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Citation: 2004TCC11
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Date: 20040107
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File: 2003-821(EI)
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BETWEEN:
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AR-TECH AUTOMOTIVE INDUSTRIES INC.,
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Appellant,
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THE MINISTER OF NATIONAL REVENUE,
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Respondent,
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and
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PIERRE BOCQUET,
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Intervener.
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REASONS FOR
DECISION
Dussault J.
[1] This is an
appeal against a decision by the Minister of National Revenue
("Minister") that Mr. Pierre Bocquet held insurable employment with
the appellant from January 1, 2001 to January 1, 2002, since he was bound to
him by a contract of service.
[2] In reaching
his decision, the Minister based his decision on the presumptions of fact found
at paragraphs a) to m) of paragraph 9 of the Reply to the Notice of
Appeal ("Reply"). These paragraphs read as follows:
a) The appellant has
operated a business manufacturing automobile suspension components since 1966.
b) On or around December 1,
1994, the appellant hired the worker as a sales representative; he was to visit
customers and sell the product, the guarantee and the services of the
appellant.
c) The worker worked as a
travelling salesman, covering all of Quebec and Eastern Ontario.
d) At the beginning of his
employment with the payer, the worker received a list of the payer's customers,
on whom he was supposed to call at a frequency of between 4 and 6 weeks.
e) The worker was to
maintain and increase the appellant's customer base.
f) The worker generally
worked between 8 am and 5 pm, Monday to Friday.
g) Notwithstanding
flexibility in his hours of work, the appellant controlled the work of the
worker upon receipt of his sales reports, orders and complaints received from
his customers.
h) The appellant met with
the worker at least once a month, in the context of a scheduled meeting in Montreal, to discuss his work.
i) The worker was to abide
by a list of prices and discounts established by the appellant; he could not
amend this list without the appellant's prior authorization.
j) The appellant provided
the worker with all the documentation and stationery needed for his work.
k) The worker had to
provide his car and to pay the costs thereof; he also provided his cellular
telephone, his pager, his home office and his office equipment.
l) The worker received a
set salary of $250 a week plus commission of 3.5% on his sales.
m) The worker was paid
monthly by cheque.
[3] Paragraphs b), f), g) and l) are denied by the appellant.
Summary of the evidence
[4] Evidence
was given by Mr. Donato Latella, Director of Business Development for the
appellant, Mr. Pierre Bocquet, the worker, and Ms. Françoise Bienvenue, the
Appeals Officer.
[5] The
appellant manufactures and distributes automobile parts, specifically the
chassis parts and brake parts. His business is based in Toronto.
[6] In 1994,
Mr. Bocquet himself approached the appellant with a view to distributing his
products in Quebec and Eastern Ontario. The appellant also had an agreement with
UniSelect, a company with two automobile parts distribution centres and some
250 members in Quebec.
[7] Mr. Latella
has been working for the appellant since March 2001. He stated that, according
to the initial verbal agreement between the appellant and Mr. Bocquet, the
latter was assigned the territory of Quebec and Eastern Ontario as a self-employed
representative with the aim of increasing the customer base and the sales of
products manufactured or imported by the appellant.
[8] According
to Mr. Latella, the appellant offered Mr. Bocquet a commission equal to 4% of
net sales. However, since sales were not initially high enough, it was agreed
that he would be paid an advance of $250 per week, payable every two weeks, and
a commission equal to 2.5% or 3% of sales, depending on the type of parts sold,
to be adjusted at the end of each month, except for the first six months, and a
final annual adjustment to achieve the equivalent of 4% of net sales. The
arrangement had always remained the same. Under it, Mr. Bocquet received money
in the course of the month instead of waiting for the end of the month to be
paid the amount of his commissions. Mr. Latella stated that all that was
required of Mr. Bocquet was that he visit the customers and encourage them to
purchase the appellant's products. Mr. Bocquet was to provide everything he
needed for his work, specifically a home office, fax, telephone and automobile,
and that he would bear the entire cost himself.
[9] Mr. Latella
said that he used to meet Mr. Bocquet once a month in Montreal to discuss sales
and review new programs introduced by the appellant to retain and increase the
level of sales. According to him, Mr. Bocquet had the authority to decide
"with the customers".
