Citation: 2007TCC591
Date: 20071101
Docket: 2007-1255(EI)
BETWEEN:
CHANTAL RHÉAUME,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
JULIE FAUCHER,
Intervener.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Archambault J.
[1] Chantal Rhéaume
is appealing from a decision made by the Minister of National Revenue
("the Minister") in respect of the insurability, for the
purposes of the Employment Insurance Act ("the Act"), of her
employment with Julie Faucher from September 6, 2005, to
April 13, 2006 ("the relevant period"). The Minister
determined that it did not constitute insurable employment because it was a
contract for services, not a contract of employment. Ms. Faucher intervened
in Ms. Rhéaume's appeal in order to support the Minister's decision, and
was represented by counsel.
[2] In making his
decision, the Minister relied on the following assumptions of fact:
[TRANSLATION]
(a) The
Payor is a kinesiologist. (admitted)
(b) The Payor
operated a fitness centre, in the Quebec City area, for older
adults aged 50 and up. (admitted)
(c) The Payor
registered the business name "Rest'actif" on June 9, 1999. (proven)
(d) The Payor was
the sole proprietor of the business. (proven)
(e) The Payor gave
fitness classes, using subcontractors where the number of classes made this
necessary.
(f) The Appellant
found out about a job opportunity with the Payor on the Université Laval website.
(admitted)
(g) The Appellant was
awarded a Bachelor's degree in kinesiology in June 2005. (admitted)
(h) On October 5, 2005,
the Appellant and the Payor signed a contract for services for the Fall 2005 term.
(admitted)
(i) The contract
specified the days, times, locations and number of the Appellant's classes for
the entire term, setting her remuneration at $18.00 per hour. (admitted)
(j) The contract
for services for the Winter 2006 term, under which the Appellant's remuneration
was set at $22.00 per hour, was signed only by the Payor. (admitted)
(k) The contract
contained clauses forbidding her to compete against the Payor's business or
solicit the participants. (admitted)
(l) Each class was
roughly one hour long, and the number of participants varied from 10 to 25. (admitted)
(m) The Payor also
offered the Appellant opportunities to fill in for other instructors, and she
was free to accept or decline. (admitted)
(n) The Appellant
had complete freedom with respect to the way in which she taught her classes,
as the Payor did not impose any work method on the Appellant. (denied)
(o) The Appellant
prepared the courses, choosing the exercises to be done. (admitted)
(p) The Appellant
supplied her own music cassettes. (admitted)
(q) The Appellant
could not change her class times. (admitted)
(r) Due to her
professional status, the Appellant could not get a person of her choice to
replace her. (admitted)
(s) The Appellant
had no reports to submit to the Payor. (denied)
(t) The Appellant
was paid every two weeks by the Payor. (admitted)
(u) The Appellant
was responsible for her own expenses and travel costs. (admitted with
respect to the travel costs)
(v) The Appellant
signed a single, all-inclusive service invoice for the entire term. (admitted)
(w) The Payor
withheld the last payment of the Winter 2006 term due to a dispute with
the Appellant. A claim was then lodged with the Commission des normes du
travail du Québec. A payment ended the dispute. (admitted)
(x) During the
period in issue, the Appellant taught physical fitness classes at the CSST as a
self-employed worker. (admitted)
[3] Ms. Rhéaume and
Ms. Faucher were the only witnesses at the hearing. Ms. Faucher operates
her business under the name Rest'Actif. As stated in her advertising flyer,
[TRANSLATION] "Rest'Actif offers fitness training sessions to people aged
50 and up. The sessions are structured and varied, and every person can work at
his or her pace." However, contrary to what the flyer states, not all
Rest'Actif trainers have university degrees in kinesiology or physical
education: Ms. Faucher also hires students in these fields. Ms. Faucher
has operated this business on her own since 1999. According to the advertising
flyer, the sessions [TRANSLATION] "are offered in different cities, clubs,
sports centres and residences."
[4] Ms. Rhéaume obtained
a Bachelor's degree in kinesiology in June 2005. She received her
instruction at the Faculty of Medicine of Université Laval. Ms. Rhéaume says
that she began three jobs in September 2005. The most important one was
with Énergie Cardio, where she worked 20 to 25 hours a week. Her work
consisted of assessing physical activity readiness and ascertaining the objectives
of the company's clients. She was considered an employee (under a contract
of employment) because Énergie Cardio made all the source deductions for taxes,
Québec Pension Plan contributions, and Employment Insurance (EI) premiums.
