Sehovic v. M.N.R.

Sehovic v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2004-03-10 Neutral citation 2004 TCC 176 File numbers 2003-1632(EI) Judges and Taxing Officers Michael J. Bonner Subjects Employment Insurance Act Decision Content Docket: 2003-1632(EI) BETWEEN: JOHN P. SEHOVIC, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and THE BEER MAN INC., Intervenor. ____________________________________________________________________ Appeal heard on February 11, 2004, at Toronto, Ontario, Before: The Honourable Justice Michael J. Bonner Appearances: For the Appellant: The Appellant himself Counsel for the Respondent: Craig Maw Agent for the Intervenor: Jim Devlin ____________________________________________________________________ JUDGMENT The appeal is allowed and the decision of the Minister is vacated. Signed at Calgary, Alberta, this 10th day of March 2004. "Michael J. Bonner" Bonner, J. Citation: 2004TCC176 Date: 20040310 Docket: 2003-1632(EI) BETWEEN: JOHN P. SEHOVIC, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and THE BEER MAN INC., Intervenor. REASONS FOR JUDGMENT Bonner, J. [1] The Appellant appeals from a decision of the Minister of National Revenue (the "Minister") that his work for the Beer Man Inc. ("Beer") during the period January 2, 2000 to November 5, 2001 was not insurable employment. The Minister found that the contract under which the Appellant worked was not a contract of service. [2] The Appellant asserted that he was employed by Beer. That must be so, he argued, because liquor delivery services (such as that operated by Beer) are permitted to operate in Ontario only under licence and the licencing authority prohibits the use of drivers who are not employees of the licensee. [3] The issue is whether the Appellant, in working for Beer, was employed by it in insurable employment. [4] Beer intervened in the appeal in support of the Minister's decision. Jim Devlin, Beer's owner, testified on its behalf. [5] Beer was in the delivery business and, during the period in question, the Appellant worked as one of its drivers. [6] The Minister pleaded that his decision was based on certain findings of fact. Those findings are, in the main, correct and they offer a useful overview. It should be noted however that (l) and (m) are in dispute and that, in relation to (d), the nature of the Appellant's engagement by the Payor, Beer, is the central issue. The findings are: a) The Payor is a business which provides delivery and courier services for a variety of goods including alcohol, food, small supplies and parcels, hereinafter referred to as the "supplies"; b) The customers, hereinafter referred to as the "customers", call the Payor to order the supplies; c) Once the order for supplies is received from the customers, the Payor dispatches delivery persons to deliver the supplies to the customers; d) The Appellant was hired by the Payor to deliver the supplies to the customers; e) Once dispatched by the Payor, the Appellant purchased and paid for the supplies to be delivered to the customers, and then the Appellant collected the monies from the customers for the supplies and for a delivery charge; f) The Appellant was paid 65% of the delivery charge for delivering the supplies; g) The Appellant supplied his own vehicle to make the deliveries to the customers; h) The Appellant paid all the expenses relating to his vehicle including the insurance, repairs and maintenance; i) The Payor provided the Appellant with a flashlight, a radio and receipt pads, and the Payor charged the Appellant $4.00 per day for these items; j) The Payor's business operated from Mondays to Fridays from 9:00 a.m. to 10:00 p.m., on Saturdays from 9:30 a.m. to 10:00 p.m., and on Sundays from 11:00 a.m. to 6:00 p.m.; k) The Appellant basically worked four shifts during the week; l) The Appellant did not have to provide the services personally for the Payor, and the Appellant could find a substitute to replace him; m) The Appellant was not supervised by the Payor; n) The Payor did not provide the Appellant with an office or a place to work; o) The Payor did not provide the Appellant with any health or benefit plans. [7] Two persons testified at the hearing of the appeal, the Appellant and Jim Devlin. Each clearly disliked the other and, no doubt, was prepared to allow that dislike to influence his testimony. [8] The delivery business was originally carried on by the Appellant under the name Arrow Express. The Appellant sold the business to Beer (or possibly Devlin) in 1997. A rather sketchy written outline of the sale agreement was produced. One of its provisions was: John Sehovic and Shauna Meyers[1] will always be offered employment with Arrow Express (as long as there are shifts available without having to lay off workers). This will be at a 35% to 65% pay ratio. [9] The Appellant produced a New Driver Information handout which he said was given to him when he was taken on by Beer. It clearly shows that Beer reserved the right to exercise a remarkable degree of control over the manner in which the drivers did their work. It reads in part: 1. You must have a $100.00 float to start each shift. It is your responsibility to ensure you have change for a $100.00 bill at the start of each shift. 