Citation: 2008TCC300
Date: 20080515
Dockets: 2007-2910(EI),
2007-2911(EI),
2007-2915(EI), 2007-2916(EI),
2007-2917(EI), 2007-2918(EI),
2007-2930(EI)
BETWEEN:
NCJ EDUCATIONAL SERVICES LIMITED,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Archambault J.
[1]
NCJ
Educational Services Limited (NCJ) is appealing seven determinations by
the Minister of National Revenue (Minister) that the services provided
by seven of NCJ’s workers (workers) constituted insurable employment
within the meaning of the Employment Insurance Act (Act) during
the 2004, 2005 and 2006 calendar years. None of the workers intervened in the
appeals of NCJ. The appeals concern the following workers:
|
Worker
|
Period of employment
|
Appeal #
|
|
Assia Hamdane
|
November 1, 2004 to
June 16, 2005
|
2007‑2910(EI)
|
|
Lara Judd
|
January 1, 2004 to
June 15, 2006
|
2007‑2911(EI)
|
|
Ugras Oguz
|
January 1, 2004 to
December 31, 2006
|
2007‑2915(EI)
|
|
Janet Odell‑Bourke
|
January 1, 2004 to
June 15, 2006
|
2007‑2916(EI)
|
|
Ellen Cooper
|
January 1, 2004 to
May 31, 2006
|
2007‑2917(EI)
|
|
Shawn Weiland
|
January 1, 2004 to
June 15, 2006
|
2007‑2918(EI)
|
|
Andrew Sivilla
|
January 1, 2004 to
June 15, 2006
|
2007‑2930(EI)
|
[2]
It
appears that the determinations with respect to the seven workers resulted from
a request for employment insurance benefits made by Ms. Hamdane in the
summer of 2005. None of the other workers made such a request and, according to
Ms. Margaret A. Jacobs, president of NCJ, Ms. Hamdane was
the first worker to request employment insurance benefits since the beginning
of NCJ's operations on July 1, 1980.
[3]
In making
his determination with respect to Ms. Hamdane the Minister relied on the
following assumptions of fact:
a) the Appellant was
incorporated on June 23, 1980; (admitted)
b) the sole shareholder of
the Appellant and its president was Margaret Jacobs who owns 100% of the
voting shares; (admitted)
c) Margaret Jacobs was
present at the Appellant's premises on a regular basis; (admitted)
d) the Appellant provides
educational services such as tutoring, consulting, school placement and
standardized testing; (admitted)
e) the Appellant's clients
are parents of students from elementary school, high school, CEGEP and
university; (admitted)
f) the Appellant hired the
Worker as a tutor on a verbal agreement; (admitted)
g) the Appellant
considered the Worker an independent contractor [admitted] although the
Worker considered herself as an employee of the Appellant; (denied)
h) the Worker provided
tutorial assistance to elementary and high school students, clients of the
Appellant; (admitted)
i) the Appellant obliged
the Worker to give the tutorial sessions at its premises on Maisonneuve
boulevard in Westmount; (admitted)
j) the Appellant instructed
the Worker concerning the tutorial lesson, which was based on the agenda of the
student and prepared by the student's teacher; (denied)
k) the [client of the]
Appellant specified to the Worker the material and the subject to cover and
established the length of time of the tutorial; (admitted)
l) the Appellant assigned
specific students to the Worker; (admitted)
m) the Worker was required
to respect a work schedule established by the Appellant [according to the
availability of the tutor];
(admitted)
n) the Worker did not have
the right to change the work schedule without the approval of the Appellant;
(denied)
o) the Appellant kept a log
of the hours worked by the Worker; (denied)
p) the Worker prepared a detailed
time sheet for every student and presented the time sheet to the Appellant, which
was verified against the Appellant's time log;
(admitted)
q) the Appellant required the
Worker to perform the tutorial sessions personally; (denied)
r) the Worker advised the
Appellant of her absence; (admitted)
s) the Worker was required to
provide the Appellant with [written and]
verbal reports relating to the progress of the student and a final report
attesting to the student's ability level; (denied)
t) it is the responsibility
