Dare Human Resources Corporation v. The Minister of Revenue; Azur Human Resources Ltd. v. The Minister of Revenue

[Indexed as: Azur Human Resources Ltd. v. Ontario (Minister of Revenue)]

Ontario Reports Court of Appeal for Ontario Hourigan, Paciocco and Fairburn JJ.A. July 2, 2019

148 O.R. (3d) 76 | 2019 ONCA 549

Case Summary

Taxation — Employer health tax — Placement agencies which supplied temporary workers to federal government being "employers" of those workers for purposes of liability to pay employer health tax under Employer Health Tax Act — Employer Health Tax Act, R.S.O. 1990, c. E.11.

The appellants were placement agencies which supplied temporary workers to the federal government. The clients paid the appellants for the workers' services, and the appellants then paid the workers lesser amounts. Clients managed and directed the workers, although the appellants had some involvement in performance and discipline issues. The Employer Health Tax Act defines "employer" as a person or government who pays remuneration to an employee. The appellants appealed assessments by the Minister of Revenue under the Act, arguing that they were not the employers of the workers in question and were therefore not liable to pay employer health tax. The appeal judge found the appellants, the workers and the Government of Canada were involved in a tripartite relationship and that in order to determine the real employer in a tripartite relationship, one must first look to the applicable legislation for guidance. The appeal judge found that the provisions of the Act strongly indicated that the appellants were the real employers of the workers. They were the only persons who had contractual obligations to the workers to pay for their services. Moreover, the contractual documentation with the Government of Canada made it clear that it was the government's intention that the workers be the employees of the appellants. The appellants appealed.

Held, the appeal should be dismissed.

The appeal judge did not focus entirely on the fact that the appellants paid the workers in determining that they were employers for the purposes of the Act. He undertook a comprehensive review of all of the circumstances and did not fail to consider relevant factors. He did not err in concluding that the appellants were the workers' employers.

IBM Canada Ltd. v. Ontario (Minister of Finance) (2008), 89 O.R. (3d) 641, [2008] O.J. No. 1168, 2008 ONCA 216, 235 O.A.C. 161, 165 A.C.W.S. (3d) 182, consd

Other Cases Referred To

International Brotherhood of Electrical Workers, Local 586 v. Dare Personnel Inc., [1996] O.L.R.B. Rep. 1014 (Div. Ct.), affg [1995] O.L.R.B. Rep. July 935, [1995] O.L.R.D. No. 2463 (L.R.B.)

Pointe-Claire (City) v. Quebec (Labour Court), [1997] 1 S.C.R. 1015, [1997] S.C.J. No. 41, 146 D.L.R. (4th) 1, 211 N.R. 1, J.E. 97-1055, 46 Admin. L.R. (2d) 1, 28 C.C.E.L. (2d) 177, 97 CLLC para. 220-039, 70 A.C.W.S. (3d) 475

Statutes Referred To

Employer Health Tax Act, R.S.O. 1990, c. E.11, s. 1(1) [as am.]

Financial Administration Act, R.S.C. 1985, c. F-11

Public Service Employment Act, S.C. 2003, c. 22, ss. 12, 13 [as am.]

Procedural History

APPEAL from the judgment of Hackland J. (2018), 142 O.R. (3d) 691, [2018] O.J. No. 4519, 2018 ONSC 5212 (S.C.J.) dismissing the appeals from the tax assessments.

Counsel: Gregory Sanders and Alanna T. Mar, for appellants. James Vlasis and James Elcombe, for respondent.

Decision

BY THE COURT:

Introduction

[1] The respondent issued assessments directing the appellants to pay an employer health tax under the Employer Health Tax Act, R.S.O. 1990, c. E.11 (the "EHTA"). The appellants appealed to the Superior Court of Justice, and the appeal judge affirmed the assessments. They now appeal the appeal judge's order.

[2] The appeals raise two issues:

(1) Did the appeal judge err in his interpretation of the EHTA?

(2) In the alternative, did the appeal judge err in his consideration of the evidence?

[3] For the following reasons, we answer both questions in the negative and dismiss the appeal.

Facts

[4] The appellants are placement agencies based in Ottawa who supply temporary workers to the Public Service of Canada and federal agencies under agreements between the appellants and the Government of Canada.

[5] When the clients put out a call for temporary workers, the appellants identify appropriately qualified persons from their inventory of candidates, ascertain the person's willingness to apply and negotiate an hourly rate of pay for the placement. The appellants profit by paying the workers an hourly wage that is less than what the client pays them.

[6] Once an assignment begins, the appellants' primary function is to pay the worker and administer the payroll, on the basis of time sheets signed off by the client. The client manages and directs the workers while they carry out their assignment. However, both the appellants and the client may be involved in dealing with performance or discipline issues that arise in a worker's assignment.

[7] The appellants were assessed by the respondent to pay the employer health tax, a payroll tax imposed on employers who pay remuneration to their employees. The appellants appealed their assessments under the EHTA, arguing that they were not obliged to pay the tax because they were not the employers of the workers placed with their clients for temporary work.

[8] The appeal judge described his task on the appeals as undertaking "a comprehensive review of the relevant factors to determine if an employer/employee relationship exists", which "includes a review of both the working relationships, and the contractual and statutory framework": at para. 23. He recognized that he was bound by the Supreme Court's "comprehensive and flexible approach" to determine whether an employment relationship exists, as provided for in Pointe-Claire (City) v. Quebec (Labour Court), [1997] 1 S.C.R. 1015, [1997] S.C.J. No. 41. The approach in that labour case was adopted by this court in IBM Canada Ltd. v. Ontario (Minister of Finance) (2008), 89 O.R. (3d) 641, [2008] O.J. No. 1168, 2008 ONCA 216, in the context of the EHTA. After considering a number of factors, the appeal judge concluded that the appellants were the workers' employers for EHTA purposes.

Analysis

(i) Interpretation of the EHTA

[9] The primary submission advanced by the appellants is that the appeal judge determined their liability by default because he was of the view that someone (i.e., the appellants or the Government of Canada) must be the employer. Instead of answering the real issue of whether the appellants were employers for purposes of the EHTA, he wrongly chose between them and the Government of Canada.

[10] We would not give effect to this submission.

[11] The appeal judge found that the workers are not independent contractors and that finding is not challenged on appeal. It is also not disputed that the workers are earning employment income.

[12] The appeal judge determined that the workers, appellants and the Government of Canada are involved in a tripartite relationship where the appellants and the Government of Canada each appear to possess some of the traditional attributes of an employer. Contrary to the submission of the appellants, he did not err in commenting that in these circumstances the workers had to be employees of either the appellants or the Government of Canada for EHTA purposes. The whole point of the analysis provided for in IBM is to determine the employer for EHTA purposes in such a tripartite arrangement. On the facts of this case, that had to be either the appellants or the Government of Canada.

[13] The appeal judge is said to have compounded his primary error by focussing on the fact that the appellants pay remuneration, instead of undertaking a comprehensive analysis of all of the facts to determine whether the appellants are employers. The appellants argue that under the two-part test mandated by IBM, the appeal judge should have first determined whether an employment relationship existed and then considered whether the putative employers paid remuneration. He did not do so, the appellants submit, and instead focused solely on the fact that they paid remuneration.

[14] We do not accept the appellants' submission. The appeal judge properly considered the issue of who paid remuneration as part of his analysis of whether an employment relationship existed. The payment of remuneration was a relevant factor and the appeal judge did not rely on it exclusively. He carefully reviewed the statutory context including the provisions of the EHTA, noting that the legislation provides that the employer is the party who pays remuneration to the employee: see s. 1(1). In addition, he observed that the provisions of the Public Service Employment Act, S.C. 2003, c. 22, ss. 12, 13 and the Financial Administration Act, R.S.C. 1985, c. F-11, are inconsistent with the notion of the Government of Canada being the employer of the workers.

[15] The appeal judge went on to consider the factual circumstances surrounding this tripartite relationship. These include the fact that the appellants are the only parties with contractual relationships with the workers and that the contractual documentation with the Government of Canada makes it clear that it was the government's intention that the workers be the employees of the placement agencies.

[16] A fair reading of the appeal judge's reasons make plain that he did not limit his analysis to a consideration of the fact that the appellants pay remuneration.

[17] Next, the appellants submit that the appeal judge erred in ignoring a previous decision of the Ontario Labour Relations Board that held that they were not employers of the workers for labour legislation purposes: see International Brotherhood of Electrical Workers, Local 586 v. Dare Personnel Inc., [1995] O.L.R.D. No. 2463, [1995] O.L.R.B. Rep. July 935 (L.R.B.), affd [1996] O.L.R.B. Rep. 1014 (Div. Ct.).

[18] In fact, the appeal judge considered and declined to follow that decision. He held that it was possible to find that a placement agency was an employer for taxation purposes and not labour relations purposes, noting that [at para. 24], "[l]abour and employment statutes are directed toward protection of workers in the workplace, which the employer normally controls. In contrast, in regard to a revenue generating payroll tax, payable by employers, the employer may well be the entity that is contractually mandated to administer the payroll." We agree with that analysis.

[19] In summary, the appeal judge undertook a comprehensive review of all of the circumstances in concluding that the appellants were employers for EHTA purposes. We see no error in his analysis and accordingly dismiss this ground of appeal.

(ii) Consideration of the Evidence

[20] In the alternative, the appellants submit that the appeal judge erred in failing to consider factors that suggested that they were not the employer. We disagree.

[21] The appeal judge acknowledged, as is typical in a tripartite arrangement, that the appellants and the Government of Canada each appeared to possess some of the traditional attributes of an employer. He explicitly referenced recruitment, payroll administration, discipline issues, testing and security clearances. While some factors may have pointed to the Government of Canada as the employer, after an analysis of all of the factors, the trial judge determined that the appellants were the employers. The appeal judge did not misapprehend the evidence or fail to consider any relevant factor. We therefore reject this ground of appeal.

Disposition

[22] The appeals are dismissed. The appellants shall pay the respondent its costs of the appeals fixed in the all-inclusive sum of $25,000.

Appeal dismissed.

End of Document