Gordon v. R., 97 DTC 1529, [1997] 2 CTC 2264 (TCC)

Sobier T.C.J. (orally):

The Appellant appeals from the assessment of the Minister of National Revenue (the “Minister”) for his 1990 taxation year whereby the Minister included in his income from his employment as a police constable with the Metropolitan Toronto Police (the “Force”) amounts which he received for performing services known as paid duty. These amounts total $7,348.

The Appellant maintains that this amount is not employment income but income earned from a business being the providing of security and other services on paid duty.

Briefly, paid duty consists of organizations and corporations and individuals and others retaining the services of police officers to provide services such as security, crowd control, and traffic control.

The evidence indicates that in order to provide these services in an orderly fashion and in a manner fair to the police officers, a system was set up whereby the Metropolitan Toronto Police Association (the “Association”), which is the police union, and the Force agreed that paid duty will be managed by the Association and the rates set by the Association.

The collective agreement between the Force and the Association makes it clear that the rate of Special Services pay or “paid duty pay” shall be determined by the Association and that the Force is to be advised of changes in that rate. The rate is based on the officer’s rate of pay for on duty services. I find that this method merely allows the rate to be determined and is not indicative of any relationship between the officer and the Force with respect to paid duty.

Evidence was led to show the difference between paid duty, overtime, and court attendance while off duty. While overtime and court appearances while off duty may be paid for, they are paid by the Force and are not optional on the part of the officers, whereas paid duty is voluntary and is paid for directly by the organization requiring the services of off duty police officers.

As I said, in order to maintain order and fairness, a scheme was developed whereby, on a rotating basis, officers could elect to perform paid duty on their days off.

Those wishing to obtain services contacted the Force and the scheme was set in motion. When an officer’s turn came up, he could accept or refuse the job. The officer reported to the job site and was informed of his duties by the customer. He was paid by cash or cheque following the paid duty. No money was ever paid to the Force. The monies were the customer’s such as Toronto Blue Jays, jewellery stores, the Liquor Control Board of Ontario, and movie production companies. No amounts were deducted for income tax, Unemployment Insurance, or Canada Pension Plan.

It appears that the Force was informed of the paid duty pay which the officers received and at the request of Revenue Canada and in order to ensure that the officers reported the paid duty pay, the Force at first issued printed statements setting forth the paid duty and the amounts received. The Force was later requested to issue T4 slips to the officers showing the amounts they received from these outside sources. These T4 slips showed only the gross amounts received by the officers without deductions. The issue of these slips I find to be only a method of telling the officers, as well as Revenue Canada, of the amounts earned by way of paid duty.

Evidence was also led to show an officer’s payment into his pension plan was based on the officer’s remuneration for his on duty services only and not on his paid duty remuneration.

The evidence of both the Appellant and Constable McIntyre leaves no room for doubt in my mind that the paid duty amounts were not employment income but income from another source, that is the business of providing services to those who wished them. It is also true that the Force was not responsible if the paid duty amounts were not paid by the contract. The Force would have nothing to do with collecting the amounts, as witness the case of Re: Metropolitan Toronto Police Association and the Metropolitan Board of Commissioners of Police, 17 OR 2nd, page 265, a decision of the Divisional Court of the Ontario High Court of Justice, which made clear that conveners of special events hiring the officers were the employers and not the Force.

Paid duty is also recognized under the Police Services Act. The Act restricts an officer’s right to engage in certain outside activities but does not prohibit a member of the Force from providing any private capacity services that have been arranged through the police force.

This is entirely in keeping with the method set up to administer the paid duty program and demonstrates why the Force is involved, i.e. since the Force arranged the jobs, they were permitted by the Police Services Act. It also points out that these services are recognized to be of a private nature. This is entirely in keeping with what happened in the case at bar.

I find that the amount of $7,348 was received by the Appellant not as income from his employment by the Force but from a business of providing services to those requesting it.

The appeal is allowed with costs and the matter referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the amount of $7,348 was income of the Appellant from a business. Thank you.

Appeal allowed.