of the Appellant to satisfy its clients, if a student was not satisfied with a
tutor, the Appellant would change the tutor; (denied)
u) the Appellant provided to
the Worker the working premises [admitted], the furnishings, the equipment and
the materials required to carry out her functions; (denied)
v) the Appellant had a
library and a computer with internet service available for the Worker to use;
(admitted)
w) the Worker received an
hourly wage of $18 [admitted] determined by the Appellant; (denied)
x) the Worker was paid by
cheque on a weekly basis; (admitted)
y) the Worker was not
required to incur any expenses in fulfilling her functions for the Appellant;
(admitted)
Appeals Officer
[4]
Mr. Paul Hyland,
the appeals officer, testified at the request of NCJ. During his examination,
he stated that, contrary to what is done in income tax matters, it is the Minister’s
practice to make de novo findings of fact at the appeal level in
order to make a determination. During the course of his investigation, Mr. Hyland
prefers to rely on direct contact to obtain information from the parties, that
is, the payer and the workers, whether by telephone conversations or meetings, instead
of proceeding through a written questionnaire. Here, the facts provided by the
payer were so provided through written representations submitted by NCJ's legal
representative, a lawyer from the renowned firm of Davies Ward Phillips &
Vineberg. Mr. Hyland noted in paragraph 5 of his reports on an appeal
that he had been informed by NCJ's legal representative that "NCJ does not
direct the tutors in any respect, including as to how tutoring should be
organised and how the tutors should be providing lessons to the students."
Unfortunately, Mr. Hyland did not ask to talk directly to NCJ's president,
Ms. Jacobs. In the case of the four workers with whom he did talk (Ms. Hamdane,
Ms. Odell‑Bourke, Ms. Cooper and Mr. Sivilla), the interview took place by
telephone. He completed the written questionnaires himself from their answers.
So he did not obtain a signed written statement from these workers.
[5]
Mr. Hyland
acknowledged that he was not informed either by NCJ's legal representative or
by any of the workers, except Ms. Hamdane, that instructions were given by
Ms. Jacobs to the workers. However, he stated that, in coming to his decision
that each of the seven workers was an employee, he assumed that Ms. Jacobs
would have provided such instructions to the other six workers.
Margaret A. Jacobs
[6]
NCJ's
second witness was Ms. Jacobs, who explained the circumstances surrounding
the establishment of NCJ. She stated that she had been a teacher in the city of
Laval and, at one point, was put on an availability list. In order to create
her own job, she started to provide English language tutoring services at home.
Her teaching certificate issued by the Quebec Department of Education states
that she is authorized to teach English at the high‑school level
(Exhibit A‑12). Through word of mouth, it became known in the
Montreal area that she was providing tutorial services, and this activity
became a full‑time job for her. Ms. Jacobs decided to create NCJ in
1980 in order to respond to the growing demand for her tutorial services, not
only for English, but also for mathematics, history, physics, chemistry,
biology, French and Spanish. She described her business model as being a simple
one: she matches students with tutors.
[7]
Given
that she is the only one managing NCJ, she gave up providing tutorial services herself
and relied instead on a large pool of tutors whom she hires. Ms. Jacobs
testified that she always tells each of them that they are being hired as
independent contractors. At the end of the year, she gives them a T4A slip,
which declares under "other income" (Box 28) the amount paid to
each worker. Her tutors are proficient and qualified individuals with an
appropriate academic record. They have to be trustworthy. In that connection,
she checks their references; otherwise, she said, she does not care.