2. We have T-shirts or sweatshirts that are mandatory. If you wish to wear a hat on the job, it must be one of ours. You cannot substitute the hat for the shirt. The shirt is a must each day you are scheduled to work. You may wear any pants or shorts you like. The only exceptions are cutoffs, ripped or stained pants or shirts. You are expected to come to work looking respectable as you are a representative of this company. 3. You must radio in or phone to say you are ready to go no more than 20 but no less than 10 minutes before your shift. By ready to go we mean you have your uniform, float and have filled-up [sic] your vehicle. 4. If the dispatcher tells you to do your deliveries in a certain order, do them that way. We do this for a reason. Usually one order is older than another. If we don't specify, then do the closest order first. 5. You are allowed to have a passenger in the vehicle during your shift. They are not allowed to pick things up for you, deliver items for you, or speak on the radio. The only time they are permitted to use the radio is if your out of the vehicle and we call for you. 6. Absolutely no foul language is to be used on the air. 7. Personal errands may be done during your shift if we do not have a delivery for you at the moment and if it will take a few minutes. If you think an errand will see you being out of reach for more than five minutes, do it on your days off. 8. Things you will need to keep in your vehicle are a pen, paper, a map (Map Art maps are the best to get), and if you wish, a calculator. 9. No matter how long you've lived here, you need a map. There will always be streets you will have to look-up [sic]. Try to find streets on the map first, but if you can't the dispatcher will help. Trying to find it yourself will be faster and you will remember where it is the next time if you look it up. 10. When you first start, you will be told the delivery charge. If your [sic] not sure, ask the dispatcher. 11. If for any reason you can't work your scheduled shift, its [sic] up to you to get it covered. The dispatcher must be informed in advance of all schedule changes. 12. If you wish to step out during your shift you must radio in first and wait for the dispatcher to answer. If you are gone for more than five minutes, we need a phone number to reach you at. 13. Radio in when we tell you to get an order, to acknowledge it. Radio in when you've picked-up [sic] the order. Radio in when your [sic] done ALL the orders you were given. Whenever you radio in, listen first to ensure no one else is talking. 14. If you think the dispatcher erred and skipped you for an order, speak up then. If that is the case they will correct it. This happens from time to time and is not intentional. Radio operation and care • You are responsible for the radio while it is in your care. Treat it as if it were your own as they cost about $1000 per unit. • Do not place drinks near the radio. • If any of the equipment is damaged DO NOT attempt to repair it. Bring it in to the office to be fixed. • Disconnect the power cord and antenna if you are removing the radio from your vehicle. • Do not hang your mic from the rearview mirror, it will damage the wires. • Put the antenna cord through a door or window not being used so the cord will not get damaged. • You have the option of mounting the radio in your vehicle. If you choose not to your equipment is to be returned on your days off. We prefer that you do mount it as there is less where [sic] and tear if you do. If you do mount it, you are not required to bring it in on your days Off. [10] The next page of the handout offers some insight into the basis of the intervenor's view that the Appellant was self-employed. It reads: WORKMAN'S COMPENSATION BOARD Note that because at the end of your shift you pay us (as opposed to being paid by us), you are considered self-employed. As such, you are NOT entitled to receive compensation benefits should you be hurt on the job. Each driver is required to complete a simple form stating that you know you are NOT entitled to these benefits through us. This form will stay on file (no one will receive a copy) unless or until you try to apply for benefits. You can make arrangements to pay into workman's comp, EI, CPP, income tax, etc., but doing so is your own responsibility! [11] Finally the handout sets out specific instructions to the drivers regarding the delivery of alcohol: Alcohol Deliveries We do not serve minors!! It is company policy as well as the policy of the LCBO that we ID everyone that looks under 25. If you ever serve a minor you will be fired, no questions asked. As well we will do everything