In Morris Meadows Country Holidays and Seminars Ltd. v. M.N.R. (2014 TCC 191), the Tax Court considered whether certain hospitality workers were employees or independent contractors for the purposes of the Employment Insurance Act and the Canada Pension Plan.
Morris Meadows offered meeting facilities, sleeping facilities and dining facilities. In doing so it hired workers, as required, to perform certain duties such as cleaning, gardening, maintenance, cooking and serving food.
The CRA classified the workers as employees, and assessed the taxpayer for additional CPP contributions and EI premiums. The taxpayer appealed on the basis that the workers were (i) independent contractors or (ii) casual employees not employed for the purposes of Morris Meadows' business.
In respect of the evidence, the Tax Court made this comment on a witness's testimony:
[3] Mr. Morris, the moving force behind Morris Meadows, was the only witness for the Appellant. He was refreshingly forthright in his testimony to the point of offering me work as a cook at Morris Meadows. I declined the offer.
On the issue of the classification of the workers, the Tax Court considered the applicable tests in 671122 Ontario Ltd. v Sagaz Industries Canada Inc. (2001 SCC 59) and 1392644 Ontario Inc. o/a Connor Homes v Minister of National Revenue (2013 FCA 85) (see our previous post on Connor Homes).
In the present case, the Court held there was no written agreement expressing intent and thus no mutual intent (as per the Connor Homes analysis). The Court then pursued the traditional Sagaz/Wiebe Door analysis to determine whether the workers performed their services in business on their own account. On this point, the Court concluded that all but one of the workers were employees.
On the issue of whether the workers were engaged in employment of a casual nature other than for the purpose of the employer's trade or business (see subsection 5(2) of the Employment Insurance Act and subsection 6(2) of the Canada Pension Plan), the Tax Court cited the Federal Court of Appeal's decision in Roussy v Minister of National Revenue ([1992] F.C.J. No. 913), which stated:
[7] ... the duration of the time a person works is not conclusive in categorizing employment as casual; the length of time may be a factor to be considered, but a more important aspect is whether the employment is "ephemeral" or "transitory" or, if you will, unpredictable and unreliable. It must be impossible to determine its regularity. In other words, if someone is spasmodically called upon once in a while to do a bit of work for an indeterminate time, that may be considered to be casual work. If, however, someone is hired to work specified hours for a definite period or on a particular project until it is completed, this is not casual, even if the period is a short one.
The Tax Court held that the workers were engaged in unpredictable "part-time" work rather than casual employment. Further, the Court noted that Morris Meadows advertised its dining facilities (available for business meetings or weddings), hired workers to serve the food, and profited from such commerce. In the Court's view, Morris Meadows was in a business to which the employment related, and the casual employment was for the purpose of Morris Meadows' business. The Court held the workers were not engaged in casual employment for the purposes of the EI Act and the CPP.
The Court allowed the appeals only in respect of the one worker who was an independent contractor.
For more information, visit our Canadian Tax Litigation blog at www.canadiantaxlitigation.com
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