[8]
Ms. Jacobs
is the person responsible for dealing with the clients (basically, the parents
of the students) and determining their needs. Ms. Jacobs says that she
receives 60 to 80 phone calls (per week, I assume) from students who may
require adjustments or changes to their schedules. She bills the clients for NCJ’s
services and she pays NCJ’s tutors on the basis of time sheets that they
provide to her. She testified that she does not keep any time log. She relies on
the good faith of her tutors. She
admitted that it is she who prepares the invoices for the workers’ services to
NCJ. All this work is done on a weekly basis. Moreover, she is present most of
the time on the premises where the tutoring takes place. There is not a
separate office for her. Everything is done in a large hall (1,800 square
feet) (tutoring hall) where approximately 17 tables are available
for the tutors to meet their students. Each tutor chooses a table that suits his
or her needs. Some tables are for one student; some are for two or more.
[9]
Ms. Jacobs
testified that NCJ’s tutoring hall is open from 9 a.m. to 10 p.m., seven
days a week, during the school year, except for certain holidays. She is there
most of the time, that is from 9 a.m. to 9 p.m. The tutors have keys to give
them access to the hall and to enable them to lockup. She prefers to have the
tutors meet their students in this tutoring hall because it is more profitable
for her and more advantageous for her tutors as well because they then do not
have to travel from one school to another to see the students. She said that
she asked on one occasion if the tutors would be prepared to teach at the
residences of the students, but they refused to do so. She also indicated that the
tutoring hall was a more secure environment for providing the tutorial services.
[10]
She
prepares a schedule assigning a particular student to a particular tutor according
to what the tutors indicate to her to be their availability. If, on a given evening
or day, it appears a tutor cannot be present for any reason, including illness,
she will try to find a replacement for the tutor or ask the student to come at
another time. If tutors do not show up as expected, there is no particular
penalty, except that they do not get paid. In one case, one of her tutors suggested
his younger brother as a potential replacement. Having been told that he was enrolled
in a university program, she accepted him as a replacement. However, she did
not remember when this took place. In any event, she testified that she did not
tell the tutors that they could not have themselves replaced by substitutes.
She acknowledged, however, that she would not accept just anybody as a
replacement; that person would have to have the proper qualifications to
provide tutoring services.
[11]
Ms. Jacobs
stated that the tutors are never required to provide written or verbal reports,
whether on an interim basis or at the end of a tutoring contract, on students' progress.
However, she did acknowledge that she could on occasion discuss with her tutors
the progress being made by the students. She also acknowledged that she would
be the one to receive positive or negative comments from NCJ’s clients, that
is, the parents. She would, in turn, relay this information to NCJ’s tutors. She
gave as an example of a parent’s complaint the case of a particular tutor who
was described as a “whiner”. She just told him to stop. She also stated that if
she was unhappy with a particular tutor, she would either assign that tutor's student
to another tutor, or simply stop using the services of that particular tutor.
[12]
Ms. Jacobs
said that NCJ does not have any code of ethics or rules governing the services
of the tutors. However, she acknowledged that she does instruct her young male
tutors not to wear tee shirts; they are required to wear a shirt with a collar.
[13]
Ms. Jacobs
does not impose any particular material or content on her tutors. The tutors
determine what has to be done based on the requests made by their students when
they meet. The tutors often help the students with homework given by the
students' teachers or do work suggested by these teachers to enable students to
improve in a particular subject. NCJ has in its library books which are used by
the different schools attended by NCJ’s students, in case the students fail to
bring their own books with them. Tutors are free to use their own material. Ms. Jacobs
also indicated that she does not provide any training or instructions to her
tutors. She said that there is nothing to explain, except the time sheets.
Janet Odell‑Bourke
[14]
NCJ's
next witness was Ms. Janet Odell‑Bourke. Ms. Odell‑Bourke
is a teacher with 33 years of experience. She teaches French as a second
language in high schools. She worked as a tutor for NCJ on a regular basis from
2002 to 2006. After 2006, she would only work very occasionally, to help Ms. Jacobs,
since she considered Ms. Jacobs as a friend. She would indicate, during
the relevant period, what her availability was and perform her tutorial
services according to the schedule prepared by Ms. Jacobs. She was not
required to have her teaching plan or her diagnostics of a student's needs
approved by Ms. Jacobs. She did not remember whether she had discussed with
Ms. Jacobs when she was hired her status as an independent contractor. She
even said that she had no contract with Ms. Jacobs. However, she agreed
that she was providing her tutorial services for a fee.
