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Citation: 2005TCC347
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Date: 20050518
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Dockets: 2004-4356(EI)
2004-4359(EI)
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BETWEEN:
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JEAN-CLAUDE LANDRY,
RAOUL LÉVESQUE,
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Appellants,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
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REASONS FOR JUDGMENT
Angers J.
[1] These two appeals, heard on common evidence, are
from a determination made by the Minister of National Revenue ("the
Minister") on October 19, 2004 in the case of Jean-Claude Landry and on
October 1, 2004 in the case of Raoul Lévesque. The Minister determined that
they did not hold insurable employment within the meaning of the Employment
Insurance Act ("the Act") during the period from August
25, 2003 to March 12, 2004 in the case of the Appellant Jean-Claude Landry, and
from August 25 to November 7, 2003 in the case of the Appellant Raoul Lévesque.
Both were associated with Yves Lévesque ("the Payor"), who carried on
business under the name "Les Entreprises Yves Lévesque".
[2] The work performed by the Appellants was not
the same except that both were forestry workers who owned logging machinery and
equipment which they leased to the Payor in addition to providing their
services. The Payor operates a forestry business which does logging on his own
lands and on Crown lands and sells the wood to sawmills in the region.
Jean-Claude Landry
[3] The Appellant Jean-Claude Landry purchased a
truck with a trailer on August 1, 2003, at a total cost of $89,700. He
purchased this truck from the Payor for the purpose of transporting logs from
the logging sites to the sawmills. After making this purchase, he leased this
truck to the Payor on August 25, 2003 for the duration of the period in issue.
In this contract of lease, the mode of payment was described as being weekly
according to tonnage. In addition to the truck, the contract of lease covered
tools, a welding machine and a compressor as well as office space in the
Appellant's personal residence. The Appellant was also responsible for maintaining
the truck and keeping it in good working order.
[4] Also under this contract, the Appellant was to
provide liability insurance and put his machinery at the disposal of the Payor.
The contract stipulated that the employer had to ensure that the operators were
covered by the Commission de la santé et de la sécurité du travail (CSST), but
did not identify the employer. The contract also contained a description of the
terms and conditions found in the insurance policy Coverage Bulletin No. 97-1
for owner-operators of forestry machinery, but provided no particulars.
[5] On that date as well, the Appellant
Jean-Claude Landry signed a contract of employment with the Payor for the
duration of the period in issue. He was hired as a truck driver at a gross salary
of $750 per week. The contract stipulated that in case of mechanical breakdown
the Appellant was to do other work if the Payor had some to be done while the
vehicle was being repaired. The terms and conditions set out in the above-mentioned
Coverage Bulletin were reproduced in the contract, but without further particulars.
[6] The Appellant thus used his truck to carry logs
from the logging sites to the sawmills. He paid all expenses related to this
work. He was paid at a rate per ton according to the distance travelled, the
species of trees to be transported and the schedule established by the Payor.
The amount owed the Appellant each week was divided between two cheques. One
represented his pay of $750 less an employee's payroll deductions. The second
represented a net amount after deduction by the Payor of the Appellant's salary,
the cost of fuel supplied to the Appellant, the Payor's share for employment
insurance and Canada Pension Plan contributions and the amount of any other
expense incurred by the Payor on the Appellant's account.
[7] The Appellant's remuneration, as entered in
the payroll register and on the record of employment prepared by the Payor, was
calculated on the basis of 50 hours per week without counting the number of
hours actually worked. In fact, the Appellant's work was closely linked to the
use of his truck.
[8] The truck was insured by the Appellant and he
was the designated driver for that purpose. If another driver had driven his
truck, he would have had to inform the insurer. Furthermore, the other driver's
wages would have been paid out of the receipts derived from the operation of
the truck.
[9] The invoicing prepared by the Appellant was based
on the information supplied by the Payor. It can be noted therein that all of
the expenses related to the Appellant's salary, the costs of operating the
truck and the employer's share of the employment insurance and Canada Pension
Plan contributions were deducted. Furthermore, the Appellant's income tax
return for the period in question and, in particular, the Statement of Business
Activities, indicates clearly that this was a business in which the expenses
associated with such operation, and not simply the leasing income, were
reported.
Raoul Lévesque
[10] The Appellant Raoul Lévesque is the owner of a
skidder worth approximately $7,000. He was hired by the Payor as a driver. The
agreement provided that the Appellant was to supply the skidder and pay all of
the operating expenses himself, including the costs of transporting the skidder
to the place where the work was being done. The Appellant worked as a team with
a logger and he was the one who took the steps to find one. The Appellant
himself repaired the skidder, and when it was not working he was not paid by
the Payor.
[11] The Appellant was given instructions by the Payor
as to where he was to cut. A foreman visited him three or four times a week to check
his work. He received $1,200 per week for the use of the skidder, or $250 per
day from Monday to Thursday and $200 on Friday. He also received a weekly salary
of $750 to drive the skidder, calculated on the basis of 50 hours of work per
week. During the period in issue, he was the only one who used the skidder.
