La Scala Conservatory of Music II v. M.N.R.

La Scala Conservatory of Music II v. M.N.R.
Court (s) Database
Tax Court of Canada Judgments
Date
2013-05-06
Neutral citation
2013 TCC 122
File numbers
2010-2539(EI)
Judges and Taxing Officers
David E. Graham
Subjects
Employment Insurance Act
Decision Content
Docket: 2010-2539(EI)
BETWEEN:
LA SCALA CONSERVATORY OF MUSIC II,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
____________________________________________________________________
Appeal heard together on common evidence with the appeal of
La Scala Conservatory of Music II, 2010-2540(CPP)
on January 19, 2011, October 3, 4, 5, 6 and 7, 2011
and on March 18, 19 and 20, 2013, at Toronto, Ontario.
The Honourable Justice David E. Graham
Appearances:
Agents for the Appellant:
Maria Piperni and Mauro Piperni
Counsel for the Respondent:
Alisa Apostle and Christopher Bartlett
____________________________________________________________________
JUDGMENT
The Appeal is allowed and the matter is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that:
(a) Ashley Hilmarson was not engaged in insurable employment in 2008 and 2009;
(b) Candice Hilmarson was not engaged in insurable employment in 2009;
(c) Robert Paul Jacobs was not engaged in insurable employment in 2008 and 2009;
(d) Michael Watson was not engaged in insurable employment in 2008 and 2009; and
(e) Robert Simpson was not engaged in insurable employment in 2008.
Signed at Ottawa, Canada, this 6th day of May 2013.
“David E. Graham”
Graham J.
Docket: 2010-2540(CPP)
BETWEEN:
LA SCALA CONSERVATORY OF MUSIC II,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
____________________________________________________________________
Appeal heard together on common evidence with the appeal of
La Scala Conservatory of Music II, 2010-2539(EI)
on January 19, 2011, October 3, 4, 5, 6 and 7, 2011
and on March 18, 19 and 20, 2013, at Toronto, Ontario.
The Honourable Justice David E. Graham
Appearances:
Agents for the Appellant:
Maria Piperni and Mauro Piperni
Counsel for the Respondent:
Alisa Apostle and Christopher Bartlett
____________________________________________________________________
JUDGMENT
The Appeal is allowed and the matter is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that:
(a) Robert Paul Jacobs was not engaged in pensionable employment in 2008 and 2009;
(b) Michael Watson was not engaged in pensionable employment in 2008 and 2009; and
(c) Robert Simpson was not engaged in pensionable employment in 2008.
Signed at Ottawa, Canada, this 6th day of May 2013.
“David E. Graham”
Graham J.
Citation: 2013 TCC 122
Date: 20130506
Dockets: 2010-2539(EI)
2010-2540(CPP)
BETWEEN:
LA SCALA CONSERVATORY OF MUSIC II,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Graham J.
[1] The Appellant is a partnership of a husband and wife named Mauro and Maria Piperni. The Appellant operates a music store known as L.A. Music. Throughout the Appeal, the Appellant was simply referred to as L.A. Music.
[2] L.A. Music sells musical instruments to the general public and, at various times in the period in question, also offered music lessons. L.A. Music engaged in various other activities during the period but those activities are not relevant to the Appeal.
[3] The Minister of National Revenue assessed L.A. Music for Employment Insurance premiums and Canada Pension Plan contributions for the period from January 1, 2007 to April 30, 2009 in respect of 19 workers that the Minister concluded were engaged in insurable and pensionable employment under the Employment Insurance Act (“Act”) and the Canada Pension Plan (“Plan”) and a further 4 workers (the sons and daughters of Mauro and Maria) that the Minister concluded were engaged in pensionable employment under the Plan. A list of the 23 workers and the years during the period in question in which they worked is attached as Schedule “A”.
[4] L.A. Music contends that the 23 workers were independent contractors and thus no premiums or contributions were payable and has appealed the assessments on that basis. The sole issue before me is whether the workers were engaged in insurable and pensionable employment in the periods in question.
