Headworth v. M.N.R.

Headworth v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2005-11-04 Neutral citation 2005 TCC 722 File numbers 2005-868(EI) Judges and Taxing Officers Cameron Hugh McArthur Subjects Canada Pension Plan Employment Insurance Act Decision Content Docket: 2005-868(EI) BETWEEN: STRIDER HEADWORTH, Appellant, and THE MINISTER OF NATIONAL REVENUE Respondent. ____________________________________________________________________ Appeal heard on August 5, 2005, at Nanaimo, British Columbia, By: The Honourable Justice C.H. McArthur Appearances: For the Appellant: The Appellant himself Counsel for the Respondent: John M.L. Gibb-Carsley ____________________________________________________________________ JUDGMENT The appeal pursuant to subsection 103(1) of the Employment Insurance Act is dismissed and the decision of the Minister of National Revenue on the appeal made to him under section 91 of that Act is confirmed. Signed at Ottawa, Canada, this 4th day of November, 2005. "C.H. McArthur" McArthur J. Citation: 2005TCC722 Date: 20051104 Docket: 2005-868(EI) BETWEEN: STRIDER HEADWORTH, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT McArthur J. [1] The issue in this appeal is whether the services provided by Strider Headworth to ABCO Building Maintenance Ltd. (ABCO) were provided as an employee or as an independent contractor during the period September 1, 2003 to May 13, 2004. The Appellant submits that he was an employee of ABCO, and the position of the Minister of National Revenue (the Minister) is that he was an independent contractor, and not engaged in insurable employment pursuant to the Employment Insurance Act. Mr. Headworth gave evidence as did Julio Godoy of ABCO. Mr. Godoy's original request to be classified as an Intervenor was not properly filed in this Court. Mr. Godoy appeared for the Respondent as a witness. [2] The Minister relied on the following facts included in the Reply to the Notice of Appeal: a) ABCO is in the business of providing janitorial and cleaning services to commercial businesses on a contract basis; b) The Appellant contracted with ABCO to provide janitorial and cleaning services ("Services") to ABCO's clients; c) The Appellant performed the Services for ABCO's clients including Galaxy Cinema, 7-11 stores, a Canadian Tire store and Toys 'R' Us (the "Clients"); d) ABCO paid a set rate to the Appellant for Services performed at each Client's premises; e) The Appellant negotiated a set rate per hour over and above the amount in his contract with ABCO for the wait time for the Contract at the Port Alberni 7-11 store job due to delays caused by highway construction; f) The Appellant invoiced ABCO separately for work done for each Client; g) The Appellant charged ABCO Goods and Services Tax (GST) on his invoices; h) The Appellant invoiced ABCO for a portion of his gas and supplies expenses, including GST; i) The Appellant and ABCO both provided some of the supplies, materials and equipment used by the Appellant in performing the Services; j) The Appellant hired a team of other individuals to assist him in providing the Services; k) ABCO did not establish nor require the Appellant to work specified hours; l) The Appellant was required to sign in and out of the Clients' business locations due to the Clients' security requirements; and m) The Appellant was in business for himself when he provided the Services during the Period. [3] The Appellant's position is the following. No contract was entered into and he provided no material or equipment. He was in fact a fulltime student and was prepared to work nights for financial reasons. He was not operating Strider's Building and Grounds at the time of the employment. He was provided equipment and materials from outside sources to do the jobs, either by ABCO or by the job sites. ABCO exercised control and required an account of his time on work sites, and directly affected his work times at 7-11, and indirectly affected when and where he was to work on other sites; ABCO supervised and trained the Appellant, as much as was needed, for the nature of the work done, and relied upon its clients to keep it informed of wrongdoing by the Appellant. ABCO monitored and disciplined workers, both by e-mail complaints, and by having other workers finish or redo their work, and reducing their hours of pay and/or future work accordingly. ABCO settled an issue of wages owed to the Appellant, through the Ministry of Skills Development and Labour, Employment Standards Branch; and the Appellant did work which ABCO's employees had done in the past. [4] I believe ABCO looks after the cleaning of many buildings in Western Canada with several employees on its payroll. It operates under other company names, including El-Gaucho and J & B, and has its head office in Mill Bay, British Columbia. The Appellant answered an ABCO advertisement to hire a cleaner, since the Appellant had experience in commercial cleaning. He assumed the responsibility of cleaning the buildings and retained his own workers to do so. For the most part, his working hours and areas to be cleaned were dictated by the building managers and relayed to him by ABCO. In addition, most buildings supplied the cleaning solvents and small tools necessary. [5] The Appellant was fired by letter from ABCO dated May 14, 2004 which states in part as follows: Strider Headworth Nanaimo, B.C. Dear Strider: This letter is a termination of all contracts held between yourself and ABCO Building Maintenance Ltd., J & B Services, and El Gaucho Enterprises Inc. as of the above mentioned date. The reasons for this termination are: 1. Canadian Tire - the site was FILTHY. Our crew of 3 took 17 ½ hours to clean up the store ... The letter continued in elaborate detail to explain why he was fired. [6] As a result of the above firing, in mid-2004, the Appellant and his spouse, Debbie Headworth, applied to the Employment Standards Branch in British Columbia, to recover wages they felt they were owed from ABCO. On August 13, 2004, the Appellant and Debbie, and ABCO agreed to the following facts: The parties confirm agreement to the following fact(s) relating to the issues in dispute: · Strider Headworth hired by company September 1, 2003. · Strider Headworth revised and submitted contract under Strider's Building & Ground Services. This contract was not signed by company. · Debbie Headworth did not enter into a contract with the company. · In January 2004, ABCO requested names from Strider Headworth of workers he would bring in to assist him on ABCO accounts. · ABCO provided a van for 7-11 contract. · Strider Headworth provided his own transportation for all other contracts. · Neither party agrees who provided tools for contracts. · Strider Headworth invoiced ABCO each month, including GST remittances. · ABCO paid