Citation: 2009 TCC 535
Date: 20091116
Docket: 2008-3752(EI)
BETWEEN:
LANGMOBILE INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
SONIA IBARZ,
Intervenor.
REASONS FOR JUDGMENT
Hogan J.
Factual Background
[1] The question posed in
this appeal is whether the teachers employed by the Appellant, Langmobile Inc. (“Langmobile”
or the “Payor”) are employees or independent contractors.
[2] Langmobile has
appealed from a decision of the Minister of National Revenue (the “Minister”)
that the 16 language instructors identified in paragraph 2 of the
Reply to the Notice of Appeal (the “Language Instructors”) were employees of
the Appellant and not independent contractors. According to the Appellant, the Language
Instructors were bound vis-à-vis the Payor by a contract for services and not a
contract of employment.
[3] In reaching his
decision, the Minister relied on the following assumptions of fact set out in subparagraphs
5 a) to w) of the Reply to the Notice of Appeal (the “Reply”), which are incorporated
herein by reference:
a) the Appellant
was incorporated on June 1, 2005;
b) the
shareholders of the Appellant were Nicole Bianco and Johanne Desjardins;
c) the Appellant
was offering language courses, in English, in French, in Spanish or in Italian,
to children aged 18 months to 8 years old, in daycares[sic] centres;
d) the Appellant
was in operation all year long with a day camp in summer months;
e) the Appellant
hired the Workers as animators and as language monitors;
f) the Workers
were responsible to give language lessons at the Appellant’s client’s premises
from mid September to mid May and at the Appellant’s premises during summer
months;
g) the Workers had
to sign a “Contract agreement” with the Appellant when they were hired;
h) the Appellant
had a specific teaching method through games and songs;
i) the Workers
received a two weeks training session from the Appellant on the Appellant’s
methods of instruction;
j) the Workers
had to follow the directives of the Appellant on this method and they had to
animate and to teach following the techniques of the Appellant;
k) the Workers
received directives from the Appellant as to which daycares[sic] centres
or schools they had to work;
l) the Workers
received directives on the schedule they had to follow;
m) the Workers
performed the teaching personally and they could not be replaced in case of
absence;
n) the Workers
were supervised by the Appellant with spot checks made by Johanne Desjardins at
the clients’ premises;
o) a questionnaire
was sent regularly to clients to evaluate the Workers;
p) the Workers had
a staff meeting every two or three months;
q) all the
teaching materials required by the Workers were furnished by the Appellant;
r) all Workers
received a fixed salary of $18 to $25 per hour;
s) the Workers
were paid by cheque every two weeks;
t) the Workers
worked with the Appellant’s client;
u) the Workers had
no financial risks while working for the Appellant;
v) the Appellant
had a hiring and a dismissal discretion over the Workers, fixed the salary,
establishes[sic] the schedules and the teaching methods, found the
clients and supervised the Workers;
w) the Appellant
considered the Workers as self employed during the school year and as employees
during the summer time.
[4] Ms. Bianco, one of
the principal shareholders, testified that she started the payor business with
her partner and co-shareholder, Johanne Desjardins. The Payor offers language
instruction principally to daycare-aged children. Initially the enterprise provided
English language training to children in public and private daycare centres in
the province of Quebec. The Payor’s
business subsequently expanded to include French, Italian and Spanish language
training.
[5] The Payor recruited
the Language Instructors primarily through newspaper advertisements. Candidates
would be hired only if they had prior experience in language instruction and teaching
young children. According to Ms. Bianco’s testimony, the Language Instructors
were expected to work autonomously.
[6] The Payor would
negotiate language training contracts with private and public day care centres.
The Payor would ask the Language Instructors whether they were willing to take
on a contract for a specific period. These contracts would be for either the
full school year or the fall or spring semester. According to Ms. Bianco, the Language
Instructors, who all worked on a part-time basis, could either refuse or accept
the work offered.
[7] Ms. Bianco
testified that the Language Instructors received roughly 1 or 2 hours of
training before they embarked upon the performance of their initial contract.
Limited training was required as the Language Instructors were generally
qualified in the field. The witness indicated that the Language Instructors
were free to prepare their own curriculum material and employ their own
teaching methods. Alternatively, if they so desired, they could use interactive
language instruction material prepared by Langmobile.
