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Citation: 2004TCC88
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Date: 20040223
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Docket: 2002-4826(EI)
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BETWEEN:
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ANNE PERREAULT,
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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 FOR JUDGMENT
BédardJ.
[1] This appeal was heard in
Québec, Quebec, on October 7, 2003.
[2] In 2001, the Appellant, Anne
Perreault, ran a business called Centre de Parrainage
Scolaire (the "Centre"). The Centre provided a personalized
academic assistance service and a homework assistance service to
children with learning problems.
[3] Ms. Perreault first identified the
child's learning difficulty and then with the parents, determined
the objectives to be attained for the child. She drew up an
action plan that she later implemented by assigning the
appropriate resource person to carry it out. This resource person
was chosen by Ms. Perreault from her central database, which
contained a list of approximately 100 resource persons who were
mostly teachers.
[4] The Minister of National Revenue
(the "Minister") claimed that the work done in 2001 by the 25
resource persons (whose names appear in Appendix A of the Reply
to the Notice of Appeal) recruited by Ms. Perreault was insurable
employment for the purposes of the Employment Insurance
Act (the "Act") and its Regulations.
[5] To have the Minister's decision
vacated, Ms. Perreault had the onus of demonstrating that:
(i) either the business she ran
was not a placement agency;
(ii) the individuals she recruited
did not provide their services under the direction or control of
the children's parents; or
(iii) she herself did not pay the
recruited individuals.
[6] In rendering his decision, the
Minister primarily made the following assumptions of fact listed
in paragraph 8 of the Reply to the Notice of Appeal:
[Translation]
(a) The Appellant
runs a personalized academic assistance and homework assistance
service for primary, secondary and college students.
(admitted)
(b) The Appellant
runs her business under the name of Centre de parrainage
scolaire. (admitted)
(c) During the
period in question, the Appellant was the sole proprietor of the
business. (admitted)
(d) The Appellant
recruits her clients (parents of the children) through newspaper
advertisements and in public and private schools in the
Québec region. Moreover, doctors and psychologists refer
parents of children with academic problems to the Appellant.
(denied)
(e) The Appellant
runs her business all year and her business hours are generally
from 9 a.m.-5 p.m., Monday-Friday. (admitted)
(f) The
Appellant recruits tutors through advertisements in the
newspaper, Le Soleil, and through Laval University's
placement office. Most are university graduates. (admitted)
(g) The Appellant
meets the potential tutors to ensure that they possess the
required skills and that they will adhere to their contract. If
the Appellant is satisfied, they are entered into her database of
candidates. (admitted)
(h) When a tutor's
application is added to the Appellant's candidate database, a
contract called Conditions d'inscription des enseignants au
fichier des fournisseurs [conditions for tutors to register
on the supplier's list] is signed by the parties and stipulates
the following: (denied)
(i) When a
tutor accepts a contract, he or she agrees to provide instruction
and the necessary guidance as contracted with the Appellant's
client to meet the specific needs expressed by the student or
parents in the agreement provided for in the educational
file.
(ii) The tutor shall
determine the educational tools, teaching method and content of
intervention for the student and shall adapt them over the course
of the mandate in order to meet the objectives set by the parents
or student.
(iii) The tutor must
report on how the arrangement is progressing by regularly
providing the Appellant with progress reports for their contract
with the invoices which can also be used for payments under the
contract.
(iv) The tutor agrees to
respect the schedule as determined with the student's
parents.
(i) The
Appellant signs a Contratde service
pédagogique [educational service contract] with each
of its clients. It contains the following: (denied)
(i) The place
where the student's private classes will be held, which is
normally at the client's home.
(ii) The requirement
to have another adult present as a guardian and to supervise the
student during the private classes.
(iii) The client can
terminate the contract with notice and the Appellant agrees to
reimburse the client for the classes that have been paid for but
not given except for the $25 non-refundable administration fee to
open the file.
(iv) The Appellant agrees
to inform the parent about the student's learning progress during
the term of the contract.
(v) The Appellant
shall inform the client that the Appellant's tutors are bound by
a non-competition clause for a period of one year after
officially leaving the Appellant's business.
