William Moore Beverly Holmes op Clean Machine v. M.N.R.

William Moore Beverly Holmes op Clean Machine v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2006-08-04 Neutral citation 2006 TCC 443 File numbers 2006-773(EI) Judges and Taxing Officers Georgette Anne Sheridan Subjects Employment Insurance Act Decision Content Docket: 2006-773(EI) BETWEEN: WILLIAM MOORE, BEVERLY HOLMES operating as CLEAN MACHINE, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on common evidence with the appeal of William Moore, Beverly Holmes operating as Clean Machine (2006-774(CPP)) on July 21st, 2006, at Sudbury, Ontario. Before: The Honourable Justice Georgette Sheridan Appearances: For the Appellant: Beverly Holmes Counsel for the Respondent: Nicolas Simard ____________________________________________________________________ JUDGMENT In accordance with the attached Reasons for Judgment, the appeal is allowed and the decision of the Minister of National Revenue is vacated on the basis that the workers were performing cleaning services through the Appellant as independent contractors and were not engaged in insurable employment pursuant to paragraph 5(1)(a) of the Employment Insurance Act for the period January 1, 2002 to December 31, 2004. Signed at Ottawa, Canada, this 4th day of August 2006. "G. Sheridan" Sheridan J. Docket: 2006-774(CPP) BETWEEN: WILLIAM MOORE, BEVERLY HOLMES operating as CLEAN MACHINE, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on common evidence with the appeal of William Moore, Beverly Holmes operating as Clean Machine (2006-773(EI)) on July 21st, 2006, at Sudbury, Ontario. Before: The Honourable Justice Georgette Sheridan Appearances: For the Appellant: Beverly Holmes Counsel for the Respondent: Nicolas Simard ____________________________________________________________________ JUDGMENT In accordance with the attached Reasons for Judgment, the appeal is allowed and the decision of the Minister of National Revenue is vacated on the basis that the workers were performing cleaning services through the Appellant as independent contractors and were not engaged in pensionable employment pursuant to paragraph 6(1)(a) of the Canada Pension Plan for the period January 1, 2002 to December 31, 2004. Signed at Ottawa, Canada this 4th day of August, 2006. "G. Sheridan" Sheridan J. Citation: 2006TCC443 Date: 20060804 Dockets: 2006-773(EI) 2006-774(CPP) BETWEEN: WILLIAM MOORE, BEVERLY HOLMES operating as CLEAN MACHINE, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT Sheridan, J. [1] The Appellant, a partnership of Beverly Holmes and William Moore operating as Clean Machine, is appealing the decisions of the Minister of National Revenue that Darlene Lawrence, Joanne Levesque, Jennifer Fox and Aline Desgagnes (the "workers"), were engaged in pensionable[1] and insurable[2] employment for the period January 1, 2002 to December 31, 2004. The appeals were heard on common evidence. [2] The Appellant's position is that the workers were working with Clean Machine as independent contractors under contracts for services. Beverly Holmes, the partner who handles the Appellant's day-to-day operation, represented the Appellant and testified at the hearing. Darlene Lawrence who, in addition to her cleaning duties, sometimes assists Ms. Holmes with some of the administrative tasks, also testified for the Appellant. The other three workers were called by the Crown. Allowing for certain small inconsistencies which I attribute to the erosion of once amiable working relationships, all of the witnesses were credible in the presentation of their evidence. [3] During the period in question, the Appellant was in the business of providing cleaning services, primarily in private homes in and around Greater Sudbury, Ontario. Ms. Holmes' background is in administration; she has never regularly performed cleaning services herself. In 1979, she came up with the idea of starting a business; after conducting a feasibility study and checking with the payroll and source deductions officials as to what was required for self-employed individuals, the Appellant began operations. Since that time, Ms. Holmes has engaged and paid cleaners on the footing of their being independent contractors under a contract for services. It was not until the Minister undertook an Employer Compliance Audit of the period 2002 to 2004 that Ms. Holmes concerned herself with the appropriateness of this practice. [4] In concluding that the workers were employees, the Minister relied on certain assumptions; it is the Appellant who bears the burden of disproving them. In the present case, the tendency of the drafter of the Reply to the Notice of Appeal to plead what were legal conclusions as "assumptions of fact"[3] made an already confusing task for a self-represented appellant, even more difficult. In spite of this, Ms. Holmes met the challenge and I am satisfied that she has successfully discharged her evidentiary burden. [5] Whether, in a particular set of circumstances, a working relationship is governed by a contract of service an (employer/employee) or a contract for services (independent contractor), is to be determined in accordance with the "four-in-one" test as enunciated by the Federal Court of Appeal in Wiebe Door Services Ltd. v. M.N.R.