Decision #56/04 - Type: Workers Compensation

Preamble

An Appeal Panel hearing was held on September 30, 2003, at the employer's request. The Panel discussed this appeal on several occasions, the last one being March 16, 2004.

Issue

Whether or not individuals contracted to build the Director's cottage should be considered workers of the firm.

Decision

That the individuals contracted to build the Director's cottage should not be considered workers of the firm in accordance with Policy 35.10.50, Independent Contractors.

Decision: Unanimous

Background

An audit of the company's records was carried out in 2001 and it revealed that the company hired individuals to build a cottage for the director of the firm. The auditor noted that some individuals had been T-4'd and others were not registered with the Workers Compensation Board (WCB). In all instances, these individuals were paid by the company and not by the director of the firm. As a result, the auditor deemed these individuals workers of the company and assessed the company for the labour portion of these individual's contracts for 2001.

On February 18, 2002, the employer disagreed with the decisions reached by Employer Services with respect to three issues, the 3rd issue being "Whether the WCB should assess workers' earnings paid to various individuals for the building of [director's name] cottage under [the firm's] WCB account.

In a March 5, 2003 decision, the Assessment Committee determined that the individuals contracted to build the director's cottage were considered workers of the firm.

The Assessment Committee relied on WCB policy 35.10.50, Independent Contractors, in rendering its decision. The Assessment Committee noted that the appellant firm was considered a general contractor and that the general contractor was required to cover individuals who were not registered with the WCB as an "employer" or "labour contractor". An "employer" was one who employed and paid workers equal to or more than the minimum assessable earnings in a calendar year. For 2001, the minimum assessable earnings were $15,908. On the other hand, a "labour contractor" had personal coverage with the WCB, covered any workers hired and worked for more than one general contractor in a season. The Assessment Committee concluded that all the contract workers hired to build the cottage were not registered as "labour contractors" or "employers". As such, these individuals were deemed workers of the firm for the period in question.

On September 30, 2003, an Appeal Panel hearing was held at the employer's request. The employer provided the Appeal Panel with information in support of the position that the individuals contracted to build the director's cottage should not be considered workers of the firm. Following the hearing and discussion of the case, the Appeal Panel requested additional information from the Employer Services branch which was later received and was shared with the employer for comment.

On November 28, 2003, the Panel met again to discuss the case and the following information was requested from the employer:
  • The appellant suggested at the hearing that he made payments to the company to repay those funds advanced by the company for the construction of his cottage. The Panel would like the appellant to provide the Appeal Commission with a breakdown of the payments that he made back to the company along with a description of the specific items that were being reimbursed and the dates these payments were made.
The above information was received at the Appeal Commission on March 9, 2004. On March 16, 2004, the Panel met to render its final decision.

Reasons

It would appear following an exhaustive review of the file materials that the WCB had not been made privy to some pertinent information concerning certain expenses incurred and by whom with respect to the construction of the Director's cottage. In light of this situation, we requested from the WCB's employer services branch a specific listing of the expenses that it was concerned about. Once received, we then requested a detailed accounting evidencing the reimbursement of these cottage expenses by the Director back to the corporate entity. This corroborating evidence was subsequently provided to the Appeal Panel by the corporation's chartered accountants.

The WCB Assessment Committee took the position that the corporation was the principal and that the individuals hired to work on the Director's cottage were sub-contractors. Inasmuch as these individuals performed work in a compulsory industry and were paid by the corporation, they are therefore deemed workers of the corporation. The corporation must report the labour portion of the earnings paid to these individuals/sub-contractors. Consequently, the corporation must be assessed accordingly.

We have compared the WCB's outstanding subcontractor assessment issues or items, which were forwarded to the Appeal Panel on October 10th, 2003, with the information furnished by the corporation's chartered accountants. The evidence confirms that the Director was the owner of the land on which the cottage was built, that the Director contracted personally with the individuals who worked on the cottage construction and therefore the Director is a homeowner and not a principal as defined in policy 35.10.50. We also find that the company was used only as a vehicle for flow through financing purposes, and that the individuals were ultimately paid by the Director personally.

We are satisfied on a balance of probabilities following this comparison that the individuals contracted to build the Director's cottage should not be considered workers of the firm/corporation.

The corporation's and/or the employer's appeal is hereby allowed.

Panel Members

R. W. MacNeil, Presiding Officer
A. Finkel, Commissioner
M. Day, Commissioner

Recording Secretary, B. Miller

R.W. MacNeil - Presiding Officer
(on behalf of the panel)

Signed at Winnipeg this 28th day of April, 2004

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