[15]
Ms. Odell‑Bourke
indicated that there was no dress code (contrary to what Ms. Jacobs stated) or
code of ethics. She also confirmed that NCJ did not keep a time log. She testified
that she was free to use her own material to respond to the students’ needs.
Although she was not required to provide reports, she did have some discussions
with Ms. Jacobs regarding the progress of her students. She said that she
had never been disciplined for cancelling her attendance for a tutoring session
at NCJ’s tutoring hall. However, she acknowledged that she only cancelled twice
and that was after advising Ms. Jacobs ahead of time. Ms. Odell‑Bourke
indicated that she was never told that she was not allowed to have herself
replaced by somebody else.
[16]
When
questioned by Mr. Hyland, Ms. Odell‑Bourke informed him that
she considered herself an independent contractor. She indicated that she was
not asked, however, how she was supervised by Ms. Jacobs. She would indicate
to Ms. Jacobs her availability up to four months ahead of time.
Shawn Weiland
[17]
Mr. Shawn Weiland
was a tutor for NCJ from 2004 to 2006. He was hired to provide science and
mathematics tutorial services to NCJ's students. At the time, Mr. Weiland
had just graduated from university. Therefore, he was available for a
significant number of hours during the week. After he had informed
Ms. Jacobs as to his availability, it was she who would prepare his teaching
schedule. He indicated that when he could not be present for a tutoring session,
he did not have to provide any justification. He testified however that he
rarely, if ever, missed his sessions. He could only remember having been absent
by reason of illness.
[18]
Mr. Weiland
stated that he was not required to provide NCJ with written reports on his
students' progress. However, he did speak informally about it with Ms. Jacobs.
With respect to content or the material covered, it was normally he who
responded to the students’ needs. He testified that he used the material
offered by NCJ, although he was free to use his own. When asked to compare his
work at NCJ with his new job as a teacher at Lower Canada College, he said that
he would follow for most part the dress code provided by Ms. Jacobs while,
at Lower Canada College, and would always follow the dress code. At Lower Canada College, he felt more compelled
as well to follow instructions respecting content and the material to be covered
in class, and he provided a written report to his students four times a year. His
remuneration at Lower Canada College was subject to withholdings at source.
Ellen Cooper
[19]
Ms. Ellen Cooper
is a professor at Vanier College with 15 years of teaching experience. She has also been working as a
tutor for NCJ since 1997. Like the other tutors, she confirmed that she indicates
her availability to Ms. Jacobs and is not required to work a minimum
number of hours. Nor is required to make reports on the progress made with her
students. However, she does volunteer this kind of information to Ms. Jacobs.
She usually bases the content of her tutoring on the students' requirements.
She does not need to be supervised in her work as a tutor, does not follow any
guidelines or dress codes and does not feel obliged to provide any justification
for her absences, although she can remember having been ill only once. Contrary
to what Mr. Hyland indicated in the questionnaire reflecting his telephone
conversation with her, Ms. Cooper considers herself an independent
contractor and not an employee. When a student stops coming to see her at NCJ's
tutoring hall, she is not made aware of the reason.
Assia Hamdane
[20]
Ms. Hamdane
moved to Canada in 2004 from Algeria. Prior to her move, she had been teaching at an Algerian
university for a period of ten years. She started to work as a tutor for NCJ in
November 2004, at a time when she had no other work. She was available to
provide tutorial services not only in French, but also in various other subjects,
including mathematics, science and geology. She taught from Monday to Thursday.
