Gagnon v. M.N.R.

Gagnon v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2006-02-01 Neutral citation 2006 TCC 66 File numbers 2004-4589(EI) Judges and Taxing Officers Eric A. Bowie Subjects Canada Pension Plan Employment Insurance Act Decision Content Docket: 2004-4589(EI) 2004-4590(CPP) BETWEEN: ANDRE GAGNON, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeals heard on November 21, 2005, at Sudbury, Ontario, By: The Honourable Justice E.A. Bowie Appearances: Counsel for the Appellant: Paul Lefebvre Counsel for the Respondent: Charles Camirand ____________________________________________________________________ JUDGMENT The appeals pursuant to subsection 103(1) of the Employment Insurance Act and section 28 of the Canada Pension Plan are dismissed and the decision of the Minister of National Revenue on the appeal made to him under section 91 of the Act and the determination of the Minister on the application made to him under section 27.1 of the Plan are confirmed. Signed at Ottawa, Canada, this 1st day of February, 2006. "E.A. Bowie" Bowie J. Citation: 2006TCC66 Date: 20060201 Docket: 2004-4589(EI) 2004-4590(CPP) BETWEEN: ANDRE GAGNON, Appellant, And THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT BowieJ. [1] These appeals are brought under the Employment Insurance Act[1] (the Act) and the CanadaPension Plan[2] (the Plan). The same issue arises in each appeal: were certain individuals who did work for the Appellant during the period January 1, 2002 and November 24, 2003 employees engaged in contracts of service, or were they independent contractors engaged under contracts for services? The Minister of National Revenue's delegate determined them to be employees, and appeals to the Minister under section 91 of the Act and section 27 of the Plan resulted in confirmation of those determinations. Mr. Gagnon now appeals those decisions to this Court pursuant to section 103 of the Act and section 28 of the Plan. [2] The names of the individuals whose status is at issue in these appeals are set out in Schedule "A" to these Reasons for Judgment. [3] Much has been written about this issue over the last 150 years. In the common-law jurisdictions of Canada, the decision of the Supreme Court of Canada in Sagaz[3] is binding on trial courts.[4] As McGuigan J.A. explained in Wiebe Door,[5] it is the trial judge's duty to consider all the evidence carefully, and then apply to the facts the four-in-one test that has been developed over the years and was approved in those two cases. This requires consideration of the facts concerning the right of the employer under the contract to supervise and control the manner in which the work is done, the ownership of the tools necessary to do the job, and the opportunity for the worker to make a profit or suffer loss in the course of doing the work. It is relevant also to consider the degree of integration of the work into the enterprise of the employer, but from the perspective of the worker, not that of the employer. It must be remembered that the purpose of the inquiry is to determine whether the worker is an entrepreneur in his own right, or an employee working for wages in someone else's business, because the general scheme of the Act is to provide insurance to persons who work under contracts of service against the loss of their employment; it is not to provide insurance to business people who are unsuccessful. The significance of the distinction, for purposes of the Plan, is that it requires employers to contribute to the retirement income of wage earners. The search, then, is for indicia of entrepreneurship. It is for that reason that both the Federal Court of Appeal in Wiebe Door, and the Supreme Court of Canada in Sagaz, gave specific approval to the formulation of the test by Cooke J. in the Market Investigations[6] case, where he posed the question: Is the person who has engaged himself to perform these services performing them as a person in business on his own account? In my view, a trial judge deciding this issue in relation to employment in a common law province of Canada is now bound to ask, and to answer, that question. [4] In approving the approach suggested by Cooke J., Major J. said in Sagaz:[7] 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. 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. [5] Mr. Gagnon gave evidence, as did three individuals who had worked for him during the relevant time period. I consider all of them to have been truthful and reliable witnesses. [6] Mr. Gagnon's business is installing drywall in new buildings under construction. This involves two separate functions. The first is boarding, which involves cutting sheets of drywall to size and fastening them to the framing of the building. The second is finishing, which consists of taping and sanding the joints between the boards to leave a smooth surface on the wall or ceiling. Most of the Appellant's work is in new residential construction, but some is in new commercial buildings. To a lesser extent, he also installs metal studs and T-bar supports for suspended ceilings. He does work for a number of contractors in Sudbury and the surrounding area, but the majority of his residential contracts are with Delron Construction. Typically, he gets contracts by way of a telephone call from a builder who wants him to install the drywall in a number of houses. While the evidence was less than totally clear, I think it is accurate to say that usually no specific deadlines by which the work was to be completed were fixed at the time of entering into the contract with the builder, but it was generally understood that such work should be done as soon as reasonably possible, and that for most houses there would be a deadline sooner or later, because a date would be fixed for the builder to give possession to the buyer, and a certain