Citation: 2008TCC326
Date: 20080616
Docket: 2007-4318(EI)
BETWEEN:
CAROLE ROBILLARD,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1]
The issue for
determination in the instant case is whether the work done by the Appellant for
Agence de Vente Dan‑Mar (ADM) Inc. ("the Payor") from
December 7, 2005 to December 14, 2006 ("the relevant
period") met the requirements of a contract of service under paragraph 5(1)(a)
of the Employment Insurance Act ("the Act").
[2]
The decision made by the
Minister of National Revenue ("the Minister") is based on
his determination that the Appellant was not employed under a contract of
service, and, in this regard, the Minister relied on the following assumptions
of fact set out in paragraph 7 of the Reply to the Notice of Appeal:
[TRANSLATION]
(a)
The Payor was
incorporated on February 28, 1989.
(b)
Donald Cloutier was the
Payor's sole shareholder.
(c)
The Payor operates an agency
that represents manufacturers in major stores, but primarily pharmacies.
(d)
The Payor's principal
mandate is to represent the products of various manufacturers, which are its
customers, in pharmacies.
(e)
The Payor sold
pharmaceutical products such as natural products, prosthetics, dental cleaning
products and antibacterial products, but did not sell any medications.
(f)
In order to promote and
sell the manufacturers' products, the Payor hires sales representatives whom it
considers self-employed.
(g)
The Appellant was hired
by the Payor as a representative in November 2003.
(h)
Apparently, the Payor gave
the Appellant a copy of the contract that it gets all representatives to sign
but she never signed it or returned it to the Payor.
(i)
The Appellant had to
promote and sell four product lines in pharmacies located within a territory
designated by the Payor.
(j)
Initially, the
Appellant received training from the manufacturers of the products to be
promoted; she was not paid for this training time.
(k)
The Appellant began her
work with a list of customers supplied by the Payor, but she had the
opportunity to lengthen her customer list and enlarge her territory (with the
Payor's permission).
(l)
The Appellant only
worked in the field, and, to a limited extent, at home. She did not go to
the Payor's place of business.
(m)
The Appellant had no
work schedule to comply with, and the Payor did not record her hours.
(n)
The Appellant scheduled
her own appointments with the various pharmacies, and contacted the suppliers
directly to obtain samples of their products, etc.
(o)
The Payor provided the
Appellant with business cards that she could leave with pharmacies, as well as order
forms that she had to fill out every time she made a sale.
(p)
The Appellant had to
submit the order forms and prepare a weekly sales report for the Payor.
(q)
The Appellant prepared
her reports on her personal computer at home and e-mailed them to the Payor.
(r)
The Appellant was paid
by commission. Initially, she received a fixed sum of money on account of her
commission, which the Payor considered an advance. During the period in issue,
she was still paid by commission (5% of her sales), but only on the sales that
she made.
(s)
The Appellant and the
Payor could not modify the pricing of the products that they sold.
(t)
The Appellant had no
sales quota to meet.
(u)
The Appellant
occasionally had to travel for training courses, and all the costs incurred
were hers to defray.
(v)
In connection with her
work, the Appellant supplied an office in her home, as well as her own computer
equipment, fax machine, stationery and automobile, all at her expense.
(w)
The Payor made no
premises or equipment available to the Appellant.
(x)
The Payor offered the
Appellant no benefits.
(y)
The Appellant had no
workers' compensation (CSST) coverage.
(z)
During the period in
issue, the Payor never prepared any report evaluating the Appellant's work.
(aa)
The Appellant devoted
all her time and efforts to increasing her income, and could work for other
payors.
(bb)
In her work for the
Payor, the Appellant had a chance of profit and a risk of loss, depending on
the amount of time that she was willing to devote to her work.
[3]
Only Donald Cloutier (the
sole shareholder, director and officer of the Payor) testified for the
Respondent. The Appellant testified in support of her position.
[4]
The Respondent
submitted the following decisions to the Court: Produits Star Appetizing Inc.
v. Canada (Minister of National Revenue – M.N.R.), [2006] T.C.J. No. 217,
2006 TCC 201; Grimard v. Canada, [2007]
T.C.J. No. 559, 2007 TCC 755; and 9041‑6868 Québec
Inc. v. Canada (Minister of National Revenue – M.N.R.), [2005] F.C.J.
No. 1720, 2005 FCA 334.
[5]
The Appellant's
credible testimony discloses as follows:
(i)
She never signed a
contract with the Payor, because the Payor never gave her one to sign.
(ii)
From November 2003 to December 31, 2004, she was not paid by commission. For the first six
months of this period, she said that she received fixed remuneration in
the amount of $1000 every two weeks from the Payor for three days of work each week.
She added that, for the remainder of the period, she received fixed
remuneration in the amount of $1500 every two weeks for four days of work. The
Appellant explained that, effective January 1, 2005, the Payor imposed a new
method of remuneration on her; from then on, she was compensated solely
by commission. She added that the Payor also forced her to become a GST
and QST registrant as of that date. She specified that the taxes were collected
from the Payor on the commissions that she received from the Payor, and then
remitted to the tax authorities.
