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Citation: 2003TCC585
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Date: 20030911
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Docket: 2001‑4481(EI)
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BETWEEN:
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DONALD PLOURDE,
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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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REASONS FOR JUDGMENT
Somers,
D.J.
[1] This
appeal was heard at Jonquière, Quebec, on June 20, 2003.
[2] By
letter dated October 26, 2001, the Minister of National Revenue (the
"Minister") informed the Appellant of his decision that his
employment with the Payor, Coopérative forestière Manicouagan‑Outardes,
during the period at issue, from May 10, 1999, to
March 30, 2000, was not insurable because it did not meet the
requirements of a contract of service and as a result there was not an employer‑employee
relationship between the Payor and the Appellant. In addition, the Minister
advised the Appellant that it had been determined the Appellant's actual
employer was 1863‑2265 Québec Inc. and that his employment was
not insurable because he had control over more than 40% of the voting shares in
the company.
[3] The burden of proof is on the Appellant. The
Appellant must show, on a balance of evidence, that the Minister's decision is
unfounded in fact and in law. Each case stands on its own merits.
[4] In
making his decision, the Minister relied on the following assumptions of fact
which were admitted or denied by the Appellant:
[translation]
(a) The Payor was
incorporated on July 1, 1980; (admitted)
(b) The Payor
operated a business specializing in wood harvesting; (admitted)
(c) The Payor's
managing director is Daniel Fournier; (admitted)
(d) The executive
director of the Payor is Marie‑Laure Bouchard; (admitted)
(e) The company
1863‑2265 Québec Inc. was incorporated on
November 15, 1982; (admitted)
(f) The
Appellant is the sole shareholder in 1863‑2265 Québec Inc.;
(admitted)
(g) The principal
office of 1863‑2265 Québec Inc. is located at the Appellant's
residence, 378 Montaigne, Chicoutimi; (admitted)
(h) 1863‑2265 Québec Inc.
owns a tree‑feller with a multifunctional head worth approximately
$450,000; (denied)
(i) During the
period at issue, the Payor had a contractual arrangement with 1863‑2265 Québec Inc.
for timber felling; (admitted)
(j) The Payor
paid remuneration to the Appellant; (admitted)
(k) 1863‑2265 Québec Inc.
was required to have liability insurance for the tree‑feller; (admitted)
(l) 1863‑2265 Québec Inc.
was responsible for costs related to the maintenance, repair and use of the
feller; (admitted)
(m) Costs for
transporting the feller to the wood‑cutting area were divided between the
Payor and 1863‑2265 Québec Inc.; (admitted)
(n) the Payor had
a foreman at the wood‑cutting area who was responsible for marking off
the wood‑cutting area, and for ensuring that government and work quality
standards were met; (admitted, subject to amplification)
(o) The Payor
paid 1863‑2265 Québec Inc. $18 per cubic metre of cut wood;
(denied)
(p) From the
amount paid to 1863‑2265 Québec Inc., the Payor deducted all of
the goods and services acquired from the cooperative, such as gas, room and
board, telephone, etc.; (admitted)
(q) In addition,
from the amount due to 1863‑2265 Québec Inc., the Payor
deducted the amount of the Appellant's salary plus an additional 27.5% for
benefits such as worker's compensation employment insurance premiums (employee
and employer), premiums paid to the Régie des rentes du Québec, etc.; (admitted)
(r) 1863‑2265 Québec Inc.
was entirely responsible for the Appellant's salary; (denied)
(s) During the
period at issue, the Appellant operated tree‑timber feller belonging to
1863‑2265 Québec Inc.; (denied)
(t) No
production volume was required of the Appellant. (admitted)
[5] The
company 1863‑2265 Québec Inc. was incorporated on
November 15, 1982, and the Appellant is the sole shareholder. The
principal office of this company is located at the Appellant's residence.
