Docket: 2006-1441(EI)
BETWEEN:
ROGER TURCOTTE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
RÉNOVATIONS MÉTROPOLITAINES (QUÉBEC) LTÉE,
Intervener.
[OFFICIAL ENGLISH
TRANSLATION]
____________________________________________________________________
Appeal heard
on September 22, 2006, at Montréal, Quebec
Before: The Honourable
Deputy Judge S.J. Savoie
Appearances:
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For the Appellant:
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The Appellant himself
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Counsel for the Respondent:
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Chantal Roberge
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Counsel for the Intervener:
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Camille Bolté
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____________________________________________________________________
JUDGMENT
The appeal is allowed and the Minister's
decision is vacated in accordance with the attached Reasons for Judgment.
Signed at Grand-Barachois, New Brunswick, this 14th
day of December 2006.
"S.J. Savoie"
Translation certified true
on this 20th day of July 2007.
Brian McCordick, Translator
Citation: 2006TCC637
Date: 20061214
Docket: 2006-1441(EI)
BETWEEN:
ROGER TURCOTTE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
RÉNOVATIONS MÉTROPOLITAINES (QUÉBEC) LTÉE,
Intervener.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Savoie D.J.
[1] This appeal was
heard at Montréal, Quebec, on September 22, 2006.
[2] The issue is the
insurability of the employment of Roger Turcotte
("the Appellant") while he was working for Rénovations
Métropolitaines (Québec) Ltée ("the Payor") from
September 15, 2003, to February 14, 2004 ("the period
in issue").
[3] On February 28,
2006, the Minister of National Revenue ("the Minister") notified
the Appellant of his decision that the Appellant was not employed in insurable
employment.
[4] In making his
decision, the Minister relied on the following factual assumptions:
[TRANSLATION]
(a) The Payor,
which incorporated on August 16, 1979, operated a building cleaning
and renovation business. (no knowledge)
(b) The Payor's sole shareholder
was Nagui Labbad. (no knowledge)
(c) The Appellant
was hired to sell the Payor's renovation products and services. (admitted)
(d) The Appellant
provided services to the Payor under an oral agreement. (denied)
(e) The Appellant
had to meet the Payor's customers and try to get them to sign an agreement
covering materials and labour or simply labour. (admitted)
(f) Upon being
hired, the Appellant received 10 days of training for which he was not
paid. (admitted)
(g) The Appellant
went to see the customers designated by the Payor but had all the desired
freedom to find new customers in the region served by the Payor. (no knowledge)
(h) The Appellant
could be replaced in the performance of his services for the Payor. (denied)
(i) The Payor did
not monitor the times at which the Appellant arrived at work and left work. (admitted
with additional details)
(j) The Appellant
was free to set his work schedule and deal with customers as he saw fit. (admitted
with additional details)
(k) The Appellant
used his car for his work and had to pay all the related expenses. (admitted
with additional details)
(l) On March 4, 2004,
the Payor issued a Record of Employment to the Appellant stating that his
first day of work was October 27, 2003, and that his last day of work was
January 23, 2004. (admitted)
(m) The Payor made
source deductions on the Appellant's behalf. (admitted)
(n) On
February 3, 2004, the Appellant confirmed to the Payor, in writing,
that he agreed that he was self‑employed. (admitted)
[5] The Appellant proved
that he could not be replaced while he was working for the Payor. His testimony
in this regard was confirmed by Jean-Guy O'Connor and Céline Rouleau, who were
also workers.
[6] The Appellant, who
was seeking employment at the time, said that he applied for a job in response
to a newspaper advertisement. The Payor was looking for a representative
in the construction field. The Payor invited the Appellant to join a group of
salespeople to take a training course. The training, which lasted two weeks,
began on September 15, 2003, and was offered by the Payor. The
purpose of the training was to tell the new candidates about the philosophy of
the business and teach them sales techniques. Despite what the Appellant says
was a difficult period, the Payor hired him to sell its products.
[7] This situation lasted
until January 2004. At that time, the situation changed.
The Appellant has shown that the Payor did everything possible to persuade
him to carry out his sales duties as a self‑employed worker from then
onward. The Appellant initially resisted this request. According to the
Appellant, the Payor later became insistent, and the Appellant gave in to the
request, as confirmed in Exhibit A‑9, a letter dated
February 3, 2004.
