Citation: 2006TCC660
Date: 20061214
Docket: 2006-379(EI)
BETWEEN:
PRIMAIRE MARKETING INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
SONA KAMAR,
Intervener.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Savoie D.J.
[1] This is an appeal
from the decision of the Minister of National Revenue
("the Minister"), dated December 12, 2005, that the
worker Jean Fares was employed in insurable employment while working for the
Appellant from January 1 to December 31, 2004, the period in
issue.
[2] In making his
decision, the Minister relied on the following assumptions of fact:
[translation]
(a)
The Appellant incorporated on
September 13, 1999. (admitted)
(b)
Mr. Dani Karam was the Appellant's sole
shareholder. (admitted)
(c)
The Appellant operates a service business that
promotes credit cards for the benefit of its clients. (admitted)
(d)
The business acts as an intermediary with its
clients in order to sign up new customers for their credit cards. (admitted)
(e)
The Appellant's main clients were the Hudson's
Bay Company (HBC), Zellers and
Canadian Tire. (admitted)
(f)
In 2003, the Appellant's revenues were
approximately $122,000 (admitted)
(g)
Before hiring workers (representatives), Mr.
Karam met his client in order to determine the sign-up objectives as well as
the period and locations of the work. (admitted with additional details)
(h)
The workers who were contacted had the right to
accept or refuse the Appellant's offer of work. If they refused too often, the
Appellant could stop contacting them. (denied)
(i)
If the workers accepted the offer, they had to
follow the Appellant's client's directives regarding clothing, appearance,
place of work, work schedule, etc. (no knowledge)
(j)
The Appellant contacted the workers by telephone
to notify them of the promotion, the place of work and the client's contact
person. (admitted)
(k)
The workers' main duty was to fill out the
credit card applications. It was not their job to approve credit. (admitted)
(l)
Initially, the workers sometimes received
training from the Appellant to learn how to fill out the credit card
applications properly. (admitted)
(m)
The workers did not have to follow a fixed work
schedule; rather, they chose their schedule based on the business hours of the
retailers who were the Appellant's clients. (admitted)
(n)
The Appellant did not obtain insurance coverage
for the workers' civil liability or work accidents because the client (the
retailer) was generally the one who took that responsibility. (admitted)
(o)
The workers had to prepare a report at the end
of each work day setting out the number of applications completed and the
number of hours worked. (denied)
(p)
The report was submitted to the Appellant's
client with the completed forms at the end of each work day. (admitted)
(q)
The Appellant assumed the costs of renting the
workers' place of work. (denied)
(r)
Mr. Karam occasionally went to the workers'
workplaces to check on their performance. (denied)
(s)
If a worker had to be absent, he or she had to
notify the Appellant one day in advance. (denied)
(t)
The application forms and pens were supplied by
the Appellant's clients; the workers did not have to supply work instruments.
(admitted)
(u)
Except for their clothing and travel, the
workers did not have to incur expenses to perform their work. (admitted)
(v)
When credit-card applicants were given
promotional gifts, those gifts were supplied by the Appellant's clients.
(admitted)
(w)
If complaints were made against workers, they
were referred to the Appellant by its client. (denied)
(x)
The workers were paid by the piece based on the
number of application forms filled out. (admitted)
(y)
The workers received $9.00 for each completed
form that was not rejected if they were incorporated, and $7.00 for each such
form if they were not. (denied)
(z)
The Appellant received $9.50 for each completed
form that was not rejected. (denied)
(aa)
Mr. Jean Fares told the appeals officer that he
received $5.00 to $6.00 for each form that was completed. (no knowledge)
(bb)
Mr. Fares did not contest the decision of the
Canada Revenue Agency, dated January 7, 2005, to the effect that he
was employed by the Appellant in insurable employment in 2004. (no knowledge)
[3] It has been
established that Promotions Bibeau, hereinafter "Bibeau", is a
corporation related to the Appellant. Dani Karam was hired by Bibeau to recruit
people to promote its clients' credit cards and to sign up new members. The
workers hired by Bibeau carried out their duties in its clients' stores.
[4] In his testimony at
the hearing, Mr. Karam admitted that he went to the workplaces, but he said
that he did not do this in order to check on the workers' performance, but
rather, to say hello to them, because they were his friends.
[5] Mr. Karam was the
supervisor at Bibeau. He said that the workers are not subject to a production
quota, but that if their production is not high enough, he wants to know this,
and asks them [TRANSLATION] "Do you want to continue getting work for the
client?"