[6] During
the period at issue, the Payor had a contractual agreement with 1863‑2265 Québec Inc.
to cut wood. A contract of employment (Exhibit A‑1) was reached
between the Payor and the Appellant on May 10, 1999, stipulating,
among other things, that the Appellant was hired as a mechanic at an hourly
rate of $16.36. The conditions of employment outlined in the contract are
as follows:
[translation]
The employee is hereby bound to
work faithfully for the Coopérative forestière Manicouagan‑Outardes
and agrees to comply with all forestry regulations of the province and of the
cooperative.
A) PROVINCIAL: Specifically, the
laws relating to the environment and to workplace safety.
B) COOPERATIVE: All regulations
presented in your working agreement and/or any regulations set out by the
Cooperative's representative.
C) I hereby authorize the doctor
designated by THE COOPERATIVE to obtain a complete copy of my medical files if
he deems it relevant.
IMPORTANT: All
workers must confirm the number of hours worked, either verbally or in writing,
to the Cooperative’s representative. Workers have 24 hours from the end of
the working day to comply with this requirement.
The
employee shall be considered an employee of the Cooperative only when present
at his usual work site. He is not considered to be at work when travelling to
and from the work site.
[7] At
the beginning of the work, the Payor and the Appellant signed a document
entitled [translation]
"Information Required to Hire New Group 04 Equipment" (Exhibit A‑2).
The equipment mentioned in this document is a saw feller worth approximately
$500,000. The Payor set a lump sum rental price.
[8] The
Appellant's company had liability insurance for the tree‑feller. This
company was responsible for maintenance costs, as well as costs associated with
the repair and use of the tree‑feller. Costs for transporting the tree‑feller
to the cutting area were divided between the Payor and the Appellant's company.
The Payor deducted from the amount paid to 1863‑2265 Québec Inc.
all the goods and services acquired from the cooperative, such as gas, room and
board, telephone, etc. In addition, from the amount due to 1863‑2265 Québec Inc.,
the Payor deducted the Appellant's salary plus a 27.5% charge for benefits such
as worker's compensation, employee‑employer employment insurance
premiums, premiums paid to the Régie des rentes du Québec, etc.
[9] According
to the Appellant, he worked for the Payor for the first time during the period
at issue. When he was hired, the Appellant received a document entitled
"Coopérative forestière Manicouagan‑Outardes – Member’s
Guide" (Exhibit A‑3), outlining employment conditions.
According to this guide, [translation] "all workers must acknowledge that
membership in the Cooperative is a pre‑condition to hiring" and the
policy with respect to paid hours is as follows (pages 12 and 13 of the
guide):
[translation]
Guiding Principle
The principle of time worked equals
time paid shall apply. This is to ensure equity among all members of the
Cooperative.
Work Schedules
Work schedules are set by
Cooperative management, after discussion with the worker/operators and
equipment owners.
Pay and Coverage
The Cooperative shall pay and cover
(C.S.S.T.) workers within the time period they are scheduled to be present on
the work site (wood‑cutting area, road and landing construction and
maintenance, loading and transportation, office, camps, kitchen, etc.) or while
involved in work ordered by a manager of the Cooperative. Workers are therefore
employees of the Cooperative.
1. When the worker/operator
conducts production work, the Cooperative is responsible for him and he
must be paid in accordance with the rates established by the Cooperative for
this purpose.
2. When the
worker/operator conducts maintenance and repairs during the work periods
scheduled, the policy of compensatory work time applies. . .
3. When the
worker/operator conducts production work outside of the established work
schedule, the worker must obtain prior authorization from the Cooperative and
will therefore be paid by and under the responsibility of the Cooperative, only
when the Cooperative has been so notified.
4. When the
worker/operator conducts maintenance and repair work for the owner,
outside of the established work schedule, he is therefore paid by and under the
responsibility of the equipment owner who must notify the Cooperative when this
work is conducted in the area of operation.
The owner is paid and covered by
the Cooperative according to the same principles which govern the
worker/operators. He is paid and covered by the Cooperative when he is on the
work site during the established work schedule.
Compensatory Work Time
Upon mechanical breakdown or any
other production stoppage of less than two hours, the worker/operator's time
may be paid on condition that he does not refuse compensatory work that he an
perform.
Upon mechanical breakdown or
production stoppage of more than two hours, the worker/operator's time may be
paid, on condition that the Cooperative has work, for which he is qualified, to
offer him.
Walking Time
Walking and travel time between the
camp and the usual work site is not considered work time.
This walking and travel time may be
covered only if the transportation from the camp to the work site is supervised
by a manager of the Cooperative.
Authorization for Hours
Paid
The time paid by the Cooperative
must be authorized by the employee's immediate supervisor.
When his time is not authorized by
his immediate supervisor, an owner, or an owner/operator is deemed to be
employed by the owner when conducting the work necessary for proper operation
of the owner's equipment and the owner must provide the Cooperative with his
C.S.S.T. number to demonstrate he is properly covered.
[10] The Appellant explained that he was required to return to the foreman
a schedule establishing his working hours, which was provided to him by the
foreman. According to the Appellant, he met the foreman twice per day. The
foreman did not testify at this hearing to corroborate the Appellant's
statements.
[11] The Appellant worked as a mechanic; Jean‑Marc Pouliot and
Daniel Bouchard were equipment operators—one worked days and the other
worked nights. The Appellant considered these operators to be [translation] "his men". The
names of these operators and that of the Appellant appear on the payroll
submitted as Exhibit A‑4.
[12] The Appellant explained that the operators helped with his duties as a
mechanic when there was a heavy equipment breakdown and that they were paid for
this time. When there was a major breakdown, the worker/operator could be
offered compensatory work, on condition that the Payor had such as to offer him
(see page 13 of the member's guide, Exhibit A‑3); therefore the
worker/operator was not paid if the Payor did not have any work to offer him.
[13] The Appellant produced as evidence the payroll, Exhibit A‑4,
in which appeared the names of the Appellant and the two operators,
Daniel Bouchard and Jean‑Marc Pouliot, the hours worked, the
earnings, the benefits, the amounts of GST and TVQ to be deducted, etc. This
payroll also indicated, under the [translation]
"Earning Summary" heading, the volume of wood cut, the hourly rate,
etc., as well as the details of purchases, such as fuel, telephone, etc.
[14] According to the earnings summary, $6,058.25 was deducted from an
amount of $10,821.24. These deductions represented the salaries of the
Appellants and the two operators, leaving an income of $4,762.99.
[15] The labourer's wage and the machine wage were paid every two weeks by
bank transfer.
[16] On cross‑examination, the Appellant explained that the heavy
equipment included a [translation]
"tree‑feller with a saw head" worth between $450,000 and
$500,000. The two operators of this equipment were labourers with the
Appellant's company: Jean‑Marc Pouliot was a regular employee of the
Appellant and Daniel Bouchard was assigned by the Payor to work on the
tree‑feller.
[17] The financial statements of 1863‑2265 Québec Inc.
(Exhibit I‑1) demonstrate, among others, the following expenses for
1999, under the heading [translation]
"Operating Costs": salaries and payroll taxes, $117,231; Machinery maintenance, $54,461; Fuel and oil, $37,508;
Insurance, $15,273; Travel and meals, $1,345.
[18] The Appellant explained that the total for salaries and fringe
benefits represented the salary and fringe benefits for him and for the two
operators. He also explained that the payroll taxes were amounts paid to the
C.S.S.T., employment insurance premiums and premiums paid to the Régie des
rentes du Québec. Equipment transportation fees were the responsibility of the
Appellant and the Payor: transportation costs to the work site were the
responsibility of the Appellant's company and costs for returning it to the
Appellant’s residence were the Payor's responsibility.
[19] The Appellant recognized that he had replied to question 28 in
the negative in his application for unemployment benefits, "Are you self‑employed
or engage in the operation of a business (other than farming)?" His
explanation for his answer was that he was not self‑employed and he did
not operate a business.
[20] The Appellant was the only witness to be heard in support of his
appeal.
[21] Marie‑Laure Bouchard, executive director for the Payor and
witness for the Minister, stated that she was responsible for the Payor's
finances. She explained that usually the heavy equipment operator brought his
operators to work at wood‑cutting. Daniel Bouchard and Jean‑Marc Pouliot,
whose names appeared on the payroll (Exhibit A‑4) are the operators
of the heavy equipment owned by the Appellant.