She would normally arrive for 3:30 p.m. and wait in queue to receive from
Mrs Jacobs the assignment of her students. It was also Ms. Jacobs who
instructed her as to what to teach NCJ's students and informed her of the
duration of her tutoring sessions. Ms. Hamdane once
suggested to Ms. Jacobs extending the teaching time for a student, but was
told by her not to do so. She would stay at NCJ until such time in the evening
as Ms. Jacobs told her that her services were no longer required. According
to Ms. Hamdane, Ms. Jacobs informed her that if she changed her
schedule, she would have to advise her. When she was sick, she would call Ms. Jacobs
and tell her that she could not be present; she does not know whether she was
replaced on such occasions. In addition, she confirmed that she did not have to
provide reports on her tutoring of her students; however, she thought it only
normal to keep Ms. Jacobs informed.
[21]
Ms. Hamdane
testified that the rules of conduct were very strict at NCJ's tutoring hall.
She indicated that “you were not allowed to speak to other tutors.” However,
she admitted that this directive did not come from Ms. Jacobs, but from a
co‑worker, Ms. Oguz. She also admitted that she did not check with Ms. Jacobs
to determine whether what she had been told was true.
[22]
Ms. Hamdane
indicated that she always thought that she was an employee while working for
NCJ. However, in her tax returns for 2004 and 2005 she declared her income from
NCJ as business income from self‑employment. It should be added that she
declared as employment income in 2004 her salary from teaching at another
school and she also declared as employment income her remuneration from her
work in a boutique in 2005.
[23]
It
should be noted that it is possible Ms. Hamdane may have had difficulty
understanding Ms. Jacobs’ English because her knowledge of the language
was not as good as it could have been. According to Ms. Hamdane, she did
not receive any input from the parents of students. She ceased working for NCJ
at the end of the 2004‑2005 school year because she decided to return to
university as a student in environmental studies in the fall of 2005.
Analysis
[24]
In Teach
& Embrace Corporation v. M.N.R., 2005 TCC 461, I wrote the following
description of the rules applicable in determining whether, for the purposes of
subsection 5(1) of the Act, a contract of employment (contract of service) or a
contract for services existed:
13 The relevant statutory provision
is subsection 5(1) of the Employment Insurance Act (Act),
which defines insurable employment as being employment "under any express
or implied contract of service". As counsel for the Minister stated, given
that the Act does not define what a contract of service is, recourse must be
had to the Civil Code of Quebec (Civil Code), pursuant to the
interpretation principle of complementarity.1 When, in interpreting a federal statute, it is necessary to refer
to a civil law concept of a province, to a nominate contract, for example,
reference must be made to the concept in force in the province. Here, given
that the Contract was entered into in Quebec, we have to refer to the Civil
Code. Since 1994, the Civil Code defines the "contract of employment"
and the "contract for services". The relevant provisions are
article 2085 for the definition of the former and articles 2098 and
2099 for the definition of the latter. They provide as follows:
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.
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.]
14 The three essential elements for a contract of employment are:
i) work, ii) remuneration, and iii) the direction or control of
the employer. In the case of the contract for services, there must be services
provided for remuneration, freedom for the provider of services to choose the
means of performing the contract and no relationship of subordination between
the parties. As stated by counsel for the Minister, it is clear that the
distinguishing factor between a contract of employment and a contract for
services is the existence or absence of a relationship of subordination, i.e.
the difference depends on whether the contract was executed under the direction
or control of an employer.
15 This view is espoused by Quebec scholars, including Robert P. Gagnon
in Le droit du travail du Québec, 5th ed. (Cowansville Qc: Les éditions Yvon Blais Inc.,
2003), at paragraph 90:
[TRANSLATION] 2
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.
At paragraph 92, Gagnon describes the notion of subordination:
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 . . . 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 the 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.
16 When the Quebec Minister of Justice tabled the new Civil Code, which
came into effect on January 1, 1994, he stated:
[TRANSLATION]3
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.]