[6] Mr. Karam is
salaried. All the workers ended up working for Bibeau. According to the
evidence, everyone wanted to be a salaried employee. However, the
Appellant's position is that the workers who worked for it were self‑employed.
What must be pointed out is that both employers' terms and conditions of
employment were the same. The workers got the same pay and supervision and were
subject to the same control. It is true that, once the workers received their
basic training, the control was minimal because of the simplicity of the tasks
to be performed.
[7] The objective of
the evidence adduced by the Appellant is to show that the terms and conditions
of its workers' jobs do not support a finding that they were governed by a
contract of employment. However, the evidence obtained shows that they did
their jobs as employees for one of the two companies. Given this context, it
appears to me that the use of Promotions Bibeau is simply a sham.
[8] It has been shown
on a balance of probabilities that the workers received two weeks of training
from the Appellant. They were shown how to do the promotion work by means of an
introduction to the use of the forms which they filled out using the
information obtained from the people they solicited. The Appellant also taught
the workers how to prepare their weekly reports. In addition, if a worker's
production was too low, the Appellant's client could assign him someone to
improve it. Mr. Karam testified that if a worker's production was low, he
proposed providing an assistant to help the worker.
[9] As far as the place
of work was concerned, the Appellant allowed the workers to choose which store
they worked in. This was often the store closest to where they lived. The
workers were paid by the piece at the rate fixed by the Appellant; that rate
was not negotiable.
[10] At the hearing, the
worker Jean Fares said that the Appellant could assign him to another
workplace, that is to say, another store. He added that there was no
supervision at his workplace, but that Mr. Karam sometimes made surprise visits
to check whether a worker was at his post. Diane Harvey, another worker, said
at the hearing that Mr. Karam had the habit of calling her when she was
absent and telling her that he ought to replace her. The evidence disclosed
that the workers who were having trouble consulted the Appellant.
[11] The issue in the
instant case is whether the worker held insurable employment for the purposes
of the Employment Insurance Act (the "Act"). The relevant
provision is paragraph 5(1)(a) of the Act, which states as follows:
5. (1) Subject to subsection (2), insurable employment is
(a) employment in Canada by one or more employers, under any
express or implied contract of service or apprenticeship, written or oral,
whether the earnings of the employed person are received from the employer or
some other person and whether the earnings are calculated by time or by the
piece, or partly by time and partly by the piece, or otherwise;
[Emphasis added.]
The section quoted above defines the term
"insurable employment". The term means employment under a contract of
service, i.e. a contract of employment. However, the Act does not define what
constitutes such a contract.
[12] A contract of
service is a civil law concept found in the Civil Code of Québec. The
nature of the contract in issue must therefore be ascertained by reference to
the relevant provisions of the Code.
[13] In a publication
entitled [TRANSLATION] "Contract of Employment: Why Wiebe Door
Services Ltd. Does Not Apply in Quebec and What Should Replace It",
published in the fourth quarter of 2005 by the Association de planification
fiscale et financière (APFF) and the Department of Justice Canada in the Second
Collection of Studies in Tax Law as part of a series called The Harmonization
of Federal Legislation with Quebec Civil Law and Canadian Bijuralism,
Justice Pierre Archambault of this Court, referring to all periods
subsequent to May 30, 2001, describes the steps that courts must go
through, since the coming into force on June 1, 2001, of section 8.1 of the Interpretation
Act, R.S.C. 1985, c. I-21, as amended, when confronted with
a dispute such as the one before us. Here is what Parliament declared in this
provision:
Property and civil rights
8.1 Both the common law and the civil law are equally
authoritative and recognized sources of the law of property and civil
rights in Canada and, unless otherwise provided by law, if in
interpreting an enactment it is necessary to refer to a province’s rules,
principles or concepts forming part of the law of property and civil
rights, reference must be made to the rules, principles and concepts in
force in the province at the time the enactment is being applied.
[Emphasis added.]
[14] It is useful to
reproduce the relevant provisions of the Civil Code, which will serve to
determine whether an employment contract, as distinguished from a contract of
enterprise, exists:
Contract of employment
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.
2086. A contract of employment is for a fixed term or an
indeterminate term.
. . .
Contract of enterprise or for services
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.]
[15] The provisions of the
Civil Code of Québec reproduced above establish three essential
conditions for the existence of an employment contract:
(1) the worker's prestation in the form of work; (2) remuneration by
the employer for this work; and (3) a relationship of subordination. The
significant distinction between a contract for service and a contract of
employment is the existence of a relationship of subordination, meaning the
employer has the power of direction or control over the worker.
