Citation: 2008 TCC 653
Date: 20081128
Docket: 2008-693(EI)
BETWEEN:
ANICK GIROUX,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
LONDON LIFE INSURANCE COMPANY,
Intervener.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Hogan J.
[1]
This is an appeal from
a decision of the Minister of National Revenue finding that the Appellant's
employment during the period from July 8, 2005, to November 2, 2006,
was not insurable because she was self‑employed and had not been hired
under a contract of service. The payor corporation, the London Life Insurance
Company, intervened in the appeal to support the
Minister's position.
[2]
In concluding that the
Appellant did not hold insurable employment, the Respondent relied on the
following assumptions of fact:
[translation]
5.(a) The payor was incorporated on March 24,
1874.
(b) The payor is an insurance company that sells
life, accident and health insurance policies.
(c) The Appellant was hired as a financial advisor
and sales and service representative.
(d) The worker's tasks involved contacting and
visiting clients and selling them insurance policies from the payor or
insurance companies associated with the payor;
(e) The Appellant and the payor do not agree on
whether the Appellant was a self‑employed worker or salaried employee.
(f) The Appellant began working for the payor on
May 9, 2005.
(g) From May 9 to July 1, 2005, the
Appellant was in training at the payor's premises on University
Street in Montréal.
(h) While she was in training, the Appellant received
fixed remuneration of $500.00 a week.
(i) On January 4, 2008, Caroline Tamraz,
a representative of the payor, told one of the Respondent's officers that
during her training period, the Appellant was considered an employee and
employment insurance premiums were deducted from her paycheques.
(j) On July 8, 2005, the Appellant signed a
sales agreement with the payor.
(k) According to paragraph 2(f) of that
agreement, the Appellant's relationship with the payor and the payor's partners
was that of a self‑employed worker.
(l) As of July 8, 2005, the payor considered
the Appellant self‑employed.
(m) At her own expense, the Appellant held a licence
to sell life insurance and a licence to sell mutual funds.
(n) The Appellant had to keep her licences valid to
work for the payor.
(o) The Appellant was not subject to direct control
by the payor.
(p) The Appellant did not have to follow a work schedule
set by the payor.
(q) The Appellant had no sales quota to meet.
(r) The Appellant had no vacation or sick leave with
the payor.
(s) The Appellant had no fringe benefits.
(t) The Appellant was paid only on commission or
through advances.
(u) The commission rate varied depending on the
products sold.
(v) The Appellant was liable for losses resulting
from her clients' bad debts.
(w) If the Appellant wanted to lease an office on the
payor's premises, she had to pay $75.00 every two weeks.
(x) The Appellant was responsible for her travel and
operating expenses.
(y) The Appellant provided her own car, laptop
computer, cellular telephone and photocopier without compensation from the payor.
(z) The relationship between the Appellant and the payor
ended because the Appellant no longer held a valid licence.
[3]
The Appellant called
two witnesses, Jean‑François Thiffault and Jean‑Stéphane
Bourgeois. She also testified on her own behalf.
[4]
Jean‑François Thiffault
explained to the Court that he worked as an investment advisor in London Life's
Freedom 55 Financial division ("Freedom 55 Financial") at
the same time as the Appellant.
[5]
He already had an
investment broker's licence when he joined London Life. He had to take training
to obtain his insurance agent's licence.
[6]
After his initial
training and after obtaining his insurance agent's licence, Mr. Thiffault
signed a self‑employment contract with London Life.
[7]
He explained that he was
paid mainly on commission and that a very complex formula was used to calculate
his commissions. He also had to pay for the cost of services provided to him by
London Life, such as the use of a computer.
[8]
He testified that he
could lease an office at a branch or work at home or elsewhere. He chose to
have an office at London Life's branch in Longueuil.
[9]
He also testified that
any insurance agent or investment broker affiliated with Freedom 55
Financial had to take continuing training for the first 24 months of
service. London Life organized a day of training every Tuesday at the branch
with which Mr. Thiffault was affiliated.
[10]
Mr. Thiffault
testified that his team manager followed up on his solicitation activities and
that he had to report on the number of telephone calls or meetings he had with
potential clients. He also explained that he was not been entitled to any
fringe benefits before the end of the two‑year period.