17 This view of the Quebec
Minister of Justice corresponds with that of the Federal Court of Appeal in Gallant
v. Canada, [1986] F.C.J. No. 330 (QL), a judgment rendered in 1986
prior to the enactment of the new Civil Code.
18
The distinction between a contract of employment
and a contract for services is not an easy one to make. The line of demarcation
between these two types of contracts can be uncertain and the fact that the
issue arises so often before this Court is certainly indicative of its
difficulty. In my article, I describe the approach which should be followed
before this Court. I state therein that the burden of proof in an appeal heard
in Quebec — as is also the
case for an appeal heard in a Canadian common law province — is on the
appellants: they have to establish that they are entitled to have the decision
of the Minister reversed. 4 Here, it is thus up to the Payer to establish that no contract of
employment existed.
[Emphasis added.]
1 See s. 8.1 of the Interpretation
Act, L.R.C. 1985, c. I‑21.
2 The
English translation comes from an article of mine "Contract of Employment:
Why Wiebe Door Services Ltd. Does Not Apply in Quebec and What Should
Replace It" (my article) published in The Harmonization of
Federal Legislation with Quebec Civil Law and Canadian Bijuralism, Second
Collection of Studies in Tax Law (2005), Association de planification fiscale
et financière and Department of Justice Canada, 2005, p. 2:1, at
p. 2:29, par. 44.
3
Ibid., p. 2:26, par. 41.
4 Ibid.,
p. 2:54, par. 80 and 81.
[25]
I
have described a similar approach in the more recent decisions Grimard v. The
Queen, 2007TCC755
and Rhéaume c. M.N.R., 2007TCC591. In those decisions, I dealt with the
differences that exist between the common law and the civil law. At paragraphs 21 to 27 of Grimard
I wrote the following:
[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. 14 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: 15
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,16 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".17
[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 2‑318:
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.,19 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.20 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.
14 See the more detailed analysis
in my article, supra.
15 Justice Major in Sagaz,
at par. 46 and 47.
[26]
Now, let us
apply these rules to the facts of this case. Contrary to what was the case in Teach
& Embrace, here there are no written contracts. It is therefore more
difficult to determine what was actually agreed upon when the workers were
hired by NCJ, and especially what kind of contract they entered into. This difficulty is illustrated by the
testimony of Mr. Weiland, who, like most of the other workers, did not
remember having discussed this question at the time of his hiring.
Mr. Weiland testified that he did not remember having specifically agreed
to be hired as an independent contractor. He only realized it was Ms. Jacob’s
intention that he work as one when he saw that no taxes were being withheld by
NCJ from his remuneration. That Mr. Weiland remembers realizing only after
he was hired that he was an independent contractor would appear to indicate
that the nature of his contract was not discussed beforehand, contrary to what Ms. Jacobs
stated. Ms. Jacobs also testified that she would negotiate salary by
asking the tutors to tell her what remuneration they wanted. However, she was
contradicted by Ms. Cooper, who stated that she merely accepted what Ms. Jacobs
offered. So Ms. Jacobs’ statements do not necessarily reflect what
actually took place during the relevant periods and are therefore not always
reliable.
[27]
I do
not think that intent plays an important role here. Although it is clear that Ms. Jacobs
wanted the sort of relationship that results from a contract for services, the
evidence regarding the workers' intention is far from clear. In the case of Ms. Hamdane,
there is a contradiction between her testimony that she always believed she was
an employee and the fact that in her tax returns she reported her income from
NCJ as business income. With respect to Mr. Weiland, as already mentioned,
in all likelihood, he did not discuss the nature of his contract.
[28]
Ms. Cooper
and Ms. Odell‑Bourke both indicated that they thought they were independent
contractors. However, I doubt whether these individuals really understood the legal
distinction between a contract for services and a contract of employment. As
mentioned earlier, Ms. Odell‑Bourke believed she did not even have a
contract! There would have had to have been a meeting of the minds on the
matter of NCJ not having any power to give direction or to control the work to
be performed. As I
stated in Rhéaume, at paragraph 34, "the existence of some
vacillation in the case law, alluded to by Décary J.A. in 9041‑6868
Québec Inc. [the Tambeau case], does not help the situation".