[16] Legal scholars have
reflected on the concept of "power of direction or control" and, from
the reverse perspective, a relationship of subordination. Here is what Robert
P. Gagnon wrote in Le droit du travail du Québec, 5th ed. (Cowansville,
Qc.: Yvon Blais, 2003):
(c) Subordination
90 – A distinguishing factor – The most significant characteristic of
an employment contract is the employee's subordination to the person for
whom he or she works. This is the element that distinguishes a contract of
employment from other onerous contracts in which work is performed for the
benefit of another for a price, e.g. a contract of enterprise or for
services governed by articles 2098 et seq. C.C.Q. Thus,
while article 2099 C.C.Q provides that the contractor or provider of
services remains "free to choose the means of performing the contract"
and that "no relationship of subordination exists between the
contractor or the provider of services and the client in respect of such
performance," it is a characteristic of an employment contract, subject to
its terms, that the employee personally perform the agreed upon work under
the direction of the employer and within the framework established by the
employer.
. . .
92 – Concept – Historically, the civil law initially developed a "strict"
or "classical" concept of legal subordination that was used for
the purpose of applying the principle that a master is civilly liable for
damage caused by his servant in the performance of his duties (article 1054
C.C.L.C.; article 1463 C.C.Q.). This classical legal subordination was characterized
by the employer's direct control over the employee's performance of the work,
in terms of the work and the way it was performed. This concept was
gradually relaxed, giving rise to the concept of legal subordination in the
broad sense. The reason for this is that the diversification and
specialization of occupations and work methods often made it unrealistic for an
employer to be able to dictate or even directly supervise the performance of
the work. Consequently, subordination came to include the ability of the person
who became recognized as the employer to determine the work to be performed,
and to control and monitor the performance. Viewed from the reverse
perspective, an employee is a person who agrees to integrate into the
operational structure of a business so that the business can benefit from the
employee's work. In practice, one looks for a certain number of indicia
of the ability to control (and these indicia can vary depending on the
context): mandatory presence at a workplace; a somewhat regular assignment of
work; the imposition of rules of conduct or behaviour; an obligation to provide
activity reports; control over the quantity or quality of the services, etc.
The fact that a person works at home does not mean that he or she cannot be
integrated into a business in this way.
[Emphasis added.]
[17] It must be specified
that what characterizes a contract of employment is not the fact that the
employer actually exercised direction or control, but the fact that the
employer had the power to do so. In Gallant v. M.N.R., A‑1421‑84,
May 22, 1986, [1986] F.C.J. No. 330 (Q.L.), Pratte J. of the Federal
Court of Appeal stated:
. . . The distinguishing feature of a contract of service is not the
control actually exercised by the employer over his employee but the power the
employer has to control the way the employee performs his duties. . . .
[18] This Court's task,
as it determines the type of contract under Quebec law, which applies to the
parties, is to consider and follow the approach adopted by Justice Archambault
of this Court in the above cited publication, whose theme he referred to in Vaillancourt
v. Minister of National Revenue), No. 2003‑4188,
June 27, 2005, 2005 TCC 328, [2005] T.C.J. No. 685,
where he wrote as follows:
15 In my opinion, the rules governing the
contract of employment in Quebec law are not identical to those in common law
and as a result, it is not appropriate to apply common law decisions such as Wiebe
Door Services Ltd. v. M.N.R., [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. In Quebec, a court has no other
choice but to decide whether a relationship of subordination exists or not to
decide whether a contract is a contract of employment or a contract for
service.
[19] The clients who
benefited from the workers' services were clients of the Appellant's or Bibeau's;
it does not matter which, because they are both essentially the same. The
Appellant provided the few instruments or tools that the workers required.
[20] It was shown that
the workers were subject to the Appellant's control. The evidence
discloses that the workers' work did not require constant supervision because,
once the basic training was given, the work could be done without supervision.
However, the Appellant had the power to control and exercised it as needed to
ensure that the workers were diligent, that the production was of sufficient
quality and quantity, and that the appropriate work method was used. To this
end, the Appellant provided training to its workers.
[21] The worker is
integrated into the Appellant's business. The evidence clearly showed that the
worker was not an independent contractor. In addition, he incurred no expenses
in the performance of his duties and used the tools supplied by the Appellant.
Moreover, there was no risk of loss or chance of profit in the performance of
his duties. It must be concluded that these are all characteristics of a
contract of employment, and not criteria pointing to the existence of a
contract of enterprise.
