Abe Vergara o/a Sweet City v. M.N.R.

Abe Vergara o/a Sweet City v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2004-04-08 Neutral citation 2004 TCC 263 File numbers 2003-3773(EI) Judges and Taxing Officers Donald G.H. Bowman Subjects Canada Pension Plan Employment Insurance Act Decision Content Dockets: 2003-3773(EI) 2003-3774(CPP) BETWEEN: ABE VERGARA O/A SWEET CITY, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeals heard on March 31, 2004 at London, Ontario. Before: The Honourable D.G.H. Bowman, Associate Chief Justice Appearances: Counsel for the Appellant: Barry R. Card Counsel for the Respondent: Charles Camirand ____________________________________________________________________ JUDGMENT The appeals are allowed and the decisions that D was employed in insurable and pensionable employment during the period from October 1, 2002 to January 31, 2003 are set aside to be replaced by a decision that she was not employed in insurable and pensionable employment in the period in question for the purposes of the Employment Insurance Act and the Canada Pension Plan. Signed at Ottawa, Canada this 8th day of April 2004. "D.G.H. Bowman" Bowman, A.C.J. Citation: 2004TCC263 Date: 20040408 Dockets: 2003-3773(EI) 2003-3774(CPP) BETWEEN: ABE VERGARA O/A SWEET CITY, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT Bowman, A.C.J. [1] These appeals are from a decision of the Minister of National Revenue that D was employed by the appellant in pensionable and insurable employment during the period October 1, 2002 to January 31, 2003. I do not propose to identify this individual by name for reasons that will be apparent from my outline of the facts. D did not testify but the appellant did, as well as one of the attendants who worked in the appellant's licensed body rub parlour. I shall identify her simply as "A". [2] The appellant carries on business known as Sweet City in premises in the City of London in which a body rub parlour, or, as the Notice of Appeal puts it somewhat more euphemistically, a "licensed adult entertainment services parlour" which provides "relaxational massage services". [3] During the period in question, D worked at the appellant's premises as an attendant who provided the massage services. She was one of about 20 to 30 women who worked at Sweet City as attendants. The parlour operated 24 hours a day, 7 days a week and three 8-hour shifts per day. It consisted of a reception area, a bathroom and shower and six massage rooms, one of which had a shower. The massage room had a massage table, a chair and shelves on which oils, ointments and powder were stored, as well as linens which had to be changed after each massage. [4] The clients would come to the parlour and select an attendant and decide what sort of service they wanted. The fees were $40 for one half hour, or $70 for a full hour, or double that amount for "duet massages" involving two attendants. The fees were somewhat higher for dance massages or shower shows. An exact description of some of these services was not given. [5] The client would pay the attendant whom he had selected the required fee who, in turn, would write the fee, the service and the name of the client in a log book and deposit the fee in an envelope on which her name or pseudonym as well as the other information would be recorded. The envelope would be deposited in a slot which led to a box. The attendant kept her own book as well, in which she recorded the service, the name of the client and the fee. [6] After the money had been paid, recorded and deposited, the client and the attendant would proceed to the massage room where the service was performed. The attendants were expected to clean up the massage room after each massage, change the linen and remove any garbage. [7] At the end of the week the total fees earned by a particular attendant would be divided up between the attendant and Sweet City on a 50/50 basis. Also, the attendants would pay Sweet City $1 for each massage, to cover the cost of laundering the linens. [8] Each week the attendants would determine how many 8-hour shifts they would schedule for the following week. A testified that there was no minimum number of shifts that had to be scheduled. Some attendants would schedule as few as one in a week, whereas A scheduled 6 and she tried to pick shifts for times when there were likely to be more clients. [9] It was the practice of Sweet City to levy fines if someone failed to come to a scheduled shift. The fines were $200 for failure to show on weekends and $100 for failure to show on a weekday. [10] The decision that D was employed under a contract of service was based upon a number of assumptions, some of which parallel the four aspects of the Wiebe Door test. [11] The simple fact of the matter is that I have seldom seen a business relationship that bore fewer of the indicia of employment than this one. I think the decision of the Minister is wrong. What we have here is clearly a business carried on by the attendants, including D. Sweet City supplied the premises, the linen and certain oils and ointments and within those premises the attendants carried on the business of providing exotic recreational massage services. For this privilege they paid Sweet City 50 percent of their revenues. [12] The leading case is the recent decision of the Supreme Court of Canada in Sagaz Industries Canada Inc. et al. v. 671122 Ontario Limited, [2001] S.C.C. 59 [2001] 2 S.C.R. 983. The passage that is usually quoted is found at paragraph 47 of the judgment: ... 