[29]
In
any event, even in a situation where both parties clearly intended to enter
into a contract for services as opposed to a contract of employment, it is the Court’s
duty to determine whether the label used by the parties corresponds to reality.
Here, the evidence does not disclose very many acts of direction or control exercised
by NCJ over the work of the workers. However, that does not mean there are none.
Mrs Hamdane testified that she was given instructions concerning the work to be
done. She stayed at work until told by Mrs Jacobs that she could leave. Ms. Jacobs
was present most of the time when the tutoring was being done and was therefore
capable of supervising what was going on in NCJ's tutoring hall. She
acknowledged that if she had seen one of her tutors behaving in an
improper manner, for example, by
laying a hand on the knee of a student, she would have immediately intervened
to ensure proper behaviour by that tutor.
[30]
She
did exercise direction or control: by assigning the students to their tutors,
by reassigning them in case of the tutor’s absence by reason of illness, and by
instructing the tutors regarding the length of the tutoring sessions (see Ms. Hamdane's
testimony). When a tutor could not attend for a tutoring session, that tutor would
call NCJ, not the student. Ms. Jacobs was the one who would find a qualified
replacement if a tutor could not be present for a tutoring session by reason of
illness or otherwise.
[31]
The
evidence also discloses that when the parents (NCJ’s clients) made a positive
or a negative assessment of the work done by a particular tutor, they did not
communicate it to the tutor, but to Ms. Jacobs. Ms. Jacobs would
exercise direction or control over the tutors by informing them of the positive
or negative comments of the parents. If the behaviour of a particular tutor did
not change, Ms. Jacobs could assign the student to another tutor or just
decide to no longer use that tutor's services.
[32]
Ms. Jacobs
also exercised direction over the work of her workers by adopting, for instance,
a dress code for her male tutors. Being present on the premises, she therefore was
in a position to control what went on.
[33]
As
to the manner in which the teaching was supposed to be carried out, it is
normal that, in dealing with professionals such as each of the tutors who
testified in this case, NCJ would rely on those professionals to adopt the
proper method for discharging their duties. There is no evidence of
interference by Ms. Jacobs in the teaching methods of the tutors. However,
this is not unusual: for example, such was the situation in both Teach &
Embrace and Rhéaume. The same can also be said about the work performed
by the worker in Grimard.
[34]
Although,
unlike the situation in Teach & Embrace, there was no formal
requirement to make written or verbal reports on the progress being made by the
students, the reality is that Ms. Jacobs was present on the premises most
of the time and verbal reports were being made to her about the students’ progress.
This was confirmed not only by her, but by all the workers who testified in
these appeals. I cannot imagine that the owner of NCJ would not have had a keen
interest in the quality of the services that her company provided to its clients.
A business cannot survive for long if it does not care about the quality of its
services and the satisfaction of its clientele. So Ms. Jacobs had an
interest to exercise control.
[35]
As
stated by the minister of Justice in his comments when the Civil Code of Québec
was adopted and by Robert Gagnon in his work entitled Le droit du
travail du Québec, a relationship of subordination can exist even when
there is no immediate control exercised by the employer (“classical legal
subordination”) if the elements of the “concept of legal subordination in a
broad sense” are present, that is the “subordination [that] 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.” (See Gagnon, paragraph 92, reproduced at paragraph 24
above).
[36]
So
the issue, in the end, as stated in Groupe Desmarais Pinsonneault & Avard
Inc. v. Canada (M.N.R.), 2002 FCA 144, [2002] F.C.J.