(j) For each
mandate, a contract called Contrat spécifique
avec l'enseignant [specific contract with tutor] is
signed by the Appellant and tutor. (admitted)
(k) This contract
sets out the contact information for the student's parents, the
tutor's name, the number of hours per week and the number of
weeks, the total hours, start and end dates of the course, and
the hourly rate. (denied)
(l) Each of
these contracts contains the following clauses: (denied)
(i) The tutor
is not authorized to exceed the hours set out in the contract and
is not authorized to discuss the hourly rates with the
Appellant's client.
(ii) In respect of
the Consumer Protection Act, the Appellant can, at any
time, terminate the contract without any penalties
whatsoever.
(iii) If the client
complains, whether justified or not, the Appellant can also
terminate the contract without any penalties.
(iv) The tutor does not
have the right to change the number of hours per week that is
indicated in the contract. The Appellant must agree to any
changes made in this regard.
(m) The tutors provided
educational material and they had a library and photocopies made
available to them at the Appellant's office. (admitted)
(n) The tutors
assumed transportation costs from their homes to the class
location. (admitted)
(o) At the beginning
of 2000, the Appellant opened a trust account for which she is
the sole trustee and signing authority for cheques, into which
she deposited all amounts received from her clients.
(admitted)
(p) The Appellant
pays the tutors' salaries from this account. (denied)
(q) The Appellant
determined the hourly rate paid to the tutors. It was $12, or,
based on skills, a little higher after negotiating done by the
tutor. (denied)
(r) The tutors
received their pay from the Appellant by direct deposit upon
presentation of their time sheets every 15 days. (denied)
(s) The tutors
generally faxed their invoices or time sheets to the Appellant or
dropped them off at her office. (admitted)
(t) The
Appellant called the tutors to provide services to her clients.
(denied)
(u) The tutors
provided professional services under the control and direction of
the Appellant's clients. (denied)
(v) The Appellant,
and never the Appellant's clients, directly paid the tutors.
(denied)
Preliminary remarks
[7] At the hearing, the Respondent's
counsel admitted that if paragraph 6(g) of the Regulations
did not apply, the 25 resource persons recruited by Ms. Perreault
(the "tutors") would not have been considered to be holding
insurable employment at the Centre because they worked as
independent consultants.
[8] It should also be pointed out that
no parent, child or teacher testified at the hearing.
Analysis
[9] The relevant part of paragraph
6(g) of the Regulations, which sets out the three
conditions that have to be met for an employment to be insurable,
is as follows:
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:
...
(g) employment of a person who is placed in that
employment by a placement or employment agency to perform
services for and under the direction and control of a client of
the agency, where that person is remunerated by the agency for
the performance of those services.
A. First condition: Was the
Centre a placement agency?
[10] I must first determine whether the
Centre was a "placement agency."
[11] It is not really important to ask
whether the Centre acted as a placement agency or an
intermediary, but, rather, to determine whether placement or
intermediary activities were its primary purpose. In fact, Ms.
Perreault's counsel did not deny that the Centre was acting as a
placement agency or intermediary. He argued instead that this was
not a determining or essential characteristic.
[12] In other words, what should be asked is
whether the parents contacted the Centre so that it would recruit
a tutor to solve their child's learning problems or if they used
the Centre's services so that it would take responsibility for
their child's learning problems. To answer this, the type of
services provided by the Centre must be reviewed.
[13] Ms. Perreault's non-contradicted and
credible testimony revealed that the parents met her or called
her to discuss their children's learning problems. She determined
the problem and reviewed the documents sent by the parents,
especially report cards and homework. She tried to know what the
home environment was like, which, in her opinion, was often the
cause of learning problems. She thus drew up an intervention plan
to attain the parents' objectives. Last, she implemented the
intervention plan by choosing the most appropriate resource
person to meet the child's needs.
[14] For those children who had more severe
and complex problems, Ms. Perreault used the services of Ms.
De Koninck (with a Ph. D. in Educational Science and a degree in
Remedial Education). She sometimes helped Ms. Perreault develop
the intervention plan and ensure that it was carried out.
Ms. De Koninck's convincing testimony corroborated
Ms. Perreault's in this regard.
