http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/109432/index.do 
Diamond D Construction Ltd. v. M.N.R. (May 5, 2015 – 2015 TCC 110, C. Miller J.).
Précis: The appellant was in the business of framing houses. Its owner, Mr. Danwich, hired a friend, Mr. Mercia, as a worker. The appellant claimed Mr. Mercia was an independent contractor while Mr. Mercia claimed he was an employee. The Minister sided with Mr. Mercia. The appellant filed both EI and CPP appeals. The Tax Court found that there was insufficient evidence of a mutual intention that Mr. Mercia be an independent contractor. The tools test and the profit/loss test favoured an employee status. The Court further found that Mr. Danwich controlled the work environment. As a result Mr. Mercia was held to be an employee for EI and CPP purposes and the appeal of Diamond D Construction Ltd. was dismissed.
Decision: The Court first looked to the evidence of intention and concluded that it was lacking:
[15] With that introduction, how best, following the jurisprudence, to clarify this very loose arrangement for
EI and
CPP purposes? First, was there any mutual intention that this relationship be one of an independent contractor nature? I find Diamond and Mr. Mercia intended, at the time of Mr. Mercia’s hiring, the following:
- That Mr. Mercia would be paid by the hour.
- That there would be no source deductions.
- That Mr. Mercia would be paid only for time when he actually showed up for work.
- Mr. Mercia would be paid after Diamond was itself paid for a job.
[16] Mr. Mercia’s intention ran no deeper than that. Mr Danwich testified that he explained to Mr. Mercia that as an independent contractor he could set his own hours and “write off stuff”. Mr. Mercia testified he never thought he was running a framing business. I am not satisfied that Mr. Mercia fully appreciated the significance in not having source deductions taken away from his pay.
[17] Given the mutual understanding of the few factors listed above and the divergent views in what that actually meant vis-à-vis the distinction between employment and independent contractor, I find there is insufficient proof of a mutual intention that Mr. Mercia was hired as an independent contractor. This leads to resorting to the traditional analysis of an objective view of the factors of control, ownership of tools, chance of profit and risk of loss and any other relevant factors.
The Court found that Double D provided the major tools for the work and found invoices purporting to charge Mr. Mercia for the use of such tools to be suspect:
[19] Mr. Mercia had some minor tools but it was the Appellant who provided the major tools necessary to do the work. Mr. Danwich claims to have charged Mr. Mercia for renting tools, and produced two invoices in 2012 to that effect. Mr. Mercia had never seen such invoices though did acknowledge the two invoices in 2013 that showed tool rental charges. He testified however that he never actually had to pay such charges. I find Mr. Danwich has attempted to paper an independent contractor arrangement by creating such invoices (and, after the fact, independent contractor agreements). This raises a suspicion in my mind as to the accuracy of such documents and, on balance, I am not prepared to accept that they truly reflect what occurred. I conclude the Appellant owned the major tools necessary for Mr. Mercia to carry out his duties: an arrangement that suggests employment.
Similarly the profit/loss test pointed in the direction of employment:
[21] With respect to chance of profit as an hourly paid worker, Mr. Mercia would earn more if he worked more. This is not what is normally meant by chance of profit. He did not work elsewhere at the same time. He did not quote a fee on a job by job basis. He worked an hour and was paid an hour.
Finally, the control test also suggested that Mr. Mercia was an employee:
[27] Apart from missing work, Mr. Mercia does not appear to have had any control over the working arrangement in which the Appellant set the terms, effectively provided on the job training and remained responsible for the work. Further, I have not been satisfied, on balance, the worker could hire replacement workers but did have to perform the work personally. Diamond has simply not proven, on balance, it had so little control over Mr. Mercia that Mr. Mercia was in business on his own account. He was not.
As a result the appeal was dismissed.
TAGS: Employment Insurance, Insurable Employment, Canada Pension Plan, Pensionable Employment