Citation: 2007TCC729
Date: 20071204
Dockets: 2007-2441(EI)
2007-2442(CPP)
BETWEEN:
GEORGE J. HERVIEUX,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Boyle, J.
[1] The Appellant,
George Hervieux, is appealing from determinations made by the Canada
Revenue Agency that he was not engaged in insurable employment or pensionable
employment for the period July to October 2006 for purposes of the Employment
Insurance Act and the Canada Pension Plan. During this period,
Mr. Hervieux did work for 1264112 Ontario Inc. which carried on business as
La Compagnie Laberge primarily in the capacity of construction project manager
for renovations being done to a property on Belanger Street in Sudbury as well as two other
properties owned by that corporation, related corporations and the shareholders
of those corporations.
[2] The Appellant,
Mr. Hervieux, testified on his own behalf and introduced a number of documents
into evidence as described below. Importantly, these included a payroll slip
from one of the companies for part of the period which showed 4% vacation
pay accruing and withholding for federal and provincial taxes, CPP and EI.
Mr. John Laberge testified on behalf of the Respondent.
Mr. Laberge’s wife owned La Compagnie Laberge. Mr. Laberge owned Cabaret
Hotels Ltd. and other related companies for whom Mr. Hervieux worked
during the period. Mr. and Mrs. Laberge owned a home on Marion Street where other work was
done. It was Mr. Laberge who met with Mr. Hervieux and offered him
the work and it was Mr. Laberge who
completed the CRA’s “Payer’s Questionnaire” on behalf of La Compagnie Laberge.
Mrs. Laberge also testified briefly.
[3] The Laberges and Mr. Hervieux had a personal,
community and working relationship going back for a period of at least
30 years. Unfortunately, that relationship broke down on October 16,
2006 over disputes about the progress of the Belanger Street renovations and the control over Mr. Hervieux’s work
schedule. That day ended with the police being called and attending at
Mr. Hervieux’s residence and later at the Laberges’ residence in the
evening and again later at night. Neither the disputes over the speed, quality and
value of the work performed, nor the October 16th incident
requiring police intervention, are relevant to this EI and CPP appeal except as
described in my reasons below. Those disputes are not to be resolved in this
proceeding. The only issue for the Court is whether Mr. Hervieux was hired
as, and worked as, an employee
or independent contractor in respect of his work for the Laberges and their companies
and for which he was paid by La Compagnie Laberge.
Mr. Hervieux’s version of the events
[4] According to
Mr. Hervieux, Mr. Laberge offered him a job in July 2006 to
conduct renovations at the Belanger Street property. Mr. Hervieux and Mr. Laberge
discussed whether the relationship was to be employment as well as the
approximate costs and time frames for the renovations, the need for other
workers to be involved, etc. It was specifically discussed and agreed that
Mr. Hervieux would be an employee and would be paid $750 a week until the
project was finished. It was estimated by both Mr. Hervieux and
Mr. Laberge that the Belanger Street work would take between one and two
months but could take longer depending upon what was discovered as the work proceeded.
[5] Mr. Laberge
was in contact with Mr. Hervieux several times a day either personally or
by cell phone. At these times, Mr. Laberge gave Mr. Hervieux a list
of what needed to be done. This regularly included work on properties owned by
the Laberges and their group of companies other than the Belanger Street property. With the
respect to the renovations at the Belanger Street property, Mr. Laberge
specified the order in which the day’s work was to be attended to on the property
as well as whether Mr. Hervieux should be attending to other matters at
other properties instead or as well.
[6] There was no
written agreement in respect of the work that either addressed the terms of
Mr. Hervieux’s contract or which addressed the specifics of the renovation
work to be done at the Belanger Street property. Mr. Laberge
had to approve of any other workers on the property and was responsible for
paying those people. Mr. Laberge was responsible for paying for all of the
materials and supplies. Mr. Hervieux kept track of the hours worked by
others on the site and reported on those to Mr. Laberge. Mr. Hervieux
was not able to work for others as he was expected to be working full-time for
the Laberges. Mr. Hervieux was given access to the Laberges’ workshop and
tools. Other trades people involved provided their own tools. In addition, Mr.
Hervieux regularly used a number of the tools he owned in connection with his
contracting construction and renovation business. Mr. Hervieux did not own
a truck or van. Mr. Laberge made available to Mr. Hervieux throughout
the period a van owned by one of his companies. Mr. Hervieux used his
utility/equipment trailer occasionally behind the van. Mr. Hervieux was
allowed some personal use of the van. Mr. Laberge bought some new tools
needed in connection with Mr. Hervieux’s work as well as disposable items
like blades and bits although Mr. Hervieux, at least once, purchased a
specialty electric tool for the tasks on his own account. In his testimony,
Mr. Laberge either agreed with, or did not contradict, Mr. Hervieux’s
evidence summarized in this paragraph.
[7] While Mr. Hervieux does run a construction renovation
business, he has also previously served as an employed construction project
manager. It was his uncontradicted testimony that, in his construction
renovation business, he always has written agreements respecting the work to be
done, time frames and charges.
[8] Mr. Hervieux
said he worked 60 to 80 hours per week six or seven days a week for the
Laberges in respect of this work during the period. He received $550 per week
in cash and understood and accounted for the other $200 a week as being in respect
of his withholdings. He was paid regularly on Fridays. In addition to keeping
track of the other workers’ hours, in order to receive the cash for
Mr. Laberge to pay the other workers (except for the one or two that Mr. Laberge
paid directly), Mr. Hervieux kept track of his own hours.
[9] Mr. Hervieux
produced a payroll slip that he received from Mr. Laberge dated September 1st, 2006
for the period ending August 31st, 2006. He says he also
received a second such payroll slip from Mr. Laberge but this disappeared
on the night of October 16 from his document file in the van when it was
taken by Mr. Laberge and his colleague as described below. The payroll
slip shows monthly regular pay of $3,000 together with appropriate vacation pay,
federal and provincial tax withholdings and withholding of Canada Pension Plan
and Employment Insurance for net pay of approximately $2,100. To this extent,
it does corroborate Mr. Hervieux’s statement that he and Mr. Laberge
agreed he would be hired as an employee and its $3,000 monthly regular salary
is largely consistent with his $750 a week salary. In addition the $2,100
monthly net pay largely corresponds to the $550 a week, net of $200 withholdings,
that Mr. Hervieux received. There are however some questions raised by the
document. Firstly, it is called a payroll calculation and secondly, it appears
to have been issued by Cabaret Hotels Ltd. a separate corporation owned by the
Laberges from La Compagnie Laberge. (The Laberges testified that Cabaret Hotels
Ltd. had a regular payroll and La Compagnie Laberge did not). In addition,
Mr. Hervieux produced some of his handwritten notes prepared during the
period which did record hours, amounts payable to others as well as accounting
for the $200 withholding from his weekly cash payments of $550.
[10] The working relationship ended on
October 16, 2006. That evening, according to Mr. Hervieux, Mr. Laberge telephoned him at
home to complain about the state of the renovation work and to insist that
Mr. Hervieux attend at the Belanger
Street property to discuss matters.
Mr. Hervieux refused. Mr. Laberge then attended with a colleague
known as “Bam Bam” to repossess Mr. Laberge’s van after removing
Mr. Hervieux’s trailer and Mr. Hervieux’s tools from the van.
According to Mr. Hervieux, his folio of documents in respect of the work
he was doing for the Laberges, including all of his notes, his second pay slip
and other documents that would have further corroborated his evidence, were
taken by Mr. Laberge and his colleague and were not returned when the
first of Mr. Hervieux’s items were returned after the police first attended
on Mr. Laberge. According to Mr. Hervieux, his folio, absent many
papers of significance, was only returned after the police’s second attendance
on Mr. Laberge. According to Mr. Hervieux, when Mr. Laberge and his
colleague attended at Mr. Hervieux’s home, a heated discussion took place
in front of the house and Mr. Laberge threatened Mr. Hervieux to make
his life miserable, ruin him, and to kill him.
Mr. Laberge’s version of the
events
[11] Mr. Laberge
testified as to a quite different version of events in several respects.
Notably, he denies that he and Mr. Hervieux agreed from the outset to an
employment relationship and he offers a different explanation for the issue of
the payroll slip to Mr. Hervieux. In
his testimony, Mr. Laberge also disagreed with the extent of his control
over the selection of other workers on the project. According to
Mr. Laberge, Mr. Hervieux was retained to do the work on the Belanger Street
property following their initial discussion of approximately how much time it
would take and what Mr. Hervieux would charge for his services. That
discussion, according to Mr. Laberge, consisted of them guessing that Mr. Hervieux
would be paid $4,000 to $5,000 but that could be perhaps $2,000 higher in the
end and that Mr. Laberge’s cost of materials would be about the same, so
Mr. Laberge anticipated about a $10,000 project. He says he offered it as
a contract job and assumed that there would be $4,000 to $5,000 of labour but
that Mr. Laberge would see what Mr. Hervieux billed at the end, assess
what it was worth at the end of the project and pay Mr. Hervieux what they
would later work out. He acknowledged he told Mr. Hervieux to hire who he
needed to work with him, to keep track of their work and that Mr. Laberge
would pay them. Mr. Laberge agreed that Mr. Hervieux was to submit
his expenses which were to be paid in cash. Mr. Laberge confirmed that the
Compagnie Laberge’s cheques to Mr. Hervieux entered into evidence were to
his mind paperwork signed by Mr. Hervieux when presented and retained by
Compagnie Laberge to reflect the cash payments already made to
Mr. Hervieux. (This is consistent with Mr. Hervieux’s description of
being paid in cash and later asked to endorse cheques from the Laberge’s
companies that they kept.)
[12] In addition to
disputing that the relationship was intended to be employment by both of them
from the outset, Mr. Laberge explained the payroll slip as being a dummy or
fictitious payroll slip prepared to show Mr. Hervieux what his net
earnings would be if he took on separate employment with Mr. Laberge’s
Cabaret Hotels Ltd. doing work on the Crazy Horse bar, including renovation
work, during a five or six week period in September and October. The bar was to
be closed for three of those weeks. Mr. Laberge denies that a second slip
was ever issued or that he kept any of Mr. Hervieux’s documents on the
night of October 16th. He says nothing ever became of this
proposed Crazy Horse employment as a result of their falling out.
Mr. Laberge acknowledges he was willing to take Mr. Hervieux on as an
employee to give him some “pogey hours” doing renovation work at his bar.
[13] According to Mr. Laberge, La Compagnie Laberge did
not have a regular payroll or any payroll capacity as it has no employees
except for his wife who was the sole shareholder and who, as part of her
compensation, received salaries and bonus as well as dividends.
Mr. Laberge did not think La Compagnie Laberge had a CRA employment number
or account.
[14] Mr. Laberge’s version of the events on the evening
of October 16th does not differ in any material way from that
recounted by Mr. Hervieux except
that Mr. Laberge denies taking, keeping or destroying any of Mr. Hervieux’s
documents from his folio in the van or intentionally keeping that folio until
the police attended again upon him for its return. When Mr. Laberge was
asked in cross-examination whether he threatened to make Mr. Hervieux’s
life miserable, ruin him as well as to kill him, Mr. Laberge responded glibly
only that the cemeteries would be full if he had killed everyone he had threatened
to kill. He did not deny making all of those threats.
The
CRA Employee/Independent Contractor Questionnaire
[15] Following Mr. Hervieux’s
application for EI benefits, CRA had Mr. Hervieux fill out a “Worker’s Questionnaire”.
The answers provided by Mr. Hervieux in that questionnaire were entirely
consistent with Mr. Hervieux’s testimony and with the other documents entered
into evidence.
[16] Mr. Laberge completed the Payer’s Questionnaire on
behalf of La Compagnie Laberge. Mr. Hervieux
obtained a copy of that from CRA under the Privacy Act legislation.
Portions of the copy he had and entered into evidence were blanked out or
excised in accordance with the Privacy Act. The Crown did not enter a
complete copy of the Payer’s Questionnaire. The questionnaire was completed by
Mr. Laberge on February 1st, 2007. There are several
notable aspects of Mr. Laberge’s answers in the questionnaire that differ
from his testimony at trial. Obviously, Mr. Laberge had a fuller
opportunity to testify at trial and did so, whereas the questionnaire is always
subject to limitations based upon its wording and the brief, point form or
yes/no answers solicited, as well as by its instructions and overall lack of clarity
at times.
[17] In answering question 10(c), Mr. Laberge refers to
himself (or La Compagnie Laberge or Mrs. Laberge) as Mr. Hervieux’s “employer”. The question asked is
whether any compensation or benefits were paid to the worker upon termination.