[12] These agreements were all oral and it was only
after the period in question that the Appellant and the Payor signed written
contracts of lease and employment. The written contracts filed by the Appellant
are identical to those signed by the Appellant Jean-Claude Landry except that
neither the cost of the lease nor the Appellant's salary are indicated.
Moreover, the Payor leased a truck, an automobile, a garage and office space in
the Appellant's personal residence. The Appellant also filed in evidence a
document identified as a mechanical equipment (i.e. skidder) lease signed on
August 25, 2003 by the Appellant and the Payor for a duration of one day and
renewable automatically from day to day failing notice to the contrary by one
of the parties. No explanation was provided at the hearing on the reason for
this lease in relation to the oral and written agreements entered into after the
period in question.
The law
[13] The issue in both cases is whether the
Appellants held insurable employment with the Payor within the meaning of
paragraph 5(1)(a) of the Act during the periods in question. In Wiebe
Door Services Ltd. v. Minister of National Revenue, [1986] 3 F.C. 553, the
Federal Court of Appeal provided a useful guide for distinguishing a contract
of service from a contract for services. In 671122 Ontario Ltd. v. Sagaz Industries
Canada Inc., [2001] 2 S.C.R. 983, the Supreme Court of Canada approved this guide and summarized the state of the
law as follows:
47 Although there is no universal test
to determine whether a person is an employee or an independent contractor, I
agree with MacGuigan J.A. that a persuasive approach to the issue is that taken
by Cooke J. in Market Investigations, supra. The central
question is whether the person who has been engaged to perform the services is
performing them as a person in business on his own account. In making this
determination, the level of control the employer has over the worker's
activities will always be a factor. However, other factors to consider include
whether the worker provides his or her own equipment, whether the worker hires
his or her own helpers, the degree of financial risk taken by the worker, the
degree of responsibility for investment and management held by the worker, and
the worker's opportunity for profit in the performance of his or her tasks.
48 It bears repeating that the above
factors constitute a non-exhaustive list, and there is no set formula as to
their application. The relative weight of each will depend on the particular
facts and circumstances of the case.
[14] In Charbonneau v. Canada, [1996] F.C.J.
No. 1337 (Q.L.), Marceau J.A. of the Federal Court of Appeal reminds us that
the factors in question are guidelines which it is generally useful to
consider, but not to the point of jeopardizing the ultimate objective of the
exercise, which is to determine the overall relationship between the parties.
[15] In a recent decision, the Federal Court of
Appeal explained once more the legal principles governing the issue of
insurability of employment. In Livreur Plus Inc. v. Canada, [2004]
F.C.J. No. 267, Létourneau J.A. summarized these principles as follows at
paragraphs 18 and 19 of his judgment:
In these circumstances, the tests mentioned
in Wiebe Door Services Ltd. v. M.N.R., 87 D.T.C. 5025, namely the degree
of control, ownership of the work tools, the chance of profit and risk of loss,
and finally integration, are only points of reference: Charbonneau v. Canada (Minister of National Revenue - M.N.R.) (1996), 207 N.R. 299, paragraph 3. Where a
real contract exists, the Court must determine whether there is between the
parties a relationship of subordination which is characteristic of a contract
of employment, or whether there is instead a degree of independence which
indicates a contract of enterprise: ibid.
Having said that, in terms of control the
Court should not confuse control over the result or quality of the work with
control over its performance by the worker responsible for doing it: Vulcain
Alarme Inc. v. The Minister of National Revenue, A-376-98, May 11, 1999,
paragraph 10, (F.C.A.); D & J Driveway Inc. v. The Minister of National
Revenue, supra, at paragraph 9. As our colleague Décary J.A. said in
Charbonneau v. Canada (Minister of National Revenue - M.N.R.), supra,
followed in Jaillet v. Canada (Minister of National Revenue - M.N.R.),
2002 FCA 394 (CanLII), 2002 FCA 394, "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."
[16] Recently, Létourneau J.A. went over all these
principles again in Tremblay v. Canada, [2004] F.C.J. 802, in which he
had to address issues similar to those in the case at bar, and in particular
the application of Coverage Bulletin 97-1. He gives the following very clear
summary of the bulletin's purpose:
The purpose of that Bulletin is to clarify
Revenue Canada's policy on workers in the forestry
industry who, in addition to providing services to a contractor, lease their
heavy machinery to the same contractor. The purpose is to facilitate
determining the insurability of the employment and lessen the requests for
rulings on insurability sent to Revenue Canada
with regard to such workers.
