Citation: 2007TCC755
Date: 20071220
Docket: 2006-1438(IT)G
BETWEEN:
MICHEL GRIMARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Archambault J.
[1] Michel Grimard
is appealing from the assessments made by the Minister of National Revenue (Minister)
for the 1995, 1996, 1997 and 1998 taxation years (relevant period).
At the audit stage, the Minister disallowed all the expenses claimed by
Mr. Grimard in computing his professional income, except professional dues
for 1995, 1996 and 1997. At the objection stage, the Minister allowed the
professional dues for 1998 and convention expenses for 1995 and 1996. The
expenses at issue here are as follows:
|
Description of expenses
|
1995
|
1996
|
1997
|
1998
|
|
Office rent
|
$11,280
|
$11,280
|
$11,280
|
$11,280
|
|
Stationery,
stamps, telephone, office expenses
|
$1,878
|
$1,803
|
$1,850
|
$1,920
|
|
Travel
|
$4,986
|
$5,127
|
$4,943
|
$5,028
|
[2] To justify
disallowing these expenses, the Minister argues that they were incurred for the
purpose of gaining or producing income from employment and that their deduction
is therefore prohibited by virtue of subsections 8(1), (2) and (10) of the
Income Tax Act (Act). In the alternative, even if the expenses
were incurred for the purpose of gaining or producing income from a business,
the Minister argues that they would not be allowable under
paragraph 18(1)(h) of the Act because they were personal or living
expenses.
Factual Background
[3] Mr. Grimard is
a physician who has held a specialist's certificate in community health since
1981. This specialty encompasses a number of fields, including public,
environmental and occupational health. Mr. Grimard also has master's and
doctoral degrees in biophysics and physiology applied to the effects of the
environment on human health.
[4] Mr. Grimard
worked as a medical assessor for the Commission d'appel en matière de lésions
professionnelles (CALP) from 1991 to 1998 and for the Commission des
lésions professionnelles (CLP) until 1999. The CLP inherited the CALP's
powers, duties and responsibilities in 1998. The CALP and the CLP (board)
are administrative tribunals whose function is to resolve disputes related to
decisions of the Commission de la santé et de la sécurité du travail (CSST).
According to section 368 of the Act respecting industrial accidents and
occupational diseases (AIAOD) as it read at the relevant time, the
board was made up of not fewer than 12 commissioners, including a president
appointed by the government, whose term of office was no more than
five years (section 368 AIAOD). The president was responsible for the
administration and general management of the board (section 377 AIAOD).
The president could appoint full‑time assessors whose function was to
advise and sit with the commissioners (section 378 AIAOD). The president
could also, in order to "expedite the business of the board", appoint
part‑time or temporary assessors and determine their fees
(section 380 AIAOD). The second paragraph of section 380 provided
that such assessors were not "members of the personnel" of the board.
[5] In general,
Mr. Grimard's services were provided under a written contract that was for
a fixed term, usually two years. The first contract covered the period from
April 15, 1991, to April 14, 1993. The contract in effect at the start of the relevant
period and which was dated November 8, 1993, read as follows:
[TRANSLATION]
CONTRACT
|
BETWEEN:
|
Commission d'appel en matière de lésions
professionnelles, having its head office at 900 Place d'Youville, Quebec
City, Quebec, G1R 3P7, here acting through and represented by its
president, Freddy Henderson,
(hereinafter the "CALP"):
|
|
AND:
|
Michel Grimard, medical specialist,
residing at . . . Sherbrooke, Quebec, J1H 3R5,
(hereinafter the "contractor").
|
WHEREAS the CALP retained the contractor to
provide his professional services under an initial written contract covering
the period from April 15, 1991, to April 14, 1993, inclusive.
. . .
WHEREAS the parties hereby confirm the verbal
contract they entered into for the period from April 15 to
September 15, 1993.
THE PARTIES AGREE AS FOLLOWS:
1. OBJECT
OF CONTRACT
The CALP retains the contractor, who agrees
to provide his professional services to the CALP for the purpose of acting as
a medical assessor under the Act respecting industrial accidents and
occupational diseases (R.S.Q., c. A‑3.001) in accordance with
this contract.
