Dynamex Canada Corp. v. M.N.R.

Dynamex Canada Corp. v. M.N.R.
Court (s) Database
Tax Court of Canada Judgments
Date
2010-01-11
Neutral citation
2010 TCC 17
File numbers
2006-1557(EI)
Judges and Taxing Officers
Pierre Archambault
Subjects
Employment Insurance Act
Decision Content
Docket: 2006-1557(EI)
BETWEEN:
DYNAMEX CANADA CORP.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
____________________________________________________________________
Appeal heard on common evidence with appeal 2006‑1558(CPP) on October 9 and 10, 2008, and October 1 and 2, 2009,
at Quebec City, Quebec.
Before: The Honourable Justice Pierre Archambault
Appearances:
Counsel for the Appellant:
Guy Dussault
Counsel for the Respondent:
Josée Tremblay
____________________________________________________________________
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 11th day of January 2010.
“Pierre Archambault”
Archambault J.
Docket: 2006-1558(CPP)
BETWEEN:
DYNAMEX CANADA CORP.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
____________________________________________________________________
Appeal heard on common evidence with appeal 2006‑1557(EI) on October 9 and 10, 2008, and October 1 and 2, 2009,
at Quebec City, Quebec.
Before: The Honourable Justice Pierre Archambault
Appearances:
Counsel for the Appellant:
Guy Dussault
Counsel for the Respondent:
Josée Tremblay
____________________________________________________________________
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 11th day of January 2010.
“Pierre Archambault”
Archambault J.
Citation: 2010 TCC 17
Date: 20100111
Dockets: 2006-1557(EI)
2006-1558(CPP)
BETWEEN:
DYNAMEX CANADA CORP.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Archambault J.
[1] Dynamex Canada Corp. (Dynamex) is appealing decisions made by the Minister of National Revenue (Minister) under the Canada Pension Plan (CPP) and the Employment Insurance Act (Act).[1] The issue raised in both appeals is whether Mr. Roger Fontaine was employed by Dynamex under a contract of service and therefore held with that corporation pensionable and insurable employment within the meaning of the above acts during the period from January 1, 2002 to March 1, 2005 (relevant period). The Minister ruled that Mr. Fontaine was indeed an employee of Dynamex during the relevant period. Dynamex, on the other hand, contends that Mr. Fontaine was an independent contractor. The two appeals were heard on common evidence.
[2] In making his decisions, the Minister relied inter alia on the following facts, which are set out in the reply filed in the appeal brought under the Act:
a) the Appellant carries on the business carries on the business [sic] of pick‑up and delivery of envelopes and parcels in Canada; [admitted]
b) the Appellant hired Mr. Roger Fontaine for the purpose of delivering envelopes and parcels of the Appellant’s customers in the Winnipeg area; [admitted]
c) the Appellant directed, controlled and supervised the pick ups and deliveries made by Mr. Roger Fontaine; [denied]
d) at all material times, Mr. Roger Fontaine and his co‑workers of the Winnipeg area were collectively represented by the Canada Union of Postal Workers - Red River Local; [admitted]
e) at all material times, a collective agreement between the Appellant and the Canada Union of Postal Workers - Red River Local - was in applicable; [admitted]
f) the Appellant provided, amongst other things, security identification card, uniforms and workers compensation coverage; [denied]
g) Mr. Roger Fontaine has to perform his task personally; [denied]
h) Mr. Roger Fontaine was paid twice a month by the Appellant and his remuneration was partially based on a percentage of the deliveries he effected; [admitted][2]
i) Mr. Roger Fontaine was obliged to
i) immediately reports [sic] any accident; [admitted]
ii) maintains [sic] daily summary of the pick up and deliveries effected; [admitted]
iii) presents [sic] his requests for holidays or other time off work in advance; [denied]
iv) physically appear in a manner acceptable to the Appellant who, if unsatisfied, could request Mr. Roger Fontaine to return home; [denied]
v) provides [sic] his own vehicle to perform his tasks; [admitted]
j) Mr. Roger Fontaine was not registered as a supplier for the purpose of the Goods and Services Tax. [admitted]
Factual background
