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Citation: 2005TCC126
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Date: 20050216
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Docket: 2004-822(EI)
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BETWEEN:
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SUZANNE SAVARD, o/a COIFFURE SANSASS,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent,
and
GILLES LAVOIE, ELIE RIZKALLAH,
Interveners.
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REASONS FOR JUDGMENT
SavoieD.J.
[1] This
appeal was heard in Montréal, Quebec, on December 13, 2004.
[2] The
issue is whether Gilles Lavoie and Elie Rizkallah, the workers, held insurable
employment during the years 2002 and 2003. The Minister of National Revenue
(the "Minister") assessed the Appellant for unpaid employment
insurance premiums during that period.
[3] By
notice of assessment dated July 31, 2003, the Minister assessed the Appellant
for unpaid employment insurance premiums for the years 2002 and 2003 in respect
of five workers: Pierre Desparois, Hélène Farès, Gilles Lavoie
(Intervener), Julie Levasseur and Elie Rizkallah (Intervener). The assessments
were as follows:
YEAR EI
PREMIUMS PENALTY INTEREST TOTAL
2002 $4,561.92 $406.19 $165.00 $5,133.11
2003 $2,177.28
$33.00 $2,210.28
TOTAL $6,739.20 $406.19 $198.00 $7,343.39
[4] On
September 24, 2003, the Appellant asked the Minister to reconsider the
assessments of July 31, 2003.
[5] By
letter dated February 16, 2004, the Minister notified the Appellant
of his decision to reduce the premiums by cancelling the amounts associated
with Pierre Desparois, Hélène Farès and Julie Levasseur because their
employments were not included in insurable employment under the Regulations.
[6] The
Appellant is appealing this last decision in relation to Gilles Lavoie and
Elie Rizkallah (the "workers"). The Appellant does not know the
workers' incomes, and submits that it is unjust and arbitrary to apply
subsection 8(3) of the Insurable Earnings and Collection of Premiums
Regulations to determine their insurable earnings.
[7] In
rendering his decision, the Minister determined that the workers' employment
was included in insurable employment under paragraph 6(d) of the Employment
Insurance Regulations, and he relied on the following assumptions of fact:
[TRANSLATION]
(a) the Appellant
has been operating a hairdressing establishment under the business name
Coiffure Sansass since 1995; (admitted)
(b) the Appellant
operates the establishment in 1,800 square‑foot premises located in Brossard; (admitted)
(c)
the
Appellant rents these premises from 154216 Canada Inc.; (admitted)
(d)
the
Appellant alone signed the lease with the owner of the premises and she alone
is accountable to the owner with regard to the premises; (admitted)
(e)
the
premises rented by the Appellant consist of three closed rooms, which she
sublets to two massage therapists and an aesthetician; (admitted)
(f)
the
rest of the premises are exclusively for the operation of the hairdressing
establishment and contains three hydraulic chairs as well as sinks and a cash
counter; (denied)
(g)
the
Appellant uses one of the chairs herself and rents the other two to workers who
are hairdressers; (denied)
(h)
the
workers pay monthly rent to the Appellant which gives them the exclusive right
to the area around their chair for providing their hairdressing services and
gives them access to the common areas (washrooms, sinks and telephone);
(denied)
(i)
the
Appellant purchases all the hairdressing products; the workers reimburse the
Appellant for the products that they use; (admitted)
(j)
each
worker has his own customers and establishes his schedules and rates;
(admitted)
(k)
each
worker prepares a bill for each of his customers and places the money in a
single cash drawer; (admitted)
(l)
at
the end of the day, the money in the cash drawer is separated between the
Appellant and the hairdressers based on their respective bills; (admitted)
(m)
despite
the prevailing billing system, the Appellant is unable to establish the
workers' pay for the years in issue; (admitted)
(n)
each
of the workers must provide his own work tools; (denied)
(o)
when
a new customer comes into the establishment, the customer is referred to the
hairdresser that is free at that time; (denied)
(p)
during
the years in issue, the workers were neither the owners nor the operators of
the hairdressing establishment; (denied)
[8] The
evidence reveals that the workers for whom the Minister's assessments were
vacated were massage therapists, aestheticians and manicurists, not
hairdressers.
[9] It
is established that the workers signed a contract with the Appellant.
The terms of that contract, set out in Exhibit A‑1 which was
produced at the hearing, reads as follows:
[TRANSLATION]
CONTRACT
BETWEEN: Coiffure Sansass, 2230 Lapinière Boulevard, Brossard, operated by Suzanne Savard Légaré, residing at 1032 D’Iberville, Ascot, P.Q., the head tenant
AND: Elie Rizkallah, women's hairdresser, residing at
155 de Navarre, Apt. 310, St-Lambert, P.Q., the concessionaire.