The contractor undertakes to provide his
professional services exclusively to the CALP in all matters and
cases coming under the Act respecting industrial accidents and
occupational diseases and the Act respecting occupational health and
safety (R.S.Q., c. S‑2.1).
2. CONTRACTOR'S OBLIGATIONS
The contractor
undertakes to
(a) deal in a
professional manner with the cases assigned to him and, more specifically
but without limiting the generality of the foregoing, examine and analyze the
cases, applying his knowledge and professional skills;
(b) advise the
commissioner responsible for the case;
(c) sit with the
commissioner during the hearing of an appeal and, if necessary, during a
preliminary meeting;
(d) conduct
specific research relating to certain content and issues in his field of
competence;
(e) prepare
reference documents for his area of activity.
3. TERM
This contract shall take effect on
September 16, 1993, and terminate on September 15, 1995, inclusive.
4. REMUNERATION
4.1 In
consideration of services rendered, the CALP undertakes to pay the contractor annual
remuneration of $116,756 corresponding to professional fees based on
forty (40) hours a week.
4.2 The contractor shall
invoice the CALP for his fees every fourteen (14) days, and the CALP
undertakes to pay him on receipt of the invoice.
5. STATUTORY
HOLIDAYS AND NON‑WORKING DAYS
The contractor shall be entitled to be
paid for the statutory holidays and non‑working days provided for in
the public service.
6. VACATION
As of the effective date of this contract, the
contractor shall be entitled to annual vacation at the rate of one and two‑thirds
(1 2/3) days per month of continuous service, up to a maximum of twenty
(20) working days for each period of twelve (12) months of continuous service.
7. CHANGES
TO THE BENEFITS PROVIDED FOR IN CLAUSES 4, 5 AND 6
The CALP may change the remuneration or
benefits provided for in clauses 4, 5 and 6 to take account of Order in
Council 1369‑93 on the taking of unpaid leave and the implementation of
alternative measures in public bodies, which was made by the Conseil exécutif
on September 29, 1993.
The CALP shall apply Order in
Council 1369‑93
to the contractor in the same way it applies that Order in Council to its
personnel appointed and paid under the Public Service Act (R.S.Q.,
c. F‑3.1.1), as if he were part of that personnel.
8. EXPENSES
The CALP undertakes to reimburse the
contractor for the travel and living expenses he incurs while performing
his duties, in accordance with Order in Council 2500‑83 of November 30,
1983, as amended.
9. MOTOR
VEHICLE
The contractor must possess a motor
vehicle for the travel required by his duties.
10. CONFLICT
OF INTEREST
The contractor agrees to avoid any situation
that would create a conflict between his personal interest and the CALP's
interest, except with regard to his obligations under this contract. If such a
situation arises, the CALP may, in its discretion, resiliate the contract
immediately, without notice.
11. CONFIDENTIALITY
The contractor undertakes not to reveal or
disclose, without proper authorization, anything he learns in the performance
of his work under this contract.
12. COPYRIGHT
The work done by the contractor under this
contract and any product, document or information tool resulting
therefrom shall be owned wholly and exclusively by the CALP.
Any assignment of copyright under this
contract or any waiver of copyright by the contractor in favour of the CALP
shall be deemed to be included in the remuneration provided for in clause 4.
13. RESILIATION
Either party may resiliate this contract by
giving three (3) months' notice prior to the termination of this contract. If
the contract is resiliated, the CALP shall pay the contractor the amounts,
costs and disbursements corresponding to the services rendered up to the
resiliation date.
14. NOTICE
To be valid and binding on the parties, any
notice required under this contract shall be given in writing and sent by
registered mail, in which case it shall be deemed to have been received on the
third (3rd) day after it was mailed. Such notice may also be given by bailiff
or courier and shall then be deemed to have been received on the day it was
delivered.
. . .
[Emphasis added.]
[6] While acknowledging
that all or almost all of his income came from the board, Mr. Grimard
stated that he had provided professional consulting services to the Brotherhood
of Locomotive Engineers (Brotherhood) (Exhibit A‑1, Tab 4)
and to patients claiming disability benefits from insurance companies such as
Mutual of Omaha (Exhibit A‑1, Tab 2). However, Mr. Grimard
admitted that he sometimes did such work gratis. Moreover, the only evidence
filed during the hearing that showed he was paid for his professional services
had to do with an amount of $683 he received on February 9, 1999, for
services provided to the Brotherhood in connection with the Railway Medical
Rules Review (Exhibit A‑1, Tab 4). Mr. Grimard
admitted that he had never invoiced the Régie de l'assurance‑maladie for
professional services he had provided as a physician during the relevant
period.