amount of time was always required after the drywall was finished for painting, and perhaps other finishing work as well. [7] Mr. Gagnon's method of operation was this. If he did not have much work to do then he would do both the boarding and the finishing himself. More frequently, however, he had more work than he could do alone, so he would engage others to install the boards, cutting them to size and attaching them with nails or screws to the framing. The sheets of drywall are 8, 10 or 12 feet long, the longer sheets being used for ceilings. A worker can install the walls alone, but two people are required to install a ceiling, so generally they worked in pairs. [8] Mr. Gagnon has been working in the construction industry in the Greater Sudbury area for about 30 years. He knows the contractors and the tradesmen in the area. When he needs help to complete a job he knows the people to call. Often drywallers who are out of work call him to ask if he has work for them. Frequently, people approach him at the job site where he is working to inquire if he has work that they could do. Sometimes a drywaller who is working for him requires assistance and recommends an individual to him to be engaged as a helper. When he takes on a person to work for him, or two people as they generally work in pairs, it is for a specific job such as a house or a specific number of houses, or a commercial project. [9] The basis on which he paid his workers varied. Some were paid an hourly rate, and others were paid piecework. It was a matter for negotiation between Mr. Gagnon and the workers at the time they were taken on. The best workers and the most experienced were able to command a higher hourly rate, or on a piecework basis a greater rate per square foot. Some workers sent him an invoice at the end of two weeks for a specific amount based on the hours they had worked or the amount of work done and the rate agreed upon. Others simply kept track of their hours and gave a note of them to Mr. Gagnon, who then calculated the amount that they were entitled to be paid. Some workers, he said, had GST registration numbers, and others did not. In no case did they get vacation pay or pay for statutory holidays. There were no fixed hours of work, but it was generally accepted that they were expected to work about eight hours a day, and they did so. On occasion they might take a day off for personal reasons. If they did so it was usual to telephone Mr. Gagnon to advise him that they would not be at the worksite that day. On other occasions, a worker might want to work extra hours in a day or work at the weekend, either to make extra money or because it was necessary to speed the job up so that the painters could get in if there was a closing date in the near future. [10] There was a good deal of evidence about supervision and control, or more accurately the absence of it, but neither counsel asked the witnesses about the right of Mr. Gagnon to exercise supervision and control over his workforce. With very few exceptions, the workers that Mr. Gagnon hired were very experienced and very capable, and he could, and did, rely on them to do the job properly and in good time. He testified that he told all the people that he took on that they would be responsible to fix any mistakes they made on their own time. There was evidence of only one occasion when that actually became necessary. Bob Pilkey's evidence as to this was that he assumed this to be so because that was the usual practice in the trade when working on a non-union job. As he put it "you're paid to do it right". Occasionally a worker the Appellant had hired would prove to be unsatisfactory. When that happened he did not fire the person, but he paid him at the end of the job, and did not give him any work in the future. [11] The evidence as to workers taking on helpers was not entirely consistent. One or two of his workers hired helpers, and then simply added the hours of those helpers to their own hours when they submitted their bills. In most cases, however, workers would bring in a helper only after consulting Mr. Gagnon and getting his approval, and the helper would work at an agreed-upon rate to be paid by Mr. Gagnon directly. One of his best workers was Bob Pilkey. Mr. Pilkey sometimes brought his son to the job site to assist him, and when he did he paid him out of his own pocket. His son was 14 or 15 years old at this time, and his evidence was that this was a family arrangement rather than a commercial one. Mr. Pilkey testified that he did not consider it to be his job to hire people, but if he felt additional help was required, on a commercial job for example, he would discuss the matter with Mr. Gagnon and make a recommendation to him. If the person was hired, however, he was hired and paid by Mr. Gagnon, not by Mr. Pilkey. [12] Mr. Pilkey, like many of the people who did work for Mr. Gagnon during this period, was a long-time union member. He worked for Mr. Gagnon if there was no union work to be had and if he was not entitled to unemployment benefits. Mr. Gagnon testified that several of his workers who were union members would leave in the middle of a job to take union work if it became available, because union work paid better than working for him. The evidence did not suggest to me that any of the people who worked for the Appellant had anything like a permanent job with him, although some, like Mr. Pilkey, worked for him often on a recurring basis over the years. It was casual work, however, on a job-by-job basis. [13] I turn now to a consideration of the various elements of the so-called four-in-one test. direction and control [14] What is significant here is not whether the Appellant exercised supervision and control over the people who worked for him, but whether he had the right to do so under the terms of the