3868478 Canada Inc. v. M.N.R.

3868478 Canada Inc. v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2006-08-04 Neutral citation 2006 TCC 444 File numbers 2005-1427(EI) Judges and Taxing Officers Donald G.H. Bowman Subjects Employment Insurance Act Decision Content Docket: 2005-1427(EI) BETWEEN: 3868478 CANADA INC. Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on common evidence with the appeal of 3868478 Canada Inc. (2005-1429(CPP)) on July 25, 2006 at Toronto, Ontario. Before: The Honourable D.G.H. Bowman, Chief Justice Appearances: Agent for the Appellant: Dr. R.J. Barakauskas Counsel for the Respondent: Aleksandrs Zemdegs ____________________________________________________________________ JUDGMENT The appeal pursuant to subsection 103(1) of the Employment Insurance Act for the period from January 2, 2003 to November 29, 2004, is dismissed. Signed at Ottawa, Canada this 4th day of August 2006. "D.G.H. Bowman" Bowman, C.J. Docket: 2005-1429(CPP) BETWEEN: 3868478 CANADA INC. Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on common evidence with the appeal of 3868478 Canada Inc. (2005-1427(EI)) on July 25, 2006 at Toronto, Ontario. Before: The Honourable D.G.H. Bowman, Chief Justice Appearances: Agent for the Appellant: Dr. R.J. Barakauskas Counsel for the Respondent: Aleksandrs Zemdegs ____________________________________________________________________ JUDGMENT The appeal pursuant to subsection 28(1) of the Canada Pension Plan for the period from January 2, 2003 to November 29, 2004, is dismissed. Signed at Ottawa, Canada this 4th day of August 2006. "D.G.H. Bowman" Bowman, C.J. Citation: 2006TCC444 Date: 20060804 Dockets: 2005-1427(EI) 2005-1429(CPP) BETWEEN: 3868478 CANADA INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT Bowman, C.J. [1] These appeals are from decisions of the Minister of National Revenue under the Canada Pension Plan ("CPP") and the Employment Insurance Act ("EI") that five dental hygienists were employed by the appellant in pensionable or insurable employment in differing periods from January 1, 2003 to November 29, 2004. [2] The appellant is owned and controlled by Dr. R.J. Barakauskas, a dentist, and it provides dental health services to Dr. Barakauskas' dental practice. For this purpose it engages the services of certified dental hygienists. [3] Dr. Barakauskas disagreed with the Minister's conclusion that the hygienists were employed under a contract of service. His position is that they were engaged under a contract for services. [4] The assumptions on which the decisions were made for EI and CPP purposes were the same. Paragraph 7 of the Reply to the Notice of Appeal in the CPP appeal reads: (a) the Appellant provides dental health services to the dental practice owned and operated by Dr. R.J. Barakauskas; (b) the Appellant's sole shareholder is Dr. R.J. Barakauskas; (c) the Workers were hired as "Dental Hygienists" under a written agreement; (d) the period in question for the Workers is as followed: - Tamara Brown Richardson January 1, 2003 to May 11, 2004 - Jayne Clare January 1, 2003 to November 26, 2004 - Cathy Medal January 1, 2003 to November 29, 2004 - Susan Miotto November 13, 2003 to November 26, 2004 - Jill Tyndall January 1, 2003 to December 31, 2003 (e) the Workers are all certified dental hygienists registered with the College of Dental Hygienists of Ontario; (f) the Workers' duties were comprised of provision of preventative and remedial dental hygiene and periodontal scaling services to patients of the Appellant's shareholder; (g) the Workers performed their duties at the office of the dental practice maintained by the Appellant's shareholder; (h) the Worker; (i) the Appellant's shareholder provided to the Workers the facilities and equipment required to perform their duties without charge or lease; (j) the Workers were required to wear standard hospital style scrubs while in the performance of their duties and this was provided by the Appellant's shareholder without costs; (k) the Workers were paid a fixed hourly rate; (l) the Appellant's shareholder scheduled the hours to be worked by the Workers in conjunction with their availability; (m) the Workers' hours of work were recorded on a timesheet; (n) the Workers were paid by cheque, on a bi-weekly basis; (o) the Workers had to provide their services personally; (p) the Appellant had the right to terminate the Workers' services; (q) the dental practice was sold in 2005. [5] Dr. Barakauskas agreed with the assumptions as stated except for paragraph (o). He stated that an hygienist could ask another hygienist to replace her. Also with respect