The Appeal CommissionThe Workers Compensation Act of Manitoba

Preamble

The employer is appealing the decision made by the Workers Compensation Board ("WCB") which determined that they were required to report the labour portion of accounting/bookkeeping services to the WCB. A hearing was held on October 1, 2014 to consider the matter.

Issue

Whether or not the firm is required to report the labour portion of accounting/bookkeeping services to the WCB.

Decision

That the firm is required to report the labour portion of accounting/bookkeeping services to the WCB.

Decision: Unanimous

Background

Based on the results of an audit performed by the WCB for the years 2009 and 2010, the appellant firm was advised that it was required to report the labour portion of its accounting/bookkeeping services to the WCB. The firm disagreed with the decision and an appeal was filed with the WCB's Assessment Committee in 2012. The firm's position on the matter was as follows:

"Accounting is not a mandatory industry under the WCB act. All of the companies we had hired for accounting related tasks, working independently on their own, for a flat rate, and work for other companies. Therefore we request that you reverse your decision to treat these companies as our employees and retroactively consider their earnings as assessable. We believe that these companies meet the status of independent contractors as outlined in policy 35.10.50 (Status of Workers, Independent Contractors and Employers). In the WCB's last audit a decision was made not to consider our bookkeepers/accountants as employees and as such we felt we have been doing the right thing all along. This position doesn't relate to day to day work of our business and is to ensure that we are complying with government and income tax."

By letter dated May 22, 2012, the firm was advised by the WCB's Assessment Committee Chairperson that it was unable to approve his appeal regarding the Additional Assessment (audit). The decision stated:

"Accounting services are not assessable when the individual or firm operates an independent business. The audit working papers and invoices indicate that the bookkeeper, who assisted the auditor while the audit was conducted, is paid an hourly wage, works on your premises and does not control the time when they are required to work. Also, there is no indication that any of the bookkeepers had a GST or Canada Revenue Agency Business Number. As these individuals could not be confirmed as operating an independent business, the labour portion of their earnings is assessable."

On April 24, 2014, the firm appealed the May 22, 2012 decision to the Appeal Commission and a hearing was held on October 1, 2014.

On October 2, 2014, the appeal panel confirmed to the firm's owner that he would be given additional time to provide them with a written submission identifying any documents that he was concerned with on his assessment file and his comments/position with each document in relation to the issue under appeal. On November 14 and 17, 2014, the employer provided his submissions to the panel. On November 19, 2014, the panel met further to discuss the case and render its decision on the issue under appeal.

Reasons

The firm is appealing the WCB decision that it must report the labour portion of accounting /bookkeeping services to the WCB.

Applicable Legislation and Policy

The Appeal Commission and its panels are bound by The Workers Compensation Act (the “Act”), regulations and policies of the Board of Directors.

The Act provides the WCB with broad authority to deal with assessment matters. Subsection 60(2) provides that the board has exclusive jurisdiction to determine whether an employer's undertaking is in an industry within the scope of the Act and whether a worker is employed in an industry within the scope of the Act. Subsection 60(2.1) provides the board with the authority to deem that a person who performs work for another person is a worker and the other is an employer and to include the worker's earnings in the assessment of the employer.

Pursuant to its authority under the Act, the Board of Directors of the WCB established policies to assist with determining the status and relationship of parties under the Act. The Board established WCB Policy 35.10.50 Status of Workers, Independent Contractors and Employers which explains how the WCB determines the status of a party under the Act. The panel has considered and applied this policy in this appeal. The policy provides, in part, that:

"3. Determining Status as an Employer, Worker or Independent Contractor

General

When a person is in a traditional employment relationship (i.e. works set hours for one person and receives T4 income), it is easy to determine that the person is a worker. However, in some cases, it is not obvious whether a person is a worker or an independent contractor because of the manner in which the relationship between the service provider and the principal is structured. The WCB will consider the details of the relationship between the service provider and the principal in order to determine whether the service provider is a worker or an independent contractor. The status of the principal (i.e. whether or not he or she is an employer) will be determined by the status of the service provider.

Specific considerations

In making the determination, the WCB will look at all of the facts. The manner in which the parties characterize the relationship will be considered by the WCB but will not determine the matter. The factors that the WCB will consider in making this determination include:

• Is the service provider paid T4 income or business income? A person receiving T4 income is likely a worker. Business income suggests independent contractor status.
• Does the service provider work under the supervision and control of the principal? In other words, does the principal dictate specific hours of work or how a particular task is to be performed, or is the service provider free to determine those matters on his or her own? The more control that is exercised by the principal, the more likely it is that the service provider is a worker.
• Does the service provider perform work that is an integral part of the business of the principal? The more integral to the business the work performed is, the more likely that a service provider is a worker.
• Does the service provider have significant financial investment in and responsibility over the vehicles, tools and major pieces of equipment that he or she requires to perform the work? Financial investment in, and responsibility over, vehicles, tools and equipment suggests independent contractor status.
• Does the service provider take financial risk or have the possibility of increasing his or her profit by, for example, performing the work in a shorter period of time? Significant risk and the possibility of reward suggest independent contractor status.
• Is the service provider hired for specific jobs or is the working relationship between the service provider and the principal continuous and ongoing? Being hired for a specific job suggests independent contractor status; having a continuous, ongoing relationship is more indicative of a worker.
• Is the working relationship exclusive or does the service provider perform the same or similar work for a number of different people or entities? Provision of service to one person suggests that the service provider is a worker.
• Is the service provider responsible to pay all business expenses and remit his or her own income tax, GST, etc? Responsibility for business expenses and taxes suggests independent contractor status.
• No one factor is determinative of the matter. The relationship as a whole will be considered."