[8] The evidence
adduced by the Appellant discloses that his working conditions did not
change at all after February 3, 2004: he was treated as an employee
and was subject to the same rules imposed by the Payor.
[9] During his
training, the Appellant received a document which, in his view, summarizes the
instruction that he received with regard to the work method that was to be
followed in order to make a sale. The document is entitled [TRANSLATION]
"The 25 Rules of Engagement". Intended for salespeople, the document
seeks to describe the different steps involved in presenting a product to a
customer. The guide was distributed to the Appellant and to the Payor's other
workers. It explains the steps that a salesperson must go through with the
customer in order to make a sale. The document was produced as Exhibit A‑6.
It also describes a salesperson's typical day with the Payor and the
procedure to follow after making a sale.
[10] The salespersons did
not have permission to make appointments with customers. It was the Payor who
looked after that. The evidence discloses that the Appellant and the other
workers were strictly forbidden from offering their services to other
employers.
[11] The Appellant showed
that the salespersons had to attend training groups regularly. Attendance was
checked. The salespersons could not contact customers to change appointments.
The Payor's office looked after that.
[12] The Appellant worked
under the close supervision of Elias Lazarikis, a co‑owner of the
business. Immediately after a meeting with a designated customer, the
salespersons had to report to the supervisor regardless of the time of day and
whether or not a sale was made.
[13] It has been shown
that the Appellant and the other salespersons received training in
"pressure sales" tactics. This sales method is described in the
documents tendered at the hearing as Exhibits A-5 and A-6.
[14] Based on the
workers' testimony, the training sessions, led by Mr. Lazarikis, taught
the workers how to sell a product under pressure. The workers were blamed
if no sale was made. The evidence disclosed that the training sessions
were structured and intense, and that the tension was palpable. The workers
described Mr. Lazarikis as a merciless supervisor who was so domineering that
some participants cried.
[15] The issue in the
instant case is whether the Appellant 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.]
[16] The section quoted
above defines the term "insurable employment". That 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.
[17] A contract of
service is a civil law concept found in the Civil Code of Québec. The
nature of the contract in issue must be ascertained by reference to the
relevant provisions of the Code.
[18] 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.]
[19] 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.]
[20] 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 that the
employer has the power of direction or control over the worker.
[21] 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):
[TRANSLATION]
(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.]
[22] 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.
. . .
[23] 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(EI),
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.
16 The approach to take is the one
adopted by, among others, Létourneau J. of the Federal Court of Appeal, who, in
D & J Driveway Inc. v. Canada, (2003), 322 N.R. 381, 2003 FCA 453,
found that there was no contract of employment by using the provisions of the
Civil Code as a basis and, in particular, by noting the absence of a
relationship of subordination, a relationship that "is the essential
feature of the contract of employment."
[24] In the case at bar,
is there a relationship of subordination between the Payor and the Appellant
that would enable us to conclude that a contract of employment exists? In
carrying out the mandate given to this Court, I have found the reasoning of
this Court's Justice Dussault in Lévesque v. Minister of National Revenue,
No. 2004-4444(EI), April 18, 2005, 2005 TCC 248, [2005] T.C.J. No. 183,
helpful:
24 Furthermore, in D & J Driveway Inc. v. Canada,
F.C.A., No. A‑512‑02, November 27, 2003 N.R. 381, [2003] F.C.J. No.
1784 (Q.L.), Létourneau J. of the Federal Court of Appeal stated that an
employer/employee relationship is not necessarily present just because a payer
can control the result of the work. Létourneau J. formulated his reasons as
follows at paragraph 9 of the decision:
9 A contract of employment requires the existence of a relationship
of subordination between the payer and the employees. The concept of control is
the key test used in measuring the extent of the relationship. However, as our
brother Décary J.A. said in Charbonneau v. Canada (Minister of National
Revenue - M.N.R.), [1996] F.C.J. No. 1337, [1996] 207 N.R. 299, followed in
Jaillet v. Canada (Minister of National Revenue - M.N.R.),
2002 FCA 394, control of the result and control of the worker should
not be confused. At paragraph 10 of the decision, he wrote:
It is indeed rare for a person to give out work and not to ensure
that the work is performed in accordance with his or her requirements and at
the locations agreed upon. Monitoring the result must not be confused with
controlling the worker.