Ms. Rhéaume's second job was with a person who had obtained a contract
from the Commission de la santé et de la sécurité du travail (CSST) [the Quebec workers' compensation
board] to train its employees in the basement of one of its buildings. In
addition to providing fitness instruction, she supervised the training room and
planned programs. She devoted three to five hours a week to this job. Ms. Rhéaume
says that she was paid as an independent contractor but considered herself an
employee.
[5] Ms. Rhéaume's
third job was with Ms. Faucher. She described the circumstances of her
hiring as follows. She learned about a fitness‑trainer job opportunity on
the Internet (probably the Université Laval website). She met Ms. Faucher
in late August 2005, and, in a one-hour interview, Ms. Faucher told
her what the work entailed. The job was to give fitness classes to people aged
50 and up. Ms. Faucher specified, at this time, that she was retaining
Ms. Rhéaume's services as an independent contractor, and she told her
about the benefits of deducting one's expenses for tax purposes. In addition,
she allegedly told her that there would be no paid vacations. Ms. Rhéaume said
that she did not see the difference between being hired as an employee and
being hired as an independent contractor. The only differences that she
perceived were from a tax standpoint. She does not recall whether Ms. Faucher
addressed the issue of EI premiums. This was the first time that Ms. Rhéaume
was hired as an independent contractor.
[6] Ms. Faucher offered
Ms. Rhéaume the opportunity to teach ten training courses effective September 14, 2005. Given her limited
availability, Ms. Rhéaume took on only six courses, which were to be taught
in four different locations. The agreed price for each course was $18 per
session. Ms. Rhéaume and Ms. Faucher signed a written contract dated
October 5, 2005 (Exhibit A‑1). The contract stipulates
as follows:
[TRANSLATION]
Service Contract
|
Between:
|
Rest'Actif
4 Champagnat
Street
Lévis, Quebec G6V
2A5
Represented by
Julie Faucher
|
|
|
|
|
And:
|
Chantal
Rhéaume
1065 Bertin
Street
Cap-Rouge, Quebec G1Y 2G5
Hereinafter
"the Practitioner"
|
1. On behalf of Rest'Actif, the
Practitioner shall teach the physical fitness sessions set out in the following
table for the Fall 2005 term at a rate of $18.00 per session.
|
|
Day of week
|
Time
|
First day
|
Location
|
Number of sessions
|
|
1
|
Monday
|
6 pm
|
19-09-05
|
Sillery
|
12
|
|
2
|
Tuesday
|
7 pm
|
20-09-05
|
Ste-Ursule rec. corp.
|
12
|
|
3
|
Wednesday
|
11:40 am
|
14-09-05
|
Revenue – Dorchester St.
|
12
|
|
4
|
Wednesday
|
6 pm
|
21-09-05
|
Sillery
|
12
|
|
5
|
Thursday
|
10 am
|
22-09-05
|
Sillery (Walking club)
|
12
|
|
6
|
Thursday
|
7 pm
|
22-09-05
|
Ste-Ursule rec. corp.
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
72
|
2. The Practitioner shall prepare
his/her courses in a manner consistent with Rest'Actif's objectives in
order to meet the clients' needs. The Practitioner shall be punctual and
shall treat Rest'Actif's clientele respectfully and professionally.
3. The Practitioner is responsible for
the equipment lent by Rest'Actif and shall reimburse Rest'Actif for any
breakage, loss or theft thereof.
4. Requests for substitute
instructors for one (1) or more sessions must be submitted five (5)
working days before the session(s) concerned and are subject to approval by Rest'Actif.
Absences without valid cause are not tolerated. Rest'Actif may, if
necessary, request a document attesting to the validity of any absence due to
illness (e.g. medical certificate) and such a document is mandatory for
sports injuries.
5. The Practitioner exonerates
Rest'Actif from any liability for damage, injury, loss or theft that he/she may
incur.
6. The Practitioner agrees to refrain
from competing against Rest'Actif, whether directly or indirectly, alone or
through another business, in the operations and objectives of Rest'Actif, for a
period of two (2) years following the signing of this contract.
7. Rest'Actif shall pay the
Practitioner based on the number of sessions completed. Cheques, covering two
weeks of instruction, shall be issued every two weeks commencing October 3, 2005.
8. Rest'Actif reserves the right to
change or cancel the location and the number of sessions set out in
section 1 if a group of participants does not consider the Practitioner
suitable.
9. In addition, Rest'Actif reserves the
right to terminate this contract without prior notice if the Practitioner does
not comply with all the terms and conditions hereof or for any other valid cause
whatsoever.
10. Upon the signing of this contract,
the Practitioner shall submit his/her invoice to Rest'Actif for the total
number of sessions in this term.