Strider Headworth a set amount for each contract (except for Galaxy, which he invoiced company by the hour). · Strider Headworth was so terminated by company on May 15, 2004. · A settlement was signed on October 7, 2004 between the parties, the relevant part of which reads: The employer agrees to pay Strider Headworth the sum of $1,000.00 in settlement of his claim for wages. He (sic) employer will issue 3 post-dated cheques, October 20 for $334.00, November 19, and December 20, 2004, each in the amount of $333.00. These cheques will be forwarded to the Ministry of Labour at 6475 Metral Drive in Nanaimo, and will be issued in Strider Headworth's name. While the settlement agreed to has no influence on my decision, I see no reason not to take the agreed facts into consideration. [7] The Appellant and the Respondent provided lengthy written submissions, and both relied on the application of the commonly referred to tests of control, ownership of tools, chance of profit or risk of loss, and integration, set out in Wiebe Door Services Ltd. v. Minister of National Revenue.[1] These tests were also approved by the Supreme Court of Canada in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.[2] and Major J., writing for the Court, restated the tests as follows at paragraphs 47 and 48: 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. I will apply those tests to the present facts. Control [8] ABCO was responsible to its clients to have their premises cleaned, usually at night, to certain specifications. ABCO controlled what buildings were to be cleaned and when. ABCO and the Appellant appear to have had equal input into how the cleaning was to be done. The Appellant was free to hire his wife and other relatives, to assist him with little interference from ABCO, although it had to be made aware of the workers before they entered the various buildings. ABCO did not permit the Appellant to speak to various site managers or employees. All communication had to be with ABCO. At times, ABCO provided work sheet instructions. For the most part, it did not attend the work sites. It did supervise the cleaning by e-mail and phone calls. Mr. Godoy admitted that little direct on-site supervision was given to payroll employees, relying on complaints reported by clients, which is similar to the supervision of the Appellant. I find that this test favours the Minister's position. Ownership of Tools [9] Obviously, the main tool is the work and cleaning skills of the worker. The Appellant supplied some only small tools. On one occasion, he used his own van, and items such as a bucket and rags, but for the most part, most sites had cleaning supplies and equipment. Failing equipment at the site, ABCO supplied what was needed, as well as a van to carry its heavy equipment such as floor or carpet cleaners and vacuums. This test is inconclusive. Chance of Profit and Risk of Loss [10] What, if any, financial risk was taken by the Appellant? The obvious answer is that he would not be paid if he took days off and did not work, or there would be a holdback, if the work was deficient. I accept the Appellant's evidence that ABCO paid what it wanted, when it wanted. It held a tight control of the purse strings. As mentioned above, the Appellant was able to force a financial settlement upon his application to the Employment Standards. Obviously, the Appellant had a risk of profit and loss, and this test favours the Minister. [11] In Sagaz, Justice Major stated that the key 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 or to put it more simply, whose business was it? To answer this question, the Minister relied on the conclusion that the Appellant signed a contract for services. As stated earlier, the parties agreed in a statement of facts before the Employment Standards, that the contract revised by the Appellant was never signed by ABCO. There was never a binding contract "for services", yet the form was initially prepared and signed by ABCO, and then revised and signed by the Appellant, but not resigned by ABCO. This enhances and supports the Minister's position; the Appellant was only paid after submitting invoices, and those invoices included GST (Exhibit R-4). In addition, the Appellant hired his own workers, and referred to himself and workers as "our company". Obviously with these acts, the Appellant was advancing himself as an independent contractor. And the Appellant was not supervised while working. This is partially true because he was supervised at times. The Appellant requested an increase to "improve his profitability and his bottom line". Again, this is the talk of an independent contractor. [12] Turning to the Appellant's position, in answer to the question "whose business was it", I find that the Appellant used language to the effect he was independent, as well as billing and charging GST on his invoices. He stated that ABCO retained a strict control over his work to ensure it was completed ABCO's way. Of course, there was control over the result of the work because any of ABCO's Clients would complain, if not satisfied. As a result of one complaint, ABCO fired the Appellant, as stated earlier. [13] The settlement and agreed facts before the Employment Standards Branch are not binding on me, but they are to be given consideration. While Employment Standards did not make a formal finding of fact, I am not prepared to infer what it might have ordered had there not been a settlement before mediation. [14] What are we left with? The Minister's most significant argument is that the Appellant held himself out, at least from time to time, as an independent contractor. Most significantly, he invoiced ABCO lump sums to include his own workers, and he charged GST. He also hired and supervised his own workers. Upon balancing all of the factors, I find that the Appellant had a cleaning business and that he acted more as an independent contractor than an employee. In contrast, ABCO did have workers who were obviously employees, and were on ABCO's payroll reflecting the usual deductions. I believe they filled in at the direction of ABCO when and where needed. [15] For the above reasons, the appeal is dismissed. Signed at Ottawa Canada, this 4th day of November, 2005. "C.H. McArthur" McArthur J. CITATION: 2005TCC722 COURT FILE NO.: 2005-868(EI) STYLE OF CAUSE: Strider Headworth and The Minister of National Revenue PLACE OF HEARING: Nanaimo, British Columbia DATE OF HEARING: August 5, 2005 REASONS FOR JUDGMENT BY: The Honourable Justice C.H. McArthur DATE OF JUDGMENT: November 4, 2005 APPEARANCES: For the Appellant: The Appellant himself Counsel for the Respondent: John M.L. Gibb-Carsley COUNSEL OF RECORD: For the Appellant: Name: N/A Firm: N/A For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada [1] 87 DTC 5025. [2] [2001] 2 S.C.R. 983.