All of his professional income for the 1995, 1996 and 1997 taxation years came
from the board, as shown by his tax returns and the T4As prepared by the board.
[7] Since
Mr. Grimard and his family lived in Sherbrooke and he had to perform his
work largely in Montreal, he rented an apartment in Montreal, where he stayed
while working there. He returned to Sherbrooke every weekend. The disallowed office expenses were
for this apartment, and the disallowed travel expenses were for the travelling he
did between Sherbrooke and Montreal. When he had to go anywhere else in Quebec
for his work, his expenses were reimbursed by the board.
[8] On March 31,
1998, during an audit by Quebec's Ministère du Revenu (department), the board
was informed that its part‑time assessors were employees according to the
standards in section 1 of the Act respecting the Québec Pension Plan
and that the appropriate source deductions had to be made, retroactive to
January 1998.
[9] The board accepted
this directive from the department. The board's president then appointed
Mr. Grimard a [translation] "casual
medical specialist" as of July 23, 1998. However, on the part of the form
dealing with working conditions, the employee status shown for Mr. Grimard
is that of [translation] "full‑time
employee".
According to Mr. Grimard, he did not become a member of the board's
personnel until that date, and he was then paid a regular salary fixed in
accordance with the collective agreement in force in the public service. The
board also began withholding at source the amounts required for income tax and
the mandatory premiums and contributions collected from the salaries of public
servants (health insurance, employment insurance, union dues, etc.). It prepared
Mr. Grimard’s T4 slip, indicating thereon that his employment income was
$57,640.71 (Exhibit I‑1, Tab 4). Mr. Grimard included that
amount as employment income in his 1998 tax return. However, he reported the
$53,702 received from the board in 1998, prior to his appointment of
July 23, 1998, as gross income from self‑employment, that is,
professional income.
[10] The department
subsequently issued notices of reassessment for 1995, 1996 and 1997 disallowing
all the deductions — apart from the professional dues —previously allowed on
the assumption that Mr. Grimard was self‑employed. Mr. Grimard
appealed to the Court of Quebec, and Judge Raoul Barbe rendered a decision
on July 9, 2003, holding that Mr. Grimard had been an employee of the
CALP during those three taxation years. In
rendering that decision, Judge Barbe analyzed the four main tests generally
recognized in common law cases, namely: control, ownership of tools, the chance
of profit and risk of loss and the worker's integration into the business. The
Quebec Court of Appeal affirmed that decision on March 23, 2005, finding
not only that the trial judge's analysis was meticulous, that his conclusion
was correct and that Mr. Grimard was therefore an employee, but also that
the travel expenses and expenses for the rented premises in Montreal could not be
applied to reduce his taxable income and would not have been deductible even if
he had been considered self‑employed. The Quebec Court of Appeal wrote
the following:
[TRANSLATION]
. . . The
Montreal premises were not an office or workplace
but rather a pied‑à‑terre, a second residence, and expenses
for transportation between the two residences cannot be characterized as
expenses incurred for his work or to produce income. Indeed, the rented
premises in Montreal did not generate any additional income for the appellant.
All of his income came from the work done in the office provided by the CALP
and wherever he had to go at the CALP's expense.
[11] The department
informed the Minister of its conclusion on the status of the board's part‑time
assessors. During his testimony, the Minister's appeals officer confirmed that
he had relied on the Quebec Court of Appeal judgment in making his decision with
respect to Mr. Grimard.
[12] Following the
department's decision to treat him as an employee, like all the other part‑time
assessors, and to disallow the deduction of the costs of his Montreal apartment
and his travel between Sherbrooke and Montreal, Mr. Grimard realized that
he could not afford to hold that employment with the board in Montreal. He
found new employment with the CSST in Sherbrooke in the spring of 1999.
Analysis
[13] The main issue is
whether the limiting provisions of section 8 of the Act apply because the income received from the
board was income from employment and not from a business.
Subsection 248(1) defines "employment" as follows:
248(1) In this Act,
"employment"
means the position of an individual in the service of some other person
(including Her Majesty or a foreign state or sovereign) and "servant"
or "employee" means a person holding such a position;
[Emphasis added.]
[14] In defining what
constitutes a "position . . . in the service of some other
person", the courts have generally found that there must be an employer‑employee
relationship (see, inter alia, Guérin v. M.N.R., 52 DTC
118, at page 120). Since the Act does not define this relationship, it is
appropriate to refer to the law governing the contractual relationship between
a worker and a payer to determine whether an employer‑employee
relationship exists. This approach is moreover consistent with section 8.1
of the Interpretation Act:
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.]
[15] The Quebec legislative provisions
that are most relevant in determining the existence of such a relationship are
the provisions of the Civil Code of Québec (Civil Code or C.C.Q.)
on contracts of employment, which, in Quebec, must be distinguished from contracts for services.
The provisions in question are articles 2085, 2086, 2098 and 2099 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.]
[16] An analysis of these
provisions of the Civil Code makes it clear that there are three essential
requirements for a contract of employment to exist: (i) performance of
work by the employee; (ii) remuneration for that work paid by the
employer; and (iii) a relationship of subordination. What clearly distinguishes a contract
for services from a contract of employment is the existence of a relationship
of subordination, that is, the fact that the employer has a right of direction
or control over the worker.
[17] In their writings,
authors have considered the concept of a right of "direction or
control" and its reverse side, the "relationship of
subordination". Robert P. Gagnon wrote the following:
[TRANSLATION]
(c) Subordination
90 — Distinguishing
factor — The most significant feature characterizing
a contract of employment is the subordination of the employee to the
person for whom he works. It is by this feature that a contract of
employment can be distinguished from other onerous contracts which also
involve the performance of work for the benefit of another person for a price,
such as a contract of enterprise or a contract for services under articles 2098
ff C.C.Q. Thus, while the contractor or the provider of services "is
free", under article 2099 C.C.Q., "to choose the means of
performing the contract" and while between the contractor or the
provider of services and the client "no relationship of subordination
exists . . . in respect of such performance," it is a characteristic of a
contract of employment, subject to its terms and conditions, that the
employee personally performs the work agreed upon under the employer’s
direction and within the framework established by the employer.
. . .
92 — Concept — Historically, the civil law first developed
a so-called strict or classical concept of legal subordination that was
used as a test for the application of the principle of the civil liability of a
principal for injury caused by the fault of his agents and servants in the
performance of their duties (art. 1054 C.C.L.C.; art. 1463 C.C.Q.). This classical legal subordination was characterized by the
immediate control exercised by the employer over the performance of the
employee’s work in respect of its nature and the means of performance.
Gradually, it was relaxed, giving rise to the concept of legal subordination
in a broad sense. The diversification and specialization of occupations and
work techniques often mean that the employer cannot realistically dictate
regarding, or even directly supervise, the performance of the work. Thus,
subordination has come to be equated with the power given a person,
accordingly recognized as the employer, of determining the work to be done,
overseeing its performance and controlling it. From the opposite
perspective, an employee is a person who agrees to be integrated into the
operating environment of a business so that it may receive benefit of his work.
In practice, one looks for a number of indicia of supervision that may,
however, vary depending on the context: compulsory attendance at a
workplace, the fairly regular assignment of work, imposition of rules of
conduct or behaviour, requirement of activity reports, control over the
quantity or quality of the work done, and so on. Work in the home does not
preclude this sort of integration into the business.
[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.]
[20] Mention should also
be made of the following commentary of the Minister of Justice on
article 2085 C.C.Q., which accompanied the draft Civil Code and which I
quoted at page 2:26 of an article I wrote (my article) entitled "Contract
of Employment: Why Wiebe Door Services Ltd. Does Not Apply in Quebec and What Should Replace
It":
[TRANSLATION]
This 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.]
[21] In my opinion, the
Civil Code rules governing contracts of employment are not the same as the
common law rules, and this means that it is not appropriate to apply common law
decisions like 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. In the common law, "there is no one
conclusive test which can be universally applied 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." Major J.
wrote the following 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.]
[22] There are numerous
common law decisions in which the courts have held that the "control"
factor is neutral and therefore not conclusive. In the common law, it is thus possible
to conclude that a contract of employment exists without making any finding of
fact regarding the existence of a right of control or direction.
[23] In Quebec, unlike in the common
law, the central question is whether there is a relationship of subordination,
that is, a power of control or direction. To determine that a contract is a
contract of employment or a contract for services, as the case may be, a court
has no choice but to make a finding as to the presence or absence of a
relationship of subordination. This was the approach taken by
Létourneau J.A. of the Federal Court of Appeal in D & J Driveway, in which he found that there was no
contract of employment; he based that conclusion on the provisions of the Civil
Code and, in particular, on his finding that there was no relationship of
subordination, which he described as "the essential feature of the
contract of employment".
[24] In addition to D & J Driveway,
I would note the decision of the Federal Court of Appeal in 9041‑6868
Québec Inc. v. Canada (Minister of National Revenue), 2005 FCA 334, [2005]
F.C.J. No. 1720 (QL). Décary J.A. wrote the following at
paragraphs 2‑3:
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] 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,
SC 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.]
It is worth noting that in Quebec civil
law, the definition of a contract of employment itself stresses
"direction or control" (art. 2085 C.C.Q.), which makes
control the actual purpose of the exercise and therefore much more than a mere
indicator of organization, as Mr. Justice Archambault observed at
page 2:72 of the article cited supra.
[Emphasis added.]
[26] I would also point
out the following comments made by Picard J. of the Quebec Superior Court
in 9002‑8515 Québec
inc., which I quoted at
paragraph 121, page 2:82 of my article:
[TRANSLATION]
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.
[Emphasis added.]
[27] Finally, it should
be noted that the courts rightly recognize that the parties' intention
regarding the nature of a contract they enter into is an important factor in
characterizing that contract. However, the following qualifications set out at
pages 2:62‑2:65 of my article are necessary:
[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 mean that the courts will necessarily 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. It
could in fact be a contract of employment. 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 that respect, 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 nature of their contractual relations is
not necessarily conclusive and 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.
[References
omitted.]
[Emphasis added.]
[28] It now remains to
apply these legal principles to the relevant facts of these appeals. The first
issue to be dealt with is what the parties' intention was with regard to the
nature of their contract. To begin with, the contract does not expressly state
whether it is a contract for services or a contract of employment. If the terms
of the contract itself are considered, it becomes apparent that some of them
tend to indicate the existence of a contract for services. Thus,
paragraph 4 of the contract refers to remuneration corresponding to
professional fees. As well, under paragraph 4.2, Mr. Grimard was to
invoice the board for his fees every 14 days, and the board undertook to
pay those fees on receipt of the invoice.
[29] However, other
provisions of the contract are more consistent with a contract of employment. Thus
we see that Mr. Grimard was entitled to be paid even for certain days on
which he did not work, including the statutory holidays and non‑working
days provided for in the public service.
He was entitled to four weeks of vacation. According to the contract of
November 8, 1993, he was subject to Order in Council 1369‑93 on
unpaid leave, which applies to "employees" of public bodies, in the
same way as the [translation] "personnel
appointed and paid under the Public Service Act . . . as
if he were part of that personnel".
[30] The board considered
Mr. Grimard to be a self‑employed worker since no taxes were
withheld when his fees were paid. As well, the board's payroll accounting for
contract workers was separate and distinct from its payroll system for its
employees (see Exhibit A‑10). Mr. Grimard too believed that he
was a self‑employed worker, since, on his tax returns, he entered the
fees he received from the board prior to July 23, 1998, as gross income
from a business.
[31] The matter of what
the parties' intention may have been raises the question of what understanding
the parties may have had of the difference between a contract for services and
a contract of employment. As we have seen, the "distinguishing factor"
in a contract of employment, as compared with a contract for services, is the
employer's right to exercise direction and control over the employee's work.
Did the parties think about "the essential feature of the contract of employment" and what distinguishes such a
contract from a contract for services? It is not enough for parties to state
that they want to enter into a contract for services; it must be their
intention that the provider of services be free to choose the means of
performing the contract and that the work be performed without direction or
control by the payer.
[32] From the testimony
of Mr. Levasseur, the head of the board's legal division, that the board
did not consider this aspect of the contract. The board was interested in
hiring assessors on contract in order to facilitate recruitment and free itself
from certain administrative constraints that are imposed when permanent
employees are hired and thereupon become full-fledged public servants. The Treasury
Board must authorize the creation of such positions. It would seem that the
hiring of contract workers allows public bodies to get around this constraint.
Mr. Levasseur admitted that he had also not concerned himself with the tax
consequences of considering Mr. Grimard a self‑employed worker.
[33] The other benefit to
the board of hiring assessors on contract (described as "part‑time"
assessors) was that it could terminate the contract after two years or
even on three months' notice, while the situation was quite obviously very
different for permanent employees with job security. During his testimony,
Mr. Levasseur acknowledged that job security was the major difference
between permanent employees and contract workers.
[34] To illustrate the
fact that trying to distinguish between a contract of employment and a contract
for services can easily be confusing for people, reference can be made to the
following question counsel for the department asked Mr. Grimard at
page 14 of the transcript of his examination out of Court (Exhibit I‑1,
Tab 17): [translation]
". . . did you have a contract of employment?", to
which Mr. Grimard replied that he did. On the next page, counsel for the
department referred to a copy of Mr. Grimard's [translation] "contracts of employment", and
Mr. Grimard did not correct the expression used by counsel. And yet the
contracts being referred to were those existing between Mr. Grimard and
the board during the relevant period.
[35] In my opinion,
little weight should be given here to the understanding the two parties may
have had of the nature of their contract at the time they entered into it. They
never specifically contemplated whether Mr. Grimard was to be free to
choose the means of performing his contract or whether he was to work without
direction or control by the board.
[36] In any event, as the
courts have stated many times, the fact that the parties characterize their
contract as a contract for services does not necessarily mean that it is one. One
must look at their conduct to determine the true nature of their contractual
relationship. In France, this is referred to as the application of the "reality
principle". Here, I have no hesitation in concluding, as indeed did the
Court of Quebec and the Quebec Court of Appeal, that the parties'
interpretation is not in keeping with reality: by its true nature, the contract
in question is a contract of employment rather than a contract for services.
The board had a right of direction or control over Mr. Grimard, and he
provided his services under the board's direction or control. There was thus a
relationship of subordination between him and the board.
[37] The following
directives applicable to assessors are evidence that this right of direction or
control over Mr. Grimard was exercised. The directives are set out in a
document (work description) entitled Le rôle du commissaire found
on the board's Internet site.
The preamble states that assessors must perform their duties in accordance with
the provisions of their Code of Ethics, which came into force on May 24,
1986. Among those provisions is one requiring an assessor to "keep up his
knowledge and professional skills so that they meet the requirements of his
work and assure the quality thereof".
Under section 4 of that Code, an assessor must "refrain from
participating in the proof and hearing of an appeal . . . where
reasonable apprehension of partiality could result, in particular, from
his . . . personal, family, social, work or business relations
with one of the parties". In his testimony, Mr. Grimard
acknowledged that this Code of Ethics, which he had not read at the time, would
have allowed any party who had been in contact with him to file a complaint with the president
of the board. Thus, there was a mechanism for controlling his work. The work description states that
assessors take part in the decision‑making process in accordance with their
respective role.
Paragraph 22(2) of the document states that assessors discharge their
duties [translation] "under
the authority of commissioners". Moreover, section 3 of the
document sets out a number of directives concerning the work to be performed by
assessors and the way they are to perform it:
[TRANSLATION]
. . .
SECTION 3 GENERAL
ROLE OF ASSESSORS
22. Assessors
shall
1. sit with commissioners and advise them on
any question of a medical, professional or technical nature;
2. discharge their duties under the
authority of commissioners in the decision‑making process;
3. foster the development of the knowledge
and skills needed to assess questions of a medical, professional or technical
nature so that commissioners and conciliators can become more autonomous;
4. participate in activities that help
maintain a high level of quality and consistency in decision making.
23. Assessors shall discharge their
duties with the utmost integrity, impartiality and objectivity and shall
make themselves available.
24. Assessors shall respect the
role of commissioners during the evidence and hearing and while the
decision is reserved.
25. Assessors shall advise
commissioners and shall not act as experts for the parties, as examiners
or as decision makers.
26. Assessors shall be understanding
and open‑minded regarding the role and particular viewpoints of members.
27. Assessors shall respond to members'
requests for medical, professional or technical information.
28. Assessors shall be open‑minded
during discussions on matters of controversy within the scientific community.
29. Assessors shall familiarize
themselves with the relevant provisions of the Act respecting industrial
accidents and occupational diseases and the regulations thereunder. They
shall have a good command of the medical component of the Scale of Bodily
Injuries Regulation.
30. Assessors shall know the specific
role of an administrative tribunal.
31.
Assessors shall be familiar with the CLP's
inquiry powers and its limitations as well as the concept of judicial notice. They
shall be familiar with the guidelines on the role of experts.
[Emphasis added.]
[38] There is no doubt
that, because of his level of expertise, Mr. Grimard had considerable
autonomy in performing his work, which consisted in using his medical expertise
to answer the questions submitted to him by the board. There is nothing
surprising about this. Staff physicians in hospitals and local community
service centres have such autonomy, as do salaried lawyers in the public service,
in corporate legal departments and in private firms. The Minister's salaried
experts in immovable property and business appraisal may be added to this list.
However, it is clear that the board's right of direction or control was
exercised when the coordinator in the assessors' office regularly assigned
cases to the board's assessors, including Mr. Grimard, and did so, moreover,
without consulting them beforehand. During the relevant period, there were
about 15 medical assessors, two of whom the board considered permanent
employees. Mr. Grimard's schedule was dictated by the board's needs.
[39] During a typical
week, Mr. Grimard went to the board's premises where hearings were held.
Generally speaking, two cases were heard in the morning and two more in the
afternoon. On the aforementioned premises, Mr. Grimard had an office
equipped with all the tools he needed to do his work. Before a hearing began,
there could be a short meeting with the commissioner responsible for the case.
Mr. Grimard's role was to assist the commissioner in analyzing the medical
evidence presented to the board. The commissioner defined the issues on which
the assessors' opinion was requested. For example, the commissioner might ask
for Mr. Grimard's opinion on the claimant's elbow pain but not the back
pain, even if both of these issues were going to be debated before the board.
If the hearing of an appeal was cancelled, the assessors' coordinator assigned
Mr. Grimard another case to hear with a commissioner. When I asked him to
compare the work he did as an employee starting in July 1998 with the work
he had done before that date, he confirmed that there was no difference as
regards the performance of his duties. The only difference was in certain fringe
benefits to which he was entitled, in particular group insurance.
[40] It must be added,
moreover, that, when he was receiving his remuneration in the form of fees, the
board tried to take account of the fringe benefits that were not received by
"contract workers" like him but "permanent employees" did
receive. For example, since the board did not contribute to the contract
workers' pension fund, it increased their remuneration by the amount of the
contribution it would have made to the pension fund if the contract workers had
been considered permanent employees of the board. However, as Mr. Grimard
pointed out, this arrangement was less advantageous for the contract workers,
since permanent employees would be entitled to "defined" pension
benefits, that is, an indexed pension amount normally calculated on the basis
of their salary. Mr. Grimard, who received an additional amount of
remuneration, could only contribute to his registered retirement savings plan,
which could not assure him the same level of benefits when he retired.
[41] Moreover, there is
no doubt that Mr. Grimard had to provide his services personally and could
not ask another physician to replace him in providing those services unless
that physician was also an assessor for the board. The contract contained an
exclusivity clause covering all matters coming under the AIAOD and the Act
respecting occupational health and safety.
[42] In addition to the
direct evidence that the board exercised its right of direction and control
over Mr. Grimard, there are also indicia — that is, presumptions of fact —
concerning the existence of this right, which arise out of the board's general supervision
of the work performed by Mr. Grimard. It is clear from the board's
organization chart that the assessors' work is an integral part of the board's
machinery. The assessors' office is directly under the president of the board
(Exhibit I‑1, Tabs 18 and 19). It should also be pointed out
that Mr. Grimard provided his services to the board continuously, on a
full‑time basis, for about eight years, from 1991 to 1999. He was
paid for 40 hours a week throughout the year. During the relevant period,
all (or nearly all) the services provided by him were provided to the board,
his employer. He had four weeks of annual leave and the same statutory
holidays as permanent employees of the public service. I know of no contractors
who are paid by their clients during four weeks of vacation and when
absent due to illness.
