http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/180173/index.do
Sistema Toronto Academy Inc. v. M.N.R. (September 8, 2016 – 2016 TCC 193, Paris J.).
Précis: The taxpayer was a non-profit organization that provided after school music education to disadvantaged students. It hired professional musicians to provide that education. This issue was whether those musicians were independent contractors or employees. Applying the well know tests of intention, control, tools, chance or profit/risk of loss and sub-delegation the Court held that the workers were engaged in pensionable and insurable employment and confirmed the Minister’s decision.
Decision: The intention test pointed in the direction of the status of an employee:
[19] With respect to Ms. Jacot, I am unable to conclude that she intended to perform her duties for the Appellant under a contract for services. The evidence shows that she did not sign the revised engagement letter because she wanted to be an employee. Her expressed intention and the engagement letter she signed when she began with the Appellant overwhelmingly point to an intention to work as an employee.
[20] I am also of the view that there is insufficient evidence that the remaining Instructors, (Chitty, Hambleton, Lee and Hidalgo,) intended to work as independent contractors for the Appellant prior to the execution of the new engagement letters in January 2014. Their acquiescence to having no source deductions made is not convincing evidence of their intention, especially in light of the terms of the original engagement letter they signed, which clearly sets out an employment relationship. Also, I do not accept that the signing of the revised engagement letter in January 2014 amounted to a retroactive acceptance of the status of independent contractor, especially since the letter itself indicates that it was to become effective on the date it was signed.
[21] For the period after January 2014, I find that Chitty, Hambleton, Lee and Hidalgo all intended to perform their work for the Appellant as independent contractors, based on the execution of the revised engagement letter. This evidence was not challenged by the Respondent.
The same was true of the control test, notwithstanding the fact that each of the instructors was a highly trained professional:
[37] The finding that the Appellant retained the right to supervise and control the Instructors’ work performance is also supported by the terms of the engagement letter, as it read both before and after January 2014. In particular, the Appendix A to the letter lists the duties of the Instructors, as follows:
APPENDIX A – GENERAL DESCRIPTION OF DUTIES
Your duties will be those determined by the Academy from time to time and may include:
(a) To be “a (Insert instrument) Teacher” for the Academy Toronto program in Toronto, Ontario, teaching beginner, intermediate and senior level children, as required from time to time.
(b) To prepare, in consultation with the program’s Artistic Director and Coordinator, lesson plans and teaching schedules that deliver the core elements of the offered program.
(c) To demonstrate/play musical examples as required.
(d) To follow established policies and procedures, including policies and procedures with respect to issues as abuse, harassment, bullying, and health and safety.
(e) To report each week and submit total weekly hours worked to the Teaching Coordinator or Executive Director.
(f) Generally, to mentor and care for children who may be vulnerable or at-risk.
Your non-teaching duties may include assisting in public relations functions to increase the recognition and appreciation of the Academy. These duties may include appearances as a performer in both solo and ensemble capacities.
[38] This description of duties is indicative of an ongoing level of supervision and control that is more consistent with a contract of service than that of an independent contract relationship.
[39] While the Appellant’s counsel is correct in pointing out that the Instructors were highly trained in their field, this factor was also present in two similar cases involving music instructors whom the Court determined to be employees: Lippert Music Centre Inc. v. M.N.R., 2014 TCC 170, and Menoudakis v. M.N.R., 2015 TCC 248. The level of expertise of a worker is only one factor to be considered in assessing the level of control retained by the party for whom the work is performed.
The “tools” test was largely inconclusive:
[43] In summary, few tools were used by the Instructors in the course of their work. Given that for the majority of the periods under review the Appellant and the Instructors both provided musical instruments used by the Instructors, this test is inconclusive as to whether the Instructors were employees or independent contractors.
The remaining factors pointed to an employment relationship:
(3) Chance of profit and degree of risk taken
[44] The Instructors were paid a fixed amount of $50 per hour of instruction. The only opportunity they had to increase their earnings was by working more hours. Therefore, they did not have the chance of making a profit in the way that is normally the case for an independent contractor (see: City Water International Inc. v. M.N.R 2006 FCA 350 at para 24).
[45] Nor did the Instructors have any risk of loss. They were not required to incur any material expenses in the course of providing instruction. Of note as well, the Appellant had insurance that covered the Instructors, and the cost of such insurance was borne by the Appellant.
[46] These factors also support the position that the Instructors were employees.
(4) Other factors
[47] Other relevant factors are: whether the Instructors hired their own helpers and the degree of responsibility for investment and management held by the Instructors. There was no evidence to show that the Instructors ever hired assistants or that they had any investment or management responsibilities with the Appellant. These factors therefore also support the finding that the Instructors were employees of the Appellant.
As a result the appeals were dismissed:
[48] A weighing of all of the relevant factors leads me to conclude that the Instructors were employed under contracts of service during the relevant periods and did not perform the services as persons in business on their own account.
[49] To the extent that the Appellant and Ms. Chitty, Ms. Hambleton, Ms. Lee and Mr. Hidalgo shared a common intention that they work as independent contractors after January 2014, this intention is not consistent with the objective reality of the terms and conditions of the work relationship.
[50] For all of these reasons, the appeals are dismissed.