. . .
[Emphasis added.]
[7] Another contract
was prepared for 2006. It is signed only by Ms. Faucher, and is not dated (Exhibit
A‑3). Ms. Rhéaume's failure to sign it is probably attributable to
neglect.
[8] Before starting her
classes, Ms. Rhéaume was invited to attend what Ms. Faucher claims to have
called an [TRANSLATION] "observation session". But Ms. Rhéaume
asserts that Ms. Faucher told her: [TRANSLATION] "I will give
you training." During this session, which took place one week before her
courses began — it is not certain whether the date was September 5 or
September 6, 2005 — Ms. Rhéaume watched Ms. Faucher as she gave
a class to a group of participants. After the class, Ms. Faucher told her
that she had to arrive, appropriately dressed, 10 minutes before each class
began. She told her what to tell the participants: at the first meeting, she
was to ask them to fill out a physical activity readiness questionnaire and
tell them to bring running shoes, water bottles and appropriate athletic
clothing. They were to be given a consent form in which they acknowledged the
risks of physical activity. The classes were to begin with a warm-up. It is
alleged that Ms. Faucher even specified the type of exercises to be done
and the time that breaks should be taken.
[9] In addition to this
September 2005 observation/training session, Ms. Faucher accompanied Ms. Rhéaume
to her first class with Revenu Québec employees on Dorchester Street in Québec. Ms. Faucher
said that the employees in question would be performing exercises with a gym
ball, but that the balls would not be available for the first class. However,
when Ms. Rhéaume reported for the class, the gym balls were available, but
were not inflated. The class was therefore delayed so that the participants could
inflate them. Ms. Rhéaume says that the class did not go well. She felt
humiliated because she was not prepared for a class in which gym balls would be
used, and she stuttered. The participants left the class disappointed. Ms. Faucher
was seated at the back of the room to observe her. After the session, she
criticized Ms. Rhéaume's work and told her that she should have presented the
class differently. She also criticized her for her lack of confidence.
[10] Ms. Faucher was
also with Ms. Rhéaume during her first fitness class with a group from a
seniors' residence. She apparently told her what to do and assessed her work after
the class. According to Ms. Rhéaume, Ms. Faucher considered this
approach appropriate. As far as the second class was concerned, Ms. Rhéaume
arrived three or four minutes late, prompting the seniors' residence manager to
complain. Ms. Faucher spoke with Ms. Rhéaume to register her
disapproval. She reminded her that the contract contained a punctuality
clause and that she was to report for her classes ten minutes before the start
time. This conversation took place at the Sainte-Ursule recreational
corporation on the third time that Ms. Faucher's visited a class led by Ms. Rhéaume.
Due to the complaint that she received from the seniors' residence, Ms. Faucher
was not in a good mood. In addition, she noticed that Ms. Rhéaume was
wearing running shoes, and was concerned about whether she had boots to cover
them, because it was raining outside. This comment made Ms. Rhéaume feel
like a [TRANSLATION] "little child".
[11] Ms. Faucher says
that the observation/training session was not mandatory for Ms. Rhéaume. She
cites another self-employed worker, just out of university, as an example. That
worker did not attend any observation/training sessions. However, Ms. Faucher
acknowledges that she attended three or four classes taught by that person,
during which she observed her.
[12] In addition to the
sessions in which Ms. Faucher observed Ms. Rhéaume's work, one must
also bear in mind that Ms. Faucher and Ms. Rhéaume phoned each other to keep Ms. Faucher
informed about how Ms. Rhéaume's classes were going.
[13] Under the service
contract, Ms. Rhéaume had to notify Ms. Faucher five days in advance
if she wanted someone to fill in for her. Ms. Rhéaume was unavailable on
one occasion, and she told Ms. Faucher a few days beforehand. At the
very last minute, Ms. Faucher demanded that Ms. Rhéaume phone each of
the participants, because she was unable to find someone to fill in for
Ms. Rhéaume.
[14] During a subsequent
session at the seniors' residence, Ms. Rhéaume decided let the participants
hold on to some bodybuilding elastics, as it appeared that one of the two
groups that she was teaching was very interested in using them. When Ms. Faucher
found out about this, she instructed Ms. Rhéaume not to let those seniors hold
on to the elastics because she felt that it was not safe for such individuals
to use such equipment without supervision. It should be mentioned that Ms. Faucher
had taken out liability insurance in the event that one of the participants got
injured in one of her training sessions; naturally, this insurance covered all
trainers that she hired, even so-called independent contractors.