[11]
Lastly, he testified
that he had to submit a quarterly evaluation and explain any decrease in sales
that might have occurred during that period.
[12]
He used a computer
leased from London Life. The software on the computer was London Life's, and it
included all data relevant to the range of insurance policies and investments
offered by London Life.
[13]
Finally, he explained
that he had to keep his files in order and that they were subject to control
by London Life.
[14]
Counsel for the
Intervener cross‑examined Mr. Thiffault, who explained that he had
previously worked for the National Bank. At that time, he received a salary
payable every two weeks and a performance bonus. While working at the
National Bank, he acquired a licence to sell mutual funds. He confirmed that
provincial regulations required him to be affiliated with an insurance company
to maintain his licence to sell insurance and mutual funds.
[15]
He also admitted on cross‑examination
that insurance brokers could sell their clients when they left
London Life. However, in practice, only insurance brokers with more than
24 months of training had this option.
[16]
He explained that he did
not have a fixed work schedule. He could determine the hours during which he
sold insurance products or investment and mutual fund products. He said that he
could hire his own administrative staff and did not have to use the services
offered by London Life. Finally, he explained that his legal relationship with
London Life could be terminated if he did not achieve a minimum sales figure.
[17]
The second witness was
Jean‑Stéphane Bourgeois. He was the executive director of training
and development for insurance and mutual fund advisors. He managed the
Appellant's training. He had to help new advisors who joined Freedom 55
Financial to draw up a business plan. He also explained that he was responsible
for giving training courses to newcomers, including training in the software
and products offered by London Life. He was also responsible for sales
techniques.
[18]
He testified that
London Life's Spectra software allowed insurance agents to produce a report for
clients. Using data gathered by the agent from potential clients, the software
identified the products that might help the clients achieve their financial
objectives or meet their insurance or investment needs. Every week, he
organized a meeting with insurance agents who had fewer than 24 months of
training. During the meetings on Monday, he checked whether the agents had done
follow‑up with clients. He explained that the Monday meetings were
mandatory for new agents. After six months, agents could be exempted from
that obligation, depending on their performance.
[19]
He confirmed that he
had to meet with an agent each quarter to make sure that the agent was meeting
London Life's minimum standards.
[20]
He testified that the
Appellant participated voluntarily in a mentoring program while she was
affiliated with London Life. Her mentor was Jocelyn Latulippe, an insurance
agent who was very successful with Freedom 55 Financial. On cross‑examination,
he told the Court that the Appellant had previously been a self‑employed
worker under Mr. Latulippe. At that time, she did administrative work for
Mr. Latulippe and another insurance agent affiliated with London Life. As
he recalled, Mr. Latulippe encouraged the Appellant to obtain her
insurance agent's licence because he was considering transferring some of his
inactive clients to her.
[21]
The Appellant testified
that Mr. Latulippe encouraged her to become a marketing trainee at
Freedom 55 Financial. Mr. Latulippe agreed to act as her mentor if
she was able to obtain her insurance agent's licence at the end of the training
and if London Life offered her a sales agreement.
[22]
The Appellant filed
Exhibit A‑2, an agreement inviting her to participate in London
Life's training program, which she signed on April 12, 2005. The agreement
provided that, if the Appellant passed the training program and obtained her
insurance agent's licence, London Life would enter into a contract with her as
a financial security advisor for Freedom 55 Financial. Since the Appellant
was paid during her training period, the contract contained a clause preventing
her from joining another financial services provider as an agent, advisor or
representative in Canada for a period of one year after the
end of the training program.
[23]
The agreement also
contained a confidentiality undertaking for the seven‑week training
program. The undertaking covered confidential information or trade secrets
related to the business, business practices, training methods and sales
practices of London Life and its affiliated companies.
[24]
The Appellant filed
Exhibit A‑3, the sales agreement she signed with London Life on
July 8, 2005.