[22] According to the witness, the Appellant was the mechanic who was
responsible for machinery maintenance and who supervised the operators' work.
She added that 1863‑2265 Québec Inc., the sole shareholder in
which was the owner, paid the maintenance costs for the machinery.
[23] Ms. Bouchard explained that the GST and TVQ
appearing in the payroll (Exhibit A‑4) were billed to the
Appellant's company but that the Payor did him a favour by doing all the
calculations. With respect to the payroll, this witness gave the following
explanations with respect to the earnings column:
[TRANSLATION]
. . . you
have a column "volume measured" and one "volume advanced".
Volume measured is when it is weighed; the volume advanced is the wood that was
cut in the forest, our measurer went by and he counted the trunks and he gave a
certain volume to be advanced. . .
[24] This witness stated that the Appellant, through his company, had two
pieces of heavy equipment involved in this contract, a tree‑feller with a
saw head and a Target. This last piece of equipment trims and sections the cut
trees. She added that the heavy equipment owners choose their operators and
they discuss this with the Payor's general management. She also added that the
machinery owner is responsible for keeping it in good working order, for the
cost of its use and repair.
[25] According to this witness, it is the foreman's responsibility to mark
the cutting area, to ensure safety and accident prevention, to respect the
environment, to apply quality standards and to ensure compliance with all the
rules and regulations of the Ministère des Ressources naturelles. In addition,
she stated that the heavy equipment owner, along with the supervisor, approves
overtime for employees.
[26] Ms. Bouchard acknowledged that the document entitled [translation] "contract of
service: multifunctional mechanical felling of short wood" (Exhibit I‑3)
is a standard agreement. Clause 1.4 of this standard agreement reads as
follows:
[translation]
"THE COOPÉRATIVE" shall
manage the salaries of its employees and the "THE OPERATOR" shall be
responsible for salaries paid under the contract. An additional amount
equivalent to 27.5% shall also be paid in order to compensate for payroll taxes
such as the Régime de rentes du Québec, the commission de la santé et de
sécurité au travail du Québec, unemployment insurance, health insurance,
vacation, holidays and others as applicable. The rate charged to the artisans
can be readjusted by the Cooperative if modifications have been made to one or
another of these benefit rates.
[27] She stated that the operator is the owner of the machine. In this
case, 1863‑2265 Québec Inc., of which the Appellant is the sole
shareholder, is the operator. She added that in the event that the machinery
belonging to the Appellant is sold, the operators, as members of the
cooperative, would be returned to the call‑back list.
[28] On cross‑examination, Ms. Bouchard stated that the contract
of service (Exhibit I‑3) did not exist when the Appellant was hired
but that there was a verbal agreement with the Appellant and his company that
the conditions outlined in the contract also applied to the verbal agreement.
[29] This witness explained that the foreman, in addition to the responsibilities
listed above, was also required to ensure that the operators conducted their
work in the proper manner, in other words, that the wood was cut to the desired
length. She added that she did not know how often the foreman visited the work
site.
[30] Finally, Ms. Bouchard said she agreed with the following
interpretation by Counsel for the Respondent with respect to compensatory work:
[translation]
Upon mechanical breakdown or any
other production stoppage—so the machine is no longer operating—the worker or
operator may be paid for his time—in other words, he will continue to receive
his salary—on condition that he does not refuse to work the hours for which he
was advanced money at another time.
[31] In M.N.R. and Emily Standing (No. A‑857‑90),
Stone J. of the Federal Court of Appeal said:
. . . There is no foundation in the case law for
the proposition that such a relationship may exist merely because the parties
choose to describe it to be so regardless of the surrounding circumstances when
weighed in the light of the Wiebe Door test.
[32] In Duplin v. Canada (Minister of National
Revenue ‑ M.N.R.), [2001] T.C.J. No. 136, Tardif J. of
this Court said the following at paragraph 30 of his decision:
In other words, the intention
of the parties to a work agreement is in no way conclusive for the purpose of
characterizing that agreement as a contract of service. It is basically one
factor among many.