PROCEDURAL HISTORY
[5] This Appeal was heard over 9 days. The first 6 days of the Appeal were heard by Justice Wyman Webb before his elevation to the Federal Court of Appeal. Following Justice Webb’s elevation, L.A. Music was given the choice of starting the trial over with a new judge or continuing the trial with a new judge who had read the transcripts of the first 6 days of hearing. L.A. Music elected to continue the trial with a new judge who had read the transcripts. Accordingly, I reviewed the transcripts of the first 6 days of hearing in detail and presided over the remaining 3 days of trial.
LAW
[6] In its very recent decision in 1392644 Ontario Inc. v. M.N.R., 2013 FCA 85, [2013] F.C.J. No. 327, (“Connor Homes”), the Federal Court of Appeal clarified the test that is to be applied in determining whether a worker is an employee or an independent contractor. Prior to this decision, there had been some confusion in the jurisprudence whether the intention of the parties was to be considered before or after applying what is commonly referred to as the Wiebe Door analysis[1]. At paragraphs 39 to 42 of Connor Homes, the Court stated that the correct test to be applied is a two-step test:
[39] Under the first step, the subjective intent of each party to the relationship must be ascertained. This can be determined either by the written contractual relationship the parties have entered into or by the actual behaviour of each party, such as invoices for services rendered, registration for GST purposes and income tax filings as an independent contractor.
[40] The second step is to ascertain whether an objective reality sustains the subjective intent of the parties. As noted by Sharlow J.A. in TBT Personnel Services Inc. v. Canada, 2011 FCA 256, 422 N.R. 366 at para. 9, “it is also necessary to consider the Wiebe Door factors to determine whether the facts are consistent with the parties’ expressed intention.” In other words, the subjective intent of the parties cannot trump the reality of the relationship as ascertained through objective facts. In this second step, the parties [sic] intent as well as the terms of the contract may also be taken into account since they colors [sic] the relationship. As noted in Royal Winnipeg Ballet at para. 64, the relevant factors must be considered “in the light of” the parties’ intent. However, that being stated, the second step is an analysis of the pertinent facts for the purpose of determining whether the test set out in Wiebe Door and Sagaz has been in fact met, i.e. whether the legal effect of the relationship the parties have established is one of independent contractor or of employer-employee.
[41] The central question at issue remains whether the person who has been engaged to perform the services is, in actual fact, performing them as a person in business on his own account. As stated in both Wiebe Door and Sagaz, in making this determination no particular factor is dominant and there is no set formula. The factors to consider will thus vary with the circumstances. Nevertheless, the specific factors discussed in Wiebe Door and Sagaz will usually be relevant, such as the level of control over the worker’s activities, whether the worker provides his own equipment, hires his helpers, manages and assumes financial risks, and has an opportunity of profit in the performance of his tasks.
The application of the test
[42] … The first step of the analysis should always be to determine at the outset the intent of the parties and then, using the prism of that intent, determining in a second step whether the parties’ relationship, as reflected in objective reality, is one of employer-employee or of independent contractor. …
[7] Based on the foregoing, I will first examine the parties’ intention and then consider whether the reality of their relationship was consistent with that intention using the Wiebe Door factors as set out in paragraph 41 of Connor Homes.
WITNESSES
[8] A total of 11 witnesses testified.
[9] Michael Watson testified for L.A. Music. He is a retired CRA employee who worked for L.A. Music during the relevant period and continues to work there. He is clearly knowledgeable about the differences between employees and independent contractors. As an ongoing worker at L.A. Music, he had a reason to support L.A. Music. In my view, his knowledge of the law and his desire to support L.A. Music caused him to embellish his testimony where he felt it would benefit L.A. Music. For that reason, where his testimony conflicts with the testimony of other, more reliable witnesses, I have preferred the evidence of those witnesses over his.
[10] Kevin Pooler testified for L.A. Music. I found him to be the most reliable of all of the witnesses. He appeared to answer questions honestly with no attempt to tailor his evidence to a specific outcome.
[11] Mark Rudyj testified for L.A. Music. He was terminated by L.A. Music during the period in question and clearly still bears a grudge against L.A. Music. In my view, his grudge caused him to slant his testimony in favour of the Respondent. For that reason, where his testimony conflicts with the testimony of other, more reliable witnesses, I have preferred the evidence of those witnesses over his.
[12] Robert Paul Jacobs (known as Paul Jacobs and referred to as such herein) testified for L.A. Music. I found him to be a reliable witness.
[13] Dragan Petrovic testified for L.A. Music. I found him to be a reliable witness. While he clearly had a strong view about his status as an independent contractor, I do not feel he made any attempt to slant his testimony to support that outcome.
[14] Victor Miolla testified for L.A. Music. I did not find him to be a reliable witness. Despite repeated objections from counsel for the Respondent and repeated warnings from Justice Webb, Maria Piperni asked leading questions on direct examination to many of L.A. Music’s witnesses. I found those leading questions to be particularly prevalent during her direct examination of Victor Miolla. Victor continues to work with L.A. Music today and thus had an evident willingness to be lead by Maria. Except where noted, I have essentially disregarded Victor’s testimony.
[15] Maria Piperni testified on her own behalf. I found that Maria frequently exaggerated evidence where she felt that doing so would benefit her case and was on occasion evasive. For this reason, where Maria’s evidence is contradicted by evidence of other workers I have generally preferred the evidence of the other workers and, in some circumstances, I have simply not accepted Maria’s evidence.
[16] Mauro Piperni testified on his own behalf. There were numerous occasions where he was lead by Maria Piperni in direct examination. I have given less weight to his evidence in those circumstances. Like Maria, Mauro tended to exaggerate evidence and thus there are a number of circumstances where I have preferred the evidence of other witnesses over that of Mauro or have simply not accepted Mauro’s evidence.
[17] Antonio Moreira testified for the Respondent. I found him to be a reliable witness. Despite the fact that he was terminated by L.A. Music sometime after the period in question and clearly dislikes the Piperni’s, I found that he answered questions posed to him in a straightforward manner with little attempt to slant his evidence against L.A. Music. While his recollection of dates was weak, I found it to be as a result of the passage of time rather than any desire to mislead the Court. My confidence in his testimony is strengthened by the fact that his evidence was generally consistent with that of Kevin Pooler who I found to be a very reliable witness.
[18] Robert Simpson testified for the Respondent. He choose to stop working for L.A. Music during the period in question but, at the time of his testimony, was actively seeking to start working for them again. As a result, he had a clear motivation to please Maria and Mauro. This desire to please was evident in his answers when he was being cross-examined by Maria. Despite that, I found his testimony to be generally reliable.
[19] Riley O’Connor testified for the Respondent. I found him to be a reliable witness. Despite the fact that he views himself as having been terminated by L.A. Music sometime after the period in question and clearly holds a grudge against L.A. Music, he did not appear to slant his testimony as a result.
[20] Despite numerous objections from counsel for the Respondent and repeated warnings from Justice Webb, both Maria and Mauro continued to attempt to put facts in evidence through the questions that they were asking witnesses. I have not considered any such “facts” to be evidence.
ANALYSIS
[21] For simplicity, I will break my analysis of the 23 workers down into two groups: workers who were members of the extended Piperni family (i.e. the Piperni’s and the Hilmarson’s) and workers who were not.
Non-Family Workers
Intention
[22] The first step in Connor Homes is to examine the parties’ intentions.
[23] There is no question that L.A. Music’s intention was that each of its workers be independent contractors. The question is whether that intention was shared by the workers. Michael Watson, Paul Jacobs, Dragan Petrovic and Robert Simpson all intended to be independent contractors from the time that their work with L.A. Music began. The intentions of the other workers are less clear.
[24] L.A. Music entered into written contracts with its non-family workers[2]. A sample contract between L.A. Music and Michael Watson is duplicated in Schedule “B”. The written contracts were essentially identical. The only significant exceptions were the name of the worker and the description of the skills that the worker possessed that were set out in subsections 1(2) and 1(4) of the written contract.
[25] Maria prepared the written contracts using some samples that she found on the internet. The contracts were prepared in 2008 after the CRA began auditing L.A. Music. They were clearly an attempt by L.A. Music to provide the CRA with written proof of the parties’ intentions and to document those intentions going forward.
[26] Workers who were already working at L.A. Music prior to the audit under oral contracts were asked to sign the written contracts. Workers who began work with L.A. Music after the audit commenced signed the written contracts at approximately the same time as they commenced work. In a number of cases the written contracts were backdated to give the impression that they had been signed when the worker started with L.A. Music.
[27] Despite L.A. Music’s assertions to the contrary, I find that the written contracts do not represent the actual terms of L.A. Music’s contractual agreement with any of the workers.
(a) Subsection 1(6) of the written contract states that the workers “will be available to teach lessons, classes, and clinics on a need basis.” The only workers who actually taught lessons were Michael Dorosz and Riley O’Connor. There was no evidence that any of the other workers ever taught lessons at L.A. Music. With the exception of Riley O’Connor, none of the workers who testified indicated that they believed teaching was part of what they had contracted to do. In fact Dragan Petrovic testified that he was asked to teach and refused to do so.
(b) Section 3 of the written contract states that the workers “will carry liability insurance relative to any service that he or she performs” for L.A. Music. None of the workers who testified carried such insurance nor was L.A. Music able to provide an example of any worker who had carried such insurance.
(c) Section 4 of the written contract purported to deal with compensation. The workers who testified made it clear that the daily or hourly rate that they were paid was something that was negotiated up front yet the written contract simply states that “L.A. MUSIC shall award the Independent Consultant the amount As [sic] agreed to by both parties, awarded at the end of each period of service.” The rate of pay is not specified nor is there any mention of L.A. Music’s bonus system. I accept that the rate of pay and timing of payment differed from worker to worker and thus that it may have been more convenient for L.A. Music to describe the compensation in general terms such as these. However, I do not accept that either party would have signed a contract on such vague terms if their true intention had been to accurately document the terms of their relationship as opposed to simply creating a piece of paper to show to the CRA.
(d) Each worker who testified made it clear that the hours and days that they worked and their ability to choose not to work on a given day was something that was negotiated up front and that was very important to them. Yet the written contract is completely silent in this respect.
[28] Maria explained that the above inconsistencies were due to the fact that she was not legally trained and that she had pieced together the contract from the internet. While I accept that that is the case, I am not prepared to simply ignore the inconsistencies in the written contract but still accept that it accurately represents the parties’ intention that the workers are to be independent contractors. Either the written contract is a full and accurate representation of the parties’ agreement or it is window dressing. Accordingly, I give no weight to the terms of the written contracts in assessing the parties’ intentions.
[29] While I do not accept that the written contract reflects the terms of the agreement between L.A. Music and the workers who signed the contracts, I do accept that the fact that a given worker signed the written contract could be evidence of an ongoing intention on the part of the worker to be an independent contractor. In other words, I accept that a worker who wanted to be an independent contractor may have been prepared to sign a written contract that purported to support that intention regardless of the contents of the rest of the contract. In order to make this determination, I would need to look at the circumstances under which each worker signed the contract.
[30] There was conflicting testimony regarding the circumstances in which the written contracts were signed.
(a) Kevin Pooler testified that the contract was presented to him by L.A. Music sometime after he started working and he was told that it was something that he needed to sign. He took it home and reviewed it before signing it. He did not feel that he had any choice but to sign it. While he was not explicitly told that he would lose his job if he did not sign the contract, he believed that he would.
(b) Antonio Moreira testified that he signed the contract because he needed the work.
(c) Mark Rudyj testified that Mauro’s and Maria’s son, Michael Piperni, told him that if he did not sign the contract he would not be paid for the work he had already done. While I accept that Mr. Rudyj felt pressured to sign the contract and that that pressure came from Michael Piperni, I do not accept that he was threatened in the manner described. No other worker testified that he had been threatened in this manner. In addition, cheating a worker out of pay for work that he had already done appears to be completely inconsistent with the type of environment which I accept that L.A. Music was trying to create for its workers. As explained above, where Mr. Rudyj’s testimony conflicts with the testimony of other workers, I prefer the testimony of the other workers as he clearly bears a grudge against L.A. Music.
(d) Riley O’Connor testified that he signed the contract because he was afraid that he would lose his job and because he was afraid of what the CRA might do if they audited him.
(e) Paul Jacobs testified that he was given the contract and told to read it over. He took it to his accountant to review before he signed it. He did not make any changes to it.
(f) Dragan Petrovic testified that he reviewed the contract with his lawyer before signing it because his understanding of contractual English is not strong. He stated that he did not feel pressured to sign the contract and felt that he could have had a term changed if he had wanted to.
(g) Robert Simpson testified that he was told that the contract needed to be signed to support L.A. Music’s dispute with the CRA. He stated that he did negotiate to have the word “liability” removed from the insurance provision. This is the only evidence that was presented of any worker actually negotiating a term of the contract.
(h) Michael Watson testified that everything in his contract was negotiated and discussed before he signed it. He stated[3]:
… In the sense that this contract was the subject of negotiated discussions, everything in here was something that we discussed before the contract was drawn up. This simply formalizes a discussion or a negotiated process that we went through.
I do not accept Mr. Watson’s evidence. I find it extremely unlikely that Mr. Watson would negotiate and discuss each clause only to end up signing a contract that was essentially identical to the contract signed by everyone else and which actually did not reflect the terms of his agreement. This is a key example of the way in which Mr. Watson embellished his testimony in an attempt to favour a finding that he was an independent contractor. That said, while I do not find him to have been a credible witness on this point, I still accept that the reason that he signed the contract was to evidence his ongoing intention to be an independent contractor.
(i) Maria testified that she gave each worker the choice of whether to sign the contract and continue as an independent contractor or to become an employee. While I accept that she gave that choice to some of the workers, I do not believe that she gave it to all of them as the workers’ testimonies do not support that fact. Maria asserted that no workers were pressured to sign the contract. I do not accept her testimony on that point. Given the testimony of the other workers, I cannot believe that there was not some level of pressure exerted.
[31] In summary, it is clear to me from the above testimony that those workers who clearly wanted to be independent contractors (i.e. Michael Watson, Paul Jacobs, Dragan Petrovic and Robert Simpson) felt they were under no pressure to sign the contract and everyone else felt as if they had no choice. As I have not accepted Maria’s testimony on this issue, I have no evidence on which to assess the circumstances in which the non-family workers who did not testify signed the contract. Given the conflicting evidence that I have heard from the witnesses who testified, I am not prepared to draw any conclusions as to the remaining non-family workers’ intentions from the fact that they signed the written contract.
[32] The parties spent a great deal of time examining whether the workers fully understood what it meant to be an independent contractor. There was a lot of testimony about discussions that Maria may or may not have had with workers about the distinction between employees and independent contractors and the benefits of being one or the other before they signed the contracts[4]. In my view, nothing turns on this. To the extent that the workers’ understanding of the distinction is relevant, it would be their understanding at the time they began working, not the time they signed the contracts. The evidence from the remaining workers who testified indicates that while they were all clearly hired as independent contractors they did not feel that that was the true nature of their relationship with L.A. Music[5].
(a) Kevin Pooler testified that he felt he was working for L.A. Music nine-to-five and running his own recording business on the side.
(b) Antonio Moreira testified that he felt he was an employee.
(c) Riley O’Connor testified that he felt he was an employee both when he started working at L.A. Music and when he signed the contract. He stated that he did contract work in other aspects of his life and that his 3 years with L.A. Music did not feel like contract work.
(d) Mark Rudyj testified that he never felt he was an independent contractor. As set out above, I feel that Mr. Rudyj was slanting his testimony against L.A. Music. I do not therefore completely accept his statement but I am prepared to accept that he was at least unsure of his status.
[33] Given this testimony, I find that Kevin Pooler, Antonio Moreira, Riley O’Connor, Mark Rudyj and Victor Miolla did not intend to be independent contractors.
[34] The Respondent did not make an assumption of fact regarding the intentions of the workers. Maria and Mauro testified that the remaining workers intended to be independent contractors. However, they said the same thing about the above workers. In light of the above evidence which contradicts Maria’s and Mauro’s evidence, I am not prepared to accept that the workers about whom I have no other evidence intended to be independent contractors based simply on the fact that they accepted the job on that basis.
[35] In conclusion, I find that the only non-family workers who shared a common intention with L.A. Music as to the nature of their relationship are Michael Watson, Paul Jacobs, Dragan Petrovic and Robert Simpson. Thus, for those four workers following the test set out in Connor Homes, I must consider whether the objective reality supports their subjective intention. For the remaining non-family workers, I must simply consider whether the objective reality indicates that they were independent contractors or employees.
[36] I will apply the Connor Homes test to each worker individually. However, because much of the evidence relating to the objective relationship is common to all of the workers, I will first review that evidence, I will then use that evidence when examining the particular circumstances of each worker in light of their intentions or lack thereof.
Control
[37] During the period in question, L.A. Music initially operated two stores. Sometime in 2008, they closed the second store. The store that was closed had previously conducted some sales and was home to L.A. Music’s rental business. The rental business is not relevant to the issues before me as none of the workers were involved in it. I heard almost no testimony about the physical layout of the store that was closed down. Substantially, all of the evidence was focused on the remaining store.
[38] The remaining store consisted of approximately 12,000 square feet spread out over 3 floors and a basement area. Sales occurred on the first and third floors. The store was a converted office space and, despite renovations, it kept the feel of a number of separate spaces with a central lobby on each floor. Thus the drums department, for example, was not part of a large open store but rather occupied a self-contained space off the central lobby on the third floor. The first floor contained an acoustic guitar room and the electric guitar department. The second floor was used for music lessons and also held some office space that was rented out to third parties. The lessons were run by L.A. Music during part of the period in question and by a third party during the remainder of the period. The third floor contained the keyboards, drum and pro audio[6] departments. The basement was used for storage and inventory.
[39] L.A. Music operated its store in what appears to be a relatively unique manner in the local industry. L.A. Music hired salespeople who were highly skilled at playing one or more instruments or, in the case of the pro audio area, highly skilled in the programming and operation of the relevant equipment. All of the salespeople came to L.A. Music with a pre-existing intimate knowledge of the instruments, equipment and/or software in their given area of expertise. The salespeople were passionate about their area of expertise outside of work and they brought that passion with them to work. Sales to customers were made, not by pressuring the customer to purchase a given instrument, but rather by having these highly proficient salespeople demonstrate their skills on various instruments or equipment in order to inspire a customer to buy that instrument or equipment. If one walked into L.A. Music’s store on a given day, it would not be unusual to come across one or more of its salespeople giving impromptu performances in order to inspire the customers.
[40] L.A. Music’s strategy was to find workers with the skills necessary to inspire customers and then to set those workers loose in the relevant department to see how they performed as salespeople. The workers did not receive training. They came to the job with the necessary musical skills. They were not trained in either sales techniques or, in the case of the workers who also taught music lessons, teaching techniques. This argues in favour of an independent contractor relationship.
[41] There was a great deal of testimony concerning the flexibility that the workers enjoyed in their working hours and days. It was clear that the flexibility that the workers enjoyed was one of the primary reasons that the workers chose to work at L.A. Music and one of the primary reasons that L.A. Music was able to attract and retain workers.
[42] When a potential worker first met with L.A. Music, he or she would negotiate the days and hours that he or she would work. Most workers agreed to work from store opening until store closing on whatever day they worked but some negotiated a later start or an earlier end to their day due to other commitments. Mauro characterized this flexibility in setting the initial days and hours to be worked as being indicative of an independent contractor relationship. I do not agree. This level of flexibility would equally be present when an employee applied to work part-time for an employer who had a variety of available shifts.
[43] However, what was unusual about L.A. Music’s relationship with its workers was that its workers could, and frequently did, simply advise L.A. Music that they would not be coming to work for some or all of a given day or days. The workers were not required to ask permission to be absent[7]. It was essential that L.A. Music offer this level of flexibility to its workers in order to attract the type of talent that they wanted. For the vast majority of the workers, this flexibility was the primary reason that they were at L.A. Music rather than another music store. The workers were musicians or technicians first and salespeople second or even third. All of the workers had outside musical interests which could unexpectedly require their attention and which were a higher priority for them than their L.A. Music work. For example, many of the workers played in bands. If the opportunity for a gig arose unexpectedly, it was understood that the workers would simply advise L.A. Music that they would not be available to work. The same was true for vacations. If workers wanted to take a vacation, they simply advised L.A. Music of the days that they would be absent. While there was an expectation that workers who were going to be absent would try to arrange to have another worker from their department cover their shift, the workers were not required to do so. This unusual level of flexibility strongly supports independent contractor status.
[44] Mauro and Maria both testified that workers could simply show up at the store when they wanted to work more days or hours and they would be allowed to work. I do not accept their testimony on that point. Not only does it make no commercial sense, it was also not supported by any of the workers who testified and was, in fact, contradicted by a number of them. I find that if workers wanted to increase, decrease or change their working days and hours, they had to negotiate that with L.A. Music. However, this ability to negotiate is not indicative of an independent contractor relationship. This same level of flexibility to negotiate changes would equally be present for a part-time employee.
[45] Subject to workers advising L.A. Music that they would be absent for part of a day, the workers’ hours of work were fixed. However, I do not think that these fixed hours suggest an employment relationship. The fixed hours were generally the hours that the store was open. L.A. Music needed workers to sell equipment during its store hours. It was not interested in having workers work at midnight.
[46] Generally speaking, the work was done at L.A. Music’s store[8]. The fact that the location of the work was determined by L.A. Music does not argue for either independent contractor or employee status. L.A. Music was a retail business operating out of a fixed location. It needed its workers to sell equipment at its store.
[47] All of the salespeople were required to demonstrate and sell instruments, equipment and related accessories and to help customers with any questions or problems that they had. However, some of the salespeople had additional duties[9]. In my view, there were 2 categories of salespeople. The first category of salespeople was those whose job was purely to sell instruments and equipment and to help customers with questions or problems. I will describe this category as the “pure salespeople”. The second category of salespeople was those who, in addition to sales, were required to perform a range of other duties more closely related to the general operations of the store such as unloading deliveries, moving inventory, setting up displays, pricing products, updating pricing on the L.A. Music website and cleaning. I will describe this category as the “sales workers”. The narrow duties of the pure salespeople indicate neither employee nor independent contractor status. However, the more general duties of the sales workers are more consistent with an employment relationship.
[48] There was conflicting evidence regarding whether the workers were supervised or not. For the reasons set out in more detail under my analysis of the relationship of Michael Piperni and Maria’s and Mauro’s other son, Rob Piperni, with L.A. Music, I find that Michael Piperni and Rob Piperni were supervisors at L.A. Music. I also find that Mauro and Maria acted in a supervisory capacity.
[49] There does not appear to have been much in the way of supervision of the actual sales activities. In fact, this appears to have been intentional on L.A. Music’s part as it was L.A. Music’s belief that creative personalities do not thrive in controlling environments. No one was looking over the workers’ shoulders telling them how to sell. However, L.A. Music had sales policies which the workers had to follow. Those policies governed such things as customer relations, refund policies, exchange policies, returns policies and discounts. As it would be normal for a company hiring workers to set parameters within which the work was to be performed, I find these policies do not point towards either independent contractor or employee status.
[50] The only supervision in the sales process occurred when a customer asked a worker if they could have a discount. In this case the worker was required to seek approval from a supervisor[10]. I do not view the simple need to seek approval in that circumstance as being indicative of an employment relationship.
[51] Based on the foregoing, I conclude that the pure salespeople had little supervision. By contrast, the presence of supervision was more noticeable for the types of duties performed by the sales workers. Workers who I would classify as sales workers described themselves as being told by a supervisor to perform various activities and as feeling that they had no choice but to do so. This is indicative of an employment relationship.
[52] Salespeople who were also teachers were not supervised in their teaching duties. They were told when and where to teach but not how. That said, one does not expect a high level of supervision of a teacher regardless whether he or she is an employee or an independent contractor.
[53] Workers did not receive sick days or vacation pay. This is consistent with an independent contractor relationship.
[54] Workers were not prohibited from working for competitors in the retail music business although there was no evidence that any of the salespeople actually did so. There was evidence that a number of the workers were involved in bands or other music related businesses on their own time. I do not consider these activities to be in competition to L.A. Music’s business. Some workers competed with L.A. Music’s music lessons by offering their own lessons. Paul Jacobs was in the process of opening his own music store (albeit far enough away from L.A. Music that it would not compete directly with them) while he was working at L.A. Music. Overall, the fact that the workers could compete and, in the case of lessons, did compete argues in favour of independent contractor status.
[55] The workers were permitted to give their names and contact information to customers who might be interested in hiring them outside of L.A. Music to provide certain services. For example, Kevin Pooler testified that he would give his contact information to customers who might be interested in his recording services. Riley O’Connor also testified that he gave customers his contact information for his personal music instruction business. This factor argues in favour of independent contractor status.
[56] The frequency with which workers were paid varied from worker to worker and was set at the discretion of the worker. Most workers were paid weekly. Some were paid every two weeks and others monthly. Regardless of the frequency of payment, the workers were paid on the last day of the pay period for all work performed up to and including that day. The variation in the frequency of payment argues slightly in favour of independent contractor status but the fact that payment was made immediately at the end of the period for all work up to the end of the period is more typical of an employment relationship. Therefore, overall, I consider this factor neutral.
[57] Prior to the CRA audit, the workers did not issue invoices. Sometime after the audit commenced, L.A. Music informed the workers that they would not be paid if they did not issue written invoices. The decision to require invoices was clearly motivated by a desire to create documents that supported an independent contractor relationship. Thus I attach no weight to the actual physical invoices. Prior to the audit, workers simply kept track of the number of days they had worked and the number of bonuses that they had earned and advised L.A. Music orally how much money was owed to them. There was no formal method employed by L.A. Music to track workers’ days or sales. Maria testified that the operation was small enough that they just knew who had worked when, what they had sold and what they were owed. Overall, I do not find the presence or lack of invoices useful in determining the workers’ status.
[58] Some of the above factors indicate that the workers were independent contractors. Others indicate that they were employees. In my view the most significant factors are the flexibility that the workers enjoyed in scheduling their work, the duties they performed and the corresponding level of supervision that they were subject to. The remaining factors taken as a whole are effectively neutral. Therefore, when applying the Connor Homes test to each worker below I will focus primarily on the issues of flexibility, duties and supervision.
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[59] The Respondent submitted that the store itself, the inve