[8] Each Language Instructor
signed a contract with Langmobile recognizing that he or she was an independent
contractor. As a result, the instructors would not be entitled to fringe
benefits and had to assume all of the costs associated with the performance of
their language instruction duties.
[9] During the hearing,
the witness Ms. Bianco, who was also acting as the representative of the
Payor, took issue with the facts assumed by the Minister in subparagraphs 5 a),
d), f), i) to l), m), o), t), q) and v) of his Reply. Ms. Bianco pointed out
during her testimony that the Canada Revenue Agency (the “CRA”) agents who had
reviewed the file were under the false impression that the status of the
Language Instructors changed during the relevant period. The Minister’s Reply
and the CRA Report on an Appeal filed as Exhibit A1 make the allegation
that there was such a change. In addition, the Respondent alleges in subparagraph 5 w)
of his Reply that the Language Instructors were considered as employees when at
a summer day camp and as self‑employed workers during the school year.
[10] Ms. Bianco testified
that the summer camp operated on premises leased by the Payor for a six-week
period. None of the 16 Language Instructors taught at the summer day camp.
The witness testified that she had hired two different individuals to teach at the
day camp and treated those workers as employees because they were subject to
her direct supervision and control. The work also took place on her premises.
The Respondent’s counsel acknowledges that the CRA agents who considered this
matter had erred on this point.
Analysis
[11] The
issue is whether the Language Instructors held insurable employment for the purposes
of the Employment Insurance Act (the “Act”). The
relevant provision of this Act is paragraph 5(1)(a), which states
the following:
5(1) Subject to subsection (2), insurable employment is:
(a) employment in Canada by one or more employers,
under any express or implied contract of service or apprenticeship, written or
oral, whether the earnings of the employed person are received from the
employer or some other person and whether the earnings are calculated by time
or by the piece, or partly by time and partly by the piece, or otherwise;
[12] This provision
defines insurable employment as employment held under a contract of service,
which results in an employer-employee relationship. A contract for services
will result in an independent contractor relationship and thus will not fall
within the purview of paragraph 5(1)(a) of the Act. Neither a “contract
of service” nor a “contract for services” is defined in the Act.
[13] Looking, then, to
provincial law for guidance, the relevant provisions for determining whether
there is a contract of service (i.e. a contract of employment) or a contract
for services (i.e. a contract of enterprise) in Quebec can be found in articles
2085, 2086, 2098, and 2099 of the Civil Code of Quebec.
Contract of employment
2085 A contract of employment is a
contract by which a person, the employee, undertakes for a limited period to do
work for remuneration, according to the instructions and under the direction or
control of another person, the employer.
2086 A contract of employment is for a
fixed term or an indeterminate term.
Contract of enterprise or for services
2098 A contract of enterprise or for
services is a contract by which a person, the contractor or the provider of
services, as the case may be, undertakes to carry out physical or intellectual
work for another person, the client or to provide a service, for a price which
the client binds himself to pay.
2099 The contractor or the provider of
services is free to choose the means of performing the contract and no
relationship of subordination exists between the contractor or the provider of
services and the client in respect of such performance.
[14] The
Federal Court of Appeal in both Wolf v. Canada, [2002] 4 F.C. 396, and Combined
Insurance Co. of America v. Canada (Minister of National Revenue), 2007 FCA
60, considered whether there was a contract of employment or a contract for services
under Quebec law.
[15] In Wolf,
supra, Desjardins J.A. noted that this determination could be made on
the basis of tests developed by the relevant case law, in both the civil and
common law contexts. The leading cases are Wiebe Door Services Ltd. v. M.N.R.,
[1986] 3 F.C. 553, and 671122 Ontario Ltd. v. Sagaz Industries Canada
Inc., [2001] 2 S.C.R. 983. Desjardins J.A., in Wolf, referred
to comments made by Major J. of the Supreme Court at paragraphs 47 and 48 of
his reasons in Sagaz:
47 . . . In making this determination, the
level of control the employer has over the worker’s activities will always be a
factor. However, other factors to consider include whether the worker provides
his or her own equipment, whether the worker hires his or her own helpers, the
degree of financial risk taken by the worker, the degree of responsibility for
investment and management held by the worker, and the worker’s opportunity for
profit in the performance of his or her tasks.
