BETWEEN:
CANADIAN SALES TAX CONSULTANTS LTD.,
and
THE MINISTER OF NATIONAL REVENUE,
____________________________________________________________________
Appeal heard on common evidence with the appeal of Canadian Sales Tax Consultants Ltd. (2004-3598(CPP)) on June 16, 2005 at Toronto, Ontario
Before: The Honourable W.E. MacLatchy, Deputy Judge
Appearances:
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JUDGMENT
The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Toronto, Ontario, this 6th day of September 2005.
2004-3598(CPP)
BETWEEN:
CANADIAN SALES TAX CONSULTANTS LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
[1] The appeals were heard on common evidence on consent on June 16, 2005 at Toronto, Ontario.
[2] The Appellant appealed a ruling to the Respondent for the determination of the question of whether or not Connie McGirr (the "Worker") was employed in insurable and pensionable employment while engaged by the Appellant during the period of January 1, 2001 to November 19, 2003 within the meaning of the Employment Insurance Act (the "Act") and the Canada Pension Plan (the "Plan").
[3] By letter dated June 7, 2004, the Respondent informed the Worker and the Appellant that it had been determined that the Worker was employed in insurable and pensionable employment, during the period in question pursuant to paragraph 5(1)(a) of the Act and paragraph 6(1)(a) of the Plan respectively.
[4] Evidence was presented through Connie McGirr for herself and on behalf of the sole shareholder of the Appellant, Headly Tulloch, who is outside Canadafor health reasons.
[5] The assumptions relied on by the Respondent are noted in paragraph 4 of the Respondent's Reply to the Notice of Appeal. By and large, it was agreed by the witness that the assumptions were substantially correct. The Appellant's business consisted of assisting churches and registered charitable organizations to recover provincial sales tax (PST) and goods and services tax (GST) refunds. The Appellant is solely owned by Headly Tulloch and such business is operated out of the personal home of the owner, who controls the day-to-day operation and the direction of the business. The Worker was hired under a written agreement signed on October 13, 1998 which agreement was entered as Exhibit A-1.
[6] The Worker was responsible to solicit and obtain new clients and negotiate an agreement for the Appellant's services and the commission to be paid. The Worker's duties were listed under heading (h) of the assumptions referred to, such duties to be performed out of her own personal residence and at the offices of the client. The Worker was paid an hourly rate together with commission on new business and her mileage. The Worker had to submit invoices detailing services performed, the hours expended and mileage travelled and was then paid by cheque together with her out of town expenses. The Worker determined her hours of work and was not regularly supervised except for the first few months of her engagement. The Appellant could terminate the services of the Worker on giving notice as agreed in the employment agreement.
[7] The question to be answered by this Court is whether the Worker was engaged under a contract of service and thus an employee of the Appellant or whether she was engaged under a contract for services and therefore an independent contractor. If the former, the Worker's employment was insurable and pensionable, and if the latter, not either.
[8] Guidance has been given by the Federal Court of Appeal in WiebeDoor Services Ltd. v. M.N.R., 87 DTC 5025 and such line of cases developed thereafter and further amplified by the decision of the Supreme Court of Canada in 671122 Ontario Ltd. v. SagazIndustries Canada Inc., [2001] 2 S.C.R. 983. A helpful review of the law and its growth and development to assist the determination of the relationship between the Appellant and the Worker was written by Major J.
[9] It is clear that there is no one test available to determine the employment arrangement existing between the parties. The early thinking was that the question of the control exercised over the Worker by the employer was paramount and determinative of the relationship existing between them. It became clear that other factors should also be considered such as whose equipment was used, whether the Worker took any interest in investment and financial risk in the business and receive profit therefrom or be subject to loss should the venture fail. A further test was called the entrepreneurial consideration or whose business was it and was the Worker in business on his own or merely an integral part of the business of the employer and thus an employee. These tests are all helpful to make the determination of the employment relationship but are not conclusive. The whole relationship existing between the parties must be carefully examined.