[15] There were several
instances in which Ms. Rhéaume would have wanted to contact the managers
of the various recreation departments to which Ms. Faucher's business
offered services. However, she had to be content to go through Ms. Faucher.
Ms. Rhéaume feels that the fact that she had to go through several
intermediaries when a complication arose posed a problem. This included
instances where supplies or equipment normally provided by Ms. Faucher's
institutional clients were unavailable, or in which Ms. Rhéaume ran into a
problem at the wrong time. Counsel for Ms. Faucher submits that this
procedure was necessary because it reduced the risk that Ms. Faucher would
lose a client to one of her subcontractors.
[16] In fact, a dispute
arose between Ms. Faucher and Ms. Rhéaume because Ms. Rhéaume contacted the manager of the Sainte‑Ursule recreational
corporation to discuss an issue raised by her group's participants, who were
complaining that the training costs had increased even though their session
time had been reduced from 75 to 60 minutes. Ms. Rhéaume says that she
would have been willing to extend her classes, but that Ms. Faucher would
not allow it. This is when Ms. Rhéaume learned that Ms. Faucher was
paid a lot more for the training sessions that she taught personally: she received
$45 per hour, whereas Ms. Rhéaume earned only $18 per hour. It appears
that the representative of the Sainte‑Ursule recreational corporation was
also annoyed by the situation, and that he decided to stop doing business with Ms. Faucher.
Apparently, since Ms. Faucher was going to lose that contract in any event,
and since someone else was going to provide courses to the Sainte‑Ursule
recreational corporation, she allowed Ms. Rhéaume to offer her services
directly to that organization, provided she did not solicit any of Ms. Faucher's
other clients. It is also possible that the need for Ms. Rhéaume's
services for the Spring 2006 term encouraged Ms. Faucher to accept this
compromise. Since Ms. Rhéaume was unable to come to an agreement with Ms. Faucher
with respect to an increase in remuneration, their relationship subsequently
deteriorated: a default notice was sent to Ms. Rhéaume, demanding that she
fulfil her contractual obligations, including the obligation not to solicit Ms. Faucher's
clients. Ms. Faucher even decided to withhold $266.38 from Ms. Rhéaume's
fees. Ms. Rhéaume filed a complaint with the Commission des normes du
travail. Following an investigation, the Commission apparently concluded that Ms. Rhéaume
was a salaried employee; however, no official decision was made, because Ms. Faucher
agreed to pay Ms. Rhéaume the $266.38.
[17] Ms. Rhéaume testified
that she also provides fitness courses to the Cégep de Ste‑Foy and the Québec
YWCA, both of which consider her an employee. Counsel for Ms. Faucher
objected to any question concerning the provision of Ms. Rhéaume's
services to these two organizations. However, there was no hesitation about
asking Ms. Rhéaume about the services that she provided to the CSST and
the Sainte-Ursule recreational corporation on a self-employed basis.
[18] Ms. Rhéaume acknowledges
that Ms. Faucher did not vet her course plan, and that she was free to
teach the course as she saw fit, provided, of course, that it was in keeping
with Rest'Actif's objectives. According to Ms. Rhéaume, she had the same
freedom at her teaching jobs at the Cégep de Ste‑Foy and the YWCA. Ms.
Rhéaume also acknowledges that no evaluation questionnaire was given to
Rest'Actif participants at the end of her training sessions. However, she
says that there were no such questionnaires for the courses that she taught as
an employee at the YWCA either. As for the Cégep de Ste‑Foy, a
questionnaire of this type was given to participants, but she says that it was
not given any serious consideration.
[19] In order to document
the payment of her remuneration, Ms. Rhéaume signed invoices covering an
entire term: there was one invoice for Fall 2005, and one invoice for Winter
2006. Ms. Rhéaume says that the invoices were prepared by Ms. Faucher.
[20] Generally, the
equipment was supplied by Rest'Actif's clients or by Ms. Faucher. This
included CD players, resistance machines, gym balls, etc. However, Ms. Rhéaume
could use her own music CDs for her classes.
Analysis
[21] The issue is whether
Ms. Rhéaume was employed in insurable employment for the purposes of the
Act. The relevant provision is paragraph 5(1)(a) of the Act, which
provides:
5(1) Subject
to subsection (2), insurable employment includes
(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.
[Emphasis added.]
[22] This provision
defines insurable employment as employment under a contract of service (or, in
more modern parlance, a contract of employment). However, the Act does not
define the concept of a contract of employment. Section 8.1 of the Interpretation
Act addresses circumstances such as the one in the case at bar:
Property and Civil
Rights
8.1 Both the common law and the civil law are equally authoritative
and recognized sources of the law of property and civil rights in Canada and,
unless otherwise provided by law, if in interpreting an enactment it
is necessary to refer to a province's rules, principles or concepts forming
part of the law of property and civil rights, reference must be made to the
rules, principles and concepts in force in the province at the time the
enactment is being applied.