(iii)
She had to assume all
the costs and expenses related to the sales made during the relevant period.
(iv)
During the relevant
period, the Payor imposed no sales quota on her; however, she stated that the
Payor required explanations if she was selling less.
(v)
She was not free to
sell products other than the Payor's during the relevant period.
(vi)
At no time during the
relevant period did she become the owner of the goods sold. She specified that
she never decided the selling prices of the goods, and never billed the Payor's
customers during the period.
(vii)
She would not have been
able to hire her own salespeople without the Payor's consent or involvement
during the period in issue.
(viii)
She had to comply with
a work schedule during the relevant period. She explained that she had to
work Monday to Friday from 9 a.m. to 5 p.m. She also said that she
had to notify the Payor of her absences, and get the Payor's permission with
respect to her vacation dates. She added that the Payor often checked on
how she was spending her days.
(ix)
She could serve only
the Payor's customers during the relevant period. In this regard, she explained
that the Payor assigned each representative an exclusive territory, and gave
each of them a list of customers that they were to serve within their exclusive
territory. She added that she could not recruit new customers within her
assigned territory unless the Payor approved and the new customers were
pharmacies.
(x)
During the relevant
period, the Payor required her to produce a daily report on the customers she
visited. The Payor required the Appellant to submit a weekly report on the
sales that she made during the week. She explained that, based on these
weekly sales reports, the Payor prepared invoices (Exhibit I‑1)
setting out the commission amounts earned plus GST and QST.
(xi)
She never worked on the
Payor's premises during the relevant period. She specified that the Payor
occasionally summoned her to a hotel so that she could report on her
activities.
(xii)
She had to assume the
expense of attending the monthly meetings, which were most often held at the
premises of one of the Payor's suppliers. At these meetings, the Payor or
suppliers gave her training on the products to be sold and, occasionally, on
sales techniques. The Appellant acknowledged that she was not paid
for this training time, though she specified that the Payor covered the cost of
her lunch at these monthly meetings.
(xiii)
She received no
benefits from the Payor.
(xiv)
The Payor did not
provide her with any premises or equipment.
[6]
The evidence further
discloses that the Appellant always reported the earnings from her work as
business income in her tax returns. In this regard, the Appellant explained
that, due to her lack of knowledge of tax law, she made no distinction between
income from a business and income from employment, since, in both cases,
she was allowed to deduct the expenses that she incurred to earn commissions.
With respect to this issue, she said that her accountant was the one who
decided, on his own initiative, to enter her work remuneration as business
income, and that this decision was never the subject of discussion between
them. She added that she was content to submit a statement of commission income
annually to her accountant, along with the vouchers associated with the
expenses that she had incurred during the year for the purpose of earning her
commissions.
[7]
Mr. Cloutier testified
as follows:
(i)
Generally, he had all
the Payor's representatives sign a standard-form contract (Exhibit I-6). He
said that he could not explain why the Payor and the Appellant did not sign the
standard-form contract.
(ii)
The Appellant had to
serve the Payor's clientele within the territory that it assigned her. Mr.
Cloutier specified that the Appellant was free to sell products other than the
Payor's, as long as those products did not compete with the Payor's products
and the Appellant's sales were not adversely affected by that activity. He also
stated that the representatives could hire their own salespersons, without needing
the Payor's approval.
(iii)
The Payor did not
provide the representatives with any work tools. Mr. Cloutier added
that they had to personally assume the costs and expenses related to sales.
(iv)
The Payor imposed no
sales quota on its representatives.
(v)
The representatives
were responsible for planning their work, decided how many hours and days they
worked, and chose the customers to meet and the frequency of such meetings. Mr.
Cloutier added that the representatives determined the timing and duration of
their vacations.
(vi)
The representatives did
not determine the pricing of the goods sold, but the Payor did not do so
either. Mr. Cloutier explained that it was the Payor's suppliers who determined
the selling prices of the goods. He also acknowledged that the
representatives never became owners of the goods sold. In addition, he
specified that the representatives never billed the Payor's customers.
(vii)
The Payor did not
require its representatives to account for their activities, nor did it
evaluate or take disciplinary action against them. However, Mr. Cloutier said
that they had to submit a weekly report of their sales during the week in
question. He categorically denied that the Payor required the Appellant to do
an inventory upon visiting the Payor's client.
(viii)
Essentially, the
purpose of the monthly training meetings, held mostly at the Payor's suppliers'
places of business, was to get to know the suppliers' new products and
marketing plans. Mr. Cloutier explained that it was chiefly the Payor's suppliers
that summoned the representatives to such meetings.
(ix)
During the relevant
period, the Appellant was paid solely by commission, and nothing more. It
should be noted that Mr. Cloutier reluctantly admitted that the Appellant,
prior to the relevant period, had received fixed remuneration which was
not based on her sales. I would also note that Mr. Cloutier reluctantly
acknowledged that the Payor did not advance money to the Appellant at any time
prior to the relevant period. Lastly, Mr. Cloutier explained that the Payor
decided to change the Appellant's remuneration method because it was not
profitable for it to pay her fixed remuneration, that is to say, remuneration that
was not dependent on her sales.