[25]
I consider the
following clauses of that agreement relevant to the outcome of this appeal:
[translation]
1. Object and Scope of Agreement
(a) Object
This agreement applies to representatives involved in sales
representation, selling, service and other related activities (sales
activities) for products established or offered by London Life or covered by
agreements with London Life's Intercorporate Partners. I agree to devote all my
efforts to fulfilling my obligations under this undertaking and this agreement.
. . .
2. Powers and Obligations
(a) Solicitation and Service
After obtaining the licences needed to sell the applicable product
and the right to represent London Life and its Intercorporate Partners, I shall
solicit contracts from clients, provide service under those contracts and
collect premiums, contributions, deposits and funds to be invested on behalf of
London Life and its Intercorporate Partners.
(b) Licences
For the entire term of this agreement, I shall at my own expense
obtain the licences needed to sell, pursuant to the authority in effect, all
products offered by London Life and its Intercorporate Partners.
(c) Standards and Common Practices
I acknowledge the interests and obligations of London Life and its Intercorporate
Partners in complying with all legislative and regulatory requirements, meeting
industry standards and preserving their image as solvent, responsible financial
institutions. Those standards and common practices
are set out in London Life's code of professional conduct, as amended, and I
agree to comply with its provisions. I acknowledge that London Life's code of
professional conduct forms an integral part of this agreement as if set out in
full herein.
(d) Compensation Guide
I acknowledge that I received a recent version of the compensation
guide prepared by London Life before signing this agreement. That guide shall
form an integral part of this agreement by reference.
I further agree that London Life may amend the compensation guide
from time to time by sending me a notice to this effect.
. . .
(f) Self-employed Workers
The relationship between me and London Life and its Intercorporate
Partners is and shall remain that of two self‑employed workers. This
agreement shall not create any employee/employer relationship between the
parties. I may choose the time, place and method for soliciting sales and
services under this agreement, the whole in accordance with legislative and
regulatory requirements and industry standards.
. . .
5. Commission and Other Payments
(a) Compensation Guide
London Life shall pay me for selling its products and assuming
responsibility for service. The compensation guide contains all details on
payments and adjustments. Sales made following any amendment to London Life's
compensation guide shall be subject to those changes.
. . .
(d) Amounts Payable to London Life
If at any time during the term of this agreement or after its termination,
my account shows that I owe an amount to London Life, that amount shall be or
shall remain payable to London Life immediately, whether London Life requests
repayment or not and notwithstanding any termination of this agreement in the
meantime.
London Life may deduct any amount owed to it as unearned commissions
or other unearned payments from any amount that it owes me.
. . .
9. Protection of Information, No Replacement
and Inducement
(a) Information on the
Business and Clients of London Life and its Intercorporate Partners
. . .
During the entire term of the contract and for a period of
two years after the termination of this agreement, I shall not for any
reason, whether on my own behalf or on behalf of any person, use, disclose,
provide or make accessible to anyone any information acquired during the term
of this agreement concerning the business of London Life or its Intercorporate
Partners.
. . .
(b) No Inducement of the
Clients of London
Life and its Intercorporate Partners
During the term of this agreement and for a period of two years
after the termination of this agreement, I shall not for any reason, whether on
my own behalf or on behalf of another person, directly or indirectly induce or
attempt to induce a client of London Life or its Intercorporate Partners to do
any of the following things in relation to an individual insurance, retirement
income, savings or investment contract established by London Life or its
Intercorporate Partners. . . .
(c) No Inducement of the Members of London Life's Field Services
During the term of this agreement and for a period of two years
after the termination of this agreement, I shall not for any reason induce or
attempt to induce a member of London Life's field services or administrative
staff to leave London Life.
[Emphasis added.]
[26]
The Appellant tried to
explain clause 2(f) of the sales agreement, which provides that the legal
relationship between her and London Life was that of a self‑employed
worker. She testified that she read the agreement but that changing a few of
its clauses hardly seemed possible. She concluded that it was contract of adhesion.
[27]
The Appellant explained
that she enjoyed some success at Freedom 55 Financial from May to
November 2006. However, at the end of 2006, she saw her family physician,
who told her that she was suffering from exhaustion related to her work. She
asked her sales director for sick leave.