in our power to see that you are prosecuted to the fullest extent of the law. If you have even the slightest doubt about someone's age, ask for ID. The correct way to do a delivery is as follows: When you get to the door, set the alcohol down beside you. Ask for the money and hand the customer the liquor pad for them to sign. Once you have the money and the liquor pad back, ask for ID if you deem it necessary. If they present valid ID, write the number (i.e. Drivers license #) in your liquor pad and give them their change and alcohol. If they do not have ID, give them back their money MINUS the delivery charge. This is the only way you will get paid! Take the alcohol and leave. The alcohol is returnable, you are not "stuck" with it. Everyone MUST sign the liquor pad every time you deliver. The person receiving the alcohol is the one that must sign. No signature, no booze, NO EXCEPTIONS!!!!!! It is your responsibility to ensure the customer signs their real name, not "Mickey mouse" or "john doe". There is a print line on the pad for you or them to print the name if the signature is illegible. Every pad is gone through page-by-page when it is brought in. If we find illegible signatures or fake names you must go back and correct the problem. It is much better to do it right the first time. Acceptable forms of ID are covered in the training video you must watch if hired government issued[2] photo I.D. We accept empties for any delivery we do. You are required to take empties at all times. The only time you may refuse them is if your vehicle is so full you can't fit more, or if it's an apartment building, there are more than you can carry, and the customer will not assist bringing them to the lobby. If the customer is willing to help you must take the empties. You give the customers $2/case, $1/twelve pack, $ .50/ six pack. The rest is yours for taking them. [12] The Appellant testified that following the 1997 sale of the business, he commenced to work for Devlin as a dispatcher. Later he started to work as a driver. Apparently, he understood at the time that he was engaged that he would be considered to be an independent contractor. The Appellant testified that as a driver for Beer: (a) he owned the vehicle used to make deliveries; (b) he obtained his own automobile insurance; (c) he carried a float of $200.00 of his own money for use in paying for goods ordered by customers; (d) he reported to Beer's office at the beginning of each shift and, as well, for purposes of cashing out, at the end of each shift; (e) he bore the risk of loss of the delivery charge in cases where the customer did not accept delivery and, as well, he bore the risk of loss if goods carried by him were stolen; (f) at the end of each shift he paid a "radio charge", the amount of which varied with the number of calls taken by him during the shift; (g) on one occasion Ms. Meyer drove in his place; (h) he filed income tax returns for the 2000 and 2001 taxation years on the basis that he was self-employed because he "didn't want to rock the boat". [13] The evidence of Jim Devlin was of little assistance. It consisted for the most part of anecdotes which he apparently thought would support a conclusion that Beer's drivers were independent contractors. Devlin attempted to dismiss the new driver handout as a guideline which he prepared for himself alone. He said that it was never given out to anyone. It seems unlikely that Devlin would have gone to the trouble to prepare a document of this sort if he did not intend to hand it out to new drivers. The evidence as a whole persuades me that, whether the document was handed out or not, the terms set out in it formed the basis of the relationship between Beer and its drivers. [14] Beer's drivers selected the schedules which they wished to work from a list posted by Beer from time to time. [15] Devlin claimed that the drivers were allowed to engage substitutes to drive for them. I am not convinced the drivers had an unrestricted right to do any such thing. For one thing, Beer's operations were regulated by a provincial body which insisted that drivers view a training video prepared by that body. Moreover, it would seem to be impractical to impose a uniform clothing code on substitute drivers selected at random. I am inclined to conclude that substitution was permitted only within the existing pool of Beer's drivers subject to the requirements of paragraph 11 of the new driver information sheet. [16] The leading case on the distinction between a contract for services and a contract of service (employment) is 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59. There, Major, J. reviewed the tests which have been applied in the case law including the control test, the four-factor test[3] and the organization or integration test. He found that there is no single conclusive test of universal application and emphasized that "what must always occur is a search for the total relationship between the parties". He found that a persuasive approach was that adopted by Cooke, J. in Market Investigations Ltd. v. Minister of Social Security, [1968] 3 All. E.R. 732. At paragraphs 47 and 48, Major, J. stated: 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. 