Tax Court of Canada Judgments

Date: 19980727

Dockets: 97-673-UI; 97-890-UI; 97-891-UI; 97-892-UI; 97-1025-UI

BETWEEN:

BJ KANE ELECTRIC LTD., MICHEL PORTUGAISE,

Appellants,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Lamarre, J.T.C.C.

[1]            These are appeals from determinations by the Minister of National Revenue (the "Minister") of a question under section 61 of the Unemployment Insurance Act (the "UI Act") and under section 91 of the Employment Insurance Act (the "Act"). These determinations were to the effect that the four workers listed below, while employed by BJ Kane Electric Ltd. (the "appellant") for the periods referred to below, held insurable employment pursuant to paragraph 3(1)(a) of the UI Act and pursuant to paragraph 5(1)(a) of the Act. All these appeals were heard on common evidence.

                The workers and the periods in issue are the following:

Appeals 97-673(UI) 97-890(UI) 97-891(UI) 97-892(UI) 97-1025(UI)

Workers Lance Larocque Donald Downer Gerald MacDonald Michel Portugaise

Periods May 1, 1996 to December 31, 1996 April 1, 1996 to April 30, 1996 April 1, 1996 to April 30, 1996 January 1, 1995 to December 31, 1995

[2]            In making his determinations, the Minister relied on the assumptions of fact set out in paragraph 4 of the replies to the notices of appeal, which are identical in each of the appeals except for the periods in issue. For more convenience, I will reproduce only the assumptions of fact found in appeal #97-673(UI). They read as follows:

(a)            the Appellant operates a business involved in electrical installations and repairs;

(b)            the worker was hired by the Appellant as an electrician;

(c)            the worker performed services for the Appellant's clients;

(d)            the worker was paid on a hourly basis by the Appellant;

(e)            all supplies and materials required to perform the electrical installations and repairs were provided by the Appellant to the worker, at no cost to the worker;

(f)*           the Appellant provided the worker with a vehicle;

(g)            the worker could not realise a profit or a loss as a result of performing the services for the Appellant;

(h)            the worker's work was subject to inspection and approval by the Appellant;

(i)^**          in 1994 and 1995 the worker reported his income as employment income;

(j)^**           in 1994 and 1995 the worker did not report any self-employed income;

(k)^**          in 1994 and 1995 the worker has collected unemployment insurance based on employment income;

(l)             the worker was an integral part of the Appellant's operation since the Appellant is an electrical contractor and the worker was hired as an electrician;

(m)           the worker did not represent, advertise or promote himself as a self-employed individual;

(n)            the worker was employed by the Appellant pursuant to a contract of service.

[3]            Mr. Brian Kane and his wife Mrs. Heather Kane who are the sole shareholders of the appellant testified. They admitted only subparagraphs 4(a), (d) and (f) above. They denied all the other allegations. No one else testified.

[4]            During the periods in issue, the appellant just started to operate an electrical business. Mr. Kane who is himself a certified electrician had previously worked for ten years for an electrical company.

[5]            The appellant contracted with the workers when it had entered into a contract with Business Depot. As Mr. Kane could not perform the contract himself he did approach the workers. No written contract was signed. In the case of Lance Larocque, an agreement was entered into with him, as proprietor of Alexandre Electric. A Certificate of Indemnification was filed as part of Exhibit A-1. It is signed by Mr. Larocque and dated May 17, 1996. It reads as follows:

Certificate of Indemnification

This is to certify that I/we Alexandre Electric have entered into a contractual arrangement with Kane Electric Ltd. whereby I/we will be performing specific work for Kane Electric and will be paid for this work upon satisfactory completion of all or, if agreed to, upon completion of specific phases of the work.

I/we will not be operating as employees of Kane Electric and they will not withhold Income Tax, Canada Pension or Employment Insurance from any amounts being paid for the work.

The work will be performed on a work site and I/we will be responsible to Kane for completion of the work according to specifications determined by them. The work will not be performed under direct supervision of any employee of Kane Electric, but will be subject to inspection and approval by Kane Electric.

I/we are operating as an independent contractor and will not be covered by any general liability insurance of Kane Electric. I/we will provide our own general contractor's liability insurance and Worker's Compensation Insurance.

Signed this 17th day of May 1996.

_____L Larocque_____

[6]            The workers were paid on an hourly basis at a rate that could vary between $16 to $20 an hour. They were all licensed electricians and the remuneration was established according to what was paid in the industry. They were paid weekly according to the number of hours they had worked.

[7]            The appellant's office was located in the Kane's residence. No worker had to report there. Every day, the workers were going directly on the job site assigned by Mr. Kane. Mr. Kane said that he was usually in contact with the general supervisor and that he was on site two or three times a week. Otherwise, he was working on other projects.

[8]            The work schedule was determined by the timetable given by the client. Mr. Kane said that he did not check at what time the workers started to work and at what time they finished. There were no scheduled hours. The workers only had to tell Mr. Kane how many hours they had worked in order to get paid.