[4]: a) The degree or absence of control exercised by the alleged employer; b) Ownership of tools; c) Chance of profit and risk of loss; d) Integration of the alleged employee's work into the alleged employer's business. [6] According to MacGuigan, J., the four-in-one test has at its essence "...the search for the total relationship of the parties". In reaching this conclusion, MacGuigan, J. put the emphasis on what Lord Wright called "the combined force of the whole scheme of the operations". Thus, there is no magic in any one of the four factors; the nature of the relationship will depend entirely on the facts of each case. [7] In the present matter, the essence of the Appellant's business was to connect cleaners with clients and vice versa. This was a mutually satisfactory arrangement: those individuals whose talent is cleaning were not necessarily able to perform or interested in performing the administrative or marketing tasks needed to find reliable positions; similarly, clients often lacked the time or skill needed to find and get cleaners they could trust to come into their homes, unsupervised, for a few hours each week. Enter Ms. Holmes: a woman with the interest and the skills to manage all of these things for cleaner and client alike. [8] The evidence shows that Ms. Holmes exercised control of her business, but not "control" of the cleaners, as contemplated by Wiebe Door. Ms. Holmes placed Clean Machine ads in the Yellow Pages to attract clients; at the same time, she regularly scanned the bulletin boards in community centers, grocery stores and similar locations for the notices of experienced cleaners seeking work opportunities. She kept a client list and a roster of cleaners. Her practice was to meet with a prospective client in her residence to receive instructions on the nature of the work to be done, the client's preferred cleaning products or methods, and the number of hours required each week. This information was duly noted in client work orders. By the same token, she met with the cleaners she had found to discuss the nature of their respective roles. If they were interested in securing clients through Clean Machine, Ms. Holmes ordered, at the Appellant's expense, a police security clearance and added the person's name to the roster of available cleaners. [9] Matching a cleaner's availability with a client's needs was fundamental to the role played by the Appellant. When a client called the Appellant looking for a cleaner, Ms. Holmes would make out a work order and present it to one of the cleaners. If that cleaner accepted the work, she would take on that client. If the cleaner rejected the job (which she was free to do), Ms. Holmes would present it to another person on the list until she had found someone willing to accept the proposed contract. If a cleaner was unable to keep the agreed-upon commitment, she was expected to notify the Appellant to allow another cleaner to be offered the job, and to avoid antagonizing the client. Unfortunately, where the client cancelled or simply forgot to provide means of access to the residence, both the Appellant and the cleaner were left without payment - such are the hazards of being self-employed. [10] Once a cleaner accepted a cleaning job, it was up to her to perform, as she chose, the tasks specified by the client in the work order. As each of the workers testified, they already knew how to clean. They did not expect to be told by the Appellant how to do their work; Ms. Holmes did not insult the cleaners by attempting to "train" them, providing only a brief orientation at a new client's home. Ms. Holmes did not make rounds to the residences being cleaned to see if the cleaning was being done properly; there was some evidence of Ms. Lawrence having kept an eye on things, but I am not persuaded that this amounted to "control" as that term is understood at law. First of all, although she helped Ms. Holmes with some of the Appellant's administration, there is no evidence of Ms. Holmes having delegated any authority to Ms. Lawrence. On other occasions when Ms. Lawrence dropped by