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Citation: 2004TCC771
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Date: 20041213
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Docket: 2003-3136(EI)
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BETWEEN:
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SERGE GRONDIN,
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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]
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REASONS FOR JUDGMENT
Deputy Judge Savoie,
[1] This appeal was heard at Montreal,
Quebec on October 25, 2004.
[2] This is an appeal regarding the
insurability of the Appellant's employment while in the service
of l'Ère du Titane Inc., the Payer, for the period
from July 14, 2001, to November 29, 2002, the period in question,
pursuant to section (1)(a) of the Employment Insurance
Act (the "Act").
[3] In his May 7, 2003 letter, the
Minister of National Revenue (the "Minister") informed the
Appellant of his decision whereby the Appellant did not hold
insurable employment because he did not meet the requirements of
a contract of service; therefore there was no employee-employer
relationship between the Appellant and the Payer.
[4] In rendering his decision, the
Minister relied on the following
assumptions of fact:
a) the Payer
was incorporated on April 28, 1999; (admitted)
b) the Payer
ran a jewellery business that specialized in the manufacture of
titanium jewellery; (admitted)
c) the Payer
hired fifteen employees; (admitted)
d) in 2001, to
expand his business, the Payer purchased an old factory and began
restoration work; (admitted)
e) the Payer
hired subcontractors for the restoration work; (admitted with
explanations)
f) the
Appellant has 17 years of experience as a house painter;
(admitted)
g) the
Appellant was hired as a subcontractor; (denied)
h) the
Appellant did demolition, painting, and development for the
Payer; (admitted with explanations)
i) the
Payer did not control the Appellant's schedule; (admitted)
j) the
Appellant decided on which days and hours he wanted to work;
(denied)
k) the hours
worked by the Appellant were not recorded by the Payer;
(denied)
l) the
Appellant set his hourly rate at $16; (admitted with
explanations)
m) the Payer paid
the Appellant based on the fees that the Appellant charged;
(admitted with explanations)
n) the
Appellant was paid by cheque; (admitted)
o) the
Appellant provided his own supplies such as rollers,
paintbrushes, etc.; (admitted)
p) the Payer
provided the paint; (admitted with explanations)
q) the
Appellant was supposed to work until the restoration was
completed, but the Payer ended the contract with the Appellant
because the Appellant's performance did not meet the requirements
of the Payer; (admitted)
r) on
April 23, 2003, the Appellant stated to a representative of the
Respondent that he had not submitted a tax return for several
years; (admitted with explanations)
s) on April
23, 2003, the Appellant stated to a representative of the
Respondent that he was receiving social assistance payments while
he was working for the Payer. (subject to
amplification)
[5] The Appellant admitted paragraphs
a) to d), f), i), n), o), and q), and denied paragraphs g), j),
and k); he admitted with explanations paragraphs e), h), l), m),
p), and r).
[6] According to the evidence, the
Payer purchased a building for the purpose of expanding his
business. He purchased an old disused factory with the intention
of restoring it. He hired a team, including the Appellant, to do
the restoration work. The team's foreman was David Richard. He
was self-employed; Alexandre Bouchard was a salaried worker. The
Appellant was paid at an hourly rate of $8. He accepted this rate
despite the fact that he had expected a rate of $20. He admitted
to having done some work under the table for the Payer. The other
employees were paid in cash. The workers, according to the
evidence, worked for six months to complete the restoration.
[7] The workers did demolition work,
cleaned the building, expanded it to make it functional, and
painted it and fitted it up. It was established that this team
did all the fitting-up for the building except for specialized
work.
[8] In his testimony, the Appellant
revealed that the Payer had agreed to pay him at an hourly rate
of $16. Because he was receiving social assistance payments, the
Appellant accepted this rate. According to his testimony, he
worked 40, 50, and even up to 76 hours per week, and he recorded
his hours on the door of the cafeteria; otherwise he was not
paid. To finance his project, the Payer had negotiated some
loans: one was with the National Bank for $175,000, and the other
was for $675,000 with another financial institution.
[9] The Appellant stated that he did
not have a qualification card, but that he was a "hard worker."
He confirmed that he had been under the supervision of foreman
David Richard, who was always on the premises. David Richard
managed the job site; he even set up accommodations for himself
there. Philippe Payette, the Payer's owner, was rarely on
the job site. However, he brought materials and tools to the site
and left instructions. It was established that work on the job
site was set according to precise schedules and priorities so as
to be able to benefit from the lending institutions' advances.
The Payer's project was frequently affected by critical funding
shortfalls.
[10] It was established that the Payer
reduced the Appellant's salary to $8 per hour for the last two to
three months of the period in question. The Appellant explained
that the Payer took advantage of him because he was an alcoholic.
After having reduced the Appellant's salary to $8 per hour,
the Payer promised the Appellant a salary of $15 per hour if the
Appellant reported to work on time the following week.
[11] Toward the end of the period in
question, the Payer paid the Appellant very little or not at all.
Often, the Appellant was paid in cash. The Payer promised to pay
the Appellant his salary from the $175,000 advance from the
National Bank, but never did. Later, the Payer promised to pay
the Appellant from the $675,000 loan, but in order to obtain it
the Payer had to prove that the work was 75% completed. He did
provide proof, but still the Appellant did not receive his pay.
Furthermore, the Payer dismissed him and sent him to the Dollard
Cormier Centre, a treatment facility for alcoholics.
[12] It was established that the Appellant
filed a complaint against the Payer to the Labour Standards
Commission on the grounds that the Payer had not paid him for his
overtime hours, his notice, and his vacation pay. The Appellant
confirmed that the Commission had found in his favour and ordered
the Payer to pay the Appellant "$2,416.84 minus statutory
deductions..." According to the Appellant, he has still not
received anything from the Payer. However, the Appellant was
unable to document the Commission's decision. He explained that
while his complaint was before the Commission and during the
period that followed, he was undergoing treatment for alcoholism,
and then was imprisoned at Bordeaux. He concluded by saying that
for a period of 9 months, which ended on August 12, 2004, he was
not able to manage his affairs.
[13] This Court gave the Appellant 10 days
to provide the documentation concerning his complaint to the
Labour Standards Commission, and his counsel did provide the
documentation to the Court.
[14] During the hearing, the Appellant
produced 4 paycheques that he had received from the Payer
(exhibit I-2). The paycheques prove that for the period in
question, i.e. from September 6 to October 4, 2002, he was
working an average of 58.25 hours per week, at an average
hourly rate of $7.94.
[15] It must be recognized that these facts
serve to corroborate the Appellant's testimony on this particular
aspect.
[16] It was established that the only tools
the Appellant had were a paintbrush and two trowels. All the
other tools used by the Appellant were provided by the Payer, who
either bought or rented them.
[17] The question is whether the Minister's
decision, at the end of this hearing, is in compliance with the
Act, the doctrine and the precedents with respect to the
insurability of the Appellant's employment.
[18] In making his decision, the Minister
relied on paragraph 5(1)(a) of the Act to determine
that the Appellant's employment was not insurable.
Paragraph 5(1)(a) reads as follows:
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;
[...]
[19] According to the well-known
case of Wiebe Door Services Ltd. v. M.N.R, [1986] 3 F.C.
553 (FCA), the courts have established a series of tests to be
used in making a determination in a case like this one,
namely:
1. degree of control over
the work or the worker;
2. ownership of
tools;
3. chance of profit or risk
of loss;
4. integration of the
employee's work in the Payer's business.
[20] In Charbonneau v.
Canada(Minister of National Revenue - M.N.R.),
[1996] F.C.J. No. 1337, Décary J.A. of the Federal Court
of Appeal had this to say about tests:
The tests laid down by this Court in Wiebe Door Services
Ltd. v. M.N.R. - on the one hand, the degree of control, the
ownership of the tools of work, the chance of profit and risk of
loss, and on the other, integration - are not the ingredients of
a magic formula. They are guidelines which it will generally be
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. The issue is
always, once it has been determined that there is a genuine
contract, whether there is a relationship of subordination
between the parties such that there is a contract of employment
(art. 2085 of the Civil Code of Québec) or, whether there
is not, rather, such a degree of autonomy that there is a
contract of enterprise or for services (art. 2098 of the
Code). In other words, we must not pay so much
attention to the trees that we lose sight of the forest - a
particularly apt image in this case. The parts must
give way to the whole.
[21] The evidence should, therefore, be
examined in light of the above-noted tests.
[22] The facts in this case, examined using
the tests of ownership of tools and chance of profit or risk of
loss, do not pose any problems and support the conclusion that
the Appellant held insurable employment. In this connection, the
evidence provided by the Appellant was uncontradicted by the
Minister.
Control
[23] Regarding the control test, the
application determined by the courts must be recognized,
particularly the determination made by by Marceau J. in Caron
v. M.N.R., [1987] F.C.J. No. 270:
...
On the question of whether there was in fact a contract of
service, the judge did not dispute that there was a contractual
relationship but questioned whether that relationship had
produced a contract of service or a contract for services, and
his conclusion that the employer did not have the control over
the employee's work which is characteristic of a contract of
service is contained in the following paragraph:
With regard to control of the appellant's work by the
employer, Roberto Caron, the evidence provided facts that we must
analyse in terms of control, because the recipient of the
services exercises such control over the work of the provider of
the services, thus constituting the subordinate relationship
characteristic of a contract of service. However, the degree of
control varies with the circumstances and the nature of the work
to be done. The appellant's work consisted in logging, which
obviously required experience, which the appellant
had. On the other hand, the employer, Roberto Caron,
who was a truck driver, admitted that neither he nor his mother
had any experience in this field. Since neither the
employer nor his mother had any experience, they could exercise
no control whatever over the appellant's work. Even though he
went to the worksite on Saturdays to inspect the work and even
though his mother saw the logs cut by the appellant being hauled
away, that did not prove that the required control was being
exercised over the appellant's work. It can be
said that there was a total absence of control by the employer,
Roberto Caron, and his mother. Moreover, the employer stated that
he gave the appellant full leeway in his work. He confined
himself merely to checking on Saturdays at quitting time to see
whether or not the work had been done.
In my view, in considering the situation the
judge relied on a concept of control which goes beyond that which
is legally required to establish a master-servant relationship.
If such a concept were to be accepted, a contract of service
could never be created between an employer inexperienced in
performing the work to be done and an employee whose occupation
is the performance of such work.
[24] I must add that there is abundant case
law that defines the Payer's control as the power of control over
the worker rather than "de facto" control.
[25] Pratte J.A. of the Federal Court of
Appeal recognized this principle in Ranjit Darbhanga v.
M.N.R., [1995] F.C.J. No. 470, stating:
The decision of the Tax Court of Canada to the effect that the
applicant did not hold insurable employment seems to be based on
the assumption that, as her alleged employer was sick when she
worked for him and could not, for that reason, supervise her
work, it necessarily followed that her work had been done under a
contract for services rather than under a contract of
service. That is an error. A contract may
be a contract of service even though the employer does not
supervise the work of the employee if he actually has that
right. That was obviously the situation here.
[26] Pratte J.A. of the Federal Court of
Appeal also considered the notion of control in determining
whether there is a contract of service. In Raymond-Guy Gallant
v. M.N.R., [1986] F.C.J. No. 330 he said the following:
... 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...
[27] It is true that the Payer was not often
on the job site, but he visited it from time to time, according
to the evidence, to bring materials and tools and to leave
instructions in accordance with the project priorities. However,
he had a foreman on the job site at all times; the foreman even
slept there. The foreman supervised the Appellant's work. This
evidence was uncontradicted. Examined using these criteria, the
facts support the Appellant's position.
Integration of the employee's work in the Payer's
business
[28] Counsel for the Minister argued that
the Appellant's work was not at all a part of the Payer's
business, since the Payer is a jeweller.
[29] It should nevertheless be noted that
the Minister recognized this activity of the Payer when he wrote
the following in his Reply to the Notice of Appeal in paragraph 6
(d):
in 2001, to expand his business, the Payer purchased an old
factory and began restoration work.
[30] The Payer's restoration project was
directly linked to the main business that he wanted to
expand.
[31] In analyzing the Appellant's work using
the organization or integration test, it is appropriate to refer
to the Supreme Court of Canada's interpretation in 671122
Ontario Ltd. v. Sagaz Industries, [2001] 2 S.C.R. 983, where
Major J., relying heavily on the decision of MacGuigan J. in
Wiebe Door Services v. M.N.R., [1986] 3 F.C. 553, had this
to say:
MacGuigan J. recognizes that despite these criticisms, the
organization test may be useful (p. 563):
Of course, the organization test of Lord Denning and others
produces entirely acceptable results when properly applied, that
is, when the question of organization or integration is
approached from the persona of the "employee" and not
from that of the "employer," because it is always too
easy from the superior perspective of the larger enterprise to
assume that every contributing cause is so arranged purely for
the convenience of the larger entity. We must keep in mind
that it was with respect to the business of the employee that
Lord Wright [in the Montreal case] addressed the question
"Whose business is it?" [My emphasis.]
According to MacGuigan J., Cooke J. came up with the best
synthesis of the problem in Market Investigations, Ltd. v.
Minister of Social Security, [1968] 3 All E.R. 732 (Q.B.D.),
p.737-738 (followed by the Privy Council in Lee Ting Sang v.
Chung Chi-Keung, [1990] 2 A.C. 374, lord Griffiths,
p. 382):
The observations of LORD WRIGHT, of DENNING, L.J., and of the
judges of the Supreme Court in the U.S.A. suggest that the
fundamental test to be applied is this: "Is the person who
has engaged himself to perform these services performing them as
a person in business on his own account?". If the
answer to that question is "yes", then the contract is
a contract for services. If the answer is
"no" then the contract is a contract of service...
[32] In the exercise engaged in by this
Court, it is helpful to keep in mind what Major J. had to say in
Sagaz, supra, where he held:
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.
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.
[33] In addition, as suggested by Major J.
in Sagaz, supra, the central question for this
Court 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 response to this question, this Court must answer
that the facts have clearly established that the Appellant did
not work as a person in business on his own account.
[34] The Appellant had the burden of
proving, on a balance of probabilities, that the facts accepted
by the Minister were false. In my view, he has discharged this
burden since the examination of the evidence, in light of the
criteria set by case law and stated above, warrants the
intervention of this Court.
[35] According to the evidence, the
Appellant worked for the Payer for a period of 20 weeks at a rate
of 58.25 hours per week, averaging an hourly rate of $7.94 per
hour. Therefore, the insurable earnings of the Appellant,
pursuant to the Insurable Earnings and Collection of Premiums
Regulations,are determined in accordance with
subsection 2(2) and amount to $9,250.
[36] It was shown on a balance of
probabilities that the Appellant held insurable employment within
the meaning of the Act during the period in question.
[37] Consequently, the appeal is allowed and
the decision by the Minister is vacated.
Signed at Grand-Barachois, New Brunswick, this 13th
day of December 2004.
Savoie D.J.
Translation certified true
on this 24th day of March 2005.
Colette Dupuis-Beaulne, Translator
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