  Firm's Position

  The firm was represented by its Director who outlined the firm's position. He advised that an audit performed in 1995 confirmed that it was appropriate for him to use independent contractors to perform bookkeeping and other services for the firm. He said that in the subsequent audits for years 2008 to 2011, the WCB auditor took a different position regarding the use of independent contractors.

  The Director also expressed concern about the WCB's collection practices and the use of liens.

  The Director noted that accounting services are excluded from the Act by regulation.

  The Director called a witness, TB, to provide information to the appeal panel about her role as a bookkeeper at the firm. She answered questions from the Director and the panel.

  She testified that:

  • she paid her own income taxes and considered herself to be self-employed
  • the firm did not issue a T4 to her
  • she was paid a flat rate
  • she chose to work at the firm's office which was in the basement of the director's residence
  • she worked only at the office and did not work at her home
  • she used the firm's computer and did not use her personal computer
  • she used the firm's software
  • to her knowledge the firm did not have employees
  • she was retired at the time that she commenced work for the firm
  • she found the job by replying to an advertisement posted on an online classified site
  • she was not aware of who the firm's accountant was
  • her duties included preparing cheques for suppliers and sub-contractors (no signing authority), paying invoices, making paper entries
  • she set her own hours
  • she did not claim home office expenses and did not have other clients
  • she never spoke to the previous bookkeeper
  • she did not prepare corporate tax returns

  The director advised TB was employed during a portion of the WCB audit period.

  The Director advised that he has used the exact same format for bookkeeping services for the last 25 years.

  The Director addressed the issue surrounding MS who also worked as a bookkeeper for the firm during the audit period. He said that there were misunderstandings with this bookkeeper and the WCB auditor. He found the WCB Auditor to be aggressive and unprofessional. In his opinion, MS was intimidated by the WCB auditor.

  The Director advised that he liked to employ retired persons as opposed to large accounting firms.

  After the close of the oral hearing, the firm was permitted to provide a further submission on the issue before the panel.

  Issue: Whether or not the firm is required to report the labour portion of accounting/bookkeeping services to the WCB.

  For the firm's appeal to be successful, the panel must determine that the bookkeepers were independent contractors and not workers of the firm. The panel was not able to make this finding. The panel finds that the bookkeepers' earnings are assessable.

  In reaching this decision, the panel has considered the file information, additional submissions from the firm, and the evidence provided by the witness, TB.

  The panel notes:

  • witness TB and the previous bookkeeper, MS, had no other clients
  • witness TB only worked at the firm premises in the workspace provided by the firm. MS worked exclusively at the firm premises until it ceased renting space.
  • the bookkeepers typically used the firm's computer and accounting software. While they were allowed, in theory, to work at home, there was no requirement that they have their own computers or their own copies of the accounting software.
  • witness TB and other bookkeepers were paid on a monthly basis, however, bookkeeper TC was paid on an hourly basis as provided in the contract between TC and firm.

  The panel finds:

  • the working relationship between the bookkeepers and the firm is continuous and ongoing
  • the firm exercises significant control over the bookkeepers, in providing a work space on its premises and a computer with accounting software. The bookkeepers were also provided with their own email address at the firm's email account
  • the bookkeepers perform work that is an integral part of the business of the firm. The evidence establishes that the bookkeepers kept the business records of the employer and were responsible for paying invoices and recording expenses (accounts receivable, accounts payable). Contrary to information provided by the Director to the WCB, the bookkeepers are retained to perform services related to the day to day operation of the business.
  • the evidence does not establish that the bookkeepers provided invoices for their services

  The panel accepts the employer's evidence that all the bookkeepers were treated the same and accordingly applies these findings to all bookkeepers retained during the audit period. The panel finds, on a balance of probabilities, that the bookkeepers are workers of the firm in accordance with WCB Policy 35.10.50 and the firm is required to report the labour portion of the accounting/bookkeeping services to the WCB. The panel finds that the work relationship and duties of the bookkeeper are more akin to a part-time employee than an independent contractor.

  The Director provided copies of non-disclosure agreements between the bookkeepers and the firm. The panel finds that these agreements are not evidence of the bookkeepers' status for the purpose of workers compensation.

  The panel recognizes that for other purposes, such as income tax, the bookkeepers may be considered independent contractors. However, for the purposes of the Act the firm's bookkeepers are deemed workers.

  With respect to the firm's position that the bookkeeper was excluded from coverage under Schedule A of Regulation 196/2005, the panel finds that the services provided by the bookkeeper do not fall within the exclusion. The regulation is intended to apply to businesses that provide accounting and tax preparation services to multiple clients and not individuals who perform bookkeeping services for one firm.

  The firm's appeal is dismissed.

Panel Members

A. Scramstad, Presiding Officer
A. Finkel, Commissioner
P. Walker, Commissioner

Recording Secretary, B. Kosc

A. Scramstad - Presiding Officer

Signed at Winnipeg this 1st day of December, 2014