The answer is “No. Worker abused employer, caused rent losses”. Not only does
this answer use employment terminology, it also appears from Mr. Laberge’s
answers in filling out the form that he was concerned with demonstrating that
he had cause for terminating Mr. Hervieux. Termination for cause is also
an employment-related concern. Similarly, in answering question 10(a) which
asked “Did the payer have the right to terminate the worker’s services?”, Mr. Laberge checked off
“Yes” and refers to a lack of communication and failure to complete because of
being busy elsewhere, helpers’ complaints, misuse of company truck and company charge
accounts.
[18] In addition, Mr. Laberge answered question 3(a)
describing the duties performed by Mr. Hervieux
as not being limited to the Belanger Street project, but also properties on Errington
Street and Main Street owned by La Compagnie Laberge, the Laberges’ home on
Marion Street as well as two Errington Street properties owned by Cabaret
Hotels (which Mr. Laberge testified Mr. Hervieux did not work on
during the time in question). The first sentence of the questionnaire addressed
to La Compagnie Laberge and completed by Mr. Laberge says the questions relate
to a working relationship between Mr. Hervieux and La Compagnie Laberge for
the period July 20, 2006 to October 16, 2006.
Credibility
[19] Before being able to
analyse from a legal point of view whether the relationship was one of
employment or one of independent contractor, I must decide, on the balance
probabilities, whose testimony I believe as it relates to (i) the initial
agreement of the parties and their intention to enter into an employment
relationship or a contract relationship; (ii) the reason for the payroll
slip Exhibit A-1 having being issued; (iii) the scope of the work; and (iv) the
terms for payment of the work.
[20] The two versions of
events are on these points entirely irreconcilable. Some documentary evidence
was put forward by the Appellant corroborating his version of the events.
Little if any was put forward by the Crown to support Mr. Laberge’s
version of the events. The earlier versions of the events provided by Mr. Hervieux and Mr. Laberge to CRA in
responding to their questionnaires shortly after the work relationship ended
also tend to corroborate Mr. Hervieux’s version of the disputed aspects of
the evidence. I find on the balance of probabilities that Mr. Laberge’s
version of the disputed events is not to be accepted. In addition to there
being several inconsistencies with his version in the Court and his
questionnaire, I am influenced by the fact that he acknowledged he was furious
with Mr. Hervieux and threatened to ruin him and make his life miserable.
That provides him with a reasonable motive for not being truthful with the
Court even though he does not appear to have any significant financial interest
in the outcome.
[21] I find that the parties intended at the outset to enter
into an employment relationship for the amount of $3,000 per month or
approximately $750 per week for the duration of the project. I do not accept
Mr. Laberge’s version that he entered into an open-ended contract based upon a
loose estimate of $4,000 to $5,000 perhaps $7,000 of costs for services,
perhaps that much again for material with the fee for services to be assessed
by him and determined by him as what is reasonable at the end of the project.
This is inconsistent with not having documented in any form the work to be done
to the Belanger Street property or the estimated timetable
for completing it. This is also inconsistent with Mr. Laberge directing Mr. Hervieux to work on other Laberge properties
and do other things for Laberges during the period in question as part of the
same contract.
[22] I also reject Mr. Laberge’s explanation of the
reason for the payroll slip having been delivered to Mr. Hervieux. His
explanation that he was prepared to have Mr. Hervieux employed for his
other company doing renovation work on its property was completely inconsistent
with his testimony that his sole concern during the period in question was
making sure the Belanger Street renovations were completed as quickly as
possible in order that tenants could move in and occupy the property. Mr. Laberge’s
testimony is very clear that the Crazy Horse bar work was to be done in
September and October.
Analysis
[23] The issue of employee versus independent contractor for
purposes of the definitions of pensionable employment and insurable employment
are to be resolved by determining whether the individual is truly operating a
business on his own account. This is the question set out by the British courts
in Market Investigations, Ltd. v. Minister of Social Security, [1968] 3
All E.R. 732 (Q.B.D.), approved by the Federal Court of Appeal in Wiebe Door
Services Ltd. v. The Minister of National Revenue, 87 DTC 5025 for purposes
of the Canadian definitions of insurable employment and pensionable employment,
and adopted by the Supreme Court of Canada in 671122 Ontario Ltd. v. Sagaz
Industries Canada Inc., [2001] 2 S.C.R. 983. This question is to be decided
having regard to all of the relevant circumstances and having regard to a
number of criteria or useful guidelines including: 1) the intent of the
parties; 2) control over the work; 3) ownership of tools; 4) chance of
profit/risk of loss and 5) what has been referred to as the business
integration, association or entrepreneur criteria.