[28]
She explained that the
sick leave continued and, as a result, she did not renew her insurance agent's
licence or her mutual fund agent's licence.
[29]
When cross‑examined
by the agent for the Respondent, the Appellant admitted asking her accountant
to prepare her tax returns for the 2005, 2006 and 2007 taxation years as
if she were self‑employed. Since that status was shown on the record of
employment received from the payor corporation, she did not think she could
prepare her returns in any other way.
[30]
The Appellant filed
Exhibit A‑11, the letter she had received from the payor corporation
on June 11, 2007. In that letter, the payor told the Appellant that she
had failed to renew her licence to sell life insurance when it expired on
April 30, 2007, and had also failed to renew her licence to sell mutual
funds on May 1, 2007. Since those two licences were essential for the
Appellant to continue working as an insurance agent or mutual fund advisor,
London Life was obliged to terminate the sales agreement it had entered into
with the Appellant. In its letter, the payor corporation referred to the clause
authorizing it to terminate the sales agreement for failure to renew a licence.
[31]
The letter was signed
by Sherry Marks, the director of field service relations. The Appellant
asked the Court to read paragraph 3 on page 2, which states:
[translation]
Please find enclosed a booklet entitled Vos
avantages sociaux à la cessation d'emploi [your fringe benefits on termination of employment]. Unless otherwise specified, the date on
which your fringe benefits end will be the date of termination of your agency
agreement and your sales agreement with the London Life Insurance Company.
Please read this document carefully, since it contains important information
about your guarantees and the options for converting your group life insurance.
[Emphasis added.]
[32]
The agent for the
Respondent called only one witness, Elio Palladini, who testified that he
was an officer in the Appeals Division of the Canada Revenue Agency (CRA). The
Appellant's file was given to him by his team leader, Sylvain Gauvin.
[33]
He explained to the
Court that an initial determination had been made in the Appellant's file. In a
letter written to the Appellant on August 21, 2007, Mélanie Girard
concluded that the Appellant was an employee and that her employment with the
corporation was insurable under paragraph 5(1)(a) of the Employment
Insurance Act. Mr. Palladini explained that he recommended to his team
leader that Ms. Girard's determination be reversed. In a letter signed by
team leader Sylvain Gauvin and dated January 24, 2008, the Appellant
was informed that her employment with the payor corporation was not insurable
because she had not been hired under a contract of service with that
corporation.
[34]
Mr. Palladini
testified that he read a letter sent to the Intervener by the CRA's CPP/EI
Eligibility Division (now the CPP/EI Rulings Division), which was filed as
Exhibit INT‑6. That letter was sent after the Intervener asked the
CRA to rule on the status of its workers following a reorganization of its
business that was to create a more autonomous legal relationship with its
insurance and mutual fund agents. The letter explained in detail how the
Intervener planned to change its legal relationship with its agents. The Court
notes that the Appellant's terms and conditions with the payor corporation were
similar if not identical to those described in the letter. The CRA concluded in
the letter that, after the changes, the Intervener's agents would have the
legal status of self‑employed workers for tax purposes. The Intervener
filed the letter with the CRA's Appeals Division for consideration, since it
obviously did not agree with Ms. Girard's initial determination in the
Appellant's file.
[35]
Mr. Palladini
testified that he applied the tests established by the courts to determine the
Appellant's status. He concluded that there was no relationship of
subordination between the payor corporation and the Appellant. He explained
that the Appellant was responsible for her work tools and had had a real chance
of profit and risk of loss, which depended on her success in recruiting new
clients.
[36]
The Intervener called
Hélène Doré, the payor corporation's executive director of market development
in Quebec. She explained that she was responsible
for 14 advisors, who could each hire their own administrative assistants
and were free to determine when and where they worked. She admitted that new
agents had to receive a great deal of training, but she said that the training
was necessary so they could meet their regulatory obligations and those of the payor
corporation.
[37]
She testified that the
Autorité des marchés financiers (AMF) required all insurance agents' records to
comply with a strict regulatory framework. The AMF audited insurance companies
to determine whether their records included all the information provided to
potential clients and to ensure that clients had signed certain essential
documents.