the clients' homes, her primary purpose was not to check up on the cleaners but to pick up the cheque left by the client. [11] The collecting of cheques from the clients and the distribution of payment from the clients to the cleaners was part of the Appellant's administrative role. This assured the cleaners of regular and timely payment and of not having to chase down defaulters, a task the Appellant was better equipped to perform. No employee deductions were made from the cheques on which Ms. Holmes routinely marked "sub-contractor fees". I accept the argument of counsel for the Respondent that the Appellant could not, merely by adding these few words to their pay cheques, unilaterally impose this term on the cleaners. The fact remains, however, that as well as registering no objection to the Appellant's practices, the workers all filed their income tax returns as self-employed; in some cases, reporting business expenses such as gas and vehicle costs. [12] One of the factors influencing the Minister's decision was that the cleaners had to perform the work personally and were not able to hire someone to do their cleaning jobs for them. First of all, there is no evidence that they did not have the right to farm their work out to others, had they wished to do so. The grim reality is, however, that the small margin for profit makes the notion of individual cleaners sub-contracting their cleaning contracts to someone else unfeasible. In a similar vein, all that can be concluded from the fact that none of the workers were GST registrants is that, despite all their hard work, they earned less than $30,000 annually and were therefore, exempt from registration. It has no relevance to the issue of their status as employees or independent contractors. Finally, the Appellant's having remitted WSIB (workers' compensation) premiums on behalf of the workers has to do with Ms. Holmes' understanding of provincial legislation requirements; it is not, in itself, determinative of the matter before the Court. [13] The tools involved were the vehicles needed to travel to and from clients' homes, the cleaning materials and the cleaning equipment. Most of the clients had products and equipment in their homes which they made available to the cleaners. Where none was provided, the Appellant usually furnished the products and sometimes a spare vacuum; rarely, a cleaner would have her own favourite products which she would use. All of the cleaners used their own cars and bought their own gas. The one exception was the Appellant's reimbursement of Ms. Desgagnes' fuel costs to travel to "the valley", a greater distance away than the average Sudburyjob. I accept Ms. Holmes' evidence that Ms. Desgagnes was a particularly skilled cleaner and an able negotiator. The additional $10 paid in that limited circumstances was geared to keeping her on the roster[5]. [14] For all of these reasons, the appeals are allowed and the decisions of the Minister of National Revenue are vacated on the basis that the workers were performing cleaning services through the Appellant as independent contractors. Accordingly, they were not engaged in pensionable employment pursuant to paragraph 6(1)(a) of the Canada Pension Plan or insurable employment pursuant to paragraph 5(1)(a) of the Employment Insurance Act for the period January 1, 2002 to December 31, 2004. Signed at Ottawa, Canada, this 4th day of August 2006. "G. Sheridan" Sheridan J. CITATION: 2006TCC443 COURT FILE NO.: 2006-773(EI) 2006-774(CPP) STYLE OF CAUSE: WILLIAM MOORE, BEVERLY HOLMES Operating as CLEAN MACHINE and The Minister of National Revenue PLACE OF HEARING: Sudbury, Ontario DATE OF HEARING: July 21st, 2006 REASONS FOR JUDGMENT BY: The Honourable Justice Georgette Sheridan DATE OF JUDGMENT: August 4th, 2006 APPEARANCES: For the Appellant: Beverly Holmes Counsel for the Respondent: Nicolas Simard COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada 1 Under section 27.2(3) and paragraph 6(1)(a) of the Canada Pension Plan. 2 Under section 93 and paragraph 5(1)(a) of the Employment Insurance Act. [3] I do not fault counsel for the Respondent, Mr. Simard, as it is my understanding that Respondent counsel at the hearing are rarely the authors of the Reply to the Notice of Appeal. Further, he made every effort to cross-examine fairly and to avoid using "loaded" terms in his questions. It is in the interest of justice, however, that the department ensures the assumptions are properly drafted. [4] 87 DTC 5025 at p. 5026 and 5027; 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983 [5] As it turned out, all was for naught as Ms. Desgagnes ultimately left the Appellant to start her own cleaning service.