[22] This Court has
considered problems similar to the one in the case at bar in several decisions,
including the following:
1. 9049-9955 Québec Inc., Appellant, v.
Minister of National Revenue, Respondent, No. 98-1091(UI), March 13,
2000, [2000] T.C.J. No. 129;
2. Promotions G. Bibeau
Inc., Appellant,
v. Minister of National Revenue, Respondent, and Serge Laverdière,
Intervener, No. 2002-4709(EI), June 25, 2003, [2003] T.C.J. No.
367;
3. Promotions DND Inc., Appellant, v.
Minister of National Revenue, Respondent, No. 2000-3393(EI),
July 18, 2001, [2001] T.C.J. No. 480;
4. 3234339 Canada Inc.
(Crédico Marketing Inc.), Appellant, v. Minister of National Revenue,
Respondent, No. 2004-4725(EI), September 15, 2005,
[2005] T.C.J. No. 433.
[23] To illustrate how
the facts of the instant case resemble the facts of the cases cited above, here
are the assumptions of fact on which the Minister relied in making his decision
in Les Promotions G. Bibeau Inc. v. Minister of National Revenue,
supra:
(a) The appellant, which was incorporated in 1986, promotes
credit cards in shopping centres and at fairs, shows and festivals. (admitted)
(b) The appellant operates its business year-round in the province
of Quebec and occasionally in the Maritime provinces. (denied)
(c) The appellant hires persons it considers as subcontractors
or independent workers to sell credit card sales. (admitted)
(d) During the period in issue, the worker worked for the
appellant to promote the credit cards of banks and major stores. (admitted)
(e) The appellant provided the worker with all the equipment
necessary for his work: the booth, promotional gifts, application forms and
report forms. (denied)
(f) A supervisor of the appellant communicated with the worker
to inform him of the places where he was to work and of his work schedule.
(denied)
(g) The worker had to follow his work schedule. (denied)
(h) The supervisor telephoned the worker at the end of each
working day to obtain the number of completed applications and a summary of the
day's activities. (denied)
(i) The supervisor went to the worker's booth once or twice a
week to complete the inventories of bonuses awarded to clients and the
inventories of forms necessary for the work. (denied)
(j) The worker had to prepare a weekly report of his
activities and return it to the appellant. (denied)
(k) The worker received $4 per completed application form.
(admitted)
(l) The worker was paid every week by cheque or direct
deposit. (denied)
[24] It should be
specified that in each of these decisions, this Court held that the workers
were governed by a contract of employment. It should also be specified that the
judgment of this Court in 3234339 Canada Inc. (Crédico Marketing Inc.),
which was appealed, was recently affirmed by the Federal Court of Appeal.
Similarly, in 9041-6868 Québec Inc. v. Minister of National Revenue, 2005 FCA 334,
[2005] F.C.A. No. 1720, the Federal Court of Appeal affirmed this Court's
judgment that the workers were employed in insurable employment in a context
similar to that of the instant case.
[25] In analyzing this
matter, it is appropriate to consider the comments made by Lamarre Proulx J. of
this Court in 3234339 Canada Inc.
(Crédico Marketing Inc.) v. Canada, supra, where she
wrote as follows:
66 As workers in Marathon
Electric (supra), as mentioned in the last paragraph of the ruling
by our Court, I do not find here any characteristic of a commercial enterprise
on the workers' part. There is no argument respecting consideration for
services. The workers do not seek out clients. Remuneration is paid per
individual unit and set by the Appellant. It is the same for all who are
accepted as representatives. The clients are the Appellant's clients. I do not
believe that the evidence has shown that the Appellant allowed the
representatives to work for competitors at the same time. In any case, in the
facts, a representative becomes attached to his or her group and performs the
work that is asked of him or her. The representative behaves as an employee,
diligently and taking initiative, yet an employee all the same.
67 We must also consider that the
representatives are an essential, primary component of the Appellant's business
and source of profit.
. . .
70 In the words of Décary, J. in
Productions Petit Bonhomme Inc. (supra), I am of the opinion
that the work relations in this case present a degree of the continuity,
loyalty, security, subordination and integration generally associated with a
contract of employment.
[26] For all these
reasons, the appeal is dismissed and the Minister's decision is confirmed.
Signed at Grand-Barachois, New
Brunswick, this 14th day of
December 2006.
"S.J. Savoie"
Translation
certified true
on this 25th day
of July 2007.
Brian McCordick,
Translator
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