to paragraph (j) he questioned the word "required". The appellant supplied the uniforms and the hygienists stated a preference for hospital style scrubs which the appellant supplied. [6] The cases with respect to the status of dental hygienists under the CPP and EI are not readily reconcilable. [7] In TLS Health Services Inc. v. Canada, [2002] T.C.J. No. 631 (QL), Justice Rip held that six dental hygienists were employed by a dentist in insurable and pensionable employment. [8] In Bradford v. Canada, [1988] T.C.J. No. 818 (QL); Arthur v.Canada, [1995] T.C.J. No. 947 (QL); Tsimerman v. Canada, [1998] T.C.J. No. 1132 (QL); Witherell v. Canada, [2000] T.C.J. No. 782 (QL) and 509023 Alberta Ltd. v. Canada, [2004] T.C.J. 628 (QL), judges of this court all decided that dental hygienists were independent contractors and not employees. [9] Justice Rip distinguished four of the five cases as follows: 39 Appellant's counsel submitted that the courts have consistently held that a dental hygienist is complementary to dental practice and is not necessary to the practice, and consequently is not considered integrated with the practice. He referred me to the following cases: Bradford v. Canada; [See Note 12 below] Arthur v. Canada; [See Note 13 below] Tsimerman v. Canada; [See Note 14 below] and Witherell v. Canada. [See Note 15 below] Note 12: [1988] T.C.J. No. 818 (Q.L.). Note 13: [1995] T.C.J. No. 947 (Q.L.). Note 14: [1998] T.C.J. No. 1132 (Q.L.). Note 15: [2000] T.C.J. No. 782 (Q.L.). 40 In Bradford, the trial judge found the dental hygienist maintained her own working hours. The dental hygienist testified she selected the most profitable work and places to work. The trial judge was also satisfied that the intentions and objectives of the dentist and dental hygienist were present in their relationship. The contract was not flawed. This is not the situation at bar. In my view, after observing the three witnesses, I prefer the evidence of Ms. Fawcett that Ms. Loro played the significant role in determining Ms. Fawcett's hours of work. 41 In Arthur, supra, Ms. Arthur was paid $75 per day in the dentist's office plus 25 per cent of her billings. She was also responsible for 25 per cent of bad debts. The appellant in Arthur had the right to adjust downward the tariff. Ms. Arthur received referrals from other dentists. She also promoted herself by giving lectures and giving away toothpaste and dental floss, for example. She also printed her own professional cards for distribution. These facts are definitely not present in the appeal at bar; Ms. Fawcett did not have to seek out patients or promote her activity. 42 In Tsimerman, the dental hygienist had no set hours and had no minimum or maximum hours to be worked. She also saw patients who were not patients of the dentist, which is not the case at bar. The dental hygienist in Tsimerman appears to have had a greater freedom than Ms. Fawcett in choosing and treating patients. 43 Finally, in Witherell, the dentist retained 50 per cent of fees earned by the dental hygienist for the facilities and equipment provided to her; the other 50 per cent of billing fees were paid to her. She was also guaranteed sufficient client base to produce a given income. Ms. Fawcett's income was not dependent on fees charged to patients nor did she contribute to the use of equipment and facilities. [10] The written contracts between the appellant and the hygienists were as follows: (I have taken the contract involving Jill Tyndall as representative) CONTRACT FOR PROVISION OF DENTAL HYGIENE SERVICES BETWEEN: (Jill Tyndall) (the Hygienist) and 3868478 CANADAINCORPORATED. (A technical services corporation providing dental hygiene services for Dr. Ramunas J. Barakauskas) The dental hygienist will provide preventative hygiene and remedial periodontal scaling and root planing services as required by the patients of Dr. R. J. Barakauskas. The hygienist will recommend an appropriate treatment protocol for each patient and, after consultation with Dr. Barakauskas, upon receipt of the orders required by the Royal College of Dental Surgeons of Ontario, and after obtaining the required patient consent, will provide the hygiene services required. The hygienist will be responsible for the effectiveness of the preventive and periodontal program provided to the patients of Dr. Barakauskas, and that the hygienist will be providing said services without specific instructions or interference from Dr. Barakauskas, except as required by the various dental regulatory bodies and enacted legislation of Ontario. Obligations of the Corporation: The corporation will provide a