1022239 Ontario Inc. v. M.N.R.

1022239 Ontario Inc. v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2004-09-09 Neutral citation 2004 TCC 615 File numbers 2003-4137(EI) Judges and Taxing Officers Judith Woods Subjects Employment Insurance Act Decision Content Docket: 2003-4137(EI) BETWEEN: 1022239 ONTARIO INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on July 7, 2004 at North Bay, Ontario By: The Honourable Justice J.M. Woods Appearances: Counsel for the Appellant: Gregory J. DuCharme Counsel for the Respondent: Michael Ezri ____________________________________________________________________ JUDGMENT The appeal in respect of a decision by the Minister of National Revenue under the Employment Insurance Act, that John Swift was employed in insurable employment while engaged by the Appellant from January 20, 2002 to May 11, 2002, is dismissed and the decision of the Minister is confirmed. Signed at Toronto, Ontario this 9th day of September, 2004. "J.M. Woods" J.M. Woods J. Docket: 2003-4138(CPP) BETWEEN: 1022239 ONTARIO INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on July 7, 2004 at North Bay, Ontario By: The Honourable Justice J.M. Woods Appearances: Counsel for the Appellant: Gregory J. DuCharme Counsel for the Respondent: Michael Ezri ____________________________________________________________________ JUDGMENT The appeal in respect of a decision by the Minister of National Revenue under the Canada Pension Plan, that John Swift was employed in pensionable employment while engaged by the Appellant from January 20, 2002 to May 11, 2002, is allowed and the decision of the Minister is vacated. Signed at Toronto, Ontario this 9th day of September, 2004. "J.M. Woods" J.M. Woods J. Citation: 2004TCC615 Date: 20040909 Docket: 2003-4137(EI) 2003-4138(CPP) BETWEEN: 1022239 ONTARIO INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT Woods J. [1] These are appeals by 1022239 Ontario Ltd. from decisions of the Minister of National Revenue that John Swift was engaged by the corporation as a taxi driver in insurable and pensionable employment during the period January 20, 2002 to May 11, 2002. [2] There are two questions to be determined: (a) Was Mr. Swift employed by 1022239 Ontario Ltd. within the common law meaning of "employment"? The answer to this question will be determinative of whether Mr. Swift was engaged in pensionable employment for purposes of the Canada Pension Plan but not necessarily insurable employment for purposes of the Employment Insurance Act. (b) Was Mr. Swift engaged in insurable employment for purposes of the Employment Insurance Act under the extended test in paragraph 6(e) of the regulations? [3] 1022239 Ontario operates a taxi business with over 30 vehicles in Sault Ste. Marie, Ontario. The general manager, Hugh Irwin, testified on the corporation's behalf. Although Mr. Irwin seemed to have a good general knowledge of the facts and background relevant to these appeals, the owner of the corporation was likely more knowledgeable but unfortunately had died shortly before the hearing. [4] Mr. Swift provided evidence for the Crown. Although he was a credible witness, Mr. Swift had limited knowledge of the general practices and procedures of the corporation because he only drove a taxi for 1022239 Ontario for five months while he was out of work as a stevedore, his main occupation. [5] The taxi business operated by 1022239 Ontario was assisted by two related corporations. One corporation provided the dispatch service and owned all the assets used in the business, including the vehicles that it leased to 1022239 Ontario for a flat fee. The other corporation employed mechanics who serviced the vehicles. [6] 1022239 Ontario contracted with drivers under verbal agreements and regarded them as independent contractors, except for employment insurance purposes where it accepted that the drivers had insurable employment under the extended test in paragraph 6(e) of the regulations. For purposes of these appeals, however, the corporation challenged the applicability of the regulation. Employment at common law [7] There are no bright line tests for determining whether a person is an employee or independent contractor and each case is determined on its own particular facts. The general principles to be applied are described by Major J. in the leading case, Sagaz Industries Canada Inc. v. 671122 Ontario Limited, [2001] 2 S.C.R. 983: [47] ... 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. [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] In terms of whether Mr. Swift was an employee at common law, the essential question is whether he was carrying on business on his own account. The Crown submitted that in order to make a finding that Mr. Swift carried on business on his own account it would have to be determined that he operated a taxi business. It was suggested that this determination would largely be influenced by whether the passengers were customers of Mr. Swift or 1022239 Ontario. Counsel submitted that the activity of driving could not constitute a business because it was merely a skill, not a business. I disagree with this. In my view an individual can carry on a business on his own account if the business consists only of driving a taxi. What is relevant in this determination are the usual factors such as control, ownership of tools, opportunity for profit and risk of loss. In this case, Mr. Swift could be carrying on his own business of driving taxis, with 1022239 Ontario being in effect his only customer. [9] On the facts of this particular case, the control factor is in my view the most important consideration and I agree with 1022239 Ontario that this factor weighs strongly in favour of self-employment. The drivers who worked for 1022239 Ontario, including Mr. Swift, were free to determine when they worked, subject only to legal constraints that imposed a daily 12-hour limit. The corporation provided a sign up sheet that drivers could sign in advance but they did not need to give advance notice. Although the sign up sheet was organized by shifts, drivers were free to work for periods shorter than a full shift. Mr. Swift worked a regular night shift but he admitted that this was his own choice. He also testified that he would not leave