Citation: 2008 TCC 490
Date: 20080926
Docket: 2007-1256(EI)
BETWEEN:
2640-6496
QUÉBEC INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1]
This is an appeal from a
decision concerning the insurability of the work done by Huguette Chénard,
Louise Chagnon, Jocelyne Durand, Gaston Audet and Luc Cloutier
for the Appellant, which operated, and continues to operate, under the name
"Services S.L.", during the period from January 1, 2005, to
February 28, 2006.
[2]
Some of the numerous
facts on which the insurability decision was based are consistent with the
evidence adduced by the parties. They include the following:
[TRANSLATION]
(a)
The Appellant was incorporated on March 17, 1989.
(b)
The Appellant carried on business under the
name "Services S.L."
(c)
The Appellant prepared advertising flyers by
inserting coupons, folding circulars and gluing coupons as required and
instructed by the Appellant's customers.
(d)
The Appellant received advertising flyers from
the Québecor and Transcontinental printing companies and prepared them for
distribution by Publisac. It did not do any of the distribution itself.
(e)
In 2005 and 2006, the Appellant had sales in
excess of $1 million a year.
(f)
The Appellant had a workshop that was located in
St-Jean-sur-Richelieu and was open Monday to Sunday from 7 a.m. to
10 p.m.
(g)
The Appellant hired salaried employees: clerks,
forklift operators, inserter machine operators and supervisors.
. . .
(i) The five Workers in the instant dispute were
"inserters".
(j) The Workers had to fill out the Appellant's employment
application forms before starting to work.
. . .
(m) The Appellant imposed no regular schedule on the Workers.
[3]
As for the other facts,
the evidence has established that they were inaccurate or incomplete, or that
they resulted from interpretation rather than from plain observation.
[4]
Five witnesses
testified. The first ones, namely Normand Tremblay, the Appellant's CEO,
and Diane Tremblay, its owner, represented the Appellant. On the
Respondent's side, three of the five individuals concerned by the appeal were
witnesses: Gaston Audet, Luc Cloutier and Louise Chagnon.
[5]
Mr. Tremblay mainly
described the premises or buildings where the business operated. He also
described its nature. The business owns a very large parcel of land on which
several buildings stand. Its main customers are Québecor and Transcontinental.
[6]
Essentially, the
business prepared or assembled, in different ways, materials for the wide range
of advertising initiatives carried out by various retail chains. The materials
were generally delivered to one of the buildings on the Appellant's site, and they
came mostly from the printers.
[7]
Once the materials were
delivered, the company carried out the work in accordance with the various
specifications. In some cases, the work was essentially done mechanically. That
kind of work was done using the company's mechanical equipment and a competent
staff of just over 30 people who were generally paid at an hourly rate.
[8]
The business also
offered a service for which the work had to be done manually (assembly, gluing,
etc.). Given the many unusual features involved, the nature of the work
varied, as did its amount and duration.
[9]
In explaining and
describing the nature of the disputed work, the Tremblay couple explained that
the business had a list of roughly 300 individuals' names and contact
information for use in connection with the performance of this essentially
manual labour.
[10]
When the business got a
contract, it phoned the people on the list in an attempt to secure the
cooperation of those who were available and interested in doing the work
involved.
[11]
That is how the company
got the labour necessary to perform a contract. When people were called,
they were told about the type of work and the possible duration of the
contract. The people who were solicited by phone could accept or decline the
offer.
[12]
If a person accepted,
the person had to go to the premises set up for that purpose and work there,
and would remain free to stay on for the anticipated duration of the work or to leave
if the work was not to his or her liking.
[13]
Occasionally, the
person would go there on his or her own, or with an assistant.
The pay was based on the price determined in advance; each completed bundle
was accounted for by stamping a sheet bearing a single name, and payment
was based on the agreed-upon price and the quantity of packages prepared.
[14]
Sometimes the price
that was offered was too low for the work involved. Some people, including
Mr. Cloutier and Ms. Chagnon, stated that they would then seek an
increase, which they sometimes obtained, and sometimes did not. They were
free to leave without reprisals or consequences if the increase that they sought
was not granted.
[15]
The testimony of the
Respondent's three witnesses, namely Gaston Audet, Luc Cloutier and Louise
Chagnon, essentially confirmed Mr. and Ms. Tremblay's testimony.
[16]
It is true that some
situations were described differently; for example, the Tremblays said
that a person would sometimes get one or two helpers even though the work was
allotted to a single person. In this regard, one witness said that he always
did his work unassisted, whereas Ms. Chagnon said that, on rare occasions,
her husband helped her at the end of a day so that she could leave earlier.
[17]
Mr. Cloutier and Ms.
Chagnon testified very precisely about particular aspects which, in my opinion,
are connected in a very important fashion with decisive factors in this appeal.
[18]
First of all, Luc
Cloutier did the disputed work to a very significant degree over a lengthy
period, which began in 1997 and ended in June 2006. A young and articulate
man, he gave clear and specific answers to the questions that he was asked. He
explained that there was no doubt in his mind that he could refuse to work, or leave
at any time if the work or price did not suit him.
[19]
However, he said that
he felt stressed at the idea of not working on certain occasions when there was
work to be done, because he feared that he would no longer be called back, a
situation that clearly never arose, given how long he worked for the Appellant.
[20]
He also stated that
working elsewhere would not have been a problem. He explained that he
sometimes asked for an increase of the initially agreed price, and that he obtained
it on some occasions, but was rebuffed on others.
[21]
Whatever price
increases were granted were extended to everyone. Mr. Cloutier also
explained that there were very wide variables in the unit prices, which ranged
from the equivalent of an hourly rate below minimum wage all the way up to the
equivalent of $13 per hour, which is considerably above minimum wage.
[22]
Assuming that
Mr. Cloutier was a very serious and efficient person, it can be concluded
that a worker with no experience or skill would earn something between ridiculously
low pay and reasonable pay.
[23]
As for Ms. Chagnon, she,
too, worked for a long time. In testimony consistent with that of the
Tremblays, who said that they had considered entrusting all the subcontracting
to her, Ms. Chagnon explained that, in addition to doing the work in
issue, she did telephone recruiting work.
[24]
Ms. Chagnon explained
that, depending on the contract, she had to call one to several dozen people from
the list of nearly 300.
[25]
She explained that some
people accepted the offer but did not show up, and that others flatly rejected
the offer made over the phone.
[26]
In either case, there
were no consequences or reprisals, because, even if the people refused or did
not show up, their names were not removed from the list, and the same people
could be phoned later. It should be noted that Ms. Chagnon earned an
hourly wage for her work on the phone.
Analysis
[27]
The instant case is a
very good case in which to deal with the issue involved, because the evidence
is clear and consistent. Indeed, it is unnecessary to engage in extrapolation, speculation
or interpretation, or even to assess credibility in order to carry out the
analysis; the many facts are not only clear, but telling.
[28]
I believe that I can
state from the outset that the work in dispute was clearly very varied,
special, sporadic and frequently one-time, and that it was not very attractive,
or not at all attractive, from a financial point of view. It was therefore
difficult, if not impossible, to recruit reliable, competent people in such a
context.
[29]
In order to remedy the
situation, the business set up the process abundantly described by the
consistent evidence adduced by both parties. In support of their respective
submissions, each party referred to two available approaches: the civil law and
the common law.
[30]
Firstly, reference was
made to the criteria set out in the leading cases: ownership of tools; chance
of profit and risk of loss; power to control; and integration. Then,
reference was made to the approach codified by the Civil Code of Québec,
in which the legislator enacted the following provisions concerning the matter:
Art. 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.
Art. 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.
[31]
The common law approach
is different, in that the distinctions between the two contracts are made on
the basis of the criteria determined by the case law.
[32]
The two approaches
converge when it comes to deciding the most determinative aspect, that is to
say, whether or not there is a relationship of subordination between the person
who does the work and the person who assigns it.
[33]
Indeed, reference has
been made to the power to control; the chance of profit and risk of loss;
integration; and the ownership of tools. And these different criteria are very
interesting and particularly helpful in ultimately answering the fundamental
question: is there or not a relationship of subordination?
[34]
If the answer is yes
and if there is also the performance of work and remuneration, the contract is
a contract of employment; but if, on the other hand, there is no relationship
of subordination, it is a contract of enterprise. Taking both approaches
into consideration is, in fact, perfectly in keeping with the Rules of
Construction – Property and Civil Rights (see Respondent's Book of
Authorities, tab 2):
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.
[35]
A contract of employment
is, of course, very different from a contract of enterprise, but each contract
has many repercussions; indeed, there are important differences from a tax
liability perspective, but also in terms of the application of the Employment
Insurance Act, in terms of administrative management, and so forth.
[36]
In addition, the
parties often have a special interest, because a contract of enterprise is less
demanding than a contract of employment for a payor. Conversely, for the
person doing the work, there can be a benefit in that the expenses incurred to
earn income are deductible under a contract of enterprise, but not under a
contract of employment.
[37]
However, a contract of
enterprise is not subject to coverage under the Employment Insurance Act.
