having to do it all herself. Ms. Johnson stated herself to be willing to accept such jobs and joined Ms. Watson in her own work at these locations. On the commercial jobs, more than one person was needed to perform the work requested by the client. It was for these reasons and not for the purpose of supervision, that Ms. Johnson happened to be working with Ms. Watson. She was required to file time sheets because her payment for services rendered was calculated on an hourly basis. The mere fact that she was paid on an hourly basis is not determinative of the nature of the contract.

[11]     As for assumptions (x) to (z) regarding Ms. Johnson having to bear the responsibility for deficiencies in her work, this is consistent with a contract for services; it is more typical of an employer-employee relationship that the cost of an employee error is borne only by the employer.

b)       Ownership of tools

[12]     In regard to this factor, the Minister assumed the following facts in paragraph 8 of the Reply:

n)          [Ms. Johnson] was required to provide cleaning cloths and transportation to and from each job;

o)          [Bonnie's Cleaning]'s client or [Bonnie's Cleaning] provided a vacuum, mops and pails;

p)          [Ms. Johnson] wore a t-shirt with [Bonnie's Cleaning]'s name on it;

[13]     Ms. Watson did not dispute these assumptions, except in respect of having providing transportation to cleaning jobs. Again, however, I do not find that these facts support the Minister's position . It would have been a physical impossibility for Ms. Watson to have driven each of the Bonnie's Cleaning cleaners to each of the job sites. In the case of Ms. Johnson, Ms. Watson admitted that they drove together to the cleaning site - that only made sense when they were both working there. Ms. Johnson testified, however, that she had her own car which she used to drive to Bonnie's Cleaning from her home in a rural community several kilometers north of Moose Jaw. She did not expect transportation to be provided to her. As for the cleaning tools, it was reasonable for Bonnie's Cleaning to provide the major tools needed given Bonnie's Cleaning contractual obligations to its construction site clients, the difficulty of imposing specific equipment requirements on self-employed cleaners working for other clients as well as Bonnie's Cleaning clients, and Ms. Watson's own concerns of ensuring hygenic standards in the delivery of cleaning services. I am of the view that in these particular circumstances, to the extent the ownership of tools has any application, it favours Ms. Watson's position.

c)        Chance of Profit, Risk of Loss

[14]     The Minister assumed[7] that Ms. Johnson told Bonnie's Cleaning when she was available for work, that she could turn down a job offered by Bonnie's Cleaning, and that she could work for others in the same industry. Ms. Watson's testimony was entirely consistent with these assumptions. She explained that some cleaners were "real go-getters" who accepted every contract available; others had clients of their own and only accepted Bonnie's Cleaning client contracts as they could fit them into their own schedules. As for Ms. Johnson, she performed cleaning services for only a few days. It was her first venture into cleaning as a means of earning income. What her choice might have been had she continued with Bonnie's Cleaning is not known. What is clear, from the Minister's own assumptions and the evidence presented, is that Ms. Johnson was able to determine how much or how little work she would do. Consequently, I am of the view that Ms. Johnson had the opportunity to increase her profit by accepting more client contracts, by performing her work in as efficient a manner possible thus increasing her availability for more work, by rejecting Bonnie's Cleaning client contracts if she had more profitable cleaning work from other sources. Conversely, she had no guarantee of client contracts from Bonnie's Cleaning: it depended on a range of unknowns such as the number of client contracts at any given time, the rejection or acceptance of those contracts by other cleaners, whether Bonnie's Cleaning chose to offer them to her. None of this is consistent with an employer-employee relationship where a diligent employee can rely on receiving a fixed amount if she performs her duties during working hours assigned to her by the employer. Rather, such uncertainty points to a finding that Ms. Johnson was working at Bonnie's Cleaning as an independent contractor.

d) Integration of the alleged employee's work into the alleged employer's business

[15]     There is no question that generally speaking, having cleaners available to perform client contracts was integral to the business of Bonnie's Cleaning. However, the performance or not of services by Ms. Johnson specifically, was in no way integral to Bonnie's Cleaning. Bonnie's Cleaning was under no obligation to offer contracts to Ms. Johnson; Ms. Johnson had merely identified herself to Bonnie's Cleaning as a person to whom client contracts could be offered from time to time. Likewise, Ms. Johnson owed no allegiance to Bonnie's Cleaning and was under no obligation to accept cleaning contracts if offered.

[16]     When looked at in the context of MacGuigan, J.'s "search for the total relationship of the parties", I am of the view that, on a balance of probabilities, the evidence does not support a finding that Ms. Johnson was an employee of Bonnie's Cleaning within the meaning of the Weibe Door test. Having weighed all of the relevant factors as set out above, I am satisfied, on a balance of probabilities, that Ms. Johnson was performing cleaning services through Bonnie's Cleaning as an independent contractor. Accordingly, her work is neither pensionable nor insurable. The appeals are allowed and the Minister's decisions are vacated.

Signed at Ottawa, Canada this 15th day of February, 2005.

"G. Sheridan"

Sheridan, J.

CITATION:

2005TCC134

COURT FILE NOS.:

2004-480(CPP) and 2004-481(EI)

STYLE OF CAUSE:

Bonnie Jean Watson A Proprietorship o/a Bonnie's Cleaning Services v. M.N.R.

PLACE OF HEARING:

Regina, Saskatchewan

DATE OF HEARING:

December 13, 2004

REASONS FOR JUDGMENT BY:

The Honourable Justice G. Sheridan

DATE OF JUDGMENT:

February 15, 2005

APPEARANCES:

Counsel for the Appellant:

Kerry R. Chow

Counsel for the Respondent:

Christina Cheater

COUNSEL OF RECORD:

For the Appellant:

Name:

Kerry R. Chow

Firm:

Chow & Co. Moose Jaw, Saskatchewan

For the Respondent:

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

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