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. [13] Essentially the Sagaz decision is a reaffirmation of the test propounded in Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553. Every case depends on its own facts and no single factor is necessarily determinative. The Court must consider all of the factors and assign to them the appropriate weight within the context of the case as a whole. [14] Here, two factors stand out in particularly bold relief. The first is that the appellant exercised no control over the attendants. They set their own schedules and determined how many shifts they would work. They were free to accept or reject any client. The appellant exercised no control over how they performed the services or what services were performed. They had to pay what was called a fine for missing a scheduled shift, but I regard this as more in the nature of compensation to Sweet City for loss of an opportunity to make the money that might have been earned had the attendant appeared. It does not point in the direction of an employment relationship. [15] One of the assumptions on which the assessment was based was that the attendant was supervised by various managers and by the appellant. The assumption is wrong. She was supervised by no one. If the appellant was there he provided security and oversaw the handing over of money. If he was not there, one of the other attendants would sit at the desk answering telephone calls and acting as receptionist. [16] A testified that the attendants were free to have someone else substitute for them. I found A to be a credible and articulate witness and most of the evidence upon which I rely in these reasons was supplied by her. I daresay the appellant was credible enough but his command of English was rather less than perfect. A described the way matters were done while she worked at Sweet City and she testified that the system was the same for D, whom she knew and who worked at Sweet City during part of the time when A was there. [17] Counsel for the respondent points to certain rules that he says the attendants had to observe. They were minimal. They are simply the rules anyone would insist on if they were allowing a business person to use his or her premises in which to carry on business. They included no smoking and no drugs. They certainly were not controls of the type only an employer would exercise. Some of the "rules" which the respondent pleaded as assumptions simply did not exist. So far as control is concerned, then, there was none. [18] Another key element is the attendant's chance of profit or risk of loss. An attendant could turn up at a scheduled shift and, if no clients came in, or if no one picked her, she would earn nothing. If she was willing to work 6 shifts a week, and if she was chosen by a number of clients, new or regular, she could earn more money. Moreover, she was free to provide services to clients in her home. [19] Clearly, to use the words quoted by Major J. in Sagaz, the attendant was performing the services "as a person in business on his own account". None of the indicia of an employment appear to be present. [20] The relationship between the attendants and Sweet City was purely a business relationship, in which each brought to the business his or her particular talents or properties. Each stood to profit if business was good; each stood to lose if it was not good. The appellant provided the facilities, the attendant provided the services, and for the privilege of using the appellant's facilities paid 50 percent of her gross revenues. It was a profit-sharing business relationship between business persons. The analogy with partnerships or joint ventures is not perfect but it is illustrative. It was a mutually beneficial business relationship. The activities of the attendants or masseuses are quintessentially and archetypally entrepreneurial. What we have is certainly not an employer-employee relationship. [21] One further point should be mentioned. D and Sweet City entered into a written agreement in which they said, among other things, "It is further agreed that the masseuse is a private contractor and not an employee of Sweet City." Since I have concluded that D was clearly an independent contractor and not an employee in any event there is no need to rely upon this provision. However, such contractual stipulations should be treated with caution. I say this for several reasons. (a) The question whether a relationship arises under a contract of service or a contract for services is essentially a determination of fact and law that is dependent upon many considerations. The label that the parties put upon the relationship is not determinative. (b) If the Court is to give any weight to declarations by the parties about their relationship it must be satisfied that the parties understand what they are agreeing to. This presupposes a reasonable level of comprehension of the legal and factual distinction between the two types of relationship. An illustration of the degree of uncertainty that exists in this area is the Sagaz decision. There, the Supreme Court of Canada arrived at precisely the opposite conclusion from three judges of the Ontario Court of Appeal (Catzman, Borins and Sharpe JJ.A.) (46 O.R. 3rd 760). If such a degree of doubt exists at those levels, it will be apparent that a court will have difficulty in finding in a formula of words in a written agreement a meeting of the minds between two individuals that can be of much assistance in determining the issue. (c) In Wolf v. The Queen, 2002 DTC 6853 three judges of the Federal Court of Appeal, in separate reasons, held that in a case arising under the Quebec Civil Code the intention of the parties as expressed in the contract between them could be a decisive factor. Noël J.A. said at p. 6870: [122] I too would allow the appeal. In my view, this is a case where the characterization which the parties have placed on their relationship ought to be given great weight. 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. [22] As noted above, regardless of the contract, D was clearly in business and not an employee. [23] The appeals are allowed and the decisions that D was employed in insurable and pensionable employment in the period in question are set aside to be replaced by a decision that she was not employed in insurable and pensionable employment in the period in question. Signed at Ottawa, Canada this 8th day of April 2004. "D.G.H. Bowman" Bowman, A.C.J. CITATION: 2004TCC263 COURT FILES NOS.: 2003-3773(EI) & 2003-3774(CPP) STYLE OF CAUSE: Abe Vergara o/a Sweet City and The Minister of National Revenue PLACE OF HEARING: London, Ontario DATE OF HEARING: March 31, 2004 REASONS FOR JUDGMENT BY: The Honourable D.G.H. Bowman, Associate Chief Justice DATE OF JUDGMENT AND REASONS FOR JUDGMENT: April 8, 2004 APPEARANCES: Counsel for the Appellant: Barry R. Card Counsel for the Respondent: Charles M. Camirand COUNSEL OF RECORD: For the Appellant: Name: Barry R. Card Firm: Barrister & Solicitor Suite 200 - 252 Pall Mall Street London, Ontario N6A 5P6 For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada