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Citation: 2004TCC826
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Date: 20041217
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Dockets: 2002‑2743(EI), 2002-2744(EI),
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2002‑2745(EI), 2002‑2746(EI) and 2002‑3730(EI)
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BETWEEN:
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COMMISSION DE LA CONSTRUCTION DU QUÉBEC,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
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[OFFICIAL
ENGLISH TRANSLATION]
REASONS OF JUDGMENT
Lamarre
Proulx J.
[1] The appeals were heard on common evidence. The Appellant is appealing the decisions
of the Minister of National Revenue (the “Minister”), dated April 15, 2002, May
15, 2002, and September 13, 2002, confirming the assessments from 1997 to 2001,
established under the Employment Insurance Act (the “Act”).
[2] The Appellant is a legal person pursuant to
An Act respecting Labour relations, vocational training and manpower management in
the construction industry, R.S.Q. c. R‑20 (“Act R-20”).
[3] The assessments
under appeal concerning the amounts paid to the workers by the Appellant for
services rendered for employers following suits brought against said employers
by the Appellant for the various reasons set out in section 81 of Act R-20,
which reads as follows:
Powers of the Commission.
81. To ensure the carrying out of a
collective agreement, the Commission may:
(a) exercise recourses arising out of this Act
or out of a collective agreement in favour of employees who have not caused a
suit to be served within a period of 15 days from the due date, and may do so
notwithstanding any law to the contrary, any opposition or of this Act or a
collective agreement in favour of the employees and that may be exercised
against them;
(b) on the same
conditions, continue suit in the place and stead of any employee who, having
caused such a suit to be served, has neglected to proceed for 15 days;
(c) recover from the employer and the
employee who violate the clauses of a collective agreement relating to
remuneration in currency and to compensation or benefits of a pecuniary value,
and from each of them, an amount equal to 20 % of the difference between the
obligatory amount and that actually paid;
(c .1) recover,
both from the employee contemplated in paragraph c
who performs construction work without being the holder of the competency
certificate or the recipient of an exemption required for that work and from
his employer, an additional amount equal to 20 % of the difference between the
obligatory amount and that actually paid;
(c .2) recover
from the employer who fails to transmit to it the monthly report prescribed by
subparagraph b of the first paragraph of
section 82, the amounts corresponding to the indemnities, contributions,
assessments and levies which should have been transmitted with the report, and
an additional amount equal to 20 % of such amounts; the total amount claimed
may be determined by an expert evaluation on the basis of the scope of the work
performed under the contract entered into by the employer or by any other means
of proof establishing the number of hours necessary for the carrying out of the
work;
(d) effect any
settlement, compromise or transaction considered expedient in the cases contemplated
in subparagraphs a to c.2;
(e) at any reasonable
time, examine the registration system, the compulsory register and the pay-list
of any employer, take copies or extracts therefrom, verify as regards any
employer and employee the rate of wage, duration of work, and observance of the
other clauses of a collective agreement;
(f) at any reasonable
time and even at the place of work, require from any employer or employee any
information considered necessary or require from any such person that he
furnish the information in writing to the Commission within a period of 10
clear days following the delivery of a written request to that effect or
following the day such a request is made to him by any appropriate means;
(g) by demand in
writing made to any employer, require that a copy it sends to him of the scale
of wages rendered obligatory, or of any decision or regulation, be posted up
and kept posted up in a suitable place and in the manner prescribed in the
demand;
(h) by resolution, grant
to any employee of limited physical or mental fitness upon proof considered
sufficient, a certificate authorizing him to work upon determined conditions
different from those contemplated in a collective agreement.
[4] Subsection 1(2) and
section 10 of the Insurable
Earnings and Collection of Premiums Regulations (the “Regulations”) read as
follows:
. . .
1.(2) For the purposes of Part IV of the
Act and for the purposes of these Regulations,
"employer" includes a person who pays or has paid earnings of an
insured person for services performed in insurable employment.
. . .
10(1) Where, in any case not coming within
any other provision of these Regulations, an insured person works
(a) under the
general control or direct supervision of, or is paid by, a person other than
the insured person’s actual employer, or
(b) with the
concurrence of a person other than the insured person’s actual employer, on
premises or property with respect to which that other person has any rights or
privileges under a licence, permit or agreement,
that other person shall, for the purposes
of maintaining records, calculating the insurable earnings of the insured
person and paying, deducting and remitting the premiums payable on those
insurable earnings under the Act and these Regulations, be deemed to be the
employer of the insured person in addition to the actual employer.
10(2) The amount of any employer’s
premium paid by the person who is deemed to be the employer under subsection
(1) is recoverable by that person from the actual employer.
10(3) Where a person who is deemed under
these Regulations to be an employer of an insured person fails to pay, deduct
or remit the premiums that an employer is required to pay, deduct or remit
under the Act or these Regulations, the provisions of Parts IV et VI of the Act
shall apply to the person as if the person were the actual employer.
[5] The English text is as follows:
1.(2) For the purposes of Part IV of the
Act and for the purposes of these Regulations,
"employer" includes a person who pays or has paid earnings of an
insured person for services performed in insurable employment.
. . .
10(1) Where, in any case not coming within
any other provision of these Regulations, an insured person works
(a) under the
general control or direct supervision of, or is paid by, a person other than
the insured person’s actual employer, or
(b) with the
concurrence of a person other than the insured person’s actual employer, on
premises or property with respect to which that other person has any rights or
privileges under a licence, permit or agreement,
that other person shall, for the purposes
of maintaining records, calculating the insurable earnings of the insured
person and paying, deducting and remitting the premiums payable on those
insurable earnings under the Act and these Regulations, be deemed to be the
employer of the insured person in addition to the actual employer.
10(2) The amount of any employer’s
premium paid by the person who is deemed to be the employer under subsection
(1) is recoverable by that person from the actual employer.
10(3) Where a person who is deemed under
these Regulations to be an employer of an insured person fails to pay, deduct
or remit the premiums that an employer is required to pay, deduct or remit
under the Act or these Regulations, the provisions of Parts IV et VI of the Act
shall apply to the person as if the person were the actual employer.
[6] At the beginning of
the hearing, counsel for the Respondent made the following changes to a few
Replies to the Notice of Appeal:
[Translation]
(1) In docket 2002‑2743(EI),
at subparagraph 24(f), the number “27” should be replaced with the number “29”
and at subparagraph 24(g), the words "the Appellant did not withhold
any amount" should be replaced with "the Appellant did not withhold
sufficient amounts."
(2) In docket 2002‑3730(EI),
subparagraph 25(g) is replaced with “Based on the T4 slips prepared by the
Appellant, there was an employment insurance deduction for the year at issue,
but it was insufficient.”
(3) In the same docket,
subparagraph 25(h) is replaced with “There is a discrepancy of $47,324.90
between EI premiums that were paid and those that are owed.”
[7] The parties
mentioned a compensation fund created for the purposes of certain provisions of
section 122 of Act R‑20. The special compensation fund is mentioned in
section 13 of the Regulation
respecting the Register, monthly report, notices from
employers and the designation of a representative. In the case at bar, the
assessments are not supposed to be based on the amounts that were allegedly
paid out of the fund. The parties agree that the amounts paid to the workers
out of the fund are not necessarily subject to the assessments made under the
Act. The Respondent does not believe the assessment of the Appellant’s returns
were based on such amounts and according to the latter, it is up to the
Appellant to prove that some of these amounts come from the fund.
[8] During the hearing,
the funding of the compensation fund for the purposes of section 122 of Act R‑20
was explained. It is prescribed in the collective agreements that employers
must pay an amount equivalent to $0.02 per hour worked per each employee.
This money is paid into the fund in order to compensate workers in case of the
employer’s bankruptcy.
[9] According to the
statements contained in the Replies to the Notice of Appeal, there were deductions
and payments made by the Appellant in compliance with the Act, but the amount withheld
was insufficient. Those payments were made subject to this appeal, according to
Jean Ménard, director of the Appellant’s legal services, a witness in this
case.
[10] Mr. Ménard explained
that one of the Appellant’s important duties is to administer the collective
agreements concluded in the construction industry. In 1994, the industry was
divided into four sectors: the residential sector, the civil engineering and
roads sector, the industrial sector and the institutional and commercial sector. For
each of these sectors, there is a collective agreement.
[11] Under section 81 of
Act R‑20, the Commission exercises the recourses of employees arising
out of collective agreements. It collects from employers unpaid amounts to workers either because the
remuneration the workers and employers agreed upon was less than that provided
for in the collective agreements, or because the registers do not indicate
earnings or that wages were not paid. The Commission institutes proceedings
and does not make a payment to an employee until it has recovered from the
employer the amounts owed, either after a judgment or after a voluntary payment
by the employer.
[12] When the Commission
remits the money to the employer, it proceeds with tax deductions. The
Commission issues T4 slips. There are also union deductions. The Commission has
the power to claim the various assessments provided for in the collective
agreements and the Commission remits to the union associations the assessments
collected.
[13] A binder of
documents was filed as Exhibit A‑1. It contains four tabs.
[14] In Tab 2 there is
letter dated December 7, 1977, sent by Revenue Canada to what the Commission
was formerly, the Office de la construction du Québec. The letter informed the
Office de la construction du Québec that it had to withold and remit source
deduction amounts for tax purposes. The witness read paragraph 3 of the
letter:
[Translation]
Considering that it is
incumbent on your organization, starting in 1977, to produce T-4 slips relating
to the information mentioned above, we are requesting that you complete the
additional T-4 slips as follows: Indicate in box “C” the benefits paid by your
organization to each of your members. Since the earnings reported in box “C”
are not insurable benefits, the term “nil” will have to appear in boxes “E” and
“H” and the letter “X” will also have to appear in box “J” in Employment
Insurance (EI).
[15] According to the
witness, this meant that no remissions were to be made with respect to
Employment Insurance.
[16] On November 24, 2000
(Exhibit A‑2), the Appellant wrote to Canada Customs
and Revenue Canada (“CCRC”) to accept to deduct and remit CCRC premiums, but indicated that
that was subject to their proceedings to the contrary. The letter mentioned
that, although it contested the validity of the amounts claimed, the Commission
would, until the complete disposition of the litigation, make employment
insurance source deductions from the amounts the Commission remits to employees
to whom amounts are owed by employers. The Commission would also claim from defaulting
employers employer contributions to Employment Insurance on the amounts owed by
these employers to their employees.
[17] There are premiums
for 2001. The explanation is that the Commission changed its way of doing
things and began to collect from employers and deduct at source amounts
relating to EI premiums, but this process occurred gradually and the amounts
paid in 2001 to workers were not always subject to these deductions.
[18] The Commission was
recognized as a provincial labour authority within the meaning of subsection
2(2) of the Insurable Earnings and Collection of Premiums Regulations.
The letter confirming this was sent on December 28, 2001 (Tab 3 of Exhibit A-1). The witness read the first and last
paragraphs of the letter.
[Translation]
This is further to the
request of the Commission de la construction du Québec and your letter of
September 20, 2001. You were seeking to obtain confirmation that the Commission
de la construction du Québec (CCQ) constitutes a provincial labour authority
within the meaning of subsection 2(2) of the Insurable Earnings and
Collection of Premiums Regulations.
. . .
We also would like to
note that a memorandum was issued to all our Tax Services Offices and Tax Centres informing them that the
CCQ constitutes a provincial labour authority within the meaning of subsection
2(2) of the Insurable Earnings and Collection of Premiums Regulations.
[19] Subsection 2(2) of
the Regulations reads as follows:
2(2) For the
purposes of this Part, the total amount of earnings that an insured person has
from insurable employment includes the portion of any amount of such earnings
that remains unpaid because of the employer's bankruptcy, receivership,
impending receivership or non-payment of remuneration for which the person has
filed a complaint with the federal or provincial labour authorities, except for
any unpaid amount that is in respect of overtime or that would have been paid
by reason of termination of the employment.
[20] I reported the
incident described above because it was part of the evidence but it has no
bearing on the outcome of these appeals involving the meaning to be given to
the term “employer” as defined by the Regulations.
[21] The Respondent filed
a book of exhibits containing 17 tabs as Exhibit I‑1.
[22] During the
cross-examination, the witness admitted that he was aware of the letter dated
June 19, 1998, Exhibit I‑1, Tab 9. The letter reads as follows:
[Translation]
June 19, 1998
Commission de la construction du
Québec
3530 Jean-Talon Street
West
Montréal, Quebec H3R 2G3
Attention: Gérard
Lawless, CA
Dear Mr. Lawless:
This is further to our
meeting of December 13, 1994, regarding whether or not the CCQ should deduct EI
premiums from the amounts it recovers from employers and which it pays to their
employees.
Following our meeting,
we sought legal advice from our counsel. They are of the opinion that the CCQ
is the deemed employer for the purposes of the Insurable Earnings and
Collection of Premiums Regulations. This decision is also supported by the
decision of the Tax Court of Canada number 92‑108(UI), Commission
de la construction du Québec v. Minister of National Revenue, dated
June 1, 1993.
As a result, we are of
the opinion that the CCQ is a deemed employer and that it should deduct the
required EI premiums from the amounts it recovers from employers and pays to
workers. However, the CCQ is not a new employer and should only deduct and
remit the premiums the employer would have had to deduct and remit had the
employer paid these amounts directly to the employee.