[15] Furthermore, Ms. Perreault agreed by
contract to inform the parents about the student's learning
development during the term of the contract.
[16] To support her representation that the
Centre was not a placement agency, Ms. Perreault submitted a
letter from the Ministère du Revenu du Québec
(Exhibit A-4), designating the Centre as a recognized
teaching establishment and giving it a certification number which
allows individuals who are 16 years of age or older to claim the
Centre's course fees as long as the courses they take are only
used to acquire or improve the required skills for a job. She
also submitted a document from the CSST, Exhibit A-5, which
classified her business as one providing teaching services.
[17] In light of the evidence provided, I
find that the Centre was not a placement agency, even though it
carried out placement agency and intermediary activities. Ms.
Perreault convinced me that the Centre's primary activity was to
offer personalized academic and homework assistance service to
children with learning problems. In fact, she was able to show
that the parents mainly used her services so that she could deal
with their children's learning problems and not to recruit a
tutor.
B. Second condition: Did Ms.
Perreault's clients control or direct the tutors?
[18] The next issue I must examine is
whether the tutors provided services under the direction or
control of Ms. Perreault's clients.
[19] In Wiebe Door Services Ltd.
v. M.N.R.., [1986] 3 F.C. 553, MacGuigan J.A. of the Federal
Court of Appeal went on at great length about the criterion of
the control test and recognized that the right to specify how the
work had to be carried out and giving instructions to the
employee on how to do the work is a fundamental element in
exercising control over the employee's work.
[20] However, MacGuigan J.A. also recognized
that the criterion of the control test was not easily applicable
in the case of highly skilled and professional workers who
possess skills far beyond the ability of their employers to
direct.
[21] In Vulcain Alarme Inc. v.
Canada (Minister of National Revenue - M.N.R..), [1999]
F.C.A. No. 749, Létourneau J.A. of the Federal Court of
Appeal again set out the principle by which control is based on
giving instructions on the way the employee's work is to be
done.
[22] To demonstrate that the tutors were
under the direction or control of Ms. Perreault's clients,
the Respondent's counsel referred to paragraphs 2, 3 and 6 of the
contract, Conditions d'inscription des enseignant(e)s au
fichier des fournisseurs [conditions for tutors to register
on the supplier's list] (Exhibit A-1), which are as follows:
[Translation]
2. Every time
a contract is accepted by a tutor, he or she agrees to teach and
provide the required coaching as contracted with the client to
meet the specific needs determined by the student or parents
under the agreement provided in the educational file. A specific
agreement must be reached by the parties in order to determine
the salary, duration and other specific obligations, if
applicable. If for any reason you have to interrupt this
agreement, you must find a replacement who must accept the
conditions of this agreement;
3. The tutor
will determine the educational tools, intervention method and
content for the student and adapt them during the mandate in
order to attain the objectives set by the parents or student;
6. The tutor
agrees to follow the schedule in the contract as determined with
the student's parents. For any modifications, the tutor will make
arrangements with the parents directly.
[23] I really do not see how the
Respondent's counsel could refer to paragraphs 2 and 3 and say
that the tutor was under the client's control or direction.
Control over the results and the setting of objectives must not
be confused with control over the tutor. In fact, paragraph 3
clearly demonstrates that it was the tutor who determined the
intervention method and content to attain the objectives set by
the clients.
[24] As for the argument based on the fact
that the tutor agreed to follow the schedule made by the clients,
which the Respondent's counsel referred to in order to
demonstrate that the client had control over the tutor, it
appears neutral and inconclusive in itself. Control cannot
automatically be inferred because the client determines the times
when the services are rendered. The idea of control is not
necessarily excluded in business contracts. It is generally
included, albeit somewhat like in work contracts, to various
degrees, which, nevertheless, can be surprising with regard to
scope and the nature of the business agreement is still
unaltered. It is sufficient to point out how subcontractors are
supervised at a construction site.
