Tax Court of Canada Judgments

Docket: 2005-3113(EI)

BETWEEN:

DRL GROUP LTD.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeal of DRL Group Ltd. (2005-3115(CPP)) on February 1, 2006 at Halifax, Nova Scotia

Before: The Honourable Justice L.M. Little
Appearances:
Agent for the Appellant:	John Harding
Counsel for the Respondent:	Ted Sawa

____________________________________________________________________

JUDGMENT

          The appeal filed under the Employment Insurance Act with respect to the Guides and Greeters for the period January 1, 2003 to December 31, 2003 is allowed, without costs, and the decision of the Minister is varied in accordance with the attached Reasons for Judgment.

          The appeal filed under the Employment Insurance Act with respect to the School Bus Drivers for the period January 1, 2003 to December 31, 2003 is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.

Signed at Vancouver, British Columbia, this 15th day of June 2006.

"L.M. Little"

Little J.

Docket: 2005-3115(CPP)

BETWEEN:

DRL GROUP LTD.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeal of DRL Group Ltd. (2005-3113(EI)) on February 1, 2006 at Halifax, Nova Scotia

Before: The Honourable Justice L.M. Little
Appearances:
Agent for the Appellant:	John Harding
Counsel for the Respondent:	Ted Sawa

____________________________________________________________________

JUDGMENT

          The appeal filed under the Canada Pension Plan with respect to the Guides and Greeters for the period January 1, 2003 to December 31, 2003 is allowed, without costs, and the decision of the Minister is varied in accordance with the attached Reasons for Judgment.

          The appeal filed under the Canada Pension Plan with respect to the School Bus Drivers is allowed and the decision of the Minister is varied in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 15th day of June 2006.

"L.M. Little"

Little J.

Citation: 2006TCC331

Date: 20060615

Dockets: 2005-3113(EI) 2005-3115(CPP)

BETWEEN:

DLR GROUP LTD.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

REASONS FOR JUDGMENT

Little J.

A.       The Facts

[1]      The Appellant is a body corporate incorporated under the Nova Scotia Companies Act.

[2]      The Appellant retained a number of individuals (the "Workers") to act as School Bus Drivers in the Annapolis Valley area of Nova Scotia.

[3]      The Appellant also retained a number of individuals (the "Workers") to work as Tour Bus Drivers, Tour Guides and Greeters in the Cruise Ship Industry in Halifax and Sydney, Nova Scotia.

[4]      The Workers were involved in the following activities:

          - 40 Tour Guides

          - 8 Greeters

          - 120 School Bus Drivers

(Note: There were also a number of Tour Bus Drivers. During the hearing Mr. Harding, the agent for the Appellant, stated that the Tour Bus Drivers were recognized as employees by the Appellant and the status of the Tour Bus Drivers is therefore not an issue before the Court.)

[5]      A Ruling was issued by the Canada Revenue Agency (the "CRA") that the Workers referred to above were employed in insurable employment for the Period January 1, 2003 to December 31, 2003 (the "Period") within the meaning of paragraph 5(1)(a) of the Employment Insurance Act (the "Act").

[6]      A Ruling was issued by the CRA that the Workers were employed in pensionable employment while engaged by the Appellant for the Period from January 1, 2003 to December 31, 2003 (the "Period") within the meaning of paragraph 6(1)(a) of the Canada Pension Plan (the "Plan").

B.       The Issues

[7]     A.        Were the Workers employed in insurable employment by the Appellant for the Period within the meaning of paragraph 5(1)(a) of the Act?

        B.           Were the Workers employed in pensionable employment by the Appellant for the Period within the meaning of paragraph 6(1)(a) of the Plan?

[8]      In a situation of this nature I must determine whether the Workers were employees of the Appellant during the Period or whether the Workers were independent contractors.