25 . . . Several factors can be considered in order to detect
the presence or absence of a relationship of subordination. In her decision in Seitz
v. Entraide populaire de Lanaudière inc., Court of Quebec (Civil Chamber),
No. 705‑22‑002935‑003, November 16, 2001, [2001] J.Q.
No. 7635 (Q.L.), Monique Fradette J. of the Court of Québec set out a
series of factors on the basis of which it could be determined whether a
relationship of subordination existed or not. She expressed herself on this
point in paragraphs 60 to 62 of the decision:
60 The caselaw requires, in order for there to be a contract
of service, the existence of a right of supervision and immediate direction.
The mere fact that a person gives general instructions about the way in which
the work is to be performed, or that he reserves the right to inspect and
supervise the work, is not sufficient to convert the agreement into a contract
of employment.
61 A series of factors developed by the caselaw allows the
Court to determine whether or not a relationship of subordination exists
between the parties.
62 The indicators of control [include]:
• obligatory presence at a place of work
• compliance with the work schedule
• control of the absences of the employee for
vacations
• the submission of activity reports
• control of the quantity and quality of work
• the imposition of ways in which the work is
to be performed
• the power of sanction over the employee's performance
• source deductions
• benefits
• [employee status on income tax returns]
• the exclusive nature of services for the
employer
[25] Most of the indicia
of control listed above can be found in the case at bar. It should be
specified, however, that the Appellant did not have vacations or benefits
beyond what was ensured by the source deductions made by the Payor.
[26] At the hearing, the
Intervener testified in support of the Minister's position on the relationship
between the Intervener and the Appellant. The witnesses claimed that the Appellant
and the other workers had no schedule to comply with, that they were free to
attend the training sessions, and that they could offer their services to other
employers — in short, that they were self‑employed.
However, the preponderance of the evidence supports the Appellant's
submission that they were in an employer‑employee relationship with the
Payor.
[27] It is helpful to
list a few of the facts established by the evidence of the Appellant and his
witnesses. The following facts, in particular, should be noted:
1. There was mandatory training for salespersons.
2. Attendance was taken at training sessions.
3. Attendance by salespersons at the
additional afternoon training and motivation meetings was mandatory.
4. Salespersons were required to submit sales reports.
5. Reports had to be prepared in accordance
with the Payor's 25 rules.
6. It was absolutely forbidden to work for other payors.
7. The Payor chose which customer would be
met and when.
8. Customers chosen by the Payor had to be accepted.
9. Salespersons were forbidden from selecting a replacement.
10. The Payor had absolute control over the way
the commissions were paid as well as the amount allocated to the sale and the time
at which they were payable.
[28] In his testimony for
the Appellant, Jean-Guy O'Connor sought to show how much control the Payor had
over the workers. He said that the Payor penalized him because he was absent
from work in order to visit his son in the hospital.
[29] The Court noted that
the Intervener, in presenting its evidence in support of the Minister, tried to
denigrate the Appellant and cast doubt on his oral evidence and on the detailed
reports that he prepared. Despite these efforts, the Payor's evidence was contradictory
and implausible in many respects. In particular, Mr. Lazarikis's
testimony contributed nothing to the debate that was capable of supporting the
Intervener and Respondent's cause. His testimony was vague, confused, nebulous,
contradictory, and consequently disputable and dubious. It validated the
Appellant's assertion that he was disdainful toward the workers and that they
were not self-employed. Mr. Lazarakis even said as much at the hearing.
By contrast, the Appellant's evidence was clear and precise and was well
presented and written. In my opinion, it is genuine and credible.
[30] The evidence also
disclosed that the Appellant worked under the control and direction of the
Payor, who managed his workers at every step of their jobs. This control
was exercised over the result of the work, but could also be seen in the method
that the Appellant used and in the performance of his duties.
The Appellant's remuneration was fixed by the Payor and was not
negotiable.
[31] The Appellant proved
that the Payor enjoyed his services on an exclusive basis and gave him a list
of customers that he was required to solicit.