[10] The question of control at issue here would appear to be in favour of an employer/employee relationship. The Worker was engaged by the Appellant not for a specific endeavour but for an indeterminate period. The Worker brought her skills for communication, her ability to operate a computer and her ability to use the database of the Appellant and basic honesty and integrity but no specific skills dealing with the business of the Appellant. The Worker was trained by the owner for a period of 3 to 6 months during which time she reported at the office of the Appellant and adhered to hours of employment as set by the Appellant. She was provided with telephone and other equipment of the owner and used the office of the Appellant. As her skills in the business developed, the Worker was able to operate out of her own residence and attended the office of the Appellant from time to time to deliver cheques from clients and the agreements that had been secured by the Worker and to submit her invoices detailing her hours performed and work accomplished and requests for reimbursement for out of town expenses and to receive cheques for payment of such invoicing. Very little supervision was required by the Appellant over the Worker once the initial training period was completed as the Worker was a well skilled communicator and could usually operate on her own unless advice from the owner was required. It was clear, however, that the invoices submitted included the information that the owner could use to evaluate the services provided by the Worker - job performance. The Appellant had the right to terminate the employment as it determined. It was an ongoing and open-ended relationship.
[11] The employment contract clearly indicates a relationship of employer/employee. The Worker agrees to perform services for the Appellant as directed relating to the Appellant's business. The witness, Connie McGirr, stated the contract was badly flawed and did not indicate their true agreement but it appears to speak for itself, when prepared, to show a contract of service was intended.
[12] Ms. McGirr further testified that she performed other more personal services for the owner (who lives out of Canada) such as obtaining and forwarding items for the owner that had nothing to do with the Appellant's business for which she was paid on an hourly basis.
[13] The client base was owned by the Appellant and accessed and used by the Worker on a daily basis.
[14] Control appears to lie in the hands of the Appellant.
[15] The Appellant provides space in its offices for the Worker when she attends there for business purposes. The Worker generally operates out of her own residence or vehicle. She also uses her own cell phone and computer. The Worker is paid mileage for the use of her vehicle and is reimbursed for out of town travel. The ownership of tools would appear to be a wash and of little assistance in establishing the parties' relationship.
[16] The income of the Worker was for the hours expended on the Appellant's business not as a sharing of the success of the actual business profit of the Appellant. The Worker had no investment in the Appellant and could only increase her income by working longer hours or increasing her commissions.
[17] In a like fashion, the Worker would not suffer any loss if the Appellant was not paid by the client. Her income was not dependent on the profit or loss of the business operation other than losing her job should the business completely fail. These factors indicate support for the arrangement between the parties being one of dependency.
[18] Although Ms. McGirr now has another client apart from the Appellant, such contact is recent. She had no other employment during the subject period and did not carry on a business venture of her own during that time frame. She was an integral part of the business of the Appellant and not in business for herself. She was the only sales consultant for the Appellant and a necessary part of the Appellant's operation.
[19] Evidence was led on behalf of the Appellant that the parties intended that the Worker should be an independent contractor but examining all of the evidence of their arrangement such intention cannot be supported. The parties' intentions can be helpful when there is little evidence to the contrary available. In this instance the parties' intentions are unconvincing. Ms. McGirr stated that she now intends to incorporate her own business and operate her business independently of the Appellant. Hindsight is 20/20 vision.
[20] The conclusion in this instance is that the Worker was an employee of the Appellant operating under a contract of service, thus the appeals are dismissed.
Signed at Toronto, Ontario, this 6th day of September 2005.
"W.E. MacLatchy"
MacLatchy, D.J.
COURT FILE NO.: 2004-3597(EI) and 2004-3598(CPP)
STYLE OF CAUSE: CANADIAN SALES TAX CONSULTANTS LTD. AND M.N.R.
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: June 16, 2005
REASONS FOR JUDGEMENT BY: The Honourable W.E. MacLatchy, Deputy Judge
DATE OF JUDGMENT: September 6, 2005
APPEARANCES:
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Agent for the Appellant: |
Frederick H. Fisher
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Counsel for the Respondent: |
Annie Paré |
COUNSEL OF RECORD:
Firm:
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Ontario