[9]      In determining whether a person is an independent contractor or an employee Canadian Courts have developed a number of tests. The Courts have developed a test focusing on the total relationship of the parties with the analysis centred around five elements:

          1.        Degree of control and supervision;

2.        Ownership of tools;

3.        Chance of profit and risk of loss;

4.        Integration; and

5.        Intent of the Parties.

[10]     These tests were propounded by the Federal Court of Appeal in Wiebe Door Services Ltd. v. M.N.R.[1] and accepted and expanded by subsequent cases. The Supreme Court of Canada had a chance to revisit the issue in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.[2] Speaking for the Court, Major J. stated:

   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.[3]

[11]     Accordingly, Major J. considered the central question to be determined is "whether the person who has been engaged to perform the services is performing them as a person in business on his own account or is performing them in the capacity of an employee".

[12]     The requirement to take a holistic approach in examining the tests has been emphasized by the Federal Court of Appeal on past occasions:

... we view the tests as being useful subordinates in weighing all of the facts relating to the operations of the Applicant. That is now the preferable and proper approach for the very good reason that in a given case, and this may well be one of them, one or more of the tests can have little or no applicability. To formulate a decision then, the overall evidence must be considered taking into account those of the tests which may be applicable and giving to all the evidence the weight which the circumstances may dictate.[4]

Similarly, Major J. stated in Sagaz:

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.[5]

[Emphasis added]

[13]     As stated above, the Wiebe Door test can be divided into five categories:

[14]     Control

          Mr. Justice MacGuigan said in Wiebe Door:

The traditional common-law criterion of the employment relationship has been the control test, as set down by Baron Bramwell in R. v. Walker (1858), 27 L.J.M.C. 207, 208:

It seems to me that the difference between the relations of master and servant and of principal and agent is this: A principal has the right to direct what the agent has to do; but a master has not only that right, but also the right to say how it is to be done.[6]

[15]     Ownership of Tools

          In applying this test the Court looks at the tools or assets used by the Worker.

[16]     Chance of Profit and Risk of Loss

          In an employee/employer relationship it is the employer who bears the burden of profit or risk of loss; the employee does not assume a financial risk as he receives the same wage no matter what the employer's financial situation.[7]

          It should also be noted that in Wolf, Desjardins J.A. expanded the notion of risk to factors beyond financial risk:

In consideration for a higher pay, the appellant, in the case at bar, took all the risks of the activities he was engaging in. He was not provided health insurance benefits nor a pension plan by Canadair. He had no job security, no union protection, no educational courses he could attend, no hope for promotion. The profit and the risk factors were his.[8]

[17]     Integration

          This is a difficult test to apply.[9] Nevertheless, in Canada v. Rouselle et al., Hugessen J. of the Federal Court made the following comments on the Integration Test:

            The judge did not mention the factor of "integration" as such. Clearly in light of the case law cited above, it was not essential for him to speak of it. However, if he had considered it, it is apparent that, from the employees' standpoint, the latter were not in any way integrated into the employer's business.

            Their comings and goings, their hours and even their weeks of work were not in any way integrated into or coordinated with the operations of the company paying them. Although their work was done for the company's business, it was not an integral part of it but purely incidental to it.[10]

          In other words, the question is:

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?"[11]

[18]     Intent of the Parties

          This is another test that the Courts have applied in determining whether a Worker is an employee or an independent contractor.

          In Wolf, Noël J.A. made the following remarks concerning the role that contractual intent plays in the classification of an employee:

... 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.[12]

[19]     The Federal Court of Appeal recently heard an appeal filed by The Royal WinnipegBallet v. The Minister of National Revenue.[13] In that case The Royal Winnipeg Ballet ("RWB") appealed a decision of the Tax Court of Canada. The Tax Court Judge had held that Tara Birtwhistle, Johnny Wright and Kerrie Souster, when engaged by the RWB as dancers during the period from January 1 to July 29, 2001 were employees of the RWB and not independent contractors. The Federal Court of Appeal allowed the appeal and held that the dancers were independent contractors. In reaching her decision Madam Justice Sharlow said at paragraph 13:

[13]       The record establishes that the understanding of the CAEA, [the Canadian Actors' Equity Association] the dancers, and the RWB is that dancers covered by the Canadian Ballet Agreement are independent contractors and not employees of the RWB. It is also generally understood that stage managers engaged by the RWB under the Canadian Ballet Agreement are employees of the RWB.