48 It bears repeating that the above factors constitute a
non-exhaustive list, and there is no set formula as to their application. The
relative weight of each will depend on the particular facts and circumstances
of the case.
[16] Pratte
J. noted the following in Gallant v. M.N.R., [1986] F.C.J. No. 330(QL):
. . . The distinguishing feature of a
contract of service is not the control actually exercised by the employer over
his employee but the power the employer has to control the way the employee
performs his duties . . .
[17] Combined
Insurance, supra, the
Federal Court of Appeal notes that it is important to consider the evidence in
the appropriate light as well as to consider the parties’ intentions:
26 In particular, at paragraph 72 of her reasons, Madam
Justice Desjardins [in Wolf] stated that the Court had to consider all
the evidence in the light of the applicable tests and give the evidence the
weight required in the circumstances of the case. In addition, she noted that
the parties’ intention should be considered whenever it reflected their real
legal relationship.
[18] Létourneau
J.A. in Livreur Plus Inc. v. Canada, [2004] F.C.J. No. 267(QL), notes
the following with respect to intention:
17 What the parties stipulate as to the nature of their
contractual relations is not necessarily conclusive, and the Court may arrive
at a different conclusion based on the evidence before it: D&J Driveway
Inc. v. The Minister of National Revenue, 2003 FCA 453. However, if there
is no unambiguous evidence to the contrary, the Court should duly take the
parties’ stated intention into account: Mayne Nickless Transport Inc. v. The
Minster of National Revenue, 97-1416-UI, Febrary 26, 1999 (T.C.C.).
Essentially, the question is as to the true nature of the relations between the
parties. Thus, their sincerely expressed intention is still an important point
to consider in determining the actual overall relationship the parties have had
between themselves in a constantly changing working world: see Wolf v.
Canada, [2002] 4 F.C. 396 (F.C.A.); Attorney General of Canada v. Les
Productions Bibi et Zoé Inc., 2004 FCA 54.
[19] In Royal
Winnipeg Ballet v. Canada (M.N.R.), 2006 FCA 87, Sharlow J.A. also notes
intention as an important factor.
61 . . . if it is established that the
terms of the contract, considered in the appropriate factual context, do not reflect
the legal relationship that the parties profess to have intended, then their
stated intention will be disregarded.
[20] In Combined
Insurance, the following factors were looked at by the Federal Court of
Appeal: a) ownership of work tools; b) chance of profit and risk of loss; c) integration;
d) degree of control; e) required presence at workplace and observance of work
schedule; f) control of absences for vacation; g) penalties; h) imposition
of work methods; i) submission of activity reports; and j) control of quantity
and quality of work. There is an ongoing debate whether the factors other than
control are independent factors to be considered in their own right or simply
additional indicia used to ascertain whether control is present in the
circumstances. Because the matter is governed by the Civil Code of Quebec
and the issue is to be determined under applicable provincial law, I adopt the
latter approach. Stated differently, I will use the additional factors noted
above as tools to determine whether Langmobile exercised, or had the power to
exercise, control over the Language Instructors in a manner consistent with the
existence of an employment relationship.
[21] Nadon
J.A. in Combined Insurance summarizes the case law as follows:
35 In my view, the following principles
emerge from these decisions:
1. The relevant facts, including the parties’ intent
regarding the nature of their contractual relationship must be looked at in the
light of the factors in Wiebe Door, supra, and in the light of
any factor which may prove to be relevant in the particular circumstances of
the case;
2. There is no predetermined way of applying the relevant
factors and their importance will depend on the circumstances and the
particular facts of the case.
Although as a general rule the control test is of special
importance, the tests developed in Wiebe Door and Sagaz, supra,
will nevertheless be useful in determining the real nature of the contract.
[22] As a
starting point, the Court must consider how the parties themselves defined the
nature of their contractual relationship. In the present case, there is an
express contract between Langmobile and the Language Instructors which
describes the instructors as independent contractors. I accept the parties’
uncontradicted evidence that an independent contractor relationship was
intended.