[38]
The Appellant chose to
cross‑examine Ms. Doré. In answering the Appellant's questions,
Ms. Doré stated that, although it was possible for an agent with less than
24 months of service to hire a subagent, in practice this rarely if ever
occurred. The Appellant asked questions about the deductions made from the net
income she received from the payor corporation, and Ms. Doré explained
that those types of deductions were voluntary and that a self‑employed
worker could ask the payor corporation to make and remit deductions rather than
waiting to make quarterly payments. The deductions were made for a self‑employed
worker.
[39]
The Appellant asked
Ms. Doré to explain how she could have been eligible for group insurance.
Ms. Doré stated that the payor corporation's policy, under the group
insurance rules, was such that several persons from the same group could take
out group insurance. The Appellant asked how she could have met the group
insurance requirements as a self‑employed person working alone.
Ms. Doré did not answer that question.
[40]
The Intervener called
Ms. Marks, the author of the termination letter of June 11, 2007,
filed as Exhibit A‑11. Ms. Marks testified in English, since
she explained to the Court that she could neither speak nor write French. She
said that a member of her translation department had prepared the letter based
on an English version and had referred to a booklet entitled Vos avantages
sociaux à la cessation d'emploi [your fringe benefits on termination of
employment]. She testified that she did not understand the title and that it
was a mistranslation. The title has since been corrected.
[41]
Ms. Marks also
testified that an independent agent could ask the payor corporation to make
deductions as a self‑employed worker. She told the Court that the
Appellant had been dismissed for failing to renew her licences.
[42]
Ms. Marks
explained that the payor corporation is subject to an extensive regulatory
framework and that, in the case of Quebec, the AMF
requires reports and internal controls on a quarterly basis to verify whether
agents are meeting their documentary obligations to their clients.
[43]
She described the
history of the payor corporation. She explained that it had been purchased by
the Great‑West Life Assurance Company, whose parent company is the Power
Corporation of Canada. Following that acquisition, the payor
corporation had to reformulate the way it did business in selling insurance and
mutual fund products. The objective of the reform was to do business with
independent agents rather than employees. She explained that the agents had
expressed a desire to be more independent so they could have the status of self‑employed
workers. Several of the payor corporation's former employees decided to leave
the corporation after the reform.
[44]
Finally, Ms. Marks
said that several insurance agents were very successful after this new business
plan was implemented. She explained that several of the big agents earned more
than a million dollars.
Positions of the Parties
[45]
The Appellant argued
that she was an employee of the payor corporation the entire time she worked
for it. She told the Court that she worked exclusively for the corporation
during that time. She noted that she received payslips like an employee and was
paid her commissions and bonuses every two weeks. She argued that there was
a strong relationship of subordination between the corporation and her. She
explained to the Court that she had to attend meetings every week and training
sessions that lasted six to ten hours. She was subject to performance
monitoring and had to attend training sessions to enrich her knowledge or
improve her weaknesses.
[46]
She had to maintain her
records in the manner required by the payor corporation. She had to use texts
chosen in advance by the payor corporation when she called potential clients to
set up appointments, and she had to meet with her first clients under her
director's supervision. The sales programs and computer data were developed and
designed by the payor corporation, and she had to use them as instructed.
[47]
She argued that her
client list did not belong to her and that she was obliged to save the list on
the Intervener's drives. Finally, she argued that she had no say in calculating
her commissions and bonuses and that she was not able to set the cost of
products or services or her own profit margin.
[48]
The agent for the
Respondent argued that the contract set out both parties' clear intention that
the Appellant's legal relationship with the payor corporation be that of a self‑employed
worker. He explained that the Appellant understood the difference between an
employee and a self‑employed worker.
[49]
The agent for the
Respondent submitted that control over records was imposed mainly by the
regulatory framework that required the payor corporation to do internal
controls and submit reports to regulatory agencies. He explained that the
Appellant could hire her own administrative staff and could work at home rather
than at the payor corporation's offices. Her work schedule was not fixed.
Finally, he explained that the Appellant could increase her net income by
selling more products. She was free to determine how much her income grew.