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. [17] It is also helpful when considering cases of this sort to refer to the following passage from the reasons for judgment of Jackett, P. in Alexander v. M.N.R., 70 DTC 6006 at 6011: ...On the one hand, a contract of service is a contract under which one party, the servant or employee, agrees, for either a period of time or indefinitely, and either full time or part time, to work for the other party, the master or the employer. On the other hand, a contract for services is a contract under which the one party agrees that certain specified work will be done for the other. A contract of service does not normally envisage the accomplishment of a specified amount of work but does normally contemplate the servant putting his personal services at the disposal of the master during some period of time. A contract for services does normally envisage the accomplishment of a specified job or task and normally does not require that the contractor do anything personally. [18] In applying the tests it will be noted first that Beer had the right to exercise control over almost all aspects of the manner in which the drivers did their work. The handout is clear on that point. [19] Next it will be noted that drivers did not have, to any meaningful degree, the right to employ substitutes to do their work for them. Drivers were not in a position analogous to a businessman such as an electrical contractor, plumber or contractor who is typically entitled to employ any suitably skilled person to do the work which the businessman has undertaken. [20] Turning to investment, chance of profit and degree of financial risk, it must be noted that the Appellant was obliged to supply, insure and operate his own vehicle all at his own expense and risk. Drivers were also obliged to pay the daily rental fee charged by Beer. All of these cost elements were significant and to some extent amenable to control by the driver. Those financial elements of the arrangement point toward the existence of a contract for services. [21] On the other hand however, I observe that it was not the Appellant but rather Beer which had the right to fix the delivery fee charged by it to its customers. The Appellant's percentage share of the fee was fixed once and for all, it would seem, by the 1997 agreement. Thus Beer controlled a major element of the Appellant's revenue stream. The Appellant's only recourse, if he wished to increase his revenue stream, was to drive more. [22] I am inclined to the view that indications arising from the financial elements of the arrangement point in opposing directions and balance each other out. [23] Typically, an independent contractor is expected to own or supply and use the tools which he requires to perform the task which he has contracted to do. Here, as noted already, the Appellant supplied the vehicle and furnished the radio under the rental arrangement with Beer. [24] In my opinion, when the arrangement is viewed as a whole it is apparent that the Appellant worked for Beer under a contract of service. The central obligation was to pick up and deliver goods for Beer's clients. This work was required to be performed by the Appellant personally. The Appellant was subject to an overwhelming degree of control by Beer with regard to the manner of performance of his duties. The tools and financial elements tests point only faintly to a contract for services and, when seen in the context of the entire arrangement, are overridden. The focus of the contract was the provision of the Appellant's time and labour. He was not in the business of selling results in the form of a multitude of individual deliveries. He was Beer's employee. [25] The appeal will therefore be allowed and the Minister's decision vacated. Signed at Calgary, Alberta, this 10th day of March 2004. "Michael J. Bonner" Bonner, J. CITATION: 2004TCC176 COURT FILE NO.: 2003-1632(EI) STYLE OF CAUSE: John P. Sehovic and M.N.R. and The Beer Man Inc. PLACE OF HEARING: Toronto, Ontario DATE OF HEARING: February 11, 2004 REASONS FOR JUDGMENT BY: The Honourable Justice Michael J. Bonner DATE OF JUDGMENT: March 10, 2004 APPEARANCES: For the Appellant: The Appellant himself Counsel for the Respondent: Craig Maw Agent for the Intervenor: Jim Devlin COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada For the Intervenor: Name: Firm: [1] Meyers was the Appellant's companion. [2] It appears that the word 'issued' was cut off in the original. [3] A complex involving (1) control; (2) ownership of tools; (3) chance of profit; (4) risk of loss, all as set out in Montreal v. Montreal Locomotive Works Ltd., (1947) 1 D.L.R. 161 at 169.