[23] While
the relationship in the case at bar may not be as unstructured as the teaching
relationship in Academy of Artisans v. Canada (Minister of National Revenue), [2001] T.C.J. No. 241(QL), I have no
doubt that it is nonetheless the same sort of relationship: the Language
Instructors are independent contractors.
[24] Langmobile
is in the business of providing language training to daycare-aged children. In
the taxation years in question, Langmobile hired 16 Language Instructors to
teach various languages to children in daycare. Langmobile was responsible for
securing contracts with the daycare centres. Once a contract was secured,
Langmobile would contact a Language Instructor to see if that instructor wanted
to accept the particular job. It should be noted that Language Instructors are
free to accept or refuse any contract. The language training took place at the
daycare centre’s facilities. The Language Instructors would arrive at their
respective daycare centres without reporting at Langmobile’s premises first. As
noted by Létourneau J.A.” in Livreur Plus, supra, these are factors
indicative of an independent contractor relationship.
41 The delivery persons had no offices or premises at the
applicant’s location. They did not have to go to the applicant’s location to
do their delivery work: ibid., page 81. Together with the right to
refuse or decline offers of services, these are factors which this Court has
regarded as indicating a contract of enterprise or for services rather than one
of employment: see D&J Driveway Inc. v. Minister of National Revenue,
supra, paragraph 11.
[25] The Language
Instructors worked on a part-time basis and the contract stipulated that they
did not have to work exclusively for Langmobile. The Language Instructors did
not work for Langmobile unless there was a specific contract. This was noted by
Archambault J. in Beaucaire v. Canada
(Minister of National Revenue – M.N.R.), 2009 TCC 142, as being a main factor indicating a contract for
services.
35 In my opinion, another indicator that a contract for
services exists rather than a contract of employment is the fact Mr. Beaucaire
did not work unless he received a specific contract.
[26] The
teachers in the present case provided language services to daycare centres and
were unsupervised in providing such services. Specifically, there was no
personnel from Langmobile on site to supervise the language training provided
by the teachers to the daycare centres. While Langmobile did do some follow-up
with the daycare centres to determine the quality of the services provided,
this does not amount to control. This distinction is well articulated in Livreur
Plus:
19 Having said that, in terms of control the Court should
not confuse control over the result or quality of the work with control over
its performance by the worker responsible for doing it: Vulcain Alarme Inc.
v. The Minister of National Revenue, A-376-98, May 11, 1999, paragraph 10,
(F.C.A.); D&J Driveway Inc. v. The Minister of National Revenue, supra,
at paragraph 9. As our colleague Décary J.A. said in Charbonneau v. Canada
(Minister of National Revenue – M.N.R.), supra, followed in Jaillet
v. Canada (Minister of National Revenue – M.N.R.), 2002 FCA 394, “It is
indeed rare for a person to give out work and not to ensure that the work is
performed in accordance with his or her requirements and at the locations
agreed upon. Monitoring the result must not be confused with controlling the
worker”.
[27] While
Langmobile did admit to exercising some control over its workers, I find that
the control exercised consisted in monitoring performance, not controlling the Language
Instructors themselves. On Langmobile’s public web site, it is noted that
Langmobile operates in a team environment, provides materials to its instructors
and does follow-ups. Web site information, however, has to be taken with a
grain of salt as it is like any other promotional material. The Language
Instructors were in fact given about one hour of basic training. While the Language
Instructors were able to rent language teaching materials from Langmobile, they
were also free to use their own teaching material. The control factor clearly
points to an independent contractor relationship.
[28] As
for ownership of tools, this is dependent on whether the Language Instructors use
their own material or choose to rent teaching material from Langmobile. The
premises used for teaching are those of the client, namely, the daycare centre,
and not Langmobile. Further, any necessary preparation of lesson plans is done
by the Language Instructors out of their own home. This factor is inconclusive.
[29] With
respect to chance of profit or risk of loss, the teachers did not share in
Langmobile’s profit or loss, so this factor tends to indicate an
employer-employee relationship, but I do not find that it carries much weight.