work early or take time out while driving without checking with the dispatcher to make sure that there was another driver available. He admitted, however, that this was ultimately his own decision - his sense of responsibility caused him to ensure that the public would be properly serviced. [10] With respect to the driving itself, the corporation also exercised virtually no control, except to ensure that applicable laws were satisfied. The corporation's hiring practices were also consistent with this. Mr. Irwin testified that he would generally hire anyone with a clean driving record, accordingly there was no attempt to hire the most qualified drivers. Training for new drivers was limited to how to use the meter and radio. Fares were referred to the drivers by dispatchers on a priority basis depending on how long a driver had been waiting in a particular area but drivers were free to reject passengers. Furthermore, drivers were not instructed where to drive and were encouraged to pick up passengers on their own. [11] Other factors also illustrate that little control was exercised over the drivers. There was no monitoring of drivers and accordingly drivers were free to attend to personal business during their shifts. The corporation also made drivers responsible for losses incurred through the fault of the driver - for example, drivers were generally responsible for theft and damage to vehicles not covered by insurance. Mr. Swift testified that he did not recall anyone advising him that he was responsible for damage in the event of an accident though he did admit that he thought he might be responsible if he was charged by the police for causing an accident. It is clear from Mr. Irwin's testimony that this was corporate policy and that the corporation had a practice of collecting damages from drivers. Looking at the relationship as a whole, it is clear that very little control was exercised over the drivers. [12] As for the other factors referred to in Sagaz Industries, opportunity for profit, risk of loss and ownership of tools, I find that these factors are not significant in this case and in any event are neutral, not pointing either to employment or self-employment. Mr. Swift had an opportunity for profit since he earned 30 percent of the fares but both counsel suggested that this was not a significant factor, presumably because earning a commission is common in both types of relationships. As for risk of loss, it is clear that Mr. Swift bore some of the risk for losses - again this is a neutral factor because employees often bear some risk of loss, especially if they handle cash. Finally as to ownership of tools, this factor is not significant because the tools employed by a driver are minimal. Mr. Swift purchased his own maps, clipboard and pen. In my view it is not significant that Mr. Swift did not own the vehicle because he was engaged as a driver only. [13] For these reasons, I conclude that Mr. Swift was not an employee of 1022239 Ontario at common law. This is sufficient to allow the appeal with respect to pensionable employment but it is not dispositive of the appeal with respect to employment insurance. Insurable employment under regulation 6(e) [14] Paragraph 6(e) of the Employment Insurance Regulations provides: 6. Employment in any of the following employments, unless it is excluded from insurable employment by any provision of these Regulations, is included in insurable 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 per cent of the vehicle or the owner or operator of the business or the operator of the public authority; [15] 1022239 Ontario submits that the regulation does not apply because Mr. Swift owns or operates the business. It suggests that this position is supported by the decision of Yellow Cab Company Ltd. v. M.N.R., 2002 FCA 294 (F.C.A.). [16] In argument, counsel for 1022239 Ontario admitted that the facts in Yellow Cab were stronger because Yellow Cab did not share any of the revenues earned by the drivers. In my view, this difference is sufficient to distinguish the Yellow Cab case. Regulation 6(e) is clearly intended to provide the benefits of employment insurance to taxi drivers unless they act in an "owner" capacity. In my view, Mr. Swift was simply a driver and did not carry on a taxi business. [17] In his testimony Mr. Irwin referred to the relationship as a lease but counsel did not provide any legal argument to support this. In my view, the relationship was much more than that of lessor and lessee. The corporation earned 70 percent of the fares, maintained the vehicles, paid for gas, advertised under the name 7500 Taxi and entered into arrangements with major corporations representing about 40 percent of the business. Mr. Irwin admitted that the 40 percent of the business represented by corporate accounts were customers belonging to the corporation and not the drivers. Although Mr. Irwin suggested that the other customers were customers of the driver, no explanation was given as to why this would be the case. I would have thought that when a customer calls a taxi service to be picked up, some sort of contractual arrangement is established with the taxi company. [18] In my view the decision in Yellow Cab should not be extended to the facts in this case where Mr. Swift's role is simply that of driver. The effect of extending Yellow Cab would be to deprive Mr. Swift of employment insurance benefits that were intended by the legislation. [19] For these reasons, the appeal under the Canada Pension Plan is allowed and the appeal under the Employment Insurance Act is dismissed. There will be no order as to costs. Signed at Toronto, Ontario 9th day of September, 2004 "J.M. Woods" J.M. Woods J. CITATION: 2004TCC615 COURT FILE NO.: 2003-4137(EI) and 2003-4138(CPP) STYLE OF CAUSE: 1022239 Ontario Inc. v. M.N.R. PLACE OF HEARING: North Bay, Ontario DATE OF HEARING: July 7, 2004 REASONS FOR JUDGMENT BY: The Honourable Justice J.M. Woods DATE OF JUDGMENT: September 9, 2004 APPEARANCES: Counsel for the Appellant: Gregory J. DuCharme Counsel for the Respondent: Michael Ezri COUNSEL OF RECORD: For the Appellant: Name: Gregory J. DuCharme Firm: Wallace Klein Partners in Law LLP North Bay, Ontario For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada