Finds no evidence to support self-employed claim; allows Crown cross-appeal to proceed
An Ontario personnel service must pay CPP and EI premiums for 53 truck drivers hired to haul steel in Ontario and Quebec, while a cross-appeal by the Crown involving another 39 drivers has been allowed to stand, ruled the Ontario Workplace Safety and Insurance Appeals Tribunal.
Between 2002 and 2004, TBT Personnel Services Inc. contracted 96 drivers to provide trucking services to another firm. The tax department assessed premiums against the company on the basis the drivers were employees, not independent contractors. The company requested a review.
At a Tax Court of Canada hearing, company owner Tony Santos testified he considered all of the drivers to be self-employed.
Santos told the court he preferred to hire truck drivers as independent contractors, citing the challenges of hiring specialized drivers in the steel industry. He testified that by hiring drivers as a corporation they could choose their work days and he could send them to different locations.
He said TBT included two clauses in signed written agreements with truck drivers that stipulated the driver represented himself as an independent contractor, and did not want to be engaged as an employee.
Although Santos considered anyone who signed an agreement to be an "incorporated driver," he testified he still hired people who hadn't signed a contract because of the shortage of skilled drivers in the steel hauling industry. Santos said they sometimes offered to be paid as subcontractors, preferring to do their own taxes instead.
Based on this evidence, the tax court judge divided the drivers into two groups: 43 drivers with written agreements and 53 drivers without.
The judge ruled drivers without written evidence of an independent contractor arrangement to be employees of TBT and ordered the company to pay the assessed premiums. The company appealed to the Federal Court of Appeal.
Meanwhile, the Crown appealed the tax court's decision on the remaining 43 drivers which found they were independent contractors.
In making its decision, the federal court turned to the central question in Weibe Door Services Ltd. v. M.N.R. for guidance: whether the person engaged to perform the services "is performing them as a person in a business on his own account."
The company's appeal
The federal court considered the previous evidence of Santos and three truck drivers.
Two of the drivers indicated they considered themselves to be self-employed, despite the fact TBT supplied their trucks, bore the cost of operating the truck or negotiated their fees, since they worked without supervision and acted as their own bosses. A third driver testified he did not sign an agreement but did consider himself to be an employee.
The court ruled Santos' testimony did not establish what the contractual terms and working conditions were for the drivers without a written agreement, and the appeal was denied.
The Crown's cross-appeal
The federal court argued four of the 43 drivers in the Crown's cross-appeal should be dismissed from the appeal. Only two were truly "incorporated" drivers, while two others testified they carried on business on their own account.
That left 39 truck drivers with signed agreements containing the clauses stating the driver believed himself to be an independent contractor with no desire to be an employee of TBT.
The court ruled the factors in Weibe contradicted the intention of the contractor clauses for several reasons. First, drivers did not provide their own trucks or bear any of the costs of running them, nor did they bear any financial risk associated with the investment or operation in the trucks.
The drivers were also not responsible for managing their work beyond what would be expected of an employee. They got their assignments from a dispatcher and even invoices related to their work were prepared by TBT. Finally, the drivers did not negotiate their rates of pay so there was little opportunity for profit.
Against this, the court found two factors in Wiebe to support the drivers' claims to be independent operators. The drivers were not directly supervised and they had the right to substitute another driver at their own cost, subject to certain conditions. However, these considerations were given little weight in the overall picture.
The court ruled that on balance the factors supported the conclusion the drivers who signed agreements with TBT were employees and allowed the Crown's cross-appeal for the remaining 39 drivers.
For more information see:
•TBT Personnel Services Inc. v. Minister of National Revenue, 2011 Carswell Nat 3755 (F.C.A.).