safe and clean environment for the hygienist to provide the services contracted for. The corporation shall supply the equipment and room generally considered necessary to provide effective hygiene services. Subject to the specific requirements of the Dental Hygiene Act, the Regulated Health Professions Act and the Royal College of Dental Surgeons of Ontario, both parties confirm that the Hygienist is in business for herself and it is intended that the Hygienist shall have control over the services to be provided under the terms of this agreement. Obligations of the Hygienist: The hygienist shall provide the hygiene services required by the patients of Dr. Barakauskas in a competent, professional and pleasant manner. The hygienist will maintain her registration with College of Dental Hygienists of Ontario and provide the required proof of permission to practice in Ontario. The hygienist will maintain her own liability/malpractice insurance. The hygienist will attend continuing education courses at her own expense. The hygienist is responsible for billing the corporation for her services on an ongoing basis and for providing account information as may be required by the corporation's accountants to verify said bills. Contract Fees: The Corporation will pay the Dental Hygienist a fee for the services provide under this agreement based on $ 40.00 per hour of services rendered. This contract fee can be reviewed when the contract comes up for renewal. The contract fees shall be paid every two weeks. The hygienist will be responsible for remitting any statutory withholdings. Other understanding: The hygienist is entitled to enter into a contract for services with other dentists, provided that such other contracts do not materially affect her ability to provide the services contracted for by the corporation. All patient charts and related information are the property of Dr. Barakauskas and cannot be used by the hygienist outside the scope of this agreement or disclosed to any other party without the express written permission of Dr. Barakauskas. However, this information will remain accessible to the hygienist if required to resolve any investigation relating to the delivery of services contracted for under this agreement. Term of this contract: This contract shall be in force from September 1, 2001 to June 30, 2002. This contract can be renewed annually for a twelve month period, from July 1, 2002 onwards, with the consent of both parties. The renewal can consist of a verbal agreement. Termination of this contract: This contract can be terminated: a) immediately if the hygienist's licence to practice is revoked by the College of Hygienists of Ontario and/or in the event of gross misconduct or negligence by the hygienist in the provision of her services, and/or in the event of serious or repeated breach of any of the hygienist's obligations under this contract; b) at anytime if by mutual consent; c) by the hygienist upon providing four weeks written notice; d) by the corporation upon providing to the hygienist four weeks written notice. Signed by: J. Tyndall (hygienist) (signature) (corporation officer) [11] I shall not quote from the well known decision of the Federal Court of Appeal in Wiebe Door Services Ltd. v. M.N.R. [1986] 3 C.F. 553. It was substantially confirmed by the Supreme Court of Canada in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983. [12] The four part test enunciated in those cases, at least in common law provinces, is well known: control, ownership of tools, chance of profit/risk of loss and integration (or organization). One cannot apply the test [or tests, depending on how you see the four parts] mechanically. The importance of each element must be determined within the context of the overall picture and no single element can predominate. [13] Let us start for example with the control test. This may assume a greater importance in cases arising in Quebec where the Civil Code of Quebec is of importance. In this case Dr. Barakauskas did not and could not tell the hygienists how to perform the dental services but he undoubtedly told them what patients to work on and his office scheduled the appointments. Where professionals are involved, whether they be doctors, lawyers or dental hygienists, the argument is sometimes made that the very nature of their work as professionals is not susceptible of the type of control that would justify a finding of employment. I do not find this argument persuasive. It would mean that a professional person could rarely, if ever, be an employee. The law simply does not support this position. [14] I think Dr. Barakauskas exercised a sufficient degree of control that this part of the Wiebe Doortest is met. For one thing, the Dental Hygiene Act, S.O. 1991, c. 22 of Ontario provides in sections 4 and 5: Authorized acts 4. In the course of engaging in the practice of dental hygiene, a member is authorized, subject to the terms, conditions and limitations imposed on his or her certificate of registration, to perform the following: 1. Scaling teeth and root planning including curetting surrounding tissue. 