[20]     Madam Justice Sharlow said at paragraphs 63 and 64:

[63]       What is unusual in this case is that there is no written agreement that purports to characterize the legal relationship between the dancers and the RWB, but at the same time there is no dispute between the parties as to what they believe that relationship to be. The evidence is that the RWB, the CAEA and the dancers all believed that the dancers were self-employed, and that they acted accordingly. The dispute as to the legal relationship between the dancers and the RWB arises because a third party (the Minister), who has a legitimate interest in a correct determination of that legal relationship, wishes to assert that the evidence of the parties as to their common understanding should be disregarded because it is not consistent with the objective facts.

[64]       In these circumstances, it seems to me wrong in principle to set aside, as worthy of no weight, the uncontradicted evidence of the parties as to their common understanding of their legal relationship, even if that evidence cannot be conclusive. The judge should have considered the Wiebe Door factors in light of this uncontradicted evidence and asked himself whether, on balance, the facts were consistent with the conclusion that the dancers were self-employed, as the parties understood to be the case, or were more consistent with the conclusion that the dancers were employees. Failing to take that approach led the judge to an incorrect conclusion.

[21]     At paragraph 66 Madam Justice Sharlow referred to the control factor exercised by The Royal Winnipeg Ballet and said at paragraph 67:

[67]       The same can be said of all of the factors, considered in their entirety, in the context of the nature of the activities of the RWB and the work of the dancers engaged by the RWB. In my view, this is a case where the common understanding of the parties as to the nature of their legal relationship is borne out of the contractual terms and other relevant facts.

[22]     I must now review the relevant facts to determine how the various tests referred to in Wiebe Door[14], Sagaz[15] and The Royal Winnipeg Ballet[16] apply to this situation.

Tour Guides and Greeters:

A.       Control

[23]     The Minister maintains that the Appellant controlled the Guides and Greeters to such an extent that the Guides and Greeters should be treated as employees.

[24]     Mr. Harding, the Appellant's agent, made the following points:

(1)      The Appellant did not have written contracts with the Workers but each of the Workers were told and accepted the fact that they were to be treated as independent contractors and not employees.

(2)      The evidence presented to the Court indicated that each of the Guides and Greeters were responsible for their own training plus any of the costs associated with training.

(3)      None of the Guides and Greeters worked on the Appellant's property and none of them rented space from the Appellant. They all worked off the dockyard where the cruise ship docked.

(4)      Each of the Guides and Greeters managed his or her own benefit and pension plan.

(5)      The Appellant did not provide the Guides or Greeters with a medical plan or a dental plan.

(6)      If a Guide or Greeter did not wish to work on a particular day they did not have to work.

(6)      Each of the Guides and Greeters invoiced the Appellant for the work that he or she performed.

(7)      Each of the Guides and Greeters managed his or her own income tax and insurance arrangements.

(8)      There was no guarantee of work and no guarantee of hours of work for the Guides and Greeters.

(9)      The Guides and Greeters had a variety of clients. The evidence indicated that some of the Guides and Greeters worked for other Cruise Ship Suppliers. Some of the Guides and Greeters worked for organizations such as Metro Centre or Exhibition Park in the Halifax area.

(10)     Counsel for the Respondent stressed that each of the Workers had to wear a "uniform" (i.e. red vest, white shirt, black pants, black "leather-type" shoes.

          With respect to the reference to a "uniform" Mr. Harding said that, for the most part, the Workers provided their own uniforms which were very basic - white shirt, black pants, black "leather-type" shoes. The Company provided a red vest for identification purposes and the Workers provided the other pieces of clothing.