[10] According
to Mr. Latella, Mr. Bocquet was not limited to selling the appellant's
products, provided that he did not sell the same type of product for
competitors.
[11] At the end
of the year, the appellant would issue Mr. Bocquet a T4A form showing the total
amount paid by way of "self-employed commissions" and no source
deductions. The T4A form for 2001 has been filed in evidence (exhibit A-4). A
statement of the commissions paid, including the amounts of $500 paid every two
weeks, was also filed in evidence (exhibit A-5). The total amount corresponds
to the amount of commissions entered on the T4A form. Mr. Bocquet was
registered for the Goods and Services Tax ("GST"). and the tax was
paid separately by the appellant on the amount of commissions paid, with the
exception of the amount of $500 paid every two weeks to Mr. Bocquet. According
to Mr. Latella, the amount of $500 included the GST (see exhibits A-1,
A-2, A-5 and INT-6). At the end of the year, the GST was adjusted depending on
the amount of adjusted commissions. Although on reading these documents there
would appear to have been some confusion concerning whether or not the GST was
to be included, it appears evident that it is not included in the total of
commissions paid to Mr. Bocquet in 2001, according to exhibits A-2 and A-5, the
amount of which is entered on the T4A form issued by the appellant for the
purposes of the Income Tax Act.
[12] Mr. Bocquet
asserts that he was an employee of the appellant. In his testimony, he claims
that he was hired as a sales representative for Quebec at a guaranteed salary of
$250 per week plus 6% commission on sales. He wanted to submit a document as
evidence setting out the calculations for commission on this basis, and these
calculations were entered on the document by the appellant's President (exhibit
INT-1). However, the document is not signed and the representative of the
appellant objected to its being introduced as evidence. In reality, it would
appear that the commissions were on the order of 2% to 3%, in addition to an
amount of $500 paid by the appellant every two weeks. However, Mr. Bocquet
claimed that he "also had 7% customers". According to him, these were
small customers who received a much lower discount than the larger ones.
[13] According
to Mr. Bocquet, when he approached the appellant in 1994, the appellant was not
well known and its managers did not speak French. He claimed that he himself
saw the potential for developing the client base for his products. However, he
said that he received his instructions from Toronto, specifically with regard
to the customers he was to visit and those he should not visit. In this regard,
he submitted a list which he stated had been given to him initially in 1994
(see exhibits INT-2 and 3). In 1998, the appellant sent him another list
of potential customers, asking him to check why they were not purchasing his
products, so as to be able to update the computerized data (exhibit INT-5).
This document also reveals that the appellant had also asked Mr. Bocquet to
look after recovering certain accounts (see exhibit INT-5, Annex 13).
[14] The
appellant provided Mr. Bocquet with his business cards, which describe him as a
sales representative. The address shown is that of the appellant in Toronto.
The telephone and fax numbers are those of Mr. Bocquet. The e-mail address is
also his.
[15] According
to Mr. Bocquet, his duties consisted of visiting customers every four or
six weeks, having them complete a form to open a credit account, as appropriate,
taking orders from customers and forwarding everything to Toronto for
approval. He stated that he had no decision-making power over the prices and
discounts, which were set in Toronto. According to him, he merely completed the
"paperwork". He also looked after sending back defective items, where
applicable, after having received authorization from Toronto.
Mr. Bocquet claimed that in reality, he visited the customers that the
directors in Toronto told him to visit, either to sell to them or to
return the parts, and organized his visit schedule as a function of the
availability of the customers. He stated that he was in daily telephone contact
with Toronto, specifically with a bilingual secretary whom the
appellant had hired at his suggestion.
[16] Although
Mr. Bocquet was to assume all the expenses related to the performance of his
duties, he said that the appellant always paid for the expenditures in relation
to the business fairs which he attended in order to promote the appellant's
products.
[17] Mr. Bocquet
acknowledged that, while it was possible for him to sell the products of other
companies, he had been told that, if he did so, he would lose his $250 per week
guarantee. He himself was the one who had decided not to work for other
companies.
[18] When it was
pointed out to him that the appellant issued him a T4A slip each year on which
his pay was shown as "self-employed commissions" (exhibit A-4), Mr.
Bocquet stated that he had "never looked". As I noted above, it is
clear that the total amount of commissions entered on the T4A slip for 2001
included the sum of $500 paid to the appellant every two weeks (exhibit A‑5).
Furthermore, it would appear that Mr. Bocquet had never reported his salary as
such and that he had reported the total amount received as business income
(gross) on his income tax returns. The examination of his tax return for the
year 2000, the only one that he had with him at the hearing, confirms this
fact. According to his testimony, he had always followed the same procedure,
including for the year 2001.
[19] Ms.
Françoise Bienvenue, Appeals Officer, testified regarding her audits of
Mr. Bocquet and Mr. Latella, as well as on her decision to consider Mr. Bocquet
an employee of the appellant.
[20] Ms.
Bienvenue specifically stated that Mr. Bocquet had a territory to cover and
that he was supposed to visit customers, essentially those of the appellant,
every four to six weeks, that he had no authority with regard to prices, that
the range of his duties was limited and, that since he was experienced, he was
supervised more or less directly by telephone on a daily basis by the directors
of the appellant.
[21] Ms.
Bienvenue also held that Mr. Bocquet ran no risk of financial loss since he had
no other risk than that of assuming the normal expenses of a traveling
salesman. With regard to opportunities for profit, Mr. Bienvenue considered
that Mr. Bocquet had only one customer, the appellant who paid him his salary,
and that his opportunity for profit was reduced accordingly.
Position of the appellant
[22] Counsel for
the appellant referred primarily to the decision of the Federal Court of Appeal
in the case of Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553,
("Wiebe Door"), to support the assertion that Mr. Bocquet was
self-employed and not an employee of the appellant.
[23] According
to her, the sales agents were self-employed and worked from their homes without
control on the part of the appellant, whose managers merely met with them once
a month with a view to increasing sales.
[24] Since they
were required to provide everything they needed to perform their duties, except
for business cards and stationery, the sales agents had to assume all the
expenses related to the ownership of their work tools. Furthermore, as Mr.
Bocquet was paid only through commissions, he had himself assumed, in view of
the expenses involved, the risk of loss and chance of profit resulting from his
work, while he himself determined the ways in which his work was performed
without any instructions from the appellant.
[25] Lastly,
counsel for the appellant noted that Mr. Bocquet had always received from the
appellant a T4A form, indicating that he was paid "self-employed
commissions", that he had never complained about this situation and that
he had declared his pay as business income. Despite that, he now claimed that
he was an employee of the appellant.
Position of the respondent
[26] The counsel
for the respondent based her claim that Mr. Bocquet was an employee of the
appellant on an analysis of the tests identified in Wiebe Door, supra,
criteria which were repeated by the Supreme Court of Canada cited as 671122
Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59, [2001] 2 S.C.R.
983, [2001] S.C.J. No 61 (Q.L.), ("Sagaz").
[27] According
to Counsel for the respondent, at issue in this analysis is to whom the
business belongs. According to her, the assigning of a territory by the
appellant to Mr. Bocquet, the obligation to visit or not visit the appellant's
customers on the basis of an existing list, the absence of any discretion left
to Mr. Bocquet in respect of prices or the approval of discounts or
rebates, as well as the monthly meetings, are clear indications of control
exerted by the appellant. Since Mr. Bocquet had considerable experience, the
appellant did not have to impose work methods on him and accordingly exercised
less direct supervision over his activities.
[28] Counsel for
the respondent emphasized the fact that, while Mr. Bocquet undoubtedly
worked from his home, the appellant supplied him with his business cards and
secretarial services.
[29] She stated
that Mr. Bocquet had invested nothing and that he had assumed no risk of loss
in respect of his activities. With regard to the chance of profit, this was
limited, since the prices on which the commissions depended were set by the
appellant.
[30] According
to Counsel for the appellant, the examination of the overall relationship
between the parties led to the conclusion that it constituted a genuine
contract of service.
