Citation: 2007TCC550
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Dockets: 2006‑2380(CPP)
2006-2379(EI)
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BETWEEN:
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KELLY CARMICHAEL,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent,
and
CREATIVE FORCE NETWORK LIMITED,
Intervener.
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REASONS FOR JUDGMENT
WEISMAN, D.J.
[1] These are appeals by Ms.
Kelly Carmichael (the "appellant")
against decisions by the respondent Minister of National Revenue (the "Minister")
that she was not engaged in insurable and pensionable employment within the
meaning of the Employment Insurance Act
(the "Act") and the Canada Pension Plan (the "Plan") while
engaged as a graphic designer by Chapters Inc. ("Chapters") from July
2, 2003 to June 20, 2005.
[2] Human Development Resources Canada had originally agreed
with the appellant that she was in insurable and pensionable employment and
granted her the maternity benefits for which she had applied. The intervener,
Creative Force Network Limited ("Creative"),
which is the agency that placed the appellant with Chapters, successfully
appealed that decision to the Minister, but was subsequently met with the
subject appeal by the appellant when her maternity benefits were discontinued.
[3] Prior to this trial date,
the parties filed Consents to Judgment allowing the appellant’s appeal on the
basis that she was indeed engaged in insurable and pensionable employment
during the period under review. Creative did not join in the consents and sought
its day in court.
[4] This scenario raises the
question whether interveners who are not parties to the proceedings can force those who are, to embark
upon a trial they have agreed to settle and do not want.
[5] I granted Creative standing
to proceed with the trial, present evidence, and cross-examine the parties’
witnesses notwithstanding the Consents, as the only way for it to put its
position before the court, and for the court to decide the issue on the merits.
[6] Creative is a placement
agency. It is common ground that it placed the appellant in employment with
its client, Chapters; that she was under Chapters direction and control; and
that the terms and conditions on which her employment or service were performed
were, or were analogous to, a contract of service. The only issue before the
court was whether or not Creative remunerated her for her services.
[7] By Regulation 6(g)
under the Act, Creative is obligated to deduct and remit employment
insurance premiums if it did. By Regulation 34.(1) under the Plan,
whichever of Creative or its client Chapters remunerated her for her services
is liable for the requisite contributions.
[8] Regulation 6(g)
provides as follows:
6. Employment in any of
the following employments, unless it is excluded from insurable employment by
any provision of these Regulations, is included in insurable employment:
. . .
(g) employment of a person
who is placed in that employment by a placement or employment agency to perform
services for and under the direction and control of a client of the agency,
where that person is remunerated by the agency for the performance of those
services.
[9] Regulation 34.(1) provides
as follows:
34.(1) Where any individual is placed by a placement or
employment agency in employment with or for performance of services for a
client of the agency and the terms or conditions on which the employment or
services are performed and the remuneration thereof is paid constitute a
contract of service or are analogous to a contract of service, the employment
or performance of services is included in pensionable employment and the agency
or the client, whichever pays the remuneration to the individual, shall, for
the purposes of maintaining records and filing returns and paying, deducting
and remitting contributions payable by and in respect of the individual under
the Act and these Regulations, be deemed to be the employer of the individual.
[10] Neither Regulation defines the
word "remuneration" as it is used in the
above sections. The Oxford English dictionary online gives the following definition: "To
reward (a person); to pay (one) for services rendered or work done."
[11] The appellant first resorted
to Creative to find her gainful employment on the 9th day of March 2001.
She was interviewed by Ms. Dorothea Kanga ("Kanga")
the President of Creative, as to her qualifications, skill set, and prior work
experience, and was advised of the expected hourly wage range that Kanga
thought she could negotiate on the appellant’s behalf based on Kanga’s knowledge
of the graphic design industry.
[12] At that initial interview, the
appellant was provided with Creative’s standard agreement between itself and
its "freelancers". She took it home and
skimmed over it. Her only concern was that it lacked an "exit
strategy" in that the fees deducted from her wages by Creative were
perpetual so long as she remained employed where placed. When she asked Kanga
if she could buy out of the agreement after one year as other placement
agencies permitted, she was told in no uncertain terms: "That
is not our policy".
[13] The appellant never signed the
agreement but accepted a placement with Creative’s clients Sparkhouse
commencing March 20, 2001; and then with Chapters which lasted from July 21,
2003 to March 30, 2004.
[14] From March 30, 2004 to the end
of September of that year, the appellant sent out numerous resumés without
success. In the meantime, Creative found her employment with Think Tank from
May 10, 2004 to June 12, 2004. That relationship ended because the appellant
was teaching part-time at Seneca College and sought flexible hours of employment, whereas
Think Tank needed a full-time contractor. Upon return from vacation in Gibraltar the appellant accepted
Creative’s offer of fresh employment at Chapters three days per week. This
turned into a full-time position which lasted until June 20, 2005.
[15] Throughout the period under
review the appellant was content that her working relationship with Creative be
governed by the terms and conditions of the unsigned agreement. On
cross-examination she was asked if the other terms of the freelancer’s
agreement were acceptable and if it was just the lack of an exit strategy that
she objected to. She replied that she had "no concerns because they
got me employment".
[16] The standard agreement
contains the following germaine provisions:
Responsibilities
of Creative Force
[. . .]
5. It is Creative
Force’s responsibility to submit invoices to the party using the Freelancer’s
services (hereinafter the "Customer"), for all services provided by
Creative Force and the Freelancer. It is Creative Force’s responsibility to
collect all monies owed under any invoices given to the Customer, and that the
Freelancer shall not collect any money directly from the Customer.
Freelancer’s
Responsibilities
[. . .]
9. The Freelancer
agrees not to enter into any contract directly with the Customer, without prior
written consent of Creative Force.
[. . .]
Remuneration
11. It is agreed that
wherever possible Creative Force shall quote for the services of the Freelancer
in an amount based on One Hundred and Ten Percent (110%) of the Freelancer’s
established rate. It is further understood and agreed that the remuneration
received by Creative Force for the services performed by the Freelancer shall
be divided as follows:
a) Should a fee
received from a Customer be based on an amount equal to One Hundred and Ten
Percent (110%) of the Freelancers established rate, the Freelancer will receive
an amount equal to Ninety Percent (90%) of such rate and Creative Force will be
entitled to receive an amount equal to Twenty Percent (20%) of such rate for
facilitating or arranging the Freelancer’s services with the Customer.
b) Should a fee
be agreed upon with a Customer which varies from the aforesaid established rate
formula and the Freelancer accepts the project, the Freelancer shall be
entitled to receive an amount equal to Eighty Percent (80%) of the agreed fee
and Creative Force will be entitled to receive an amount equal to Twenty Percent
(20%) of the agreed fee for facilitating or arranging the Freelancer’s services
with the Customer.
12.It is agreed that
amounts received from Customers from invoices provided by Creative Force to
which the Freelancer is entitled in accordance with the formula set out above
belong to the Freelancer and that Creative Force is merely collecting such
amounts on behalf of the Freelancer.
13. It is agreed that
the Freelancer shall receive such payment that is due pursuant to this
contract, once the payment from the client has been received by Creative Force
and cleared by an appropriate financial institution.
14. The parties agree
that Creative Force shall collect all monies from the Customer and the
Freelancer shall not accept payment or other remuneration directly from the
Customer. Any attempt by the Customer to make payment or other remuneration to
the Freelancer shall be reported directly by the Freelancer to Creative Force
in writing, setting out any particularities of the circumstances.
15. If the Freelancer
does receive remuneration directly from the Customer, it is agreed that
Creative Force is entitled to its Twenty Percent (20%) fee according to
paragraph 11, and that the Freelancer shall immediately transfer to Creative
Force such fee.
[. . .]
19. It is agreed that
Creative Force shall make every reasonable attempt to collect fees and expenses
invoiced to customers, but Creative Force cannot guarantee such payment. The
Freelancer hereby constitutes Creative Force as its agent to collect the fees
from the Customer to which the Freelancer is entitled.
[17] The standard freelancer’s
agreement is clearly an attempt by Creative to secure receipt of its fees by
invoicing the various employers directly for the workers wages, deducting its
share, and paying the remaining monies to the freelancer. Further assurance is
gained by prohibiting the worker from contracting directly with Creative’s
customers.
[18] The question is whether
Creative succeeded in its objective without placing itself in the position of
having "remunerated" freelancers such as the
appellant within the meaning of the regulations passed under the Act and
the Plan.
[19] Creative argued that far from
remunerating the appellant it acted only as a conduit between her and its
client – charging the appellant ten percent of her wages for invoicing its
client on her behalf, collecting the monies, and paying her share; while
invoicing its client a further ten percent for having arranged the freelancer’s
services.
[20] The problem with this argument
is that nowhere in the freelancer’s agreement is there provision for Creative
charging workers such as the appellant ten percent of their wages for invoicing
and collection services. The agreement contemplates only that twenty percent of
all wages will be deducted for securing the placement. In actual fact, the
appellant was never invoiced, nor charged G.S.T. for Creative’s supposed
services on her behalf. The various clients were charged G.S.T. on the entire
twenty percent, which is consistent with paragraph 11 of the standard
agreement. I also find it somewhat disingenuous of Creative to purport to
charge the appellant for services rendered when it really was primarily
concerned with the dual purpose of ensuring that it secured its fees from each
and every paycheck, while at the same time buttressing its contention that it
merely acted as a conduit between its remunerating clients and its freelancers.
[21] For her part, the appellant
never invoiced Creative for her services. She was content that Creative
confirmed her hours worked, and then invoiced its clients "on
behalf of Kelly Carmichael". On December 15, 2003,
she faxed Creative as follows: "…starting in the new
year, I will need you to charge G.S.T. for me also. I will provide my number to
you". On one occasion when Chapters was slow in remitting
payment due, she did not complain to Creative – but called Chapters payroll
department directly.
[22] Finally, at no time since
March 9, 2001 did she look to Creative for her remuneration. This changed only
when she sought maternity benefits subsequent to the birth of her son in
October of 2005. She inquired of Human Resources Development Canada how she
could collect such benefits under the Act, and was duly directed to
Regulation 34.(1). This required her to adopt the position for the first time
that it was Creative and not Chapters that was remunerating her.
[23] Until then she was content
that her relationship with Creative be governed by the terms and conditions of
the standard freelancer’s agreement. As aforesaid, it clearly provides that it
is Creative’s client and not Creative that remunerated the Freelancer; that the
Freelancer will get paid by Creative once payment has been received from its
client; and that such payment cannot be guaranteed. The appellant accordingly
agreed to look for her remuneration to Creative’s client and not to Creative
itself, and to bear the loss if it was not forthcoming.
[24] The burden is upon the
appellant to demolish the assumption set out in paragraph 8 of the Minister’s
Reply to the Notice of Appeal. The only assumption that she successfully
refuted was 8(g). The evidence indicated that she billed Chapters
directly only after she severed her ties with Creative. The remaining assumptions
are more than sufficient to support the Minister’s determinations, which are
objectively reasonable. With one exception, there are no new facts and no
evidence to indicate that the known facts were misunderstood by the Minister.
[25] The sole exception is the
evidence which was not refuted by the appellant, that Creative negotiated her
remuneration with its clients on her behalf, and did not set such fees itself.
This fact distinguishes this case from those wherein it was held that a
placement agency remunerates a worker if it sets the fees itself.
[26] In the result, the appeals
will be dismissed and the decisions of the Minister confirmed.
Signed at Toronto, Ontario this 24th day of September 2007
Weisman, D.J.
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