Analysis and conclusion
[8]
When the courts must
define concepts from Quebec private law to apply federal legislation
such as the Employment Insurance Act, they must follow the rule of
interpretation in section 8.1 of the Interpretation Act. To determine
the nature of a Quebec employment contract and distinguish it
from a contract for services, one must apply the relevant rules of the Civil
Code of Québec (the "Civil Code"), at least since June 1, 2001. These rules are not consistent with the rules stated
in decisions such as 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.,
[2001] 2 S.C.R. 983 and Wiebe Door Services Ltd. v. M.N.R.,
[1986] 3 F.C. 553. Contrary to the situation with the common law, the
constituent elements of a contract of employment have been codified, and, since
the coming into force of articles 2085 and 2099 of the Civil Code on January 1,
1994, the courts no longer have the same latitude as the common law courts to
define what constitutes an employment contract. If it is necessary to rely on
previous court decisions to determine whether there was a contract of
employment, one must choose decisions with an approach that conforms to civil
law principles.
[9]
The Civil Code contains
distinct chapters governing the "contract of employment" (articles
2085 to 2097) and the "contract of enterprise or for services"
(articles 2098 to 2129).
[10]
Article 2085 states
that 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.
[11]
Article 2098 states
that a contract of enterprise
. . . 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.
[12]
Article 2099 follows,
and states:
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.
[13]
It can be said that the
fundamental distinction between a contract for services and a contract of
employment is the absence, in the former case, of a relationship of
subordination between the provider of services and the client, and the
presence, in the latter case, of the right of the employer to direct and
control the employee. Thus, what must be determined in the case at bar is
whether there was a relationship of subordination between the Payor and the
Appellant.
[14]
The Appellant has the
burden of proving, on a balance of probabilities, the facts in issue that establish its right to have
the Minister's decision vacated. She must prove the contract entered into
by the parties and establish their common intention with respect to its nature.
Where, as in the instant case, there is no direct evidence of that intention,
the Appellant may turn to indicia in keeping with the contract that was entered
into and the Civil Code provisions that governed it. In the case at bar, if the
Appellant wishes to show that there was an employment contract, she will have
to prove that there was a relationship of subordination. I wish to emphasize that
where the evidence discloses elements both of independence and of subordination,
the finding must be that a contract of employment existed, because there
can be no subordination in the performance of a contract for services.
[15]
Was the Appellant free
to choose "when" and "where" to work? These are two indicia
that must be examined where, as here, it must be determined whether there was a
relationship of subordination between the Payor and the Appellant. While the
answer to this question is not necessarily determinative in and of itself, an
analysis of the question is necessary. In the case at bar, the Appellant has
satisfied me that the facts in the Reply to the Notice of Appeal concerning the
time and place of work, on which the Respondent relied in making his
decision, were inaccurate in the following respects:
(i)
The Appellant had to
comply with a work schedule, notify the Payor of her absences and obtain the
Payor's permission with respect to the timing and duration of her vacations.
(ii)
She had to serve the
Payor's customers within the exclusive territory assigned to her. It should be
noted that, in my opinion, the Minister's allegation that the Appellant worked
solely from door to door and a little bit from home, and that she never went to
the Payor's place of business, is not at all relevant in the instant case given
the nature of the Appellant's work. I should emphasize that the fact that the
Payor supplied no premises or equipment to the Appellant is no more relevant,
given the nature of the Appellant's work.
[16]
I am also of the
opinion that the following facts adduced in evidence by the Appellant show very
clearly that her work was integrated into the Payor's activities to a large
extent. In addition to being individual indicia of subordination, the following
facts, considered together, constitute an indicia of subordination that I would
characterize as an indicia of integration into the business:
(i)
The Appellant worked
only for the Payor during the relevant period.
(ii)
The customers who were
served were the Payor's, not the Appellant's.
(iii)
The Appellant could not
negotiate the terms and conditions of the contracts of sale entered into with
the Payor's customers. The Appellant did not set the prices of the
products to be sold, and could sell only the Payor's products.
(iv)
The Appellant could not
get anyone to replace her, nor could she hire her own salespersons without the
Payor's consent.
(v)
At no time did the
Appellant become the owner of the goods sold, nor did she invoice the Payor's
customers. Consequently, she was in no way liable for bad debts.
(vi)
The Payor provided the
Appellant with business cards.
[17]
It is true that the
Appellant had to assume all the costs and expenses associated with sales. It is
true that she was not paid for training time. It is true that she had no sales
quota to fulfil. It is true that she was not paid anything other than her
commission. Although these facts are generally indicia of independence, not subordination,
it is my opinion that they do not, in themselves, make the existence of a contract
for services more likely, because most of the other facts adduced in evidence support
the existence of a contract of employment.
[18]
For these reasons, the
appeal is allowed.
Signed at Ottawa, Canada, this 16th day of June 2008.
"Paul Bédard"
Translation certified true
on this 24th day of July 2008.
Brian McCordick, Translator
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