Consequently, in some situations, workers may have an interest in exploiting
both statuses: the status of salaried employees when they are out of work and
want to have access to employment insurance benefits, and the status of independent
contractors when they are working and want to deduct the expenses they incur to
earn income.
[38]
The payor benefits as
much as the independent contractor, firstly from a management perspective, but
also, and more importantly, from great contractual freedom in terms of layoff
notices, causes and grounds, and, in many cases, labour relations.
[39]
In the employment
sphere, there are many laws that make management more burdensome, such as
contributions or premiums payable to associations, the QPP or CPP, EI, group
insurance, workers' compensation or pension funds; statutory holidays and
vacations; notices and notice periods in the event of a production slowdown or
stoppage; bargaining, etc.
[40]
Under such
circumstances, it is obvious that parties might wish to describe a work
relationship in a manner that is not based on the way in which the work is
performed, but, rather, on the advantages or drawbacks that one contract, or
the other, presents.
[41]
Once this reality is
understood, it becomes much easier to comprehend why it is essential, in assessing
whether a contract is an employment contract or a contract of enterprise, to
take all the available and relevant facts and evidence inherent to the
performance of the work into account, as opposed to simply considering the
wishes and intention of the parties, especially since such wishes or intention can
differ, and can often stem from ignorance or from one party's authority over
the other.
[42]
In the case at bar, it
was obviously in the clear interest of the business that the people who did the
disputed work be independent contractors. By way of illustration, it is
sufficient to recall that this was sporadic work which varied in duration and
which had to be done within short and precise time frames in a fiercely
competitive context.
[43]
Generally, the rates
that were offered meant that the pay was modest, the hours were variable and
the vast majority of the people in question earned less than $5,000 per year.
Thus, those people unquestionably had to earn more income by working elsewhere.
[44]
The evidence has
established, on a balance of probabilities, that the Appellant waived the
fundamental rights that an employer would have in terms of authority; the Workers'
independence and freedom has been shown by the Appellant, but also, and
primarily, by the three people who did the work in issue over a period of several years.
As a result of this waiver, the Appellant was obliged to have a very long list
of names and make numerous telephone calls, and the Appellant did not count on
the exclusive availability of the people whose names were on the call list.
[45]
The genuine ability to
turn down the work that was offered, to leave the premises, and to negotiate
the prices that were offered has been established clearly; first of all, the
person responsible for making calls clearly stated that there was no penalty
for such refusals, that is to say, that the people who did not report even
though they had said they would be present, and the people who immediately turned
down offers, were not penalized, and their names remained on the call list.
[46]
In addition, the work
that was available involved several variables, notably financial ones; some
work was much more attractive than other work; and the people whose names
were on the call list were free to accept or decline.
[47]
The work certainly had
to be done well, and it had to be redone if it did not meet the specifications,
since a single unit price was paid. This was an obligation of result, not an
obligation of means.
[48]
Although the
"independent contractor" arrangement is beneficial to the Appellant
in managing its business, it is my opinion that the company structured and
organized its activities based on such an arrangement, and that it did so in
compliance with the applicable rules of the game.
[49]
Indeed, in order to
meet workers' compensation requirements, the Appellant had to pay premiums for
employees who earned more than $5,000. Such a constraint might have resulted in
no one earning more than $5,000, but this is not what happened, because some
people did earn more than $5,000.
[50]
In addition, the
Appellant had roughly 30 employees who were paid an hourly wage. Moreover,
certain people on the call list were offered more stable and regular work with
hourly remuneration.
[51]
Lastly, the number of
people on the call list was roughly 300, a number which I consider to be a
determinative factor in and of itself, and which shows very clearly that the
expectations were realistic having regard to the potential refusals and the
reduced availability. Moreover, the business was aware that there was no
exclusivity, and realized that the people had to be available to, and accept
work from, other companies because the Appellant could only offer modest income
that was insufficient for a decent living.
[52]
In the case at bar, the
parties knew and accepted the consequences of their choice and the nature of
the contract between them. As for the various elements related to the
relationship of subordination, the evidence showed that the Appellant waived
them and agreed to treat the Workers as equals in managing the business
relationship with them.
[53]
For all these reasons,
I find that the work done by Huguette Chénard, Louise Chagnon,
Jocelyne Durand, Gaston Audet and Luc Cloutier for the Appellant from
January 1, 2005, to February 28, 2006, constituted
self-employment, and was therefore not insurable under the Act.
Signed at Ottawa, Canada, this 26th day of
September 2008.
"Alain Tardif"
Translation
certified true
on this 12th day
of November 2008.
Brian McCordick,
Translator
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