This contract is further to the oral agreement between
the parties for the operation of a concession.
Object of Contract
The operation of a concession.
Exclusive Space Subleased
The concessionaire is granted an exclusive space for
the operation of his concession.
General Operating Costs
1.
The concessionaire
shall pay the head tenant $500 per month for the exclusive space and the
expenses related to power, heat, telephone and taxes.
2.
The head tenant may
increase the general operating costs on 60 days' notice to the concessionaire.
Common Areas
The concessionaire may use the washrooms, a meal area,
the sinks and the main telephone.
Concessionaire's
Responsibilities
1.
The concessionaire
shall furnish the space allocated by the head tenant.
2.
The concessionaire
shall supply his work tools.
3.
The concessionaire
shall keep the allocated space clean at all times.
4.
The concessionaire may
use his own products and purchase products from the head tenant as the case may
be.
5.
The concessionaire
shall use the telephone number that is exclusive to the name under which he
carries on business or may make an arrangement with the head tenant to use her
telephone.
6.
The concessionaire
shall notify the head tenant of any deterioration in the premises as promptly
as possible.
Head Tenant's Responsibility
It is expressly established that the head tenant shall
in no way be responsible for the management of a concession granted to a
concessionaire, or for the payment of amounts charged by various municipal,
provincial or federal government authorities.
Advertising
1.
The concessionaire
shall be responsible for his advertising. He may make an agreement with the
other concessionaires and/or the head tenant to advertise his business name in
the news media.
2.
The concessionaire may
advertise his occupation in the store window or on the main sign by agreement
with the head tenant.
Business Hours
1.
The concessionaire
shall comply with the head tenant's business hours.
2.
The concessionaire may
change the business hours by agreement with the head tenant.
Interpretation
Clause
Whenever the context requires
it, any word written in the singular shall include the plural and vice-versa,
and any word written in the masculine shall also include the feminine.
The words "head tenant" and
"concessionaire" may mean one or more male or female persons, and one
or more individuals or legal persons.
Compliance Statement
The concessionaire declares that the information
provided for the purpose of obtaining a concession from the head tenant is
true. If the information is not true, the head tenant may terminate the
contract. Furthermore, the concessionaire shall compensate the head tenant for
any costs incurred because false information was provided.
Renunciation of Contract
The parties shall give each other 30 days' notice to
terminate the contract.
Signature of Contract
The parties have signed before a witness in Brossard on March 29, 1995.
[10] It was established that each of the workers was responsible for his
share of the expenses. In addition, the Appellant showed that the workers were
free to hire employees if they wished. It is also established that the workers
were paid by their customers, not by the Appellant. The evidence adduced by the
Appellant showed the money received from customers was divided between the
Appellant and the workers daily.
[11] It was established that the workers purchased their products from the
Appellant or elsewhere, and paid for their purchases from the Appellant weekly.
The workers had their own furniture and tools. It was determined that if a
new customer came into the establishment, the customer was directed to the
hairdresser of her choice, or, if she made no choice, she became the customer
of the hairdresser who stood up first or went to greet her at the door.
[12] Each hairdresser had his own clientele and was responsible for his own
schedule, but they all had to comply with the establishment's business hours.
Workers would notify the establishment if they were going to be absent.
[13] The Appellant paid no wages to the workers, and the workers got no T4
slips from the Appellant.
[14] The Appellant's agent argued that both workers have always been self‑employed
and that they associated with the Appellant under the terms of a contract which
maintains their self-employed status. He submitted that the Minister's decision
has the effect of denying the workers their contractual rights under the Civil
Code of Québec, thereby violating their rights under section 15 of the Canadian
Charter of Rights and Freedoms.
[15] The Appellant asks this Court to declare paragraph 6(d) of the Employment
Insurance Regulations unconstitutional.
[16] The Appellant's agent claims that the Minister's decision is
arbitrary. He adds that the decision is discriminatory because the Minister
excluded, from insurable employment, three jobs that are similar to the
worker's jobs.
[17] In making his determination, the Minister invoked paragraph 5(1)(a)
and sections 92 and 93 of the Act, paragraph 6(d) of the Employment
Insurance Regulations and subsection 8(3) of the Insurable Earnings and
Collection of Premiums Regulations. It is therefore appropriate to
reproduce the statutory provisions that are relevant to the analysis of this
matter.