No. 572 (QL), and
in Gallant supra
is whether NCJ had the power to exercise control and direction over the
work of its workers. I believe this power can be inferred not only from the direct
evidence referred to above, but also from the circumstantial evidence referred
to hereunder. There are here several “indicia of supervision” (to use the words
of Gagnon, above) and “indicia of integration” (to use mine) of the workers'
services into the business of NCJ. First, it is important to realize that the
business of NCJ is to provide tutorial services to the children of the parents
who constitute its clientele. Clearly, the students and their parents are NCJ’s
clients and not the tutors’. In order to provide the tutorial services, NCJ
requires the services of tutors. Its business is not simply to match a student
with a tutor, as Ms. Jacobs claimed. The tutors do not communicate with
NCJ’s clients, the parents. The tutors do not have the parents’ addresses and
phone numbers. As Ms. Cooper stated, the tutors may not even know why the
students stop attending the tutoring sessions. It is Ms. Jacobs who deals
with the clients.
[37]
Another
very strong indication of integration, indicative as well of the power of
control and direction over the work of the tutors, is the fact that the tutors’
services were provided on the premises of NCJ and, most of the time, in the
presence of Ms. Jacobs herself. Although the tutors were free to use their
own material, NCJ provided a library of books and access to the Internet. The
tutors were not required to incur any expenses in providing their tutoring
services other than the costs of attending at the tutoring hall, as indeed all
teachers hired as salaried employees in school boards across Quebec and the rest of Canada must bear the costs of
attending at the institutions at which they teach.
[38]
I
find, on a balance of probabilities, that NCJ had the power to give direction to,
and exercise control over, its tutors, a power it has had to possess in order
to be successful in operating its business since 1980. That business did not consist
merely in head‑hunting, that is, trying to fulfill the employment
requirements of a particular employer, or in providing the services of a pool
of tutors to other employers. Its business was to provide tutoring services directly
to its students. I cannot imagine that Ms. Jacobs, in operating this
business from 1980 up to today, has not encountered any problems with regard to
the way that her tutors provided their services. Therefore, I have not been
convinced by Ms. Jacobs' testimony that NCJ’s input was limited to simply
matching one student with one tutor.
[39]
We
are not dealing here with a simple and limited service that does not require
much supervision, as is the case delivery of parcels or vehicles as in D & J
Driveway Inc. v. Canada (Minister of National Revenue),
2003 FCA 453, [2003] F.C.J. No. 1784 (QL), and in Sauvageau
Pontiac Buick GMC Ltée v. Canada (Minister of National Revenue ),
[1996] T.C.J. No. 1383 (QL).
[40]
Here,
the main object of NCJ's business is to provide tutorial services during the
school year seven days per week, from 9 a.m. to 10 p.m., and this
required Ms. Jacobs’ presence from 9 a.m. to 9 p.m. I believe
that Ms. Jacobs exercised more supervision over the tutoring of her tutors
than she is prepared to admit. That this power was exercised discretely does
not alter the fact that she did exercise it. I am convinced that, in the
circumstances of this case, had a problem arisen, she would have had the power
to exercise control and direction over her tutors. She admitted as much herself
when asked what she would have done if she had seen improper (sexual)
behaviour. Moreover, if a tutor had not acted on any suggestion she made, she
could either have reduced that tutor’s workload by assigning one of the tutor’s
students to another tutor or terminated the tutor’s services.
[41]
In
addition, although this is a very minor point, I do not know of any
entrepreneurs who ask their clients to prepare their invoices for them.
[42]
For
all these reasons, I conclude that NCJ has failed to convince the Court that it
did not have the power to exercise control and direction over the work of its
seven workers during the different relevant periods. Given that a
relationship of subordination existed between the seven workers and NCJ,
the contract between them could not have been a contract for services (see article
2099 of the Civil Code). In my view, NCJ hired each of the workers as its
employee.
[43]
The
appeals of NCJ are dismissed.
Signed at Ottawa, Canada, this 15th day of May 2008.
“Pierre Archambault”
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