[30] The
situation before me is distinguishable from that in Teach & Embrace
Corp. v. Canada (Minister of National Revenue – M.N.R.), 2005 TCC 461. That is a case in which the
tutor stated that she believed she was entering into a contract of employment,
and the contract itself in fact did not provide expressly that it was not a
contract of employment. In the case at bar, the intention that the Language
Instructors be independent contractors was shared by the parties and is clearly
stated in the contract.
[31] In an
article written by him my colleague Archambault J. he states the following:
As article 1425 [Civil Code of Quebec] states, one
must look to the real common intention of the parties rather than adhere to the
literal meaning of the words used in the contract. The courts must also verify
whether the conduct of the parties is consistent with the statutory
requirements for contracts.
[32] Further,
in Teach & Embrace, not only was intention at issue, but the control
factor did not point to an independent contractor relationship.
23 . . . First, the provisions of the
contract reveal that the Payer had the power to direct and control the work
performed by the Tutor. In my view, one of the strongest stipulations
disclosing such a power is the following: “Under the authority of the ‘Corporation’,
the ‘Tutor’ is expected to accomplish the following results”.
[33] In Teach
& Embrace there were a number of additional factors which indicated
control over the tutors and which are not present in the case at bar, most
notably: the majority of services were provided at a central tutoring hall; a
dress code was in place; tutors had to provide tutoring based on the Continuums
and resources offered by the payor; there was a learning coordinator assigned
to a tutor’s tutoring location and the coordinator’s role was to supervise the
operations of the tutoring programs; tutors were to provide academic progress
reports based on the payor’s Continuums; and the last five minutes of tutoring
were to be reserved for a recapitulation of the tutoring session. In addition
to these indicia of control, the fact that the tutors in Teach & Embrace
were subject to a non-competition clause is of importance and, as noted in that
case, the existence of such a clause “has been accepted by the courts in the
past as an indication of the existence of a contract of employment”.
[34] The
case at bar is also distinguishable from NCJ Educational Services Ltd. v.
Minister of National Revenue, 2008 TCC 300 (affirmed by the Federal Court
of Appeal, 2009 FCA 131). There were no written contracts between NCJ and the
tutors in that case and the evidence showed that the tutors were unclear about
what type of employment relationship existed. A clear contract reflecting the
parties’ intentions does exist in the present case, however.
[35] While
the tutors in NCJ Educational Services were allowed to use their own
material, the tutoring occurred at NCJ’s tutoring hall and Ms. Jacobs (NCJ’s
founder) was on the premises most of the time. She acknowledged that if she had
seen one of her tutors behaving in an improper manner, she would have
intervened. In the case at bar, the tutoring takes place at the various daycare
centres and is unsupervised. Archambault J. wrote in NCJ Educational
Services:
30 [Ms. Jacobs] did exercise direction or control: by
assigning the students to their tutors, by reassigning them in case of the
tutor’s absence by reason of illness, and by instructing the tutors regarding
the length of the tutoring sessions (see Mrs. Hamdane’s testimony).
. . .
37 Another very strong indication of integration,
indicative as well of the power of control and direction over the work of the
tutors, is the fact that the tutors’ services were provided on the premises of
NCJ and, most of the time, in the presence of Ms. Jacobs herself.
[36] Further,
in NCJ Educational Services, Ms. Jacobs would exercise direction or
control over the tutors by informing them of the positive or negative comments
of parents. She further exercised control by adopting a dress code for male
tutors.
[37] The
case before me is more similar to Preddie v. Canada, 2004 TCC 181, a decision
of McArthur J. in a case heard under the informal procedure. In that case, Mr.
Preddie worked as a tutor for Sylvan Learning Centre, and after analyzing the Wiebe
Door and Sagaz factors, the Court concluded:
19 In conclusion, considering all the evidence as a whole,
and on the balance of probabilities, I find the Appellant was in the business
of tutoring on his own account. He was so highly skilled, he needed no
control. His fee of $15 an hour was a bargained amount. Both parties referred
to the relationship as one of independent contractor. The business of Sylvan
was to get the students and tutor together. The Appellant was in the business
of tutoring.
[38] In
conclusion, after considering the intention of the parties, the evidence before
me and the factors noted in previous cases, I find the Language Instructors to
be independent contractors and allow the appeal.
Signed at Ottawa,
Canada, this 16th day of November 2009.
"Robert J. Hogan"
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