engagement. The distinguishing mark of a contract of service was described by the Supreme Court of Canada in Quebec Asbestos Corporation v. Couture[8] as: ... le droit de donner [à l'employé] des ordres et des instructions sur la manière de remplir les fonctions qu'il avait acceptées ... It is unfortunate that neither counsel chose to ask the witnesses about the right to direct the manner of doing the work, as opposed to whether that right was exercised by the Appellant. However, the evidence taken as a whole suggests to me that it was understood between Mr. Gagnon and the workers that he indeed had that right. It is not surprising that it was seldom, if ever, exercised; the people that he hired were almost without exception very experienced and very skilled, and had a good work ethic. Moreover, the nature of the work is such that a skilled worker needs no direction to perform it properly. Each job was essentially the same in this respect as dozens, or hundreds, of jobs that they had done before. Even the one or two less skilled workers about whom I heard evidence did not need the Appellant's direct supervision, because they were employed to work with an experienced drywaller. Any direct supervision of the work by the Appellant would simply have been redundant and a waste of his time. [15] Counsel for the Appellant submits that it is important that Mr. Gagnon did not require the workers to adhere to any particular hours of work, and that they were free to work or not work on any particular day as they might choose. No specific deadlines were imposed on them. In isolation that fact might seem to be significant, but in its context I do not consider it to be at all determinative of the nature of the relationship. What was important to Mr. Gagnon was that the work be done properly - not that it be done at any specific time. His contracts generally had no specific deadlines, and as is apparent from the time records in Exhibit A-1, the workers usually put in a full week of work, although they were left to set their own schedules. This is not surprising, as they would not be paid for a full week if they did not work for a full week. ownership of tools [16] The evidence was that the workers were expected to, and did, bring with them the basic hand tools required to practice their trade. These were such things as drills, ladders, routers, chalk lines, power nailers and various small hand tools. If there was a need for scaffolding then Mr. Gagnon supplied it, renting it for the duration of the job. The drywall, the nails and any other necessary supplies were supplied by Mr. Gagnon, or by the builder, but not by the workers. [17] It is apparent from the judgment of Lord Wright in Montreal v. Montreal Locomotive Works[9] that the significance of the ownership of the tools is that it is indicative of the investment that an entrepreneur has made in his business. In the present case there is little investment of capital by either the Appellant or his workers. In a questionnaire that he completed for the Minister, Mr. Gagnon estimated the value of the workers tools to be $1,000.00. In the Precision Gutters[10] case the fact that the workers supplied their own hand tools was considered by the Federal Court of Appeal to be one indicator of a contract for services. The evidence in the present case makes it clear however, that the practice in the trade required a person employed on a union job to supply for his own use the same hand tools that Mr. Gagnon's workers supplied. I therefore find that this fact is of no assistance in the present case. opportunity for profit - risk of loss [18] It is the opportunity to profit from the employment of capital and skillful organization and management of the enterprise, together with the concomitant risk of suffering loss, that is the essence of entrepreneurship. There is little of that to be found in the circumstances of Mr. Gagnon's workers in the present case. Certainly those workers who are paid on a piecework basis may make more money by working faster, and those who are paid by the hour may make more by working longer hours. This is not entrepreneurship, however, it is simply doing more work. It is only Mr. Gagnon who stands to profit from efficient organization and execution of the work, and by skillful negotiation of the contracts with the builders and the workers. It is suggested that the fact that there was some opportunity for the workers to negotiate their rates of pay is indicative of an opportunity for profit. However, the evidence was that there was essentially the same degree of opportunity for the workers to negotiate rates that is found in all employment situations. Mr. Gagnon was willing to pay his top rate to the best workers - Mr. Pilkey for example - but only a minimal amount to someone who did not have his skills and experience. Denis Roy, for example, was hired to work with his brother, but was paid only a minimal amount because that was all that he was worth to the Appellant. As in all occupations, those who had bargaining power because they were known to be skilled and conscientious workers could command a higher wage than those who were unskilled or not known to be hard workers. That, however, is not entrepreneurship; it is simply a reflection of the differing values of different people in the labour market. [19] Nor was there any possibility of loss on the part of these workers. They had no investment at stake. Certainly they had tools, but only the tools that they required as tradesmen when they worked at any other job. They did not negotiate contracts that might cost them more than the contract price to execute. They did not risk potential liability for failure to complete a contract. It was not unusual for them, or at least the less conscientious of them, to leave in the middle of a job if a better paying job was offered