[50]
The agent for the
Respondent admitted that certain tests used to identify an employment
relationship were met in this case. For example, the Appellant was required to
take training courses and to explain her sales figures when they did not meet
the payor corporation's requirements. However, he explained to the Court that
the control exercised by the payor corporation was largely imposed by the
regulatory framework or was consistent with the monitoring done in the context
of a contract of enterprise. He said that the Appellant always achieved the
annual sales required by the payor corporation until very recently, that the
way she made sales was never controlled and that she was not obliged to have
her telephone conversations monitored by her sales director. Finally, he said
that the Appellant was free to choose her sales territory. He therefore
concluded that the Appellant's status was that of a self‑employed worker.
[51]
Counsel for the
Intervener argued that the parties' intention must be respected. He argued that
the Appellant understood the difference between an employee and a self‑employed
worker and even benefited from the latter status when she worked for
Mr. Latulippe. The Appellant knew that Mr. Latulippe had that status
with the payor corporation. She thought that she could repeat his success by
completing her training with the payor corporation and obtaining her insurance
agent's licence and mutual fund broker's licence.
[52]
Counsel for the Intervener
also explained that control over records was a requirement imposed by the
regulatory authorities. Each independent insurance agent had to be affiliated
with an insurance company regulated by the provincial authorities. He therefore
concluded that the Chief of Appeals correctly decided the appeal in the
Appellant's case by finding that she was a self‑employed worker when she
was affiliated with the payor corporation.
Analysis
[53]
In my opinion, the
facts established in this case are very similar to those considered by the
Federal Court of Appeal in Combined Insurance Company of America v. Canada
(Minister of National Revenue), 2007 FCA 60. In that case, the insurance
company appealed the decision of the Tax Court of Canada that the worker was
its employee. The worker in that case had to sell insurance policies for the
appellant. The sales contract entered into by the appellant and the worker
stated that the worker was self‑employed. The worker had to provide her
own work tools and was free to choose to whom she tried to sell insurance
policies. The worker had been recruited by a district manager, himself a self‑employed
worker with the insurance company, to join the company.
[54]
In rendering the
unanimous judgment of the Court of Appeal, Nadon J.A. found that the
decision of the Tax Court of Canada was incorrect because Justice McArthur
of this Court had failed to attach enough importance to the test of the
parties' intention. After making those findings, he applied the test
established by the courts to the facts of the case and concluded that the
control exercised by the appellant in that case was based more on regulatory
obligations. Nadon J.A. also concluded that the worker had a great deal of
freedom in deciding how to conduct her activities. She could work in an office
leased by the appellant or at home. She had to pay her own promotional and
sales costs. She could hire administrative staff or delegate some of her
activities to subagents.
[55]
While the same conditions
exist in the Appellant's case, I find that the Appellant had greater freedom in
some respects. Unlike the worker in Combined Insurance Company of America,
she could define her own sales territory and target clientele. She was free to
participate or not participate in trade shows and professional events. Indeed,
the Appellant testified that she rented a booth at the parents' fair in
Montréal on her own initiative and made some good sales as a result.
[56]
I find that the
Appellant in this case clearly understood the difference between an employee
and a self‑employed worker. She chose to report that she was a self‑employed
worker because the nature of her work was appropriate to that legal
relationship.
[57]
I also find that the payor
corporation exercised control for the sole purpose of complying with regulatory
obligations imposed on it and of determining whether the Appellant was meeting
her obligations under a contract of enterprise.
[58]
I find that the
Appellant had a great deal of freedom in performing her work. She could
determine where she worked, and she could also hire her own administrative
staff.
[59]
As can be seen from the
sales agreements signed by the Appellant, she was entitled to be paid
commissions on the policies or mutual fund products she sold. She had control
over her hours of work and the effort she devoted to increasing her net income.
I conclude that she was a self‑employed worker while she was affiliated
with the payor corporation and that her work was not insurable employment for
the purposes of the Employment Insurance Act during the period in issue.
For all these reasons, I dismiss the Appellant's appeal.
Signed at Ottawa, Canada, this
28th day of November 2008.
"Robert J. Hogan"
Translation
certified true
on this 23rd day
of January 2009.
Brian McCordick,
Translator
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