[Emphasis added.]
[23] The provisions most
relevant to the task of determining whether a contract of employment exists in Quebec, and distinguishing
such a contact from a contract for services, are articles 2085, 2086, 2098 and
2099 of the Civil Code of Québec ("Civil Code" or "C.C.Q."):
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.
[Emphasis added.]
[24] Upon analysing these
provisions of the Civil Code, it is clear that three essential conditions must be met in order for
a contract of employment to exist: (i) prestation of work by the employee;
(ii) remuneration paid by the employer for this prestation; and (iii) a
relationship of subordination. The factor that clearly distinguishes a
contract for services from a contract of employment is the existence of a
relationship of subordination, that is to say, the employer's power of
direction or control over the worker.
[25] Legal scholars have
reflected on the concept of "power of direction or control", and,
from the reverse perspective, the "relationship of subordination". Robert P. Gagnon
writes as follows:
[TRANSLATION}
(c) Subordination
90 — A
distinguishing factor – The most significant characteristic of an
employment contract is the employee's subordination to the person for
whom he or she works. This is the element that distinguishes a contract of
employment from other onerous contracts in which work is performed for the
benefit of another for a price, e.g. a contract of enterprise or for services
governed by articles 2098 et seq. C.C.Q. Thus, while article 2099 C.C.Q
provides that the contractor or provider of services remains "free to
choose the means of performing the contract" and that "no relationship
of subordination exists between the contractor or the provider of services and
the client in respect of such performance," it is a characteristic of an
employment contract, subject to its terms, that the employee personally
perform the agreed upon work under the direction of the employer and within
the framework established by the employer.
. . .
92 — Concept –
Historically, the civil law initially developed a "strict" or
"classical" concept of legal subordination that was used for the
purpose of applying the principle that a master is civilly liable for damage
caused by his servant in the performance of his duties (article 1054 C.C.L.C.;
article 1463 C.C.Q.). This classical legal subordination was characterized
by the employer's direct control over the employee's performance of the work,
in terms of the work and the way it was performed. This concept was gradually
relaxed, giving rise to the concept of legal subordination in the broad
sense. The reason for this is that the diversification and specialization
of occupations and work methods often made it unrealistic for an employer to be
able to dictate or even directly supervise the performance of the work.
Consequently, subordination came to include the ability of the person
who became recognized as the employer to determine the work to be performed,
and to control and monitor the performance. Viewed from the reverse
perspective, an employee is a person who agrees to integrate into the
operational structure of a business so that the business can benefit from the
employee's work. In practice, one looks for a certain number of indicia
of the ability to control (and these indicia can vary depending on the
context): mandatory presence at a workplace; a somewhat regular assignment of
work; the imposition of rules of conduct or behaviour; an obligation to provide
activity reports; control over the quantity or quality of the services, etc.
The fact that a person works at home does not mean that he or she cannot be
integrated into a business in this way.
[Emphasis added.]
5. The question the trial judge should have asked was
whether the company had the power to control the way the workers did their
work, not whether the company actually exercised such control. The fact
that the company did not exercise the control or that the workers did not feel
subject to it in doing their work did not have the effect of removing, reducing
or limiting the power the company had to intervene through its board of
directors.
[Emphasis added.]
[28] The following
comments by the Minister of Justice concerning article 2085 C.C.Q.,
which accompanied the draft Civil Code and which I quoted in my article
entitled "Contract of Employment: Why Wiebe Door Services Ltd.
Does Not Apply in Quebec and What Should Replace It" at page 2:26, should be added:
[TRANSLATION]
The article restates the rule enacted by article
1665(a) C.C.L.C. The definition contained in the new article establishes more
clearly the difference between a contract of employment and a contract for
services or contract of enterprise. The sometimes fine line between the
two kinds of contracts has caused difficulties both in the scholarly literature
and in the case law.
The definition
indicates the essentially temporary nature of a contract of employment, thus
enshrining the first paragraph of article 1667 C.C.L.C., and highlights the chief
attribute of such a contract: the relationship of subordination
characterized by the employer's power of control, other than economic
control, over the employee with respect to both the purpose and the means
employed. It does not matter whether such control is in fact exercised
by the person holding the power; it also is unimportant whether the work is
material or intellectual in nature.
[Emphasis added.]
[29] In my opinion, the
rules governing the contract of employment in Quebec law are not identical to the
common law rules, and thus, it is not appropriate to apply common law decisions
such as Wiebe Door Services Ltd. v. Minister of National Revenue, [1986]
3 F.C. 553 (F.C.A) and 671122 Ontario Ltd. v. Sagaz
Industries Canada Inc., [2001] 2 S.C.R. 983, 2001 SCC 59. At common law, "there is no universal test to
determine whether a person is an employee or an independent contractor . . . The
central question is whether the person who has been engaged to perform the
services is performing them as a person in business on his own account." As Major J.
Held in Sagaz:
47 Although there is no universal test to
determine whether a person is an employee or an independent contractor, I agree
with MacGuigan, J.A. that a persuasive approach to the issue is that taken by
Cooke, J. in Market Investigations, supra. The central question is whether the person who has been
engaged to perform the services is performing them as a person in business on
his own account. 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.
[Emphasis added.]
[30] Consequently, at
common law, it is possible to hold that a contract of employment exists without
even deciding the factual question of whether a power of control or direction
exists.
[31] In Quebec, unlike the common law situation, the central
question is whether there is a relationship of subordination, that is to say, a
power of control or direction. Courts have no choice but to determine whether
or not there is a relationship of subordination in order to determine whether a
contract constitutes a contract of employment or a contract for services. That
is the approach that Létourneau J.A. of the Federal Court of Appeal adopted in D
& J Driveway,
where he determined that there was no contract of employment based on the
provisions of the Civil Code, and, in particular, his finding that there
was no relationship of subordination, which he described as "the
essential feature of the contract of employment."
[32] In addition to the
decision in D & J Driveway, I would point out the decision
of the Federal Court of Appeal in 9041‑6868 Québec Inc. v. Canada (Minister
of National Revenue), [2005] F.C.A. No. 1720 (QL), 2005 FCA 334,
where Décary J.A. writes as follows at paragraphs 2 and 3:
2 With
respect to the nature of the contract, the judge's answer was correct, but, in
my humble opinion, he arrived at it incorrectly. He did not say
anything about the provisions of the Civil Code of Québec, and merely
referred, at the end of his analysis of the evidence, to the common law
rules stated in Wiebe Door Services Ltd. v. Canada (Minister
of National Revenue), [1986] 3 FC 533 (FCA) and 671122 Ontario Ltd. v.
Sagaz Industries Canada Inc., 2001 SCC 59, [2001] 2 S.C.R. 983.
I would hasten to point out that this mistake is nothing new and can be
explained by the vacillations in the case law, to which it is now time to
put an end.
3 When
the Civil Code of Québec came into force in 1994, followed by the
enactment of the Federal Law - Civil Law Harmonization Act, No. 1, S.C.
2001, c. 4 by the Parliament of Canada and the addition of section 8.1 to
the Interpretation Act, R.S.C., c.
I-21 by that Act, it restored the civil law of Quebec to its rightful place in
federal law, a place that the courts had sometimes had a tendency to ignore. On
this point, we need only read the decision of this Court in St-Hilaire v.
Canada, [2004] 4 FC 289 (FCA) and the
article by Mr. Justice Pierre Archambault of the Tax Court of Canada entitled
"Why Wiebe Door Services Ltd. Does Not Apply in Quebec and What
Should Replace It", recently published in the Second Collection of Studies
in Tax Law (2005) in the collection entitled The Harmonization of
Federal Legislation with Quebec Civil Law and Canadian Bijuralism, to see
that the concept of "contract of service" in paragraph 5(1)(a)
of the Employment Insurance Act must be analyzed from
the perspective of the civil law of Quebec when the applicable provincial law
is the law of Quebec.
[Emphasis added.]
[33] Lastly, before
finishing this statement of the rules that govern the determination of whether Ms. Rhéaume
held insurable employment, we should recall the remarks made by Picard J. of
the Quebec Superior Court in 9002‑8515 Québec Inc., which I reproduced
at paragraph 121, page 2:82 of my paper:
15 In order for there to be a contract of
enterprise, there must be no relationship of subordination and the Agreement
contains several elements showing a relationship of subordination. A sufficient
number of indicia exists in this case of a relationship of authority.
[34] We must now apply
these relevant legal rules to the facts of the instant case. In order to
determine the nature of the contract between the parties, it is helpful to
begin by ascertaining the intention of the parties at the relevant time.
Looking at the matter from Ms. Faucher's point of view, it is clear that
her intention was to enter into a service contract, not an employment contract.