INSURABLE EMPLOYMENT
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;
EMPLOYMENT INSURANCE REGULATIONS
6. Employment in any of the following employments,
unless it is excluded from insurable employment by any provision of these
Regulations, is included in insurable employment:
. . .
(d) employment
of a person in a barbering or hairdressing establishment, where the person
(i)
provides any of the
services that are normally provided in such an establishment, and
(ii)
is not the owner or
operator of the establishment.
INSURABLE EARNINGS AND COLLECTION OF
PREMIUMS REGULATIONS
Barbering or Hairdressing Establishments
8.(3) Where the owner or operator of a barbering or
hairdressing establishment is unable to determine the insurable earnings of a
person whose employment in connection with the establishment is included in
insurable employment under paragraph 6(d) of the Employment Insurance
Regulations, the amount of insurable earnings of the person for each week
during that employment shall be deemed, for the purposes of the Act and for the
purposes of these Regulations, to be an amount (rounded to the nearest dollar)
equal to 1/78 of the maximum yearly insurable earnings, unless the owner or
operator of the establishment maintains records that show the number of days on
which the person worked in each week, in which case the amount of the person's
insurable earnings for that week shall be deemed to be an amount (rounded to
the nearest dollar) equal to the lesser of
(a) the number of days the person
worked in that week multiplied by 1/390 of the maximum yearly insurable
earnings, and
(b) 1/78 of the maximum yearly
insurable earnings.
[18] In support of his submissions, the Minister cited Nelson v. Canada (Minister of National Revenue – M.N.R.), [2001] F.C.J. No. 700 (C.A.), a case
involving similar facts. Having analysed those facts, Sharlow J.A. determined
that the workers in issue were engaged in insurable employment, and stated, inter
alia, as follows:
The facts are not in dispute. In
1995 and 1996, the respondent Connie Nelson was a member of a partnership that
operated a hairdressing salon under the name "Team JK". The
partnership had some employees and it is common ground that the employees were engaged
in insurable employment. Team JK also entered into arrangements with four
individuals who were not employees but "chair renters". The issue in
this appeal is whether the chair renters were engaged in insurable employment.
. . .
It is common ground that the Team
JK store was a hairdressing establishment within the meaning of paragraph 6(d)
of the Employment Insurance Regulations. The Tax Court Judge held that
the chair renters were employed in that hairdressing establishment, that they
provided the services normally provided in such an establishment, and that they
were not the owners or operators of the establishment.
8. Despite those findings,
however, the Tax Court Judge concluded that paragraph 6(d) of the Employment
Insurance Regulations did not apply to the chair renters. He held that the
terms and conditions of service of the chair renters in this case were not
similar to the terms and conditions of service of persons engaged by Team JK
under a contract of service. On that basis, he held that paragraph 6(d)
of the Employment Insurance Regulations is ultra vires in so far
as it purports to apply to the chair renters, and should be read down so that
it does not apply to them.
9. To understand this conclusion, it is
necessary to consider the portions of section 5 of the Employment Insurance
Act that authorize the enactment of paragraph 6(d) of the Employment
Insurance Regulations:
Employment Insurance Act, paragraph 5(1)(d)
(successor to paragraph 3(1)(d) of
the Unemployment Insurance Act)
5.(4) the Commission may, with the approval of the
Governor in Council, make regulations for including in insurable employment […]
(c)
employment that is not employment under a contract of service if it appears to
the Commission that the terms and conditions of service of, and the nature of
the work performed by, persons employed in that employment are similar to the
terms and conditions of service of, and the nature of the work performed by,
persons employed under a contract of service […]
10. Clearly, the Tax Court Judge treated the
provisions of paragraph 5(4)(c) of the Employment Insurance Act
as stating preconditions to the application of paragraph 6(d) of the Employment
Insurance Regulations. The same reasoning was rejected by this Court in Canada (Procureur général) v. Agence de Mannequins Folio Inc. (1993), 164 N.R. 74 (F.C.A.). In that
case Hugessen J.A., speaking for the Court, said this (translation):
. . .
[4] We are all of the opinion that the
trial judge erred in law. Section 4 sets out the parameters within which the
Commission may exercise its regulation-making power. The validity of section 12
of the Regulations was not challenged in this case. The provisions that allow
for the power to be exercised are not conditions for the application of the
regulation made under that power. Paragraph 12(g) of the Regulations
sets out its own conditions, and the trial judge had no need to look for other
conditions in the enabling provision.