The amounts from the
compensation fund, paid by the CCQ to workers, are not subject to EI premiums.
Considering that it is
incumbent on your organization to produce T-4 slips relating to the information
mentioned above, we are requesting that you complete the additional T-4 slips
as follows:
Box “14” indicate
the amount paid by your organization to the worker.
Box “18” indicate the
amount of EI premiums (per employee) deducted from the payment made to the
worker. In the case of an amount coming from the compensation fund and
considering that these amounts are not subject to EI premiums, insert “NIL”.
Box “24” indicate
the amount of insurable earnings on which you calculated EI premiums. As in box
“18” for the amounts coming from the compensation fund, insert “NIL”.
Box “28” indicate
the letter “X” in EI Exemption, when the amounts come from the compensation
fund.
Employers subject to an
assessment by the Commission de la construction du Québec will have to be
informed not to produce additional T4 slips, for the amounts paid to your
organization, during visits by your auditors.
...
[23] On March 27, 2000,
another letter confirmed the above letter.
Arguments
[24] Counsel for the Appellant argued that the
person other than the actual employer, mentioned in section 10 of the
Regulations, should be in the context of the Regulations an employer
carrying out activities substantially similar to those of the employer. This
argument is based on the use of the actual term in a spoken or written text.
Thus, a person who asks for a product made of authentic leather in a store is
not asking for a product made of imitation leather.
[25] With respect to the legal concept of
payment, counsel for the Appellant argued that the payment was made to
terminate an obligation. However, there is no remuneration obligation for
services rendered to the Commission.
[26] Counsel for the Respondent argued that the
actual term in the context of the Regulations is contrary to “deemed
under the Act.” The purpose of the Regulations is to appoint as an
employer a person who is not the employer, but the payor. The payor is not the
actual employer but the deemed employer.
[27] Counsel for the Respondent referred to Insurance
Corp. of British Columbia v. Canada, [2002] F.C.J. No. 380 (Q.L.),
and argued that the term “pay” should not be interpreted in too narrow a
contractual legal sense. It should be attributed the meaning of paying earnings
to terminate obligations that existed between the employer and the worker or
that should have existed had the employer complied with the collective
agreements in force.
[28] She referred to
paragraphs 4 to 9 of that decision:
[4] ICBC appealed this decision to the Tax
Court of Canada. The learned Tax Court Judge allowed the appeal. He rejected
ICBC's argument that as an agent of the provincial Crown it was immune from
this federal regulation. However, he concluded that ICBC did not come within
section 10 because it could not be said to have "paid" Harvey. He reached this conclusion in the
belief that the term "paid" as it appears in section 10 can only
apply where the money which is transferred is legally owed by the transferor to
the transferee.
[5] I am of the view that the
learned Trial Judge gave an unnecessarily narrow construction to the word
"paid" in section 10 of the Regulations. As a result he wrongly
concluded that when ICBC transferred to Harvey the amount of salary as agreed
upon by Lake and Harvey, it was not "paying" an insured
person as defined in the Employment Insurance Act. In reaching this conclusion
he relied on textbook and dictionary definitions of the verb "to
pay", as well as a decision of this Court in A.G.C. v. Théorêt ((1988), 61
D.L.R. (4th) 289). He interpreted the word to mean that one only
"pays" when one has a legal obligation owed specifically to the
payee.
[6] I would first observe that the Théorêt decision, while
it did specifically involve a predecessor to present section 10 of the
Regulations, focussed on different issues. The Court there was divided on
whether the person assessed as payor was a "mandatary" of the person
providing the funds and whether that fact would be determinative of whether
such assessed person could be said to have "paid" within the meaning
of the then regulation. This involved issues of interpretation of article 1715
of the Civil Code of Lower Canada. I do not find this case helpful because:
first, there was no majority decision on the crucial issue; secondly, it did
not focus on the meaning of the regulation itself; and thirdly, it involved an
alleged agent paying, not on behalf of the real employer, but on behalf of a
lender to that employer, all facts which are not found in the present case.
[7] Nor are general textbook or
dictionary definitions of "pay" or "paid" helpful in the
interpretation of "paid" as it appears in the context of section 10
of the Regulations.
[8] The purpose
of the Regulations and the statute which authorizes them is in part to
facilitate collection of employment insurance premiums, an activity which is
essential to the scheme as it now exists. The Act clearly authorizes the kind
of provision which has been adopted by the Governor in Council in section 10 of
the Regulations. In examining section 10 one sees that it is to apply inter
alia where an employed insured person is being "paid by a person other
than [his or her] actual employer". In such case that "other
person" must maintain records of employment and calculate, deduct, and
remit the appropriate premiums. The proposition is simple enough and its
purpose clear: premiums are to be deducted at the source where salary or wages
are calculated and administered, and where checks or pay-packets are issued.
The term "paid" ought to be interpreted in context, and it is not
necessary to examine technical sources in order to attribute to it a meaning
that would defeat the clear purpose of the section. It would be equally
possible, if one were to dwell on abstract legal concepts, to hold that a
person can be an "actual employer" only if that person is paying the
"employee" from his or her own resources and not at the expense of
another. But that would also defeat the purpose of the section by precluding
its application to any situation where a third party was actually providing and
administering the wages or salary.
9 I am
reinforced in this opinion by several decisions of the Tax Court of Canada
which are consistent with the conclusion that the "other person" can
be considered to have "paid" someone else's employee without having a
legal obligation to that employee to do so (See Kern Hill Co-op Ltd. v. Canada
[1989] T.C.J. No. 702; Gateway Building and Supply Ltd. v. Canada [1991] T.C.J.
No. 521; Commission de la Construction du Québec v. Canada [1993] T.C.J. No 650;
Danks v.Canada [1995] T.C.J. No. 948; and Ferme Riomil Inc. v. Canada [1998] T.C.J. No. 203).
Analysis and conclusion
[29] I am of the opinion that if one reads the Regulations,
which are very short, in full, the proposal of counsel for the
Respondent’s seems to be the most consistent with the purpose of the Regulations.
The definition of the word “employer” at the very beginning does not refer to
the person who gives instructions and for whom services are performed but
explicitly stipulates that for the purposes of Part IV of the Act and for the purposes of
these Regulations, “employer” includes a person who pays or has paid
earnings of a worker for services performed in insurable employment. This is a deeming provision of the nature
of a legal fiction.
[30] Section 10 of the Regulations is
entitled “Other Deemed Employers.” Section 7 of the Regulations involves
placement or employment agencies. Their activities are not similar to those of
their clients.
[31] Legal fiction is a
legislative scheme that is well-known in civil law. It is also frequently used
in federal statutory law. The Court must therefore attribute to the deeming
provision the meaning it decrees to a term or expression. I am referring to the
decision of the Supreme Court of Canada in The Queen v. Verrette,
[1978] 2 S.C.R. 838, particularly page 845, and the decision of the Federal
Court of Appeal in Canada v. Scarola, [2003] F.C.J. No. 482
(Q.L.), at paragraphs 19 and 20.
[32] According to the
decision of the Federal Court of Appeal in Insurance Corp. of
British Columbia (supra), when a person, other than the actual
employer, pays earnings owed to an insured person, that person is an employer
under the Regulations. This decision ultimately exempted ICBC because it was an agent of Her Majesty
and the Regulations were not binding on Her Majesty. The Appellant did
not claim that status, with reason it seems to me, upon reading the recent
decision of the Supreme Court of Canada in Nova Scotia Power Inc. v.
Canada, [2004] S.C.J. No. 36 (Q.L.) which analyzed the notion of agent
of the Crown. Nevertheless, considering that there was no legal debate as to
the Appellant’s capacity as agent of the Crown, I will not deal with the issue.
[33] It should be noted
that in Insurance Corp. of British Columbia, supra, at
paragraph 9, the Federal Court of Appeal relied, among other things, on the
decision of Allard J. of this Court in Commission de la Construction du
Québec v. Canada (Minister of National Revenue — M.N.R), [1993]
T.C.J. No. 650 (Q.L.). The decision of Allard J. confirmed that the
Appellant was a deemed employer. It should also be noted that the Federal Court
of Appeal distanced itself from Théoret (supra), on which the
Appellant relied in part.
[34] I must conclude that the
Appellant is not exempt from the deeming provisions of the Regulations.
Subsection 1(2) of the Regulations clearly stipulates that “employer”
includes a person who pays or has paid earnings of an insured person for
services performed in insurable employment. Subsection 10(1) of the Regulations
also clearly stipulates that where an insured person is paid by a person other
than the insured person’s actual employer, that other person
shall, for the purposes of maintaining records, calculating the insurable
earnings of the insured person and paying, deducting and remitting the premiums
payable on those insurable earnings under the Act and these Regulations, be
deemed to be the employer of the insured person in addition to the actual
employer.
[35] Consequently, the
appeals are dismissed.
Signed at Ottawa, Canada, this 17th day of December
2004.
Lamarre
Proulx J.
Translation
certified true
on this 29th day of
July 2005.
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