[9]            The workers were responsible for the work performed and according to the witnesses they had the responsibility to correct any deficiencies at their own cost. This fact seemed to be corroborated by Mr. Lance Larocque in his written answers (made on January 27, 1997) to a questionnaire sent to him by Revenue Canada on December 16, 1996 and which are part of Exhibit A-1.

[10]          The workers provided their own material except for large power tools that were rented by the appellant and charged back to the client. The appellant also provided a van occasionally to the workers. The value of Alexandre Electric's tools was approximately $900 as of December 1996 (see answers to questionnaire referred to above).

[11]          Although it did not happen, it seems that the workers could have worked for other contractors as long as their obligation to complete their contract with the appellant in a defined time frame was respected.

[12]          Mr. Kane testified that during the periods in issue, he did not have the financial resources to hire employees. When the appellant was given the Business Depot contract, Mr. Kane hired electricians at the standard rate in the industry without any other compensation (this is corroborated in the answers given by Lance Larocque to the questionnaire referred to above) as he needed some help only for short time periods. Now that his business has grown up, he owns more powerful tools and has a few employees one of whom is an electrician who is also paid on an hourly basis ($20 an hour).

Analysis

[13]          The question I must consider is whether, during the periods in issue, the workers were employed by the appellant under a contract of service pursuant to paragraph 3(1)(a) of the UI Act and paragraph 5(1)(a) of the Act. To make this determination, the tests adopted in Wiebe Door Services Ltd. v. M.N.R.,[1] namely control, ownership of tools, chance of profit and risk of loss as well as the test of integration or organization, i.e. whether the workers worked for their own business or for the appellant's, must be analyzed in order to define the total relationship between the parties.

[14]          First, I have to say that I only heard the appellant's version which of course might tend to be self-serving evidence. However, the appellant filed in evidence, under Exhibit A-1, some documents signed by one worker, Mr. Lance Larocque, who was not present at the hearing, that are aimed at corroborating the appellant's version. I must say however that upon the objection raised by the agent for the respondent to the filing of these documents in evidence, I accepted them but I do not intend to rely heavily on these documents in my analysis, as Mr. Larocque was not present to be cross-examined. Furthermore, one of the appeals has been introduced by another worker, Mr. Michel Portugaise. His notice of appeal also discloses facts favourable to the appellant's version as Mr. Portugaise pretends that he was not an employee during the period in issue. However, the latter did not appear before me.

[15]          Bearing in mind that the appellant's own ex post facto characterization of the relationship with the workers is not determinative of the issue, I will now try to give to all the evidence before me the weight which the circumstances may dictate in order to decide if the workers were employees of the appellant (see Standing v. M.N.R., [1992] F.C.J. No. 890 (FCA)).

[16]          So far as the control exercised by the appellant over the work done by the workers is concerned, even if Mr. Kane did not closely supervise the work done by the workers, he pointed out that he was going on site two or three times a week to check the work done. He also said that he regularly kept in touch with the general supervisor on site. It was also admitted by Mr. and Mrs. Kane that the appellant was liable for the overall performance of the contract to the client. It was the appellant who entered into an agreement with the client and in the end it was the appellant who had to deliver the results. It is true that the two witnesses testified, and Mr. Lance Larocque seems to corroborate it in Exhibit A-1, that the workers had the responsibility to correct defective work at their own cost. However no specific evidence was brought on this particular point. I am not satisfied that such situation ever happened and if so I am not convinced that the workers did assume the cost of their own repairs.

[17]          As for the work schedule, Mr. Kane testified that the workers had no scheduled hours. However, they were scheduled by the time frame given by the client. The appellant was responsible to the client to have the work done within a certain period of time. In this sense, he surely had an eye on the time schedule of the workers for each particular contract. Furthermore, the workers had to report the number of hours they had worked in order to be paid. I therefore conclude that the appellant did control the work schedule of the workers.

[18]          With regard to equipment, the workers provided their hand tools as all electricians do, whether they are employees or independent contractors. The more powerful tools were rented by the appellant.

[19]          As for remuneration, each worker was regularly paid a fixed hourly rate that was determined when he was first hired. No other benefits were paid. The evidence did not reveal that the workers were in a position to earn a profit. In fact, it is the appellant who had the chance to make a profit out of the contracts it had in each year. In addition, I am not satisfied that the workers ran any risk of incurring a loss. If any, I am not convinced that they would have been borne by the workers, while for the appellant it is obvious it would as it was responsible to the client for the work done.

[20]          As to the integration of the workers' activities into the appellant's business, I am not satisfied from the evidence that the workers were working for their own business. It is the appellant who provided the work for the whole period. The workers did not work for anyone else during that time. The appellant did not convince me that the workers were performing their work as persons that were in business for themselves.

[21]          Taking all of these various features into account, I am of the view that the appellant has not established, on a balance of probabilities, that the workers were not employed under a contract of service during the periods in issue and accordingly the workers' employment were insurable under the UI Act and under the Act.

[22]          The appeals are therefore dismissed and the Minister's determinations are affirmed.

Signed at Ottawa, Canada, July 27, 1998.

"Lucie Lamarre"

J.T.C.C.

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