Freeway Technologies Inc., v. M.N.R.

Freeway Technologies Inc., v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2006-04-20 Neutral citation 2006 TCC 243 File numbers 2005-3646(EI) Judges and Taxing Officers Donald G.H. Bowman Subjects Employment Insurance Act Decision Content Docket: 2005-3646(EI) BETWEEN: FREEWAY TECHNOLOGIES INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and MARK BRIDEAU, Intervener. ____________________________________________________________________ Appeal heard on April 10, 2006 at Saint John, New Brunswick. Before: The Honourable D.G.H. Bowman, Chief Justice Appearances: Agent for the Appellant: Greg Jewett Counsel for the Respondent: Claude Lamoureux For the Intervener: The intervener himself ____________________________________________________________________ JUDGMENT The appeal pursuant to subsection 103(1) of the Employment Insurance Act for the period from January 5, 2004 to June 4, 2004, is dismissed and the decision of the Minister of National Revenue that Mr. Brideau was engaged in insurable employment is confirmed. Signed at Ottawa, Canada this 20th day of April 2006. "D.G.H. Bowman" Bowman, C.J. Docket: 2005-3645(CPP) BETWEEN: FREEWAY TECHNOLOGIES INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and MARK BRIDEAU, Intervener. ____________________________________________________________________ Appeal heard on April 10, 2006 at Saint John, New Brunswick. Before: The Honourable D.G.H. Bowman, Chief Justice Appearances: Agent for the Appellant: Greg Jewett Counsel for the Respondent: Claude Lamoureux For the Intervener: The intervener himself ____________________________________________________________________ JUDGMENT The appeal pursuant to subsection 28(1) of the Canada Pension Plan for the period from November 15, 2003 to January 1, 2004, is dismissed and the decision of the Minister of National Revenue that Mr. Brideau was engaged in pensionable employment is confirmed. Signed at Ottawa, Canada this 20th day of April 2006. "D.G.H. Bowman" Bowman, C.J. Citation: 2006TCC243 Date: 20060420 Dockets: 2005-3646(EI) 2005-3645(CPP) BETWEEN: FREEWAY TECHNOLOGIES INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and MARK BRIDEAU, Intervener. REASONS FOR JUDGMENT Bowman, C.J. [1] The appellant appeals to this Court from decisions by the Minister of National Revenue that Mark Brideau was employed by Freeway Technologies Inc. in insurable and pensionable employment during the period from January 5, 2004 to June 4, 2004. [2] The assumptions upon which the Minister's determinations were based are the following: (a) the Appellant is a computer network system integration and consulting business, providing sales and services of computer networks, computer parts and computer support; (b) the Appellant operated year round; (c) during the period under appeal the Worker was hired by the Appellant as its director of sales and services and his duties included generating new business and providing technical support for the Appellant's new and existing clients; (d) during the period under appeal the Appellant provided the Worker with the materials needed to do the work, internet connection, e-mail account, fax machine, printer and access to its repair shop and the Appellant was not compensated for their use; (e) during the period under appeal the Worker used his lap top computer, cellular telephone and vehicle and he was not compensated for their use; (f) during the period under appeal the Appellant was liable for non-payment of invoices issued to its clients and this did not impact on the wages paid to the Worker; (g) during the period under appeal the Appellant guaranteed the work performed for its clients by the Worker; (h) during the period under appeal the Worker was paid weekly based on the following: Annual Salary $40,000 Gross Weekly Salary $769.23 Net Weekly Salary $553.77 (i) during the period under appeal the Worker performed services for the Appellant for 22 calendar weeks; (j) the Worker received a Record of Employment from the Appellant which reported insurable hours of 880 and insurable earnings of $16,923.06 ($769.23 per week x 22 weeks); (k) after the period under appeal, the Worker operated a proprietorship under the name e-Pro Computer Services and he provided contract services to the Appellant; (l) after the period under appeal the Worker invoiced the Appellant for his services based on 33% of the amount billed by the Appellant to its client plus GST; and (m) after the period under appeal the Worker's pay dates and amounts varied. [3] During the period in question, Mark Brideau was engaged[1] by the appellant. [4] The usual criteria for determining whether someone is an employee or an independent contractor are found in the four in one test enunciated by the Federal Court of Appeal in Wiebe Door Services Ltd. v. M.N.R., [1986] 2 C.T.C. 200, (control, ownership of tools, chance of profit/risk of loss and integration). These tests have been substantially confirmed by the Supreme Court of Canada in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc. [2001] 4 C.T.C. 139, although the integration part of the test is generally recognized as hard to apply. Recently the Federal Court of Appeal has added a further test to cases arising under the common law and that is intent: The Royal Winnipeg Ballet v. M.N.R., 2006 FCA 87. This factor has always figured more prominently in cases arising under the Civil Code of Quebec, but under The Royal Winnipeg