to them. If they did so Mr. Gagnon had no recourse, because they had not committed to complete a certain amount of work for a certain price. What they did was to supply their labour on an indeterminate basis for a fixed hourly rate, or a piecework rate. Mr. Gagnon could certainly have discharged an unsatisfactory worker at any time. His evidence was that he did not do that on the few occasions when it might have been appropriate, but I have no doubt that he was motivated in that by humanity and not by the law of contract. [20] To summarize, the right to control and direct the manner of doing the work is not a factor upon which I place much emphasis in the present case, because the evidence failed to address the existence of the right, as opposed to the exercise of the right, in any meaningful way. Ownership of tools also is not a factor to which I would give much weight, for the reasons expressed in paragraph 17 above. The considerations relating to the opportunity for profit and the risk of loss militate in favour of the conclusion that these workers were employees rather than independent businessmen. There was no evidence to suggest that they could have hired others to do the work in their place. When they hired helpers, the prevailing practice was that Mr. Gagnon was consulted, gave his approval, took the helper on as his own employee and paid him directly, subject only to very rare exceptions. There certainly was no management or organization of an enterprise involved in what these workers did. They were given a straightforward job to do and they did it. [21] The Appellant, understandably, placed considerable emphasis on the Judgment of Porter D.J. in Capri Interiors Ltd. v. M.N.R.,[11] a case that superficially resembles this one in that the type of work involved was the installation of drywall. Nine of the workers testified in that case, and Porter D.J. was clearly impressed by the degree of rugged independence from the head contractor that they demonstrated in their evidence. Nothing in the evidence of Mr. Pilkey, Mr. Gervais or Mr. Guy would lead me to the same conclusion. Some of Mr. Gagnon's workers gave him invoices, having multiplied their hours, or square feet, by their rates, but many simply gave him a note of their hours, which is not what would be expected of a person in business for himself. Many of the workers in Capri Interiors operated under a business name and were registrants for purposes of the goods and services tax (GST). In this case only Mr. Boyes had a GST registration number and added GST to his bill. This certainly would be one indication that he was in business for himself, but as he did not give evidence it is difficult to assess the significance of that fact. It seems to have been a matter of indifference to Mr. Gagnon. The case was argued by both counsel on the basis that there was no differentiation to be made among the workers, and I am therefore not inclined to view that one fact as determinative of the character of Mr. Boyes' employment. Capri Interiors is also distinguished from the present case by the extent of the workers' investment in their tools. Porter D.J. found that at least one of the workers had tools valued at as much as $10,000. It is trite that all cases of this type must be decided on their own facts, and the facts of these two cases are significantly different. [22] In my view, a person knowing the facts as they emerged in the evidence before me would answer Cooke J.'s question in the negative. These workers were not in business for themselves. They were tradesmen of various levels of skill and experience who worked for Mr. Gagnon as casual labour. Some were between union jobs, some were simply out of a job when he hired them, and at least one was virtually unemployable, and was hired by the Appellant more out of charity than for any commercial reason. The double negative in paragraphs 5(2)(a) of the Act and 6(2)(b) of the Plan makes it clear, however, that casual employment is both insurable and pensionable, so long as it is in connection with the employer's trade or business. [23] The appeals are dismissed. Signed at Ottawa, Canada, this 1st day of February, 2006. "E.A. Bowie" Bowie J. SCHEDULE "A" Individual Period under review Gilles Gervais January 1, 2002 - December 29, 2003 David Boyes January 1, 2002 - December 29, 2003 Armand Guy January 1, 2002 - December 31, 2002 Rene Bouthiliette January 1, 2002 - December 29, 2003 Robert Pilkey January 1, 2002 - December 29, 2003 Gaston Guy January 1, 2002 - December 29, 2003 Roy Totman November 1, 2002 - November 15, 2002 Michael Houle January 1, 2002 - December 31, 2002 Steven Pilkey January 1, 2002 - December 29, 2003 Marcel Roy January 1, 2002 - November 24, 2003 Denis Roy January 1, 2002 - December 31, 2002 CITATION: 2006TCC66 COURT FILE NOS: 2004-4589(EI) and 2004-4590(CPP) STYLE OF CAUSE: Andre Gagnon and The Minister of National Revenue PLACE OF HEARING: Sudbury, Ontario DATE OF HEARING: November 21, 2005 REASONS FOR JUDGMENT BY: The Honourable Justice E.A. Bowie DATE OF JUDGMENT: February 1, 2006 APPEARANCES: Counsel for the Appellant: Paul Lefebvre Counsel for the Respondent: Charles Camirand COUNSEL OF RECORD: For the Appellant: Name: Paul Lefebvre Firm: Weaver Simmons For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada [1] R.S. 1996, c.23, as amended. [2] R.S.C. 1985, c. C-8, as amended. [3] 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983. [4] Different considerations apply in the province of Quebec, where the issue is governed by the Civil Code of Quebec. [5] Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025. [6] Market Investigations Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732 (Q.B.D.). [7] supra, at paragraphs 47 and 48. [8] [1929] S.C.R. 166 at 168. [9] [1947] 1 D.L.R. 161. [10] [2002] FCA 207. [11] 2004 TCC 23.