2. Orthodontic and restoration procedures. 1991, c. 22, s. 4. Additional requirements for authorized acts 5. (1) A member shall not perform a procedure under the authority of section 4 unless the procedure is ordered by a member of the Royal College of Dental Surgeons of Ontario. 1991, c. 22, s. 5(1). Grounds for misconduct (2) In addition to the grounds set out in subsection 51(1) of the Health Professions Procedural Code, a panel of the Discipline Committee shall find that a member has committed an act of professional misconduct if the member contravenes subsection (1). 1991, c. 22, s. 5(2). [15] The other tests seem to be met as well. The dentist provides all of the tools. The hygienist is paid an hourly rate and has no financial commitment or investment that is at risk. The integration test is seldom applied (or, for that matter, understood). Its genesis appears to be the statement of Lord Denning in Stevenson Jordan and Harrison Ltd. v. McDonald & Evans, [1952] 1 TLR 101 at 111. The following passage from Street on Torts, 8th Edition, pages 446-447 is instructive. A. CONTROL The formula, regularly used by the courts to mark the distinction, is 'control". '... The final test ... lies in the nature and degree of detailed control over the person alleged to be a servant.'4 A person is a servant where the employer 'retains the control of the actual performance' of the work.5 In a simple industrial society such as England was until this century, where work was done by agricultural labourers or craftsmen under the directions of employers who had the same or even greater technical skill than their workmen, it would ordinarily be enough to say that the employer could tell the man not merely what task he was to perform but also how he should perform it: if the employer could do both these things, the man was a servant. But now, when a new class of managers, as distinct from owners, has arisen in industry, and when so many employees have some technical skill or other which is often not possessed by any of their employers, the relationship has become more subtle and hardly capable of exact definition: the test formerly applied will not necessarily be adequate.6 In short, 'control' has become a legal fiction rather than a technical reality. In deciding whether enough 'control' is exercised over another to make him a 'servant' one must take into account several factors, no one of which is conclusive. That is a rule of law, but the application of those factors to the circumstances of the case is a question of fact. The criteria include the extent to which the employer can control the details of the work, whether the method of payment is on a time or a job basis, whose tools, equipment and premises are to be used,7 the skill called for in the work, the intention of the parties, the freedom of selection of labour by the employer,8 and the power to dismiss. All these matters, and many more, but especially and increasingly that mentioned in the quotation from DENNING LJ, immediately following, must be considered in order to decide whether this right of control can be inferred. DENNING LJ said:9 It is often easy to recognize a contract of service when you see it, but difficult to say wherein the difference [between a contract of service and a contract for services] lies.10 A ship's master, a chauffeur, and a reporter on the staff of a newspaper are all employed under a contract of service; but a ship's pilot, a taxi-man, and a newspaper contributor are employed under a contract for services. One feature which seems to run through the instances is that, under a contract of service, a man is employed as part of the business, and his work is done as an integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it.11 B. SOME PARTICULAR CASES EXAMINED In the majority of cases, there is no difficulty in determining the status of the person.12 Factory employees, official clerical staff, agricultural hands and the like are clearly servants; garage proprietors, house-builders, and dry-cleaners are the independent contractors of the members of the public who employ them. A typical instance where