[3] Dynamex’s main business activity in Winnipeg is same‑day pickup and delivery of envelopes and parcels (both herein referred to as parcels). It also provides overnight delivery and logistic services in Canada and in the United States. Dynamex is a subsidiary of a U.S. public corporation, Dynamex Inc. (see Exhibit R‑33, Tab 42). Dynamex has business centres all across Canada, from St. John’s to Victoria. According to Mr. James Aitken, Dynamex’s president,[3] it is the only national same‑day delivery company in Canada. Dynamex has about 600 employees and all the drivers who do its deliveries are independent contractors. In its business, Dynamex uses the services of delivery people who walk (referred to as walkers), delivery people who use a bicycle (referred to as bikers) and delivery people who use their own vehicle (referred to as owners‑operators or drivers). According to Mr. John McMaster, a representative of the Canadian Union of Postal Workers (Union) and a Dynamex walker, there were in 2002 in the Winnipeg area 3 or 4 walkers, one biker and 140‑145 owners‑operators. During the relevant period, the walkers and the bikers were treated by Dynamex as employees for the reason that, according to Mr. Aitken, these people did not use and did not need to own substantial assets to make their deliveries, and by reason of the application of the control test developed by the courts. The owners‑operators used their own vehicle, which could have been a car, a minivan, a van or even a tractor and trailer. Some of the owner‑operators were also operating aircraft.
[4] The types of deliveries carried out within the city of Winnipeg during the relevant period can be divided into two categories. The first is “delivery on demand”, which involved the delivery of parcels from one point to another in the city. The orders for such deliveries came from a dispatcher, an employee of Dynamex, who, through communication equipment, kept in contact with the delivery persons and transmitted to them the addresses at which the parcels were to be picked up and those to which they were to be delivered. The second category was called the “dedicated route delivery”. This work involved servicing the delivery needs of a particular client, such as a bank. The delivery person had a regular schedule whereby he or she attended at the premises of the customer, that is, the bank, and received there his or her delivery orders for that particular customer.
[5] Mr. Fontaine was first hired in 1989 by a courier company called Zipper Courier Service Ltd. (Zipper), which was purchased by Dynamex in 1995 or 1996, according to Mr. Aitken.[4] At that time, Dynamex assumed certain of Zipper’s obligations towards its drivers. For instance, Zipper provided its independent contractors with a health benefits plan to which Zipper made financial contributions. Mr. Fontaine continued to be entitled to such benefits after the purchase of Zipper. During the relevant period, Mr. Fontaine was generally involved in delivery on demand. One exception was with respect to the dedicated route delivery for IBM, which he had for a short period of time.
[6] On June 16, 1998, the director at the Winnipeg Tax Services Office issued a ruling that Mr. Fontaine’s employment could not be considered pensionable pursuant to paragraph 6(1)(a) of the CPP or insurable pursuant to paragraph 5(1)(a) of the Act. This ruling was “binding for the period January 1, 1997 to the present”.
[7] According to Mr. McMaster, a collective agreement (Collective Agreement) between Dynamex and the Union was first entered into effective March 1, 2000, and it expired on January 31, 2003. This agreement was renewed and was to expire on January 31, 2006 (see Exhibit R‑1, Tabs 1 and 2). The purpose of the Collective Agreement was to establish and maintain rates of remuneration, hours of work and other working conditions and to “provide appropriate procedures for the resolution of grievances and problems arising during the term of the Collective Agreement” (Article 1.01 of Exhibit R‑1, Tab 1).
[8] Mr. Fontaine was required to sign with Dynamex a contract for services entitled “Owner Operator Contract for Retention of Services” (Fontaine contract). Mr. Fontaine was not given an opportunity to negotiate the terms of this contract. He had to sign it if he wanted to continue providing his services to Dynamex. He was told by the Union that it was all right for him to sign the contract. It is useful to reproduce here the main provisions of this contract dated March 13, 2000:[5]
. . .
WHEREAS the Company carries on a same day transportation and distribution business and is licensed to use certain trademarks in connection therewith;
AND WHEREAS the Owner Operator owns/leases a vehicle[6] (the “Vehicle”) suitable to the business and the provision of services for the Company, and the Owner Operator desires to perform, and the Company desires to engage the Owner Operator to perform, certain distribution and delivery services for the Company;
AND WHEREAS, subject to the prevailing provisions of any applicable Collective Agreement, the Company and the Owner Operator desire to fix and determine between themselves their respective rights and obligations:
NOW THEREFORE in consideration of the mutual covenants and agreements hereinafter contained the parties hereto agree as follows:
1. The Owner Operator making use of the Vehicle shall perform the Services by Company standards in a timely and efficient manner.
2. The Owner Operator shall maintain the Vehicle in a safe, damage‑free, serviceable and clean condition and shall maintain, repair, license, insure (for Public Liability and Property damage in the amount of $1,000,000 all‑inclusive coverage and supply proof of same to the Company), and operate each Vehicle used by it at its own expense.
3. Provide all services in a safe, efficient, courteous and lawful manner and comply with all relevant laws, rules and regulations concerning the operation of the Vehicle and the provision of services hereunder. The Owner Operator shall at all times conduct itself so as not to jeopardize the relationship between the Company and its customers.
4. In consideration of the Company entering into this Agreement with the Owner Operator and allowing the Owner Operator to Service the Company’s customers, the Owner Operator hereby covenants, agrees, acknowledges and confirms that during the term hereof, and upon the cancellation of this Agreement for any cause or means whatsoever, then for a period of one (1) year from the cancellation of this Agreement, the Owner Operator shall not either personally or by its agents, or by letters, circulars or advertisements, or in any manner whatsoever, whether on its own behalf or on behalf of any person, persons, firm, association, syndicate, company or corporation, canvas, solicit or do business of a similar nature as that of the Company with any person, persons, firm, association, syndicate, company or corporation who:
4.1 Either are customers of the Company at the time of the cancellation of this Agreement, or,
4.2 Have been customers of the Company within a period of twelve (12) months prior to the cancellation of the agreement; and,
4.3 Have become known to the Owner Operator as customers of the Company, and,
4.4 By reason of the Owner Operator having over a period of time Services [sic] such customers, have become known to the Owner Operator.
5. In consideration of the Company entering into this Agreement with the Owner Operator and allowing the Owner Operator to Service the Company’s customers, the Owner Operator hereby covenants, agrees, acknowledges and confirms that, during the term hereof, and upon the termination of this Agreement for any cause or by means whatsoever, then for a period of one (1) year from the termination of this Agreement, the Owner Operator shall not use or disclose any information concerning the business or customers of the Company which may have been acquired by it during the course of its relationship with the Company for its own benefit or to the detriment or to the intended or probable detriment of the Company.
. . .
9. Upon termination of this Agreement, the Owner Operator shall forthwith remove from the Vehicle all trademarks, logos and other elements of decoration which are distinctive of the Company or its customers and immediately return, in good condition, any Company property, material or documentation, including all communication equipment.
10. The Owner Operator undertakes to indemnify and hold the Company harmless from all claims, debts, demands, suits, actions and causes of action whatsoever for loss, damages, delay and liability of any nature or kind whatsoever made or brought by any person, firm or corporation with the Services rendered by the Owner Operator.
. . .
12. The Owner Operator acknowledges and agrees that the Owner Operator’s function and status under this agreement shall be, and is intended to be wholly and exclusively that of a dependent contractor. No partnership, employer-employee, joint venture or other similar relationship is intended. The Owner Operator agrees that the Owner Operator shall, at all times, hold himself out as a dependent contractor, not as an agent, employee or legal representative of the Company, in any respect. The Owner Operator shall take all necessary steps and shall be responsible for the payment of all federal, provincial and local taxes arising out of his activities.
13. The Owner Operator expressly acknowledges that the Company will not on behalf of the Owner Operator remit employment insurance premiums, nor withhold income tax, C.P.P. or provide T-4 slips and that the Owner Operator shall be solely and wholly liable and responsible therefore.