[25] To show that the tutors provided
services under the clients' control and direction, the
Respondent's counsel referred to a clause in the Contrat
de service pédagogique [educational service
contract] (Exhibit A-2), which mostly stipulates that instruction
must be given in the presence of another adult who cares for and
supervises the child. Again, I do not see how control over the
teacher can be inferred because an adult has to be present to
supervise the child while the services are rendered. There is
certainly a slight difference between ensuring the child's
supervision and care and directing or controlling the tutor. Is
protecting the child not the only purpose of this contractual
clause?
[26] The Respondent's counsel referred to
two cases heard by the Court concerning the Centre's employees. I
must point out that each case is a particular one and that I must
render a decision based on the evidence submitted at this
hearing. For example, from what I understand, the testimony of
the tutor, Ms. Bussière, in which the client had some
control over her, was a determining factor in the decision1 of Somers J. of
March 1, 2000. It should also be pointed out that in that case,
the testimony of the student, who was an adult, was also probably
vital to the decision. In this case, no tutor, student or parent
testified. However, Ms. Perreault's credible and
non-contradicted testimony clearly demonstrated that the tutors
did not provide services under the clients' control or
direction.
[27] As for the other case2 referred to by the Respondent's
counsel, I simply do not see the relevance in it because the
deputy judge, A. J. Lesage, came to the conclusion that the
Appellant and employee were linked by a contract of employment
within the meaning of paragraph 5(1)(a) of the Act.
[28] On these grounds, I believe that the
tutors in the case were not under the control or direction of Ms.
Perreault's clients.
C. Third condition: Did Ms.
Perreault pay the tutors?
[29] Ms. Perreault's counsel argued that in
each case, the parents paid the tutor. He maintained her
representation on the following contractual clause of Exhibit
A-2:
[Translation]
I order Anne Perreault to make periodic payments to the tutors
on my behalf, as well as the payment that was made in trust to
that effect, and based on the hours worked by them and confirmed
with a time sheet. I also authorize the business to withdraw its
fees from this same account.
[30] It was admitted that the client
probably did not know the percentage of the amount that he
deposited into this account that went to the tutor. Ms. Perreault
testified that she withdrew her fees from the money deposited
into the account and that it represented about 50% of the
funds.
[31] The client and Ms. Perreault were the
sole parties to the contract. It was an executory contract of
tutoring that Ms. Perreault executed through self-employed
workers who, most of the time, were teachers. As payment for
services rendered by Ms. Perreault, the client paid her a sum of
money. The tutor was not a party to the contract at all. Within
the terms of the contract, the client therefore had no obligation
to the tutor. The parents were only contractually bound to
Ms. Perreault.
[32] The mandate actually consists of one
person providing another with the power to represent him or her
in carrying out a legal transaction. In this case,
Ms. Perreault claimed to be mandated by the client to pay
the tutor. However, the client owed the tutor nothing and did not
even know how the tutor was paid. The contract linked the client
and Ms. Perreault. In my opinion, the mandate was invalid.
[33] The mandate clause was merely a
simulation put in place by Ms. Perreault to avoid the application
of paragraph 6(g) of the Regulations. In addition, the
Appellant's counsel admitted the following at the hearing, which
I quote:
[Translation]
Payment. I admit that in this regard, there is a grey zone Your
Honour. But, if you find that payment was intentionally made, in
spite of the system that is implemented, and which, Your Honour,
is done so that the payment is made directly by the parents to
the tutor through a trust account. Ms. Perreault has expert
accountants who . . . .
[34] I therefore believe that the mandate
was invalid. The mandate clause was merely a simulation and, in
reality, Ms. Perreault, and not the parents, paid the tutor.
[35] The employment held in 2001 by the 25
resource persons (whose names appear in Appendix A of the Reply
to the Notice of Appeal), was not insurable employment for the
purposes of the Act and its Regulations because two of the three
conditions listed in paragraph 6(g) of the Regulations
were not satisfied. In fact, I believe that the business run by
Ms. Perreault was not a placement agency and that the resource
persons she recruited did not provide their services under the
direction or control of Ms. Perreault's clients.
[36] Consequently, the appeal is allowed and
the Minister's decision is vacated.
Signed at Ottawa, Canada, this 23rd day of February 2004.
Bédard J.
Translation certified true
on this 23rd day of December 2004 .
Julie Oliveira, Translator
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