17 In a word, the Bulletin,
which I set out below, enables an operator-owner of heavy machinery to conclude
two separate contracts with a contractor: a contract to rent the machinery and
a contract of employment, which the Bulletin calls a contract of service. In
principle, the separate agreements must be in writing although verbal agreements
are also accepted, but applications based on verbal agreements are subject to
special review by Revenue Canada: see also the addendum to Coverage
Bulletin No. 97-1 on insurance policy, which confirms this. The rental contract
and the employment contract must comply with strict conditions, otherwise the
employment insurability application will be denied:
[17] And he adds, later:
19 In rental contracts the Coverage
Bulletin properly requires that certain clauses in the contract should indicate
that lessee takes control of the machinery for the duration of the agreement.
The contract of employment must be separate from the rental contract.
Additionally, the services of the operator-owner must not be directly and
exclusively linked to the operation of the machinery and the employer must be
responsible for damages or injuries caused by the operator as part of his or
her duties.
[18] Clearly, the appellant and the payor, by their
way of doing things, agreed to sign these contracts for the purpose of fulfilling
the requisite conditions to enable the appellant to qualify for employment
insurance benefits in accordance with Coverage Bulletin 97-1. The purpose of
this bulletin is to facilitate the determination of the insurability of an
employment and, as Létourneau J.A. says in Tremblay, supra, it is
relevant in analysing the parties' intentions as to their contractual and
business relationships.
Analysis
[19] In the case of the Appellant Jean-Claude
Landry, we find two contracts: a contract of lease and a contract of
employment. It is clear from the evidence adduced, however, that these are not
two distinct contracts. The contract of employment depended entirely on the
contract of lease in the sense that, if the truck was not working, there was no
income to pay the Appellant's salary. In fact, not only did the Appellant's salary
depend on it, but so also did all the employment-related expenses for which the
employer is normally responsible. The lease revenues were used to pay for
everything, so we are far from the norm that is found in a contract of service,
in which the employee's compensation depends on the employer's revenues.
[20] The evidence also discloses that the Appellant's
time was not accounted for by him or by the Payor. Although the contract provided
for a work week of 50 hours, the Appellant was paid according to the tonnage
rate, provided there was wood to transport to the sawmills.
[21] The terms and conditions of the contract of
lease provide that the Appellant was responsible for all expenses related to
his truck, so he assumed the possible risks of loss. The Appellant was
responsible for the maintenance, repair and operating costs of the truck and for
the liability insurance. In the insurance contract, the Appellant is designated
as the driver. To enable another driver to drive the truck, the Appellant would
have had to inform the insurer, just as he had to inform the insurer that the
truck was leased, so that the Payor's liability would be covered as well. In
this case the Appellant remained in control of his truck, therefore, and was
the only one responsible as the driver. In my opinion, this is a contract consistent
with that of a contractor who supplies his labour and the tools needed to perform
the work and who assumes the risks of loss and the chances of profit in return
for a tonnage rate, less all the operating costs, including those of the Payor.
So it is neither a genuine contract of lease nor a genuine contract of service.
[22] Why did the Payor have to lease office space
in the Appellant's residence? I am unable to conclude from the evidence as a
whole that there exists a true contract of service here. Even if under Coverage
Bulletin 97 an owner-operator of forestry machinery may hold insurable
employment, the Appellant still has to prove that he meets the conditions set
out in this Bulletin. In the instant case it is clear that the Appellant's
duties were performed in the context of operating his own business and that his
income was directly related to the use of his truck. In my opinion, there was
no contract of service between the Appellant and the Payor during the period in
question. The appeal is therefore dismissed.
[23] In the case of the Appellant Raoul Lévesque,
he tried to define his agreements with the Payor by producing contracts drawn
up and signed after the period in issue. It is therefore necessary to disregard
these contracts and rely solely on the facts establishing their relationship according
to the evidence heard. The Payor is the one who told the Appellant where he was
to perform his work. The Appellant was visited by a foreman three or four times
a week to verify his work, so this had more to do with control over the result
and quality of the work than control of its performance, using the test laid
down in Jaillet v. Canada, [2002] F.C.J. No. 1454. Because the contracts
were signed after the period in question, the evidence did not disclose the
existence of a lease agreement for the skidder and, even if there was a valid
contract of lease, the Appellant was the only one authorized to drive and operate
the machine.
[24] The Appellant owned his skidder. He paid his
transportation costs and was responsible for all expenses. This situation is
clearly more consistent with a contract for services. In fact, he assumed the
chances of profit and the risks of loss associated with the operation of the
skidder. Furthermore, the Appellant reported a business loss of $7,128 in 2003.
This proves that the Appellant is a self-employed worker.
[25] The Appellant's duties were performed in the
context of his business since these duties and his income are directly tied to
the operation of his skidder. In this case, therefore, there was no contract of
service during the period in question. For these reasons, the appeal is
dismissed.
Signed at Ottawa, Canada, this 18th day of May 2005.
Angers
J.
Translation certified
true
on this 11th day of
March 2009.
Brian McCordick,
Translator
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