Ballet case, it has assumed a significance in cases arising under the common law that it appears not to have previously had. I doubt that I can go so far as to say that it displaces the Wiebe/Sagaz test but it is superimposed upon it. I need not consider it here because for it to have any effect I should have thought that at the very least there had to be a common intent. Here the appellant and Mr. Brideau are not in agreement at all. Mr. Brideau wants to be an employee and is of the view that he is. [5] The closest that we have to a written contract is Exhibit A-3, an exchange of e-mails between Greg Jewett and Mark Brideau, which reads in part as follows: Mark, I'm anxious to get going! Due to recent events my lawyer has advised me to do better employment contracts so we will have to slog through that but I think it will benefit both of us long term. Call me so we can set up an hour or two outside the shop to work on it. . . . . . Greg, ... Greg i have been thinking about this venture and I not sure what I should be shooting for but I do have bank Managers and a wife to answer to so, what I am proposing is that for the first 6mths - I won't be drawing any commissions - this is so that all the revenue will be feed back into the business. I believe with the a few weeks of putting together a Curriculum and a sales strategy that we will be able to start mailing out invoices very soon. First 6 mths, No expenses for travel(Gas) - out side of Saint John --- ie Fredericton, Moncton ect...I will never ask for Gas expenses for anywhere in Saint John or Surrounding areas. First 6 mths No Commissions ( After this to be negotiated - likely a sliding scale, pending on total sales per month) My base salary will need to be in the range of 40, 000 to 45, 000. / year - this is what i'll need to just stay alive - I anticipate on making 6 figures once the commissions start rolling in after the six months. [6] The Wiebe Door tests should not be applied mechanically. For example, control must be given a meaning that reflects the reality of modern life. Mr. Jewett certainly had the right to tell Mr. Brideau what clients to visit, and what jobs to undertake but I very much doubt that he could tell him how to perform his duties. [7] Similarly, with respect to ownership of tools, Mr. Brideau owned his own laptop. Most people do. I do not think that this in itself points in either direction. So far as the somewhat elusive integration test is concerned, Mr. Brideau seems to have been integrated into the appellant's operation. He was shown on his card as "Director of Sales and Marketing" of the appellant. However, an independent contractor can be as integral to and as integrated into a business organization as an employee. For that reason, I find the integration test of little assistance. [8] The most meaningful test is that stated by Cooke J. in Market Investigations, Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732, 737-8, as quoted in Sagaz: 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 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 application of the general test may be easier in a case where the person who engages himself to perform the services does so in the course of an already established business of his own; but this factor is not decisive, and a person who engages himself to perform services for another may well be an independent contractor even though he has not entered into the contract in the course of an existing business carried on by him. [9] I do not think it can fairly be said that Mr. Brideau was in business for himself. He was obviously working for the appellant. Mr. Jewett stated that Mr. Brideau had, during the period of his employment, done work for other clients of the appellant under the name of e-Pro Computer Services. I do not believe that this has been established and Mr. Brideau denies that he worked for anyone under the name of e-Pro Computer Services until after his engagement with the appellant terminated. [10] I think that Mr. Brideau was being paid on the basis of a $40,000 annual salary. He was paid weekly $553.77 which is net of income tax, which Mr. Brideau believes was remitted on his behalf by the appellant. This is strictly speaking not a test that is squarely within the four-in-one Wiebe test but it is hard to see an independent contractor getting paid a fixed salary net of income tax. [11] The appeals are dismissed and the decisions of the Minister of National Revenue that Mr. Brideau was engaged in insurable and pensionable employment are confirmed. Signed at Ottawa, Canada this 20th day of April 2006. "D.G.H. Bowman" Bowman, C.J. CITATION: 2006TCC243 COURT FILES NOS.: 2005-3646(EI) & 2005-3645(CPP) STYLE OF CAUSE: Freeway Technologies Inc. and The Minister of National Revenue and Mark Brideau PLACE OF HEARING: Saint John, New Brunswick DATE OF HEARING: April 10, 2006 REASONS FOR JUDGMENT BY: The Honourable D.G.H. Bowman, Chief Justice DATE OF JUDGMENT AND REASONS FOR JUDGMENT: April 20, 2006 APPEARANCES: Agent for the Appellant: Greg Jewett Counsel for the Respondent: Claude Lamoureux For the Intervener: The intervener himself COUNSEL OF RECORD: For the Appellant: Name: Greg Jewett Firm: Freeway Technologies Inc. P.O. Box 6392, Brunswick Square Saint John, N.B. For the Respondent: John Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada [1] I use "engaged" as a neutral term implying neither employment nor an engagement as an independent contractor.