[43] Furthermore,
Mr. Grimard provided his services at the board's offices or in the other
places where the board sat. During the entire year, he had an office in which
the board provided all the tools he needed to do his work. It is true that he
could study his cases at his apartment in Montreal if he wished, but this was
not required for the performance of his duties.
[44] In addition,
Mr. Grimard's conduct was not that of a contractor who was a party to a
contract for services and who was running his own business. The contract under
which he was hired provided that he had to possess a motor vehicle for the
travel that might be required by his duties. In my opinion, such a requirement
is contrary to article 2099 C.C.Q., which provides that a contractor or
provider of services must be "free to choose the means of performing the
contract". During the relevant period, Mr. Grimard worked for just
one payer, the board. All the expenses he incurred while performing his duties
were reimbursed to him, in particular those he incurred when he travelled
between Montreal and St‑Jérôme or between Montreal and Abitibi. He was
given an office and everything he needed to do his work. Under the AIAOD, no
judicial proceedings could be brought against him for any act done in good
faith in the performance of his duties as an assessor for the board. He did not
need to be covered by a liability insurance policy. Mr. Grimard's work during the
relevant period was no different than that of the other assessors who were
employees of the board or the work he himself did as an employee starting in
July 1998.
[45] It is true that
Mr. Grimard, who lived in Sherbrooke, had to travel to Montreal to perform
his duties as a medical assessor for the board, and this required him to rent
an apartment there. Had it not been for those duties, he would not have had to
incur accommodation expenses in Montreal and expenses for travel between
Sherbrooke and Montreal. On the other hand, the courts have consistently held
that the costs of travel between a person's residence and that person's place
of business or that person's employer's place of business are personal expenses
that may not be deducted in computing income from employment or from a business
(see the decision of the Quebec Court of Appeal in Mr. Grimard's case
(paragraph 10, supra)). I can readily understand that
Mr. Grimard would probably not have accepted the work with the board if he
had known that he could not deduct his accommodation and travel expenses. It is
possible that his employer misled him and thus caused him harm. However, fault,
if any, and the resulting damage must be proved in a court of competent
jurisdiction. This Court's jurisdiction is limited to applying to the relevant
facts the provisions of the Act in force at the relevant time. In my opinion,
Mr. Grimard was an employee of the board during the relevant period, even
though he did not have all the benefits enjoyed by permanent employees of the
public service. Many employees do not have the job security that government
employees have. One need only think of all the employees who have no collective
agreement.
[46] Finally, although under
section 380 of the AIAOD "part‑time" or
"temporary" assessors were not considered members of the board's
personnel, this does not change my legal conclusion that Mr. Grimard was
an employee for the purposes of the Civil Code and that the fees paid by the
board constituted employment income for the purposes of the Act.
Section 380 of the AIAOD did not provide that part‑time or temporary
assessors were deemed not to be "employees" (within the meaning of
article 2085 C.C.Q.) of the board. As well, nothing in the AIAOD indicates
that the general provisions of the ordinary law, namely, the provisions of the
Civil Code, are not applicable in this case. For the purposes of the Public
Service Act, it is clear that the board did not consider Mr. Grimard
an employee having the benefits arising under that Act. This is why he was paid
on a fee basis and his contract was only for a limited term of two years.
However, the fact that employment is for a fixed term does not prevent a
contract of employment from existing. On the contrary, it is of the essence of
a contract of employment that a person undertakes for a "limited
period" to do work.
Article 2086 C.C.Q. states that a contract of employment is for a fixed
term or an indeterminate term. In my opinion, the determination of whether a
contract of employment exists must be based on the tests laid down in the
ordinary law, that is, in Quebec, the requirements of the Civil Code of
Québec.
[47] For all these
reasons, Mr. Grimard's appeals are dismissed.
Signed at Ottawa, Canada, this
20th day of December 2007.
"Pierre Archambault"
Translation
certified true
on this 30th day
of April 2008.
Erich Klein, Revisor
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