11. In my view, the reasoning of Hugessen J.A.
should apply to the interpretation and application of paragraph 6(d) of
the Employment Insurance Regulations in this case. Paragraph 5(4)(c)
of the Employment Insurance Act is intended to permit the Commission to
identify classes of persons for inclusion in the statutory scheme. It must be
presumed that the Commission, in enacting paragraph 6(d) of the Employment
Insurance Regulations, did so because it appeared to the Commission that,
for persons working in barbering and hairdressing establishments in the
circumstances described in paragraph 6(d), the terms and conditions of
their service and the nature of their work is similar to that of employees
working in such establishments. . . . Thus, once the Tax Court
Judge found as fact that the chair renters met the conditions stated in
paragraph 6(d) of the Employment Insurance Regulations, it was
not open to him to decide that the regulation could not be applied because
there were additional conditions in paragraph 5(4)(c) of the Employment
Insurance Act that had not been met. . . .
12. In this case, . . . the
validity of paragraph 6(d) of the Employment Insurance Regulations
is challenged. The argument is that it is ultra vires in so far as it
purports to extend the scope of the Employment Insurance Act to a person
who does not provide services to the party that is to be treated as the
notional employer of that person. I am unable to accept this argument.
. . .
14. Counsel for Ms. Nelson argues that
Commission's authority under paragraph 5(4)(c) of the Employment Insurance
Act did not permit the Commission to find a similarity between the terms
and conditions of service (les modalités des services) of the Team JK chair
renters and the employees of Team JK, because the chair renters provided
services only to their own customers and not to Team JK. I cannot accept that
interpretation of paragraph 5(4)(c) because it requires reading into the
provision words that are not there and are not necessarily implied.
15. . . . Therefore, it is open
to the Commission to conclude that chair renters in a hairdressing
establishment who provide no service to the owners of the establishment are
nevertheless engaged in employment that is appropriately described by the words
of paragraph 5(4)(c) of the Employment Insurance Act.
16. Counsel for Ms. Nelson also argued that the
employment of chair renters cannot be treated as insurable employment without
first obtaining the approval of the Governor in Council and an affirmative
resolution of Parliament. . . .
17. . . . However, that would not
detract from the conclusion that the paragraph 6(d) of the Employment
Insurance Regulations was authorized by paragraph 5(4)(c) of the Employment
Insurance Act.
[19] Sharlow J.A. of the Federal Court of Appeal
concluded his reasons as follows:
24. As I read these regulations, they impose on
Team JK an obligation to pay both the employee premiums and the employer
premiums with respect to the chair renters who are within the scope of
paragraph 6(d) of the Employment Insurance Regulations.
[20] Counsel for the Minister also relied on 9070-8835 Québec Inc. v.
M.R.N. (2002 CarswellNat 2123), where Somers T.C.J. ended his analysis of
the facts, which were similar to those in the instant case, as follows:
[TRANSLATION]
21. The worker's employment
as hairdresser with the Appellant is insurable because she provided services
normally provided by such an establishment and was not the owner or the
operator of the establishment.
[21] In my opinion, the matter before this Court was the subject of a detailed
analysis by the Federal Court of Appeal, and resulted in Shalow J.A.'s
determination, in Nelson, supra, that the workers' employment was
insurable.
[22] By virtue of the principles of our jurisprudence, this Court is bound
by that judgment.
[23] This Court must find that the assessments of the premiums made in
respect of the workers are valid because it has been proven that each worker
provided services normally provided by a hairdressing establishment and that
they were not the owners or operators of the establishment. Consequently, each
worker held insurable employment within the meaning of paragraph 6(a) of
the Employment Insurance Regulations.
[24] This Court also finds that each of the workers' insurable earnings
were established in accordance with the provisions set out in subsection 8(3)
of the Employment Insurance Regulations.
[25] The Appellant's agent's argument that the Minister's decision fails to
recognize the workers' contractual rights under the Civil Code of Québec
is rejected because there is no evidence to support it. His allegation that the
workers' constitutional rights under the Canadian Charter of Rights and
Freedoms were violated must fail as well. The allegation was not proven. It
should also be specified that the Appellant did not give the prescribed notice
of her intent to seek this type of relief.
[26] Consequently, the appeal is dismissed and the decision of the Minister
and the assessments concerning the workers (Interveners) are confirmed.
Signed at Grand-Barachois, New Brunswick,
this 16th day of February 2005.
Savoie D.J.
Translation
certified true
on this 1st day of
December 2005.
Aveta Graham,
Translator
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