[32] It is important to
note that despite the Appellant's experience in the sales field, he received
two weeks of training. The Payor gave the Appellant and the other
salespersons regular training sessions.
[33] The fact that a
salesperson is remunerated by means of a commission on sales does not prevent
the work from being done under a contract of service contemplated in paragraph
5(1)(a) of the Act. Thus, if the Appellant's job meets the requirements
of article 2085 of the Civil Code of Québec, it will be considered to
have been done under a contract of employment, regardless of the method of
remuneration.
[34] The Court is of the
opinion that the evidence heard at the hearing, and the documents adduced,
unequivocally establish the relationship of subordination between the Appellant
and the Payor. The training given by the Payor, and the instructions and
guidelines in the various documents tendered as Exhibits A-3, A‑4,
A-5 and A-6, are sufficient proof of this.
[35] In addition, the
Appellant's T4 forms for the years 2003 and 2004, which were produced at the
hearing as Exhibit A‑7, confirm the Payor's acknowledgement that the
Appellant was his employee during the period in issue. It should be specified
that the arguments made by the Payor with a view to reducing the significance
and relevance of the forms were unpersuasive. The Court is of the same
view with respect to the significance and relevance of Exhibit A‑10,
the Record of Employment which the Payor issued to the Appellant.
[36] It is also important
to note that the following documents, which were tendered at the hearing, also
support the Appellant's submissions:
1. Exhibits A-3 and
A-4 are forms prepared by the Payor for the use of workers, who entered the
customer information and the terms and conditions of the sale.
2. Exhibit A-5 is
a form provided to the Appellant and the other workers. The forms were to
be used to write their sales reports in accordance with the 25 rules of
engagement.
3. Exhibit A-6, described
above, lists the 25 rules of engagement, sets out a typical salesperson's day,
and discusses the procedure to be followed after every sale.
4. Exhibit A-7 discloses
the nature of the Appellant's working relationship with the Payor. It is the T4
form which the Payor remitted to the Appellant, Revenue Canada and Revenu
Québec for the years 2003 and 2004.
5. Exhibit A-10 is
the Appellant's Record of Employment, prepared by the Payor for the period in
issue. The document also shows the employer‑employee relationship between
the Payor and the Appellant.
The onus was on the Appellant to prove that the
Minister's assumptions of fact were wrong, and in my opinion, he has discharged
this duty.
[37] The facts obtained
at the hearing clearly established the three essential conditions of the
existence of a contract of employment: the prestation of work by the employee,
remuneration for this work by the employer, and a relationship of
subordination.
[38] The Federal Court of
Appeal articulated the principles that must be applied in resolving the problem
before the Court in Légaré v. Minister of National Revenue, A-392-98,
May 28, 1999, [1999] F.C.J. No. 878. The following is an excerpt from
that case:
The Act requires the Minister to make a determination based on his
own conviction drawn from a review of the file. The wording used introduces a
form of subjective element, and while this has been called a discretionary
power of the Minister, this characterization should not obscure the fact that
the exercise of this power must clearly be completely and exclusively based on
an objective appreciation of known or inferred facts. And the Minister's
determination is subject to review. In fact, the Act confers the power of review
on the Tax Court of Canada on the basis of what is discovered in an inquiry
carried out in the presence of all interested parties. The Court is not
mandated to make the same kind of determination as the Minister and thus cannot
purely and simply substitute its assessment for that of the Minister: that
falls under the Minister's so-called discretionary power. However, the Court
must verify whether the facts inferred or relied on by the Minister are real
and were correctly assessed having regard to the context in which they
occurred, and after doing so, it must decide whether the conclusion with which
the Minister was "satisfied" still seems reasonable.
[39] Given the evidence
that has been obtained, the Court must conclude that the facts inferred or relied
on by the Minister are not real and were not correctly assessed having regard
to the context in which they occurred. Based on the evidence adduced at the
hearing, the conclusion with which the Minister was "satisfied" no
longer seems reasonable.
[40] Consequently, the
appeal is allowed and the Minister's decision is vacated.
Signed at Grand-Barachois, New Brunswick, this 14th day of December 2006.
"S.J. Savoie"
Translation certified true
on this 20th day of July 2007.
Brian McCordick, Translator
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