Position of the worker
[31] Counsel for
Mr. Bocquet also referred to the tests set out in Wiebe Door, supra,
and to the authorities. According to him, the business cards supplied by the
appellant did indeed indicate that Mr. Bocquet was a sales representative for
the appellant, that the appellant provided him with secretarial services from Toronto and
that the customers were customers of the appellant.
[32] Counsel for
Mr. Bocquet also pointed out that Mr. Bocquet had a great deal of experience
and that the control exercised by the appellant was "operational" in
nature. He claimed that Mr. Bocquet had no discretion over the prices of the
products sold and the appellant was the one who decided what discounts to
grant.
[33] Counsel for
Mr. Bocquet also noted the fact that he
was an exclusive representative of the appellant, even though he had been
authorized to sell other products: doing so would, however, have resulted in
his losing his guarantee of $250 per week. According to him, this factor demonstrated
the degree to which the duties of Mr. Bocquet were integrated into the
activities of the appellant.
Analysis
[34] As Major J.
noted in paragraph 44 of the Sagaz decision, supra, MacGuigan
J.A. in Wiebe Door (supra) recognized that the best synthesis of
the problem regarding the distinction between a contract of service and a
contract for services was that given by Cooke J. in Market Investigations,
Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732 (Q.B.D.), at pp.
737 and 738:
The observations of LORD WRIGHT, of DENNING L.J. and
of the Judges of the Supreme Court in the USA 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 of
service. If the answer is "No", then the contract is a contract of
service. No exhaustive list has been compiled and perhaps no exhaustive list
can be compiled of considerations which are relevant in determining that
question, nor can strict rules be laid down as to the relative weight which the
various considerations should carry in particular cases. The most that can be
said is that control will no doubt always have to be considered, although it
can no longer be regarded as the sole determining factor, and that factors,
which may be of importance, are such matters as whether the man performing the
services provides his own equipment, whether he hires his own helpers, what
degree of financial risk he takes, what degree of responsibility for investment
and management he has, and whether and how far he has an opportunity of
profiting from sound management in the performance of his task. [emphasis
added.]
[35] Similarly,
in Sagaz, supra, at paragraph 46, Major J. shares the opinion
expressed by MacGuigan J.A. in Wiebe Door, supra, when he states
at page 563 citing Atiyah, supra, (Vicarious Liability in the Law of
Torts. London: Butterworths, 1967 p. 38) "that what
must always occur is a search for the total relationship of the parties".
[36] Part of the
quotation drawn from Atiyah's book is repeated by Major J. in the same
paragraph as follows:
It is exceedingly doubtful whether the search for a
formula in the nature of a single test for identifying a contract of service
any longer serves a useful purpose [...] The most that can profitably be done
is to examine all the possible factors which have been referred to in these
cases as bearing on the nature of the relationship between the parties
concerned. Clearly not all of these factors will be relevant in all cases, or
have the same weight in all cases. Equally clearly, no magic formula can be
propounded for determining which factors should, in any given case, be treated
as the determining ones.
[37] In light of
these comments, I believe that the circumstances of this case warrant a
conclusion that Mr. Bocquet was not an employee of the appellant during the
period at issue.
[38] First, it
was Mr. Bocquet himself who approached the appellant in 1994 because he had
determined that the appellant was not well known in Quebec and
because he saw the potential for developing a customer base for his products.
In this context, it is surprising that he could state that he was to visit only
the customers whose names appeared on a list compiled by the appellant.
Certainly, from the outset in 1994, he was provided with a list of customers
who were to be visited and customers who were not to be visited. Since his
specific purpose was to increase the number of customers in Quebec and
Eastern Ontario, one can only conclude that he was in no way limited in his
activities to soliciting only customers who were already known to the
appellant. This is, moreover, specifically admitted at paragraph 9e) of the
Reply. We do not know a great deal about the way in which the customer base was
to be developed, and there is little information available that would support a
conclusion that Mr. Bocquet was under the supervision or control of the appellant
in terms of how his work was organized.
[39] Whether the
appellant retained control over the prices of his products and the discounts or
rebates to be granted to customers does not mean that the appellant controlled
the way in which the respondent organized his work nor the time he devoted to
it. Furthermore, Mr. Bocquet himself admitted that he could have sold products
for other companies, provided that these were not competing products.
[40] In Sagaz
(supra), Major J. analyses the control test in a situation where certain
factors bear a resemblance to those present in this case. In paragraph 55 he
says:
Central to this enquiry
is the extent of control that Sagaz had over AIM. While Sagaz directed the
prices, terms and other conditions that AIM was to negotiate on Sagaz's behalf,
AIM was ultimately in control of providing assistance to Sagaz in retaining the
good will of Canadian Tire. Again, AIM decided how much time to devote to Sagaz
and how much time to devote to its services for other supply companies.
Although Sagaz controlled what was done, AIM controlled how it was done. This
indicates that Landow was not controlled by Sagaz.
[41] Mr.
Bocquet was required to provide everything he needed for his work, specifically
a home office, a telephone, a fax and a car, and to assume all the costs
related thereto without any reimbursement from the appellant.
[42] With
regard to pay, despite some contradictory evidence, this consisted primarily of
commissions on sales without any other advantages or benefits of any kind. The
appellant considered the amounts paid to Mr. Bocquet as "self-employed
commissions" and issued a T4A form to that effect (exhibit A-4) for income
tax purposes. According to the information contained in his tax return for the
year 2000, the total amount received from the appellant was reported by Mr.
Bocquet as (gross) business income against which he claimed his expenses. No
amount was declared as having been received in the form of salary. We can
conclude from Mr. Bocquet's testimony that this way of reporting his income
always remained the same over the years.
[43] It should
also be noted that Mr. Bocquet was registered for the GST and that this was
paid by the appellant and collected by Mr. Bocquet on the commissions earned.
[44] Taken
together, all these elements certainly do not support a conclusion that the
parties regarded their relationship as an employer-employee one.
[45] With
regard to the question of the risk of loss and the chance of profit, the
position of the respondent is difficult to reconcile with the assessment of the
situation of a commission salesman as made by the Supreme Court of Canada in Sagaz,
supra. Major J. expresses himself as follows in paragraph 54 of the
decision:
In terms of a risk of
loss or an opportunity for profit, Landow and AIM worked on commission on sales
of Sagaz's products. As such, the risk of loss and the opportunity for profit
depended on whether AIM's expenses (such as travel expenses) exceeded its
commissions.
[46] We know
that Mr. Bocquet was obliged to provide everything he needed for the
performance of his duties and to himself pay all expenses with the exception of
stationery and his business cards. On the issue of stationery, only a single
envelope bearing the heading of the appellant has been submitted in evidence
(exhibit INT-4) and the question may be asked to what extent Mr. Bocquet's
activities required him to communicate personally in writing with the
customers. The same comment applies to the issue of secretarial services that
were provided to him from Toronto. No item of correspondence between Mr. Bocquet and
the customers has been submitted as evidence.
[47] With regard
to the issue of the business cards, it is true that Mr. Bocquet is described on
them as a sales representative for the appellant and the appellant is the one
who assumed the - in any event minimal - cost of printing these cards. This can
be considered an indication that he was to some degree integrated into the
appellant's business. It must be noted, furthermore, that the telephone and fax
numbers and the e-mail address of Mr. Bocquet are the ones printed on his
cards. In view of the purpose of business cards, this can be regarded as merely
a way of introducing Mr. Bocquet as a person authorized to sell the appellant's
products. In any event, I consider this a minor element and one that is
insufficient, by comparison with the other elements described above, to warrant
a conclusion that an employer-employee relationship existed between the
appellant and Mr. Bocquet. On the contrary, I believe, based on all the
elements characterizing the overall relationship between the parties, that Mr.
Bocquet was not an employee of the appellant during the period at issue.
[48] In light of
the foregoing, the appeal is allowed and the decision of the respondent is
amended, on the basis that Mr. Pierre Bocquet did not hold insurable
employment with the appellant during the period from January 1, 2001, to
January 1, 2002.
Signed at Ottawa, Canada, this 7th day of January, 2004.
Dussault J.
Certified true translation
Colette Beaulne
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