In fact, she told Ms. Rhéaume that she would be self-employed. Moreover,
the written contract expressly states that it is a service contract. As for Ms. Rhéaume,
she said that she saw no difference between an employment contract and a
service contract; she thought that the only consequences of this
distinction were tax-related. One must recall that Ms. Rhéaume had
just graduated from university and was entering the job market. Consequently,
she had little experience to understand the meaning of this type of contract.
Thus, it is far from clear that Ms. Rhéaume understood that, in Quebec, a
contract of employment is one in which a person performs services under the
direction or control of another person, the employer. In fact, I doubt
that many workers know that the existence of a relationship of subordination is
what distinguishes an employment contract from a service contract. The existence
of some vacillation in the case law, alluded to by Décary J.A. in 9041‑6868 Québec Inc,
supra, does not help the situation. Thus, under the circumstances of
this appeal, one can conclude that it is doubtful that Ms. Rhéaume truly
acquiesced in a service contract, since she was not familiar with the
conditions essential to the existence of such a contract.
[35] Even if one had to
find that Ms. Rhéaume gave her fully informed consent to a service
contract under which the work would not be performed under Ms. Faucher's
direction or control and she would be free to chose the means of performing the
contract, it would still be the court's duty to ensure that the contract, as
worded, correctly reflects the parties' intention and that the parties behaved
in a manner that is consistent with their intent. I wrote the following
about this issue in my paper, at page 2:63:
[TRANSLATION]
[97] Even
if the contracting parties have manifested their intention in their written or
oral contract or if their intention can be inferred from their conduct, this does
not necessarily mean that the courts will view it as determinative. As Décary J.A.
indicated in Wolf, supra, performance of the contract must be
consistent with this intention. Thus, the fact that the parties have called
their contract a "contract for services" and have stipulated both
that the work will be done by an "independent contractor" and
that there is no employer-employee relationship does not necessarily make the
contract a contract for services. As article 1425 C.C.Q. 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. According to Robert P. Gagnon:
[TRANSLATION]
91 — Factual assessment — Subordination
is verified by reference to the facts. In this regard, the case law has
always refused to simply accept the parties' description of the contract:
In the contract, the
distributor himself acknowledges that he is working on his own account as an
independent contractor. There is no need to return to this point, since doing
so would not alter the reality; furthermore, what one claims to be is often
what one is not.
[Emphasis added.]
[98] In D & J
Driveway, Létourneau J.A. of the Federal Court of Appeal wrote:
2 It should be noted at the outset that
the parties' stipulation as to the of the contractual relations is not necessarily
conclusive and that the Court which has to consider this matter may arrive
at a contrary conclusion based on the evidence presented to it: Dynamex
Canada Inc. v. Canada (2003), 305 N.R. 295 (F.C.A). However, that stipulation
or an examination of the parties on the point may prove to be a helpful tool in
interpreting the nature of the contract concluded between the participants.
[Emphasis added.]
[99] Judges may therefore
recharacterize the contract so that its name reflects reality. In France, the
recharacterization of a contract results from the application of the reality
principle. The
Cour de cassation has adopted an approach similar to the Canadian one:
[TRANSLATION]
Whereas the existence of an employment
relationship depends neither on the expressed will of the parties nor on the
name they have given to their agreement but rather on the factual conditions in
which the workers' activity is performed; . . .
[100] In
my opinion, this verification that the actual relationship and the parties'
description of it are consistent is necessary when interpreting contracts of
employment since the parties may have an interest in disguising the true nature
of the contractual relationship between the payer and the worker. Experience
shows, in fact, that some employers, wanting to reduce their fiscal burden with
respect to their employees, sometimes decide to treat them as independent
contractors. This decision can be made either at the outset of the
contractual relationship or later on. Similarly, some employees could have an
interest in disguising their contract of employment as a contract for services
because the circumstances are such that they do not foresee that they will need
employment insurance benefits and they want to eliminate their employee
contributions to the employment insurance program, or they desire more freedom
to deduct certain expenses in computing their income under the Income Tax
Act.
[101] Since the EIA
generally authorizes the payment of employment insurance benefits only to
employees who lose their employment, the courts must be on the alert to unmask
false self-employed workers. The courts must also ensure that the employment
insurance fund, which is the source of these benefits, receives premiums from
everyone who is required to pay them, including false self‑employed
workers and their employers.
[Footnotes omitted.]
[36] In the case at bar,
does the Service Contract comply with the conditions essential to the existence
of such a contract? As we have seen, article 2099 C.C.Q. states that
the provider of services must be free to choose the means of performing the
contract, and that there must be no relationship of subordination in
respect of such performance.