[24] The decision of the
Federal Court of Appeal in Royal Winnipeg Ballet v. The Minister of National
Revenue, 2006 DTC 6323 highlights the particular importance of the parties’
intentions and the control criterion in these determinations. This is
consistent with the Federal Court of Appeal’s later decision in Combined
Insurance Co. of America v. Canada (Minister of National Revenue), 2007 FCA
60 as well as its decision in City Water International Inc. v. Canada
(Minister of National Revenue), 2006 FCA 350. The Reasons of this Court in Vida
Wellness Corp. v. Canada (The Minister of National Revenue), 2006 TCC 534 also
provide a helpful summary of the significance of the Royal Winnipeg Ballet decision.
Most recently, the Chief Justice’s Reasons in Lang v. Canada (The Minister
of National Revenue), 2007 TCC
547 are
also very helpful on this point.
The intent of the parties:
[25] In this case I have
found that the parties intended that the relationship be an employment relationship
and that employment-related withholdings were to be made by La Compagnie
Laberge when paying Mr. Hervieux. In their dealings with each other, there
was no repudiation or any behaviour inconsistent with this relationship being
an employment relationship until after the working relationship ended.
Following Royal Winnipeg Ballet, intention is an important consideration
and in this case clearly leans in favour of employment.
Control:
[26] In this case,
Mr. Hervieux’s daily work was under the control of Mr. Laberge. Mr. Laberge,
and at times Mrs. Laberge, communicated with him several times a day. The
Laberges directed which property Mr. Hervieux was to attend to that day
and the order in which the needed work to be done was to be performed. It was
not up to Mr. Hervieux to decide if he was going to work on the flooring
or the handrails at any point in time. He was directed in that regards by
Mr. Laberge. Indeed, the relationship ended over a dispute concerning in
part how much control Mr. Laberge sought to exercise over the time at
which Mr. Hervieux was to be at work on a weekend.
[27] If this was an independent contract situation, one
would expect Mr. Hervieux to have primary control over what portion of the
agreed-to renovations he would work on at any point in time and at what pace,
subject to ordinary, reasonable and necessary construction practices and any
overall agreed‑to time frames for completion of the project or of partial
completion progress. The degree of control by Mr. Laberge over what work
Mr. Hervieux was to do and when he was to do it inclines in favour of the
relationship being an employment relationship not one of independent
contractor.
Ownership of tools:
[28] In this case, the
needed tools and equipment appear to have been provided approximately equally
by the worker and the payer based upon their ownership and availability of
tools. With respect to the vehicle, it is not uncommon for an employer to
provide a vehicle to an employee during the course of his employment. It
strikes me as most unusual that a contractor would be provided with a general
purpose vehicle throughout the period of his contract. In the facts of this
case, there appears to have been a sensible, reasonable and practical
contribution of tools, vehicles and trailers already owned and available. I do
not find that inclines in either particular direction of employment or independent
contractor.
Chance of profit/Risk of loss:
[29] Mr. Hervieux was paid a fixed
rate per month or per week while he did the Laberges’ work. There was no
specific, detailed work that was agreed at the outset to be the work to be done
nor was there any maximum amount of time or amount of pay within which any
agreed work or the work expected of him had to be done. Mr. Hervieux was
going to receive $3,000 per month or approximately $750 per week for as long as
he did the work the Laberges wanted done at their properties. Mr. Hervieux’s
only cost was for the gas used by Mr. Laberge’s van that he was provided
with and which he also used for personal purposes during the period. Since Mr. Hervieux
worked full-time for the Laberges and was not allowed to work for others during
the time, he did not have any chance of profit beyond receiving his agreed-to
pay from the Laberges nor did he have any risk of loss associated with the work
he did for the Laberges. This consideration also inclines in favour of an
employment relationship.
Conclusion
[30] For the reasons given above, I am allowing
Mr. Hervieux’s appeal since I find he was an employee and not an
independent contractor and therefore was engaged in insurable employment for EI
purposes and pensionable employment for CPP purposes during the period in
question.
Signed at Ottawa,
Canada, this 4th day of December 2007.
"Patrick Boyle"
Email this Content