14. The Owner Operator shall protect and indemnify the Company, and any of its officers, directors, employees and agents from all losses, claims, costs, damages, or liabilities which the Company may suffer or incur, whether at law or in equity, directly or indirectly, from any act or omission, made or not made by the Owner Operator in providing services to the Company under this agreement, including without limitation, any damage to person or property whether it be that of the Company, its customers or accounts or that of a third party.
15. This contract may not be sold, assigned or transferred without the express written consent of the Company.
. . .
19. Lease from the company suitable Radio and Pager or other communications equipment as may be designated by the Company with the terms and conditions contained in the form of lease attached hereto.
20. Either obtain at its own expense, or reimburse the Company for the cost of a Fidelity Bond as per attached Fidelity Bond Schedule.
21. Charge no expense whatsoever for any reason to the Company except where authorized by the company.
22. The Parties hereto acknowledge and agree that they both would benefit by the greater exposure of the Company’s presence in the marketplace and to that end agree as follows:
i) The Owner Operator shall wear uniforms approved by the Company while servicing the company’s customers. Uniforms for purchase by the Owner Operator at the Company’s cost price, plus applicable taxes, payable by the Owner Operator on invoice therefore.
ii) When the Company’s trademarks, tradename, logos or decals are displayed or shown on a uniform or the Owner Operator’s motor vehicle, not to place any other name, notice, advertising, decal or painting of any nature or kind whatsoever on the uniform or motor vehicle other than as expressly permitted by the Company which may not be unreasonably and arbitrarily withheld.
iii) The trademark “Dynamex”, distinctive colour and designs used in connection therewith, are all the property of the Company and their use accrues wholly to the benefit of the Company. Upon written request of the Company, the Owner Operator shall immediately surrender to the Company, any item bearing any of its trademarks and shall remove any such trademarks from its vehicle.
23. In the event the Contractor is successful in obtaining a new customer for the Company, the Company shall pay the Owner Operator as additional compensation five percent (5%) of the first three (3) months billings the customer uses the Company’s service. This compensation shall only apply if the amount billed to the customer exceeds one hundred dollars ($100.) per month. IN [sic] the course of accepting new business, the Owner Operator may pledge the credit of the company to the limited extent of such credit being acceptable to the Company and subject to a credit application being completed and turned in to the Company by the Contractor and the new client subsequently passing the Company’s credit check.
24. The parties agree that this Agreement shall be terminated as follows:
i) With 2 weeks notice by the Owner Operator or the Company upon written notice of either to the other; or
ii) By the Company following a material breach by the Contractor of the terms of this agreement; or
iii) Upon the insolvency or bankruptcy of either Party. In the case of drivers, only if unable to provide the requisite equipment to perform the work.
25. Upon the demand from the Company the Owner Operator shall immediately return to the company, but not limited to, all equipment loaned and provided, including identification cards, radios and advertising signs.
. . .
28. This agreement shall be interpreted in accordance with the Laws of the Province in which the Owner Operator’s services are primarily performed, and if any provisions of this Agreement contravene the Law of such Province, then such provisions shall be deemed not to be part of this Agreement, but all other provisions shall remain in full force and effect.
[My emphasis.]
[9] The Fontaine contract was terminated at the end of March 2005 because Mr. Fontaine was asked to choose between devoting himself full‑time to Dynamex and carrying on the massage therapy business that he had started in September 1999. It is my understanding that at first he saw his massage clients during the evening and on weekends. Later, Dynamex allowed him some flexibility to devote time to this new business during Dynamex’s regular business hours. For instance, he was authorized to leave work on a short notice to provide service to his own clients. The massage therapy business grew over the years. It produced revenues of $ 2,500 in 2002 and $ 7,800 in 2004. Mr. Fontaine considered himself to be working for Dynamex part‑time as of November 1, 2004. He worked only 3 days for Dynamex in January 2005 and 5 days in February 2005 (up to February 23). (See Exhibit A‑2.)
[10] My colleague Justice Bowie issued a decision on January 31, 2008 in which he concluded that a Mr. Gareth Palmer provided his services to Dynamex under a contract for services during the period from August 13, 2003 to April 11, 2004. His work was performed in the city of Toronto and the surrounding area. The decision in question is Dynamex Canada Corp. v. the Minister of National Revenue, 2008, TCC 71 (Palmer decision).[7] Dynamex’s counsel began his argument in the present appeals by stating that his client did not understand why it had to argue again the status of its owners‑operators given the fact that independent contractor status was the norm in the industry, that this status had been recognized in the Palmer decision and in many other similar decisions of this Court and of the Federal Court of Appeal. In particular, he referred to Justice Bowie’s statement in Palmer that, “in view of the number of previous decisions of this Court that have reached the same result in similar circumstances,” he regretted that he was “unable to make a substantial award of costs to the appellant” (paragraph 20). In addition, counsel stated that the courier business is a very competitive one and that the margin of profit is narrow. A finding of employee status could therefore have a detrimental impact on his client’s business. However, I was informed by the respondent’s counsel that the worker, Mr. Palmer, did not testify before Justice Bowie and this was one of the reasons why the Minister did not appeal the decision to the Federal Court of Appeal. In addition much of the documentary evidence introduced in these appeals, such as the Dynamex Driver’s Handbook (Exhibit R‑2) and several of the internal memoranda referred to below, was not before the Court in Palmer.
[11] In addition to Palmer, there are four referees’ decisions concerning 27 of Dynamex’s workers who performed similar delivery services in Winnipeg and Saskatoon. All 27 workers were found to be employees of Dynamex. The relevant periods for those 27 workers are the 1997 to 2001 calendar years. The decisions in question are the Mamona and Morgan decisions (supra) and two other decisions rendered by two different referees, namely: the Hogg decision by Referee Wallace, dated January 20, 2003 and the Derksen decision by Referee Hood, dated March 8, 2005 (see Exhibit R‑32, Tabs C and D). Counsel for Dynamex in the appeals before me and a union representative were involved in each of these cases, except possibly Derksen as in that decision the names of counsel are not mentioned.
[12] Like the other 26 Dynamex workers, Mrs. Mamona was found to be an employee of Dynamex for the purposes of the labour standards provisions found in Part III of the Canada Labour Code and was therefore entitled to vacation pay. Unlike Part I, Part III of the Canada Labour Code does not define what an employee is. Therefore, the referees had to apply common law principles in making their determinations. The Mamona decision of Referee Taylor was affirmed by the Federal Court, Trial Division, and by the Federal Court of Appeal. See Dynamex Canada Inc. v. Mamona, (2002) 218 F.T.R. 269 (F.C.T.D.), 2002 FTC 393, and (2003) 305 N.R. 295 (F.C.A.), 2003 FCA 248. Leave to appeal to the Supreme Court of Canada was denied in March 2004. [8] As a result of the aforementioned referees’ decisions, Dynamex, with the consent of the Union, adjusted the rate of commission paid to its drivers to take into account its higher costs of remuneration. According to Mr. Fontaine, his rate of commission went from 71% to 66%. It was the workers’ success in Mamona that encouraged Mr. Fontaine to attempt to get his status as an employee recognized by the respondent. His goal was to have Dynamex contribute to the Canada Pension Plan. If successful, he would get a refund of half of his own contributions to the Plan. Mr. Fontaine did not ask for employment benefits.
Dynamex’s detailed position
[13] Counsel for Dynamex outlined in his Notice of Appeal the reasons why independent contractor status should be held to exist here:
16. The Appellant states that Mr. Fontaine was an independent contractor for the following reasons:
The Appellant applies a four-fold test in reaching the conclusion that Mr. Fontaine was not an employee.
Control test
17. Mr. Fontaine decided when he wanted to work and he set his own schedule. In addition to the services he provided to the Appellant, Mr. Fontaine operated his own message [sic] therapy business. Mr. Fontaine decided when he wanted to perform services to Dynamex and when he wanted to work, or not work at his message [sic] therapy business.
18. Mr. Fontaine would decide whether he was going to provide services to the Appellant on a given day or work in his other business, or work the morning for the Appellant and the afternoon for his other business or vice versa. These were choices for Mr. Fontaine to make.
19. The hours of service were dictated by the customer. Mr. Fontaine was a member of a fleet of drivers servicing the downtown core of Winnipeg. This again was Mr. Fontaine’s choice. He could have provided service throughout numerous areas of the city of Winnipeg.
20. When Mr. Fontaine decided to provide his services were [sic] up to him. If he wanted to start at 7:00 a.m. or 9:00 a.m. that was his choice. If Mr. Fontaine wanted to quit work at 3:00 p.m., 4:00 p.m. or 5:00 p.m. – that was his choice. The start times and the ending days were within the exclusive domain of Mr. Fontaine.
21. These arrangements fit directly with the concept of being an independent contractor nor [sic] an employee.
Ownership of tools test
22. Mr. Fontaine, as an independent contractor, had to provide his own vehicle. He could decide what type of vehicle to use.
23. Furthermore, he supported all the expenses related to his vehicle like insurance coverage, maintenance of licenses, upkeep of the vehicle and fuel.
24. Such onerous obligations clearly indicate that Mr. Fontaine was an independent contractor.
Risk of profit and loss test
25. The key in the courier business is to use the asset, i.e. the vehicle for as long as possible and as efficiently as possible.
26. Profit is of course also related to expenses. The operation of Mr. Fontaine’s vehicle is an expense, and the higher that expense the less his profit. Of course how Mr. Fontaine operated the vehicle and how he maintained the vehicle were solely factors within Mr. Fontaine’s control.
27. Mr. Fontaine as an independent contractor needs to maximize his time receiving commission generating work and reduce his operating expenses. But it all depends on how he determines and plans his deliver [sic] routes and the number and types of deliveries he decides to do.
28. Generally, a person in Mr. Fontaine’s position wants the quickest fastest deliver [sic] as they are the most profitable, and it allows the best use of his time. If Mr. Fontaine decided his priority was to take call [sic] from downtown to the far west end of the city of Winnipeg – that would be his decision to make. The downside, less time spent in the downtown core means missing the quick high profit business inter office traffic.
29. As previously noted Mr. Fontaine controlled the crucial asset, his vehicle. How he utilized his crucial asset to maximize his earnings and minimize his expenses was solely up to him and is indicative of a contract for services.
Integration test
30. Mr. Fontaine’s business is not integrated into the Appellant’s business. Mr. Fontaine is working on his own behalf. He is not dependent on the Appellant’s clients. Mr. Fontaine can move to another courier company and take his equipment – the key asset his vehicle with him. There is no non-competition covenant in Mr. Fontaine’s services agreement.
31. Furthermore, as already mentioned, Mr. Fontaine operated a second business (message [sic] therapy) and he even decided when he wanted to perform services to Dynamex and when he wanted to work at his message [sic] therapy business.
Common Intention of the parties
32. In addition, or in the alternative to the above, the Appellant states, that in accordance with the modern approach applicable to taxing statutes, that the common intention of the taxpayers supports the Appellant’s view that Mr. Fontaine is an independent contractor. In particular, we note the following:
a) In 1998 the Minister of National Revenue decided that Mr. Fontaine was [an] independent contractor. In our view nothing has changed in the nature of that relationship to now make him, Mr. Fontaine, an employee;
b) Since 1998, Mr. Fontaine has freely entered into other contracts with the Appellant confirming that he is an independent contractor and not an employee. – See the March 2000 Agreement; and
c) The March 2000 Agreement expressly states that Mr. Fontaine is not an employee in any circumstances.
33. To the knowledge of the Appellant, Mr. Fontaine has always declared himself to be an independent contractor to the taxing authorities. This would include of course filing tax returns claiming business expenses.
34. Clearly, the parties freely contracted with each other. The parties clearly signalled an intention that they were contractors and not in an employee and employer relationship. Since 1998 until this current claim, Mr. Fontaine has never claimed that he was an employee, but always represented himself as an independent contractor. Clearly Mr. Fontaine operated “at will” – he decided when to provide service to the Appellant – or his other business interests. That relationship between the parties should be respected.
Collective Agreement
35. There is a Collective Agreement for Owner Operators and employees of the Appellant in Winnipeg. The Collective Agreement is not determinative on Fontaine’s status. We refer the Court to the decision of the Tax Court in DHL Express Canada Ltd. vs. MNR 2005 docket 2004 – 4055 (EI) & 2004 – 4057 (CPP).
36. The independent contractor may be entitled to collective bargaining, but that does not mean they are employees. In particular, according to the DHL Express Canada Ltd. case, independent contractor [sic] certified under Part I of the code are not employees for tax purposes.
37. It is interesting to note that the contractors at issue in DHL Express Canada Ltd. were assigned a dedicated route. Mr. Fontaine operated off a call board in the downtown area of Winnipeg taking calls as they came in, or not. It would seem the assigned route is a greater control factor than Mr. Fontaine’s situation.
38. Like the Appellant, the DHL Express Canada Ltd. Collective Agreement requires that independent contractors provide their own vehicles and insure their own vehicles.
39. The nature of DHL Express Canada Ltd. business dictated the service level. For instance, packages had to be delivered by 9:00 a.m. That in our view, is not much different than Mr. Fontaine’s situation where he must get a package from A to B within a certain time window. It is that certain time window that the customer is paying for.
40. Like DHL Express Canada Ltd., the Appellant provides independent contractors, like Mr. Fontaine, with the opportunity if they wish under the Collective Agreement to have replacement drivers. The purpose of course, is to allow the independent contractors to keep their vehicle working – when the Owner Operator does not want to provide the service. There is, however, no indication that Mr. Fontaine ever took advantage of this part of the Collective Agreement – although other the Appellant independent contractors has [sic].
41. The DHL Express Canada Ltd. driver had to provide a route sheet giving details of the delivery, pickup, weight etc. Mr. Fontaine has to provide a bill of lading with similar information.
42. The DHL Express Canada Ltd. case acknowledges that DHL Express Canada Ltd. had some control over the independent contractors. For instance packages had to be delivered within certain times – just like the Appellant. However, the Tax Court in DHL Express Canada Ltd. dealt with the control issue by quoting the Federal Court of Appeal in Livreur Plus Inc. vs. Minister of National Revenue 326 NR 123:
“The Court should not confuse control over the result or quality of the work with control over its performance by the worker responsible for doing it . . . It is indeed rare for a person to give out work and not insure that the work is performed in accordance with his or her requirements at the locations agreed upon . . .”
43. Given all the factors stated above, the relationship of Mr. Fontaine and Dynamex had been that on [sic] an independent contractor.
[My emphasis.]
Analysis
Statutory provisions
[14] The relevant provisions for the purpose of deciding the appeals herein are paragraph 5(1)(a) of the Act and subsections 6(1) and 2(1) of the CPP:
5(1) Subject to subsection (2), insurable employment is
(a) employment in Canada by one or more employers, under any express or implied contract of service or apprenticeship, written or oral, whether the earnings of the employed person are received from the employer or some other person and whether the earnings are calculated by time or by the piece, or partly by time and partly by the piece, or otherwise;
6(1) Pensionable employment is
(a) employment in Canada that is not excepted employment;
(b) employment in Canada under Her Majesty in right of Canada that is not excepted employment; or
(c) employment included in pensionable employment by a regulation made under section 7.
2(1) In this Act,
. . .
“employment” means the performance of services under an express or implied contract of service or apprenticeship, and includes the tenure of an office;
[My emphasis.]
Common law principles
[15] To decide if Mr. Fontaine was employed in insurable employment under the Act and pensionable employment for the purposes of the CPP, this Court must determine whether the contract between him and Dynamex was a contract of service or a contract for services. If it was the latter, Mr. Fontaine could not be found to have held either pensionable or insurable employment during the relevant period while working for Dynamex. Given that neither act defines what a contract of service is, it is necessary to refer to concepts of the law of property and civil rights of the province where the contract was entered into in order to determine whether or not it was a contract of service.[9] Here, the Fontaine contract was governed by the laws of Manitoba pursuant to section 28 of that contract (reproduced above) given that Mr. Fontaine’s services were provided mainly in Winnipeg. It is therefore the common law rules[10] that must govern the determination whether Mr. Fontaine was employed under a contract for services or under a contract of service, even though these appeals were heard in Quebec City.
[16] The two leading cases dealing with the distinction between these two kinds of contracts are 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983 (Sagaz), a decision of the Supreme Court of Canada, and Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553 (Wiebe Door), a decision of the Federal Court of Appeal. The Supreme Court of Canada stated that there is no one conclusive test which can be universally applied to make the determination. The key passage of the Supreme Court’s pronouncement on this point is at paragraphs 47 and 48:
47 . . . 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.
[My emphasis.]
[17] One of the limitations of the approach adopted by the Supreme Court of Canada in Sagaz and the Federal Court of Appeal in Wiebe Door is that it focuses on the distinction between employee status and independent contractor status without defining the essence of an employment relationship. However, I found enlightening the following analysis in Employment in Canada.[11] The author refers to the English decision Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance, [1968] 2 Q.B. 497,[12] in which MacKenna attempts to better define what an employment relationship is:
2.13 . . . His Lordship stated that there are three necessary conditions for the existence of an employment relationship. First, there must be a wage or remuneration paid by the employer because, without consideration, there could be no contract of any kind, and the servant “must be obliged o provide his own work and skill”.
2.14 Second, the employer must exercise a sufficient degree of control over the essential incidents of the parties’ relationship as follows:
Control includes the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it, the time when and the place where it shall be done. All theses aspects of control must be considered in deciding whether the right exists in a sufficient degree to make one party the master and the other his servant. The right need not be unrestricted.
2.15 The prerequisite that the employer must exercise a sufficiently high degree of control over the worker (the modern law emphasizes control in the sense of directing the residual “when and where” employment is carried on rather than the manner in which the job is done, as was the case in the previous century) reflects a fundamental truth about the nature of the employment relationship that the courts have long sought to reflect in their determinations of “employee” status and to defend in their formulation of the employee’s implied duty of fidelity. The truth is that there is more to the employment contract than an economic exchange of work for remuneration. Rather, given employer’s need for flexibility in deploying its labour force in the dynamic economic and technological environment of the workplace, the primary “consideration” for which the employer bargains is the right of command, the power to direct the worker to suit the changing needs of the labour process. Since the hallmark of the employment relationship in the social sense is subordination, it makes sense for the courts to make subordination its legal hallmark too, and this is exactly what they have done. Nevertheless, it appears that a relatively low level of control will pass the threshold for “employee” status if it is clearly harmonious with the broader policy goals of the legislation that the worker in question qualify as an employee.
2.16 Two recent decisions involving the alleged wrongful dismissal of salesmen are illustrative. In the first, a real estate salesman was held to be an employee despite the fact that he had considerable freedom to set his own working hours, was paid entirely by commission and declared himself as “self-employed” for income tax purposes. This is because he was subject to “substantial control” by the company in several ways: he was bound by company policy regarding discipline and dismissal; he used the company’s office and secretarial services according to prescribed policies; he was covered by the company’s fringe benefit package; and he was eligible for promotion in the company hierarchy. In the second case, a worker who incorporated his own company and sold advertising for a broadcasting station was held to be an “employee” because he was subject to close direction and supervision by the station over his working hours, which clients he was to service, the number of clients he could meet each day, how he should present the station’s offerings to clients and even the sort of business lunches he could order on his expense account.
2.17 The third requirement for “employee” status, according to Mckenna [sic] J. in Ready Mixed Concrete, is that the other provisions of the contract must be consistent with its being a contract of service.
. . .
2.19 What, then, are the “economic realities” which will point to the relationship being characterized as either “employee” status or “independent contractor” status? The most comprehensive recent attempt by a C