[37] As counsel for the
Respondent acknowledges, there are several stipulations in the Service Contract
that show that Ms. Faucher reserved a right of direction or control over Ms. Rhéaume's
work. It should be noted that, pursuant to paragraph 2 of the contract, Ms. Rhéaume
had to prepare courses [TRANSLATION] "in a manner consistent with
Rest'Actif's objectives." Moreover, Ms. Rhéaume agreed to be punctual
and to treat Rest'Actif's clientele respectfully and professionally. Paragraph 4
stipulates that absences without a valid reason will not be tolerated, and that
a document attesting to the validity of an absence due to illness may be
requested. Lastly, requests for a substitute had to be approved by Rest'Actif.
It should be added that Rest'Actif reserved the right to change Ms. Rhéaume's
places of work.
[38] Apart from these
contractual provisions, Ms. Faucher's conduct in supervising Ms. Rhéaume's
work provides further direct evidence of her control over Ms. Rhéaume.
This control manifested itself when Ms. Faucher reprimanded Ms. Rhéaume
for showing up late for one of her classes. It also manifested itself when she
showed up several times to observe Ms. Rhéaume as she taught her classes,
and when she ensured that Ms. Rhéaume was taking appropriate measures to
avoid using wet sneakers during her classes. She also exercised her right of
direction when she instructed Ms. Rhéaume not to leave elastics with
customers so that they could use them outside the training sessions. The
control was also shown when Ms. Faucher gave her instructions during the
training that she dispensed right after hiring Ms. Rhéaume. This included
telling her to have the participants fill out the physical activity readiness
questionnaires and the consent forms concerning the risks of physical activity.
Control was also shown when she said when it was appropriate to take breaks and
that warm-up exercises were to be done at the beginning of her sessions.
[39] Ms. Faucher also
exercised her power of control when she criticized Ms. Rhéaume's
performance with the employees of the Ministère du Revenu du Québec and when
she informally obtained reports about what happened by phoning Ms. Rhéaume
or by showing up where the fitness instruction was being given.
[40] Her power of direction
was also made plain when she limited Ms. Rhéaume's contacts with her
clients to a strict minimum: Ms. Faucher generally did not allow Ms. Rhéaume
to contact them; she did so herself. This power of direction was also
exercised when Ms. Faucher refused to allow Ms. Rhéaume to prolong
her fitness classes for a few minutes more than what had been agreed with the
clients.
[41] It is not surprising
that Ms. Faucher reserved the right to exercise a power of control and
direction over Ms. Rhéaume's work or that she exercised that power,
because Ms. Rhéaume was performing services for Rest'Actif's clients. I
cannot see how Ms. Faucher's business could have survived without
exercising these rights of control over the work done by the kinesiologists
that she hired. Ms. Faucher was not operating a simple kinesiologist
placement business that offered services to its clients. Rather, it was
offering its clients physical fitness training courses.
[42] The fact that Ms. Rhéaume
had some latitude in selecting activities suggests a certain degree of
autonomy. However, as Picard J. reminds us in 9002‑8515 Québec Inc.,
and, as stated in article 2099 C.C.Q., there must be no relationship
of subordination between Ms. Rhéaume and Ms. Faucher in respect of
the performance of the work. But the record discloses the existence of a
relationship of subordination. Indeed, "[a] sufficient number of indicia
exists in this case of a relationship of authority" and thus, the contract
in issue cannot be a contract for services within the meaning of the Civil Code
of Québec. It is, rather, a contract of employment. I would note that many
instructors at the primary, secondary, college and university levels have
considerable independence with respect to the manner in which they teach their
subject matter, but are considered employees. As Noël J.A. stated in Pinsonneault,
supra, the important thing is to determine whether the payor had the
right to exercise control or direction over the work done by the workers, not
whether such contract was actually exercised, and it is clear that school
boards, colleges and universities have this power of control and direction over
the work done by their professors. In my opinion, Ms. Rhéaume's work was
in the same situation.
[43] Although it is only
a minor fact, I should note in closing that I do not know many contractors and
service providers who ask their clients to prepare invoices for them. In my
opinion, the contractor in this instance was Ms. Faucher, and Ms. Rhéaume
was merely an employee.
[44] For all these
reasons, Ms. Rhéaume's appeal is allowed, and it is my determination that
her employment with Ms. Faucher, during the relevant period, constituted
insurable employment for the purposes of subsection 5(1) of the Act.
Signed at Ottawa, Canada, this
1st day of November 2007.
"Pierre Archambault"
Translation
certified true
on this 21st day
of November 2007.
Brian McCordick,
Translator
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