a man might fall into either group, depending on the circumstances, is that of a salesman.13 Similarly, a chauffeur is a servant, but a taxi-driver is not.14 (1) HOSPITAL STAFFS The courts have often been concerned to decide which members of hospital staffs are servants. After much uncertainty it is now settled that nurses, radiographers,15 house-surgeons,16 and assistant medical officers17 in the full-time service of hospitals are servants. Part-time anaesthetists have also been held to be servants on the ground that they are members of the organisation of the hospital.18 Surgeons and consultants under the National Health Service, even though only engaged part-time or occasionally, will for the same reason be servants of the hospital authority. It is only when the surgeon or consultant treats the patient by virtue of a contract between him and the patient that the hospital authority is not answerable for his torts. (Footnotes omitted) [16] It may well be that Lord Denning, in enunciating the integration test, was simply attempting to respond to the difficulties in applying the control test which sometimes involves drawing artificial distinctions. This seems to be the view expressed in Clerk & Lindsell on Torts, 16th Edition, paragraphs 3 to 6. [17] If the integration test has any meaning, it would seem that the hygienists' function is an integral and essential part of the dental practice. They are not extraneous or incidental to it. The bill that the patient gets from the dentist has, as part of the total, an amount for the hygienist's services. The cleaning and scaling of teeth as well as instructing patients in proper methods of oral hygiene is as much a part of a dental practice as drilling and extracting. The problem with the integration test is that an independent contractor can be as integral a part of a business organization as an employee. [18] I do not think we can go on forever treating the integration test like the proverbial elephant in the living room, looking embarrassedly over our shoulders at it, trying to ignore it, refusing to talk about it and knowing it is there but barely acknowledging it. It is unquestionably part of our law but it must be kept in perspective and must not be given a greater significance than it warrants. Here, for what it is worth, it points to an employer-employee relationship. [19] Ultimately it boils down to a common sense appreciation of all of the factors. At paragraph 44 of 671122 Ontario Ltd. v. Sagaz Industries CanadaInc., Major J. said: According to MacGuigan J.A., the best synthesis found in the authorities is that of Cooke J. in Market Investigations, Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732 (Q.B.D.), at pp. 737-38 (followed by the Privy Council in Lee Ting Sang v. Chung Chi-Keung, [1990] 2 A.C. 374, per Lord Griffiths, at p. 382): 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?" If the answer to that question is "yes", then the contract is a contract for services. If the answer is "no" then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors, which may be of importance, are such matters as whether the man performing the services provides his [page 1004] own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task. The matter was succinctly summarized by him at paragraph 47 of Sagaz: 47 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. [20] I have devoted more time to this than I might otherwise have done because of the apparent differences between members of this court on the question of dental hygienists particularly with respect to the role of the integration test. Each case turns on its own facts. Although the hygienists could on occasion ask someone else to substitute for them and could work for other dentists, I do not think that this fact alone can predominate nor do I believe that the evidence in its totality can reasonably support the conclusion that the hygienists were "in business on [their] own account". [21] The appeals are dismissed. Signed at Ottawa, Canada this 4th day of August 2006. "D.G.H. Bowman" Bowman, C.J. CITATION: 2006TCC444 COURT FILES NOS.: 2005-1427(EI) & 2005-1429(CPP) STYLE OF CAUSE: 3868478 Canada Inc. and The Minister of National Revenue PLACE OF HEARING: Toronto, Ontario DATE OF HEARING: July 25, 2006 REASONS FOR JUDGMENT BY: The Honourable D.G.H. Bowman, Chief Justice DATE OF JUDGMENT AND REASONS FOR JUDGMENT: August 4, 2006 APPEARANCES: Agent for the Appellant: Dr. R.J. Barakauskas Counsel for the Respondent: Aleksandrs Zemdegs COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: John Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada