Citation: 2007TCC391
Date: 20070809
Docket: 2006-2761(EI)
BETWEEN:
FERME YOANIE INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal
from a determination under subsection 103(1) of the Employment Insurance Act ("the Act")
dated June 22, 2006. The determination under appeal is that Samuel Bonsant
was employed under a true contract of employment for the period from
January 1 to December 27, 2005.
[2] In order to justify
his decision, the Minister of National Revenue ("the Minister")
relied on the following assumptions of fact:
[TRANSLATION]
(a) The Appellant,
which incorporated on August 31, 1998, operates a dairy farm. (admitted)
(b) Hans Stirniman,
Jr., was the sole shareholder of the Appellant. (admitted)
(c) The Appellant's
herd consisted of roughly 75 dairy cows and a few calves. (admitted)
(d) The Appellant's
activities were centred on dairy production and on the growing of hay as feed
for the livestock. (admitted)
(e) In 2004, the
Appellant hired the Worker on a temporary basis to look after the milking of
cows and perform certain farm-related work. (denied)
(f) During his
employment, the Worker was enrolled in an adult education course at the local
high school, and Mr. Stirniman taught him how to do work related to the
operation of his farm. (admitted)
(g) On January 1,
2005, after the Worker completed his course, the Appellant hired him as a
regular employee. (denied)
(h) The Worker's
main duties consisted in:
- milking the cows twice a day
- sowing crops
- feeding livestock
- cleaning the barn
- performing other duties determined by Mr.
Stirniman. (admitted)
(i) The Worker
provided all his services on the Appellant's farm. (admitted)
(j) During the
summer season, the Worker worked 70 to 80 hours per week. (admitted)
(k) During the
winter season (October to December), the Worker worked an average of 20 hours
per week. (admitted)
(l) In January
2005, the Worker's wage was $8.00 per hour, and during the remainder of the
period in issue, his wage was $10.00 per hour. (admitted)
(m) The Worker's hours
were controlled by the Appellant because he had to punch his hours on a card at
the beginning and end of his work day. (admitted)
(n) The Worker was paid by a cheque from the
Appellant every two weeks. (admitted)
(o) The Worker had to do the work himself; he
could not have himself replaced or hire an assistant without the Appellant's
authorization. (admitted)
(p) The Worker had CSST [workers'
compensation] coverage for his job and the Appellant paid the premiums for it. (admitted)
(q) The Worker had no paid vacation or sick
leave and was not paid a higher hourly rate for his overtime. (admitted)
(r) The Appellant considers the Worker
self-employed, while the Worker considers himself an employee of the Appellant's.
(admitted)
(s) All aspects of the Worker's work were
supervised by the Appellant. (admitted)
[3] After being sworn
in, Hans Stirniman, Jr., the Appellant's agent and sole shareholder, told
the Court that he admitted to the contents of subparagraphs (a) through
(d), (f), and (h) through (s). Only subparagraphs (e) and (g) were denied.
[4] Hans Stirniman, Jr.
used very harsh and extremely critical language in his testimony about Samuel Bonsant,
the young man whose work is in issue. Among other things, he accused
Mr. Bonsant of lying egregiously and of being abusive and vengeful.
[5] The Appellant's agent
says that the Appellant entered into an agreement with Mr. Bonsant that
the work would be governed by a contract of enterprise. In other words,
according to Mr. Stirniman, Mr. Bonsant worked for his business as an
independent contractor, knowing full well that he was doing so, since he had
made an informed choice.
[6] Mr. Stirniman says
that he explained the proposal to his accountant, who told him that there was
no problem having the work done as part of a contract of enterprise, provided
certain conditions were met.
[7] A contract of enterprise
enabled Mr. Bonsant to be paid a higher salary because there would be no withholdings.
In addition, Mr. Bonsant could deduct his expenses as a self-employed worker.
[8] For the purposes of
his Notice of Appeal, the Appellant essentially repeated the contents of the
letter addressed to the Chief of Appeals (Exhibit A-1). I reproduce
the contents of the Notice of Appeal:
[TRANSLATION]
Sawyerville, March 20, 2006
Chief of Appeals
Canada Revenue Agency
305 René-Lévesque Boulevard West,
3rd Floor
Montréal, Quebec H2Z 1A6
Re: Insurability of Samuel Bonsant
Dear Sir:
Further to our recent discussions and your recent decision on the
insurability of the job at our business, I am writing to challenge that
decision and to provide my comments regarding the terms and conditions that
were agreed to with Mr. Bonsant in connection with his work.
Mr. Bonsant had little work experience in dairy production, and
had just joined the workforce.
Here are the options that were proposed to him:
- A salary with regular source deductions in accordance
with the rules; or
- Increased pay to take account of his contributions
as a self-employed worker
Mr. Bonsant contacted his accountant to assess this
proposal, and then got back to me to tell me that he was opting for the better-paid
self-employment option based on the following arguments:
- Deduction of part of his fuel costs
- Deduction of part of his motor vehicle maintenance
costs
- Deduction of some of the depreciation on his motor
vehicle
- Billing other dairy farms for occasional milking
work
Everything was going well between us until
the review, by the GST/QST section of Revenu Québec, of my corporation's sale
of a truck to Mr. Bonsant. Revenu Québec is claiming GST on the sale of
the vehicle. The QST was assumed by Mr. Bonsant upon
registering his truck.
In order to help Mr. Bonsant pay us back this amount, we
proposed that we make regular deductions over several pay periods.
Unfortunately, from that point onward, everything changed. I have been extremely
surprised by threats, derogatory comments, demands made by relatives of his,
and more. He told me that he wants the farm to pay for all this, and that he
will notify the [Commission des] normes du travail [the labour standards board].
The Commission des normes du travail closed this claim
without making any adjustments, after Mr. Bonsant told the Commission that he
was self-employed. He wanted to retract that statement when he realized
that it would result in his claim being dropped, but his arguments were not
accepted. (Source: Mr. Christian Lessard,
Commission des normes du travail du Québec . . .) Later, Mr. Bonsant told me that this would not be the end of
it. You know the rest, and I remain available to help finalize this matter as
soon as possible.
. . .
[9] Samuel Bonsant also
testified. He formally denied Mr. Stirniman's allegations, and said that
Mr. Stirniman told him what to do, and that his hours of work were monitored
in that he punched in and out on every workday.
[10] He used tools owned
by the Appellant to do his work. At one point, the pay of $10 per hour was
reduced to $8 per hour on the basis that less work was being done and that the
quality of his work had diminished.
[11] After the matter was
taken under deliberation, the Appellant moved for a resumption of hearings; the
motion was granted upon the Respondent's consent.
[12] When the hearing
resumed, the Appellant, who was represented by counsel this time, called the
corporation's sole shareholder, Hans Stirniman, Jr., as a witness again, along
with three other people.
[13] Having resumed, the
trial confirmed the Appellant's submission that the parties to the work
contract in issue did indeed agree that the work would be governed by a
contract of enterprise.
[14] This finding is
based on the testimony of Samuel Bonsant's brother and of others. Samuel
Bonsant's brother helped him with his chores (milking, distributing the feed
and cleaning the cows' stalls). Samuel gave his brother a lump sum to perform
this defined set of chores; thus, the two brothers shared the $50 or so that
was obtained.
[15] However, for
gathering rocks or hay, the witness was paid on an hourly basis, as was his
brother.
[16] Mr. Stirniman's brother
also testified. He said that he retained Samuel Bonsant's services several
times, always as an independent contractor, during periods when he was not
working for the Appellant. This showed that the Worker did not work exclusively
for the Appellant, because he had was entitled to work for others, and did, in
fact, do so.
[17] At one point, Mr.
Bonsant filed a complaint against the Appellant in order to obtain higher
compensation. There was no investigation, and the decision was made promptly
because Mr. Bonsant himself stated in his complaint that the work in
question was self-employment.
[18] Following a check
with the Appellant, who confirmed that Mr. Bonsant had worked as an independent
contractor, the Commission immediately closed the file based on a lack of jurisdiction
in view of the type of contract that the parties had decided upon.
Mr. Bonsant applied for a review of the decision, but the response to his
application was not tendered in evidence.
[19] Lastly, Mr.
Stirniman stated, and insistently repeated, that he had retained Mr. Bonsant's
services as a self-employed worker; he also said that Mr. Bonsant appeared
to be aware of all the consequences of that status. He said that milking was
paid for on a fixed-price basis, and that hay and rock gathering work was paid for
on an hourly basis.
[20] Mr. Stirniman also said that Samuel Bonsant was free
to work for any other business, and that he could get himself replaced or helped
by a responsible and competent person. Mr. Stirniman would not have
allowed a replacement who smoked or took drugs.
[21] Mr. Stirniman
repeated that when the initial agreement was made, Mr. Bonsant chose to
work as an independent contractor because the hourly rate was higher, as there
was no withholding from the fixed pay for the cow milking, or from the hourly
pay for the other work.
[22] The hours worked
were calculated by a punch clock, which indicated the time at which the work
period began and ended.
[23] In summary, the
Appellant's agent emphatically contended that the work that he had the young
Mr. Bonsant do was independent contracting work.
[24] In this regard, while
the evidence concerning the parties' intentions is decisive, is that reason
enough to require the Court to hold that the contract between the parties was a
contract of enterprise?
[25] Given his lack of
experience and his youth, Mr. Bonsant was clearly not able to draw the
necessary distinctions or nuances; his consent alone was not sufficient to
determine that the contract of work was a contract of enterprise.
[26] On several occasions,
the Federal Court of Appeal has stated that while the parties' intention
certainly constitutes an important factor, it is not necessarily determinative.
In order to be relevant, however, it is essential that the parties' intention
be consistent with the way in which the work is performed. In fact,
this qualification was acknowledged by Mr. Bonsant himself upon
commencing proceedings with the Commission des normes du travail.
[27] The contracting
parties can choose to have work governed by a contract of enterprise.
[28] Very often, that choice
is not made based on the way in which the work is done, but rather on wholly
unrelated factors, such as
·
no
withholdings
·
no deductions
for contributions, insurance permits, etc.
·
the opportunity
to claim expenses
·
easier
contract termination
·
significant
lessening of certain limitations
·
liability
[29] For the purposes of
employment insurance, such a choice is of no effect where the terms and
conditions of the work in question are those of a contract of employment.
[30] In the case at bar,
the only indication that this was a contract of enterprise was the Appellant's perception
of the contract and Mr. Bonsant's acceptance of the chosen approach. However,
that contract was not consistent with the provisions of the Civil Code of
Québec governing contracts of enterprise.
[31] Indeed, the
Appellant itself admitted that the work was controlled, that training was given
for it, and that it was continuously supervised and checked.
[32] In fact, the work
done by Samuel Bonsant met all the conditions of a true contract of service,
notably with respect to the duties, the remuneration and the indisputable
existence of a relationship of subordination between the payor and the
employee.
[33] In this regard, the
Appellant's admissions, including the following ones, are revealing and very
helpful in finding that the determination was well‑founded:
[TRANSLATION]
(f) During his
employment, the Worker was enrolled in an adult education course at the local
high school, and Mr. Stirniman taught him how to do work related to the
operation of his farm. (admitted)
. . .
(h) The Worker's
main duties consisted in
- milking the cows twice a day
- sowing crops
- feeding livestock
- cleaning the barn
- performing other duties determined by
Mr. Stirniman (admitted)
. . .
(m) The Worker's hours were controlled by the
Appellant because he had to punch his hours on a card at the beginning and end
of his work day. (admitted)
(n) The Worker was paid by a cheque from the
Appellant every two weeks. (admitted)
(o) The Worker had to do the work himself; he
could not have himself replaced or hire an assistant without the Appellant's
authorization. (admitted)
(p) The Worker had CSST [workers'
compensation] coverage for his job and the Appellant paid the premiums for it. (admitted)
. . .
(s) All aspects of the Worker's work were
supervised by the Appellant. (admitted).
[34] The Appellant
clearly did not understand the requirements of the Act as far as employment
insurance was concerned, and the advice obtained from its accountant was not
thoroughly thought-out. The provisions of the Act are not optional; they are
compulsory. Employment insurance is not an insurance policy that one can choose
to accept or decline; it is a support program that covers and protects workers
who perform work as employees during a certain period of time.
[35] If a work contract
fulfils the requisite conditions of an employment contract, the employer
cannot, even with the worker's complicity or acceptance, disregard the Act and
decide that it is a contract of enterprise.
[36] A contract is
defined by the way in which the work is performed, not the vocabulary used by
the parties. In other words, the parties cannot characterize a contract of
employment as a contract of enterprise if the work is performed in a way that
corresponds to the characteristics of an employment contract.
[37] If the decision that
I must make depended essentially or exclusively on the parties' intention, the
balance of probabilities would unquestionably dictate a finding on my part that
the contract in issue was a contract of enterprise.
[38] However, I do not
believe that I can come to such a conclusion without considering anything else,
especially since the mere fact that the agreement was valid between the parties
does not mean that the Respondent is bound by it.
[39] The parties'
intention is undoubtedly a factor to consider, but I do not believe that it
alone is determinative.
[40] Other aspects must
be taken into account, including the way in which the work was performed, the
nature of the work, and all facts, actions and circumstances that enable to
Court to determine whether there was a relationship of subordination or not, in
which case the appropriate decision is that the work was performed as part of a
contract of employment.
[41] The Respondent's decision
that Samuel Bonsant's work was performed under a contract of employment is
based on the following assumptions of fact:
[TRANSLATION]
(a) The Appellant,
which incorporated on August 31, 1998, operates a dairy farm. (admitted)
(b) Hans Stirniman,
Jr., was the sole shareholder of the Appellant. (admitted)
(c) The Appellant's
herd consisted of roughly 75 dairy cows and a few calves. (admitted)
(d) The Appellant's
activities were centred on dairy production and on the growing of hay as feed
for the livestock. (admitted)
(e) In 2004, the
Appellant hired the Worker on a temporary basis to look after the milking of
cows and perform certain farm-related work. (denied)
(f) During his
employment, the Worker was enrolled in an adult education course at the local
high school, and Mr. Stirniman taught him how to do work related to the
operation of his farm. (admitted)
(g) On January 1, 2005, after the Worker completed his course, the
Appellant hired him as a regular employee. (denied)
(h) The Worker's
main duties consisted in:
- milking the cows twice a day
- swing crops
- feeding livestock
- cleaning the barn
- performing other duties determined by
Mr. Stirniman. (admitted)
(i) The Worker
provided all his services on the Appellant's farm. (admitted)
(j) During the
summer season, the Worker worked 70 to 80 hours per week. (admitted)
(k) During the
winter season (October to December), the Worker worked an average of 20 hours
per week. (admitted)
(l) In January
2005, the Worker's wage was $8.00 per hour, and during the remainder of the
period in issue, his wage was $10.00 per hour. (admitted)
(m) The Worker's hours
were controlled by the Appellant because he had to punch his hours on a card at
the beginning and end of his work day. (admitted)
(n) The Worker was paid by a cheque from the
Appellant every two weeks. (admitted)
(o) The Worker had to do the work himself; he
could not have himself replaced or hire an assistant without the Appellant's
authorization. (admitted)
(p) The Worker had CSST [workers'
compensation] coverage for his job and the Appellant paid the premiums for it. (admitted)
(q) The Worker had no paid vacation or sick
leave and was not paid a higher hourly rate for his overtime. (admitted)
(r) The Appellant considers the Worker
self-employed, while the Worker considers himself an employee of the Appellant's.
(admitted)
(s) All aspects of the Worker's work were
supervised by the Appellant. (admitted)
[42] The evidence also
discloses a number of relevant facts, the first of which is that the
contracting parties' knowledge and experience differed considerably. One of
the parties operated a sizeable farm and had years of experience, and the other
was a young man, barely out of school, with no experience in the labour market
and no knowledge of its technicalities. In fact, it was shown that he underwent
training and completed one or more apprenticeships.
[43] These factors are of
considerable importance to the way in which the agreement was arrived at.
Indeed, there is no possible doubt that a young, inexperienced man who is
offered the choice between, on the one hand, a higher salary without source deductions
and the ability to deduct expenses, and, on the other hand, a salary cut down by
various withholdings and the inability to deduct his expenses, will opt for the
type of contract that is more beneficial to him in the short term.
[44] Although the opportunity
to earn one or two more dollars per hour under a contract of enterprise is
attractive in the short term, a worker must not lose sight of the fact that farm
work is generally seasonal and that, under such conditions, it is significantly
preferable for a person to participate in the employment insurance system under
a contract of employment so that he can be eligible for benefits during the
winter unemployment period.
[45] Moreover, a very
quick calculation shows, very convincingly, that a payor has a lot to gain from
a contract of enterprise in that it greatly simplifies the administration of
the payor's operations and enables the payor to terminate an agreement quickly
without being subject to any restrictions such as regarding notices of
termination.
[46] However, in light of
the facts as a whole and the circumstances disclosed by the evidence, it seems
clear to me that the Appellant had control over Mr. Bonsant's activities
at all times. Indeed, there was a true relationship of subordination, and the
Appellant had a constant right to oversee the work.
[47] It is a fact that the
work of milking the cows, which was paid for on a fixed‑price basis, was
performed by Samuel Bonsant and his brother on many occasions; they shared the fixed
price that was paid. Obviously, this is a characteristic of a contract of
enterprise.
[48] The Appellant was aware
of this practice and consented to it. This was a special aspect of the case at
bar.
[49] It must be understood
that the milking of cows should ideally be done at specific times of the day,
and very promptly.
[50] The fact that the
Appellant had confidence in the Bonsant brothers and that they had the
necessary skill to perform this work is not, in my view, sufficient to conclude
that a contract of enterprise existed.
[51] The situation could have
been different if Samuel Bonsant's work had consisted solely of milking the
cows or doing the related chores.
[52] In the case at bar, this
was certainly an important component of Samuel Bonsant's work, but it was
not the only work that he did. The method of remuneration is of some relevance
in determining whether a contract is one of employment or enterprise. However,
it is not a determinative factor. Indeed, many employees are paid by the task,
by the piece, or based on the amount of work done.
[53] Despite the fixed-price arrangement
and Samuel's brother's participation, I am satisfied that there was a
relationship of subordination and have no doubt that the Appellant would have
reacted very openly if the brother had done something wrong or had performed
his work negligently or carelessly.
[54] The Appellant would
certainly not have gone to Samuel Bonsant about any reprehensible conduct
engaged in by his brother. He would have spoken with the culprit himself.
[55] In fact, Mr. Stirniman
stressed that he would not have allowed just anyone to do this work. Mr.
Bonsant's brother's assistance was subject to Mr. Stirniman's approval.
[56] Based on the
preponderance of the evidence, primarily the evidence regarding the factors favouring
the existence of a relationship of subordination between the Appellant and the
worker Samuel Bonsant, I find that, despite the agreement between the
parties, the work was performed under a contract of service.
[57] For all these
reasons, the appeal is dismissed.
Signed at Ottawa,
Canada, this 9th day of August 2007.
"Alain Tardif"
Translation certified true
on this 5th day of September 2007.
Brian McCordick, Translator
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