(11)     Mr. Harding said that the Appellant did not "supervise" the Workers. He said "They supervised themselves."

[25]     From an analysis of the items as outlined above I have concluded that the Appellant did not "control" the Guides and Greeters in the manner that an employer would control an employee.

B.       Ownership of Tools

[26]     Mr. Harding emphasized that each of the Guides and Greeters were responsible for obtaining information that was necessary to act as Tour Guides and Greeters. Mr. Harding referred to books, lectures and the internet as places where information could be obtained that was required to familiarize the Guides with the history of the area where the tour was taking place. Mr. Harding said that on a three-hour tour the Guides would be required to talk for approximately two hours. He said that they developed their own spiel. Mr. Harding said "all of the materials they had were their own".

[27]     I have concluded that this test indicates that the Guides and Greeters were independent contractors and not employees of the Appellant.

C.       Chance of Profit and Risk of Loss

[28]     Mr. Harding noted that the Guides received $100.00 for a full-day tour and $60.00 for a half-day tour. In addition Mr. Harding said that the Guides would generally receive tips from their customers. Mr. Harding said that the tips gave the Guides the opportunity to increase their compensation for the tours they did. He said that the tips were based on their energy and their professionalism and the work that they put in behind the scene to make sure that they provided the customer with an excellent tour.

[29]     I have concluded that when we apply this test it is obvious that the Tour Guides stood a chance of profit and a risk of loss with respect to their work as Guides.

D.       Integration

[30]     I do not believe that this test is that significant in this situation.

E.       Intent of the Parties

[31]     Mr. Harding said that the practice in the cruise ship industry in Atlantic Canada and, he believes, on the West Coast of Canada is that Guides and Greeters are treated as independent contractors and not as employees. The witnesses who testified for the Appellant and the witnesses called by the Respondent indicated that the intent of the parties was that the Guides and Greeters should be treated as independent contractors and not employees.

[32]     In The Royal Winnipeg Ballet decision[17] Madam Justice Sharlow said:

[67] ... In my view, this is a case where the common understanding of the parties as to the nature of their legal relationship is borne out by the contractual terms and the other relevant facts.

I believe that Madam Justice Sharlow's comments apply in this situation and in my opinion the Guides and Greeters were independent contractors.

[33]     The appeal filed by the Company with respect to the Guides and Greeters will be allowed, without costs.

School Bus Drivers

[34]     When we apply the Wiebe Door tests to the School Bus Drivers I am satisfied that the School Bus Drivers were not employees of the Appellant. However Regulation 6(e) of the Regulations passed pursuant to the Employment Insurance Act reads as follows:

6.          Employment in any of the employments, unless it is excluded from insurable employment by any provision of these Regulations, is included employment:

...

(e)              employment of a person as a driver of a taxi, commercial bus, school bus or any other vehicle that is used by a business or public authority for carrying passengers, where the person is not the owner of more than 50 percent of the vehicle or the owner or operator of the business or the operator of the public authority. [Emphasis added.]

This Regulation gives the Minister the power to determine that a school bus driver is in an employer-employee relationship.

[35]     The appeal filed by the Appellant under the Employment Insurance Act for School Bus Drivers is dismissed.

[36]     The appeal filed by the Appellant under the Canada Pension Plan with respect to the School Bus Drivers is allowed, without costs.

Signed at Vancouver, British Columbia, this 15th day of June 2006.

"L.M. Little"

Little J.

CITATION:

2006TCC331

COURT FILE NO.:

2005-3113(EI) 2005-3115(CPP)

STYLE OF CAUSE:

DRL Group Ltd. and The Minister of National Revenue

PLACE OF HEARING:

Halifax, Nova Scotia

DATE OF HEARING:

February 1, 2006

REASONS FOR JUDGMENT BY:

The Honourable Justice L.M. Little

DATE OF JUDGMENT:

June 15, 2006

APPEARANCES:

Agent for the Appellant:

John Harding

Counsel for the Respondent:

Ted Sawa

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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