Lantz v. M.N.R.

Lantz v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2005-09-09 Neutral citation 2005 TCC 593 File numbers 2005-1154(EI) Judges and Taxing Officers Georgette Anne Sheridan Subjects Employment Insurance Act Decision Content Docket: 2005-1154(EI) BETWEEN: CINDY A. LANTZ, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard together on common evidence with the appeal of Cindy A. Lantz (2005-1155(CPP)) on September 1, 2005, at Hamilton, Ontario Before: The Honourable Justice G. Sheridan Appearances: Counsel for the Appellant: Jennifer Zdriluk Counsel for the Respondent: Suzanne M. Bruce ____________________________________________________________________ JUDGMENT The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 9th day of September, 2005. "G. Sheridan" Sheridan, J. Docket: 2005-1155(CPP) BETWEEN: CINDY A. LANTZ, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard together on common evidence with the appeal of Cindy A. Lantz (2005-1154(EI)) on September 1, 2005, at Hamilton, Ontario Before: The Honourable Justice G. Sheridan Appearances: Counsel for the Appellant: Jennifer Zdriluk Counsel for the Respondent: Suzanne M. Bruce ____________________________________________________________________ JUDGMENT The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 9th day of September, 2005. "G. Sheridan" Sheridan, J. Citation: 2005TCC593 Date: 20050909 Dockets: 2005-1154(EI) 2005-1155(CPP) BETWEEN: CINDY A. LANTZ, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT Sheridan, J. [1] The Appellant, Cindy A. Lantz, appealed the decisions[1] of the Minister of National Revenue that she was working under a contract for services during the period June 22, 2003 to June 15, 2004. The appeals were heard together on common evidence. Facts [2] In January 2001, Bill MacGillivray and two colleagues formed a company known as National Instore Services Corporation ("NIS"). Prior to that time, Mr. MacGillivray had had another business for which Ms. Lantz had been providing bookkeeping services. She operated her bookkeeping business out of her home office under the name "Lantz & Associates". Her office was equipped with a computer and the other supplies and equipment normally associated with accounting work. Mr. MacGillivray asked Ms. Lantz to do the books for his new company. They agreed that she would provide her services to NIS as an independent contractor at a rate of $30 per hour. There was a lot to do to get the company up and running. Ms. Lantz pitched in, helping to equip and organize the new office: setting up telephone and e-mail services, applying her computer skills to the creation of the company logo, choosing and installing accounting and spreadsheet programs for the company's computer. [3] Time passed and Mr. MacGillivray and his partners worked hard at establishing the new company. Ms. Lantz handled the bookkeeping and payroll, usually working at the NISoffice. In May 2003, Ms. Lantz had a son. About a month prior to his birth, she and Mr. MacGillivray discussed the possibility of her providing accounting services from her home office. They agreed that she would work out of her home office and that her services would be available to NISnot more than four days per week. The NIS computer, in which were stored all of the company's financial data, was moved to her home office and she communicated daily via telephone and e-mail with the NIS administrative staff and with the company representatives and clients, as required, to ensure proper and timely payment of accounts receivable and payable. When necessary, Mr. MacGillivray met with Ms. Lantz at her home office where, from time to time, he noticed the comings-and-goings of her other clients. [4] Meanwhile, NIS continued to become busier and more successful. Mr. MacGillivray retained the services of sub-contractors to do what he and his partners had once done themselves. To handle the increasing administrative demands of the office he hired employees, at least two of whom had begun with the company as independent contractors. At some point[2], she and Mr. MacGillivray discussed the possibility of changing her status from independent contractor to employee, but no agreement was reached and she continued as before. In June 2004, Mr. MacGillivray advised Ms. Lantz that NIS would no longer need her services. At the hearing, he stated that because of the growth the business had experienced, NIS needed the full-time attention of an in-house accountant rather than the part-time services of a self-employed bookkeeper. Ms. Lantz testified that she had been told she was "too busy"; that is to say, not available as often as the company would have liked. In any event, she ceased providing any services to NIS. Ms. Lantz then sought EI benefits on the basis that she had been an NISemployee; the company opposed to her claim on the ground that she had been a self-employed independent contractor. And thus, this appeal. Analysis [5] In deciding whether an individual is an employee under a contract of service or an independent contractor under a contract for services, the Court must be guided by 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.[3] and Wiebe Door Services Ltd. v. The Minister of National Revenue[4] in considering the central question of "whose business it was" along with other relevant factors such as the exercise of control, ownership of tools, chance of profit/risk of loss and the degree of integration. [6] Ms. Lantz had the onus of proving wrong the assumptions upon which the Minister based his conclusion that she had been working as an independent contractor from June 2003 to June 2004. Ms. Lantz was very straight-forward in her testimony and I found her to be a credible witness. She was candid in her admission that she had worked for Mr. MacGillivray's former company as a self-employed professional and continued in this capacity when she accepted NISas a client. She acknowledged that she had wanted to change her status to that of employee but that this desire had not been fulfilled. She admitted she herself prepared her 2003 income tax return in which she claimed no "employment" income, reporting as income only "professional" income from her work as Lantz & Associates. Against her professional income, which included her fees from NIS, she claimed expenses[5] related to her work for NIS, none of which would have been available to her had she been an employee. She had a GST number and included GST in her invoices to NISand her other clients. As the person responsible for the NISpayroll, she knew some of the NIS personnel were employees and others, independent contractors. She was aware of the difference this made in respect of whether deductions had to be made and remitted for EI and CPP. She knew none needed to be made in her case because she was an independent contractor. [7] In view of the above, it seems hardly necessary to consider any of the other factors leading to the conclusion that throughout the period, Ms. Lantz was working under a contract for services. Nonetheless, there was other evidence to support such a finding, including the following: 1. Control - While Ms. Lantz had to meet certain deadlines in the performance of her bookkeeping tasks, these were imposed not so much by NIS as by the external realities of operating a small business: no matter who was doing them, payroll cheques had to be ready on payday; payroll remittances were due at the office of the Receiver-General on a specified date; credit card bills had to be paid on or before the due date. Within those parameters however, Ms. Lantz was free to choose when she attended to these tasks. The manner in which she did her bookkeeping work was not supervised; indeed, the reason Mr. MacGillivray sought her services in the first place was that he and his partners lacked both the time and the skills to do it properly themselves. Finally, although I had the sense that Mr. MacGillivray appreciated all the help she had given him in setting up the office, I am not satisfied that performing these tasks was in any way expected of her. Her efforts were not of a continuing nature and formed no significant part of duties during the period in question. Her assistance was a kind - but voluntary - act; just like Mr. MacGillivray's decision to include her in the company's group benefits plan and to pay her premiums, even though he was under no obligation to do so. 2. Tools - Ms. Lantz owned the tools of her own bookkeeping business: her home office, car, computer, other office equipment and supplies, all of which were duly taken into account in her 2003 income tax return. That NISmoved the computer upon which its financial records were stored to Ms. Lantz's home office does not detract from this fact. The NIScomputer was, in essence, merely the receptacle in which the company's financial information was retained, no different in character from a ledger or a file folder. It is not unreasonable for a professional to have such items in her possession while rendering services to her client. It is unreasonable to conclude that such possession transforms her status as independent contractor status to that of employee. 3. Chance of Profit and Risk of Loss - The fact that Ms. Lantz lost NISas a client after that company outgrew the level of services she was able to provide is illustrative of the kinds of risk inherent in working under a contract for professional services. She was equally at risk when she took NISon as a client in 2001 as there was no guarantee the new venture would succeed. Any errors she made had to be corrected on her own time at her own expense. On the other hand, Ms. Lantz was free to have clients[6] in addition to NIS. She was able to choose and employ her own strategies to maximize her earnings and to minimize her expenses thereby increasing her profits. None of this is consistent with the much more static situation of an employee. 4. Integration - There was insufficient evidence before me to support the conclusion that Ms. Lantz's services were integrated into the business carried on by NIS. [8] For all of these reasons, I find that Ms. Lantz failed to satisfy the evidentiary burden of proving wrong the assumptions upon which the Minister based his decisions that she was working under a contract for services during the period June 22, 2003 to June 15, 2004; accordingly, these appeals are dismissed. Signed at Ottawa, Canada, this 9th day of September, 2005. "G. Sheridan" Sheridan, J. CITATION: 2005TCC593 COURT FILE NOS.: 2005-1154(EI) and 2005-1155(CPP) STYLE OF CAUSE: Cindy A. Lantz v. M.N.R. PLACE OF HEARING: Hamilton, Ontario DATE OF HEARING: September 1, 2005 REASONS FOR JUDGMENT BY: The Honourable Justice G. Sheridan DATE OF JUDGMENT: September 9, 2005 APPEARANCES: Counsel for the Appellant: Jennifer Zdriluk Counsel for the Respondent: Suzanne M. Bruce COUNSEL OF RECORD: For the Appellant: Name: Jennifer Zdriluk Firm: Ross & McBride, LLP Hamilton, Ontario For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada [1] Pursuant to section 93 and paragraph 5(1)(a) the Employment Insurance Act and pursuant to subsection 27.2(3) and paragraph 6(1)(a) of the CanadaPension Plan. [2] There was conflicting evidence as to at whose initiative the discussions arose but that determination does not alter their effect. [3] [2001] 4 C.T.C. 139 (S.C.C.). [4] 87 DTC 5025. [5] Primarily "motor vehicle" and "meals and entertainment" expenses. [6] And did have other clients during the period in question.