[33] In 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.,
[2001] S.C.J. No. 61, the Supreme Court of Canada retained that
the degree of control exercised over the worker is an essential element that
must be considered in order to decide whether the latter is an employee or a
self‑employed entrepreneur.
[34] The Supreme Court of Canada outlined the following principle at
page 2 of this judgment:
There is no one conclusive test which can be
universally applied to determine whether a person is an employee or an
independent contractor. What must always occur is a search for the
total relationship of the parties. 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.
[35] In the case under review, only two witnesses were heard: the Appellant
and the Payor's executive director.
[36] The degree of control exercised by the Payor over the work of the
Appellant and his operators was mentioned. The Appellant explained that the
Payor's foreman set the hours of work, designated the work site and visited
them twice per day to verify compliance with the directives that had been
given.
[37] The Court must limit itself to the evidence presented. The degree of
control is an essential test. The foreman, who is the individual responsible
for exercising the control, did not testify at the hearing of this appeal. The
Appellant testified that he supervised the work of his operators when he was
not busy with his duties as a mechanic. He added that during his free time, he
drove around in his truck, which is owned by his company, to check on the work
of his operators.
[38] In Charbonneau v. Canada (Minister of National Revenue ‑
M.N.R.), [1996] F.C.J. No. 1337, the Federal Court of Appeal
said the following:
When we look at the overall picture, it is
quite apparent that this was, prima facie, a contract of enterprise. The
ownership of the skidder, the choice of the other crew member, payment based on
an undefined volume and the autonomy of the crew are determining factors which,
in the context, can only be associated with a contract of enterprise.
Supervision of the work every second day
and measuring the volume every two weeks do not, in this case, create a
relationship of subordination, and are entirely consistent with the
requirements of a contract of enterprise. It is indeed rare for a person to
give out work and not to ensure that the work is performed in accordance with
his or her requirements and at the locations agreed upon. Monitoring
the result must not be confused with controlling the worker.
The same is true of the standards imposed
in respect of hours and days of work, holidays, operating method and
safety. The standards are common to all workers in public forests whose
activities are "governed" by the Ministère des Ressources
naturelles. They apply regardless of whether the worker is a mere employee
or a contractor.
[39] It is normal for the foreman to check the quality of the machinery operators'
work. The Payor had an interest in the result; in addition, the Appellant
stated in his testimony that the Payor did not set a quota.
[40] According to the payroll (Exhibit A‑4), the Appellant
assumed all expenses related to the operation of the heavy equipment, paid the
operators' salaries—and his own—as well as the fringe benefits mentioned above.
The Payor provided a service to the Appellant and/or his company by making
certain calculations, and in exchange for this, the Payor charged the Appellant
GST and TVQ.
[41] The 1999 financial statements for the Appellant's company
(Exhibit I‑1) corroborate the data entered on the payroll. All of
the operating costs for 1863‑2265 Québec Inc., of which the
Appellant is the sole shareholder, the payroll taxes, etc., are indicated in
these financial statements.
[42] The Appellant affirmed to the Court that he did not have any contracts
in 1999 other than that with the Payor. Therefore the Appellant, through his
company, provided services to the Payor under a contract for services.
[43] The selection of fellow team members, worker supervision, payment as a
function of an undefined volume and the independence of the team are all
determining factors which, in this context, can only be associated with a contract
for services.
[44] The Appellant stated to the Court that Jean‑Marc Pouliot
had been the regular operator of his heavy equipment for several years,
therefore he brought him to perform work for the Payor. The other operator,
Daniel Bouchard, was a worker who was suggested by the Payor, and the
Appellant, before agreeing to hire him, reassured himself of his competence.
This worker was therefore under the Appellant's supervision.
[45] Ms. Bouchard testified that the Appellant owned two pieces of
heavy equipment, a tree‑feller and a Target (delimber). The Appellant
stated that his company also owned a service truck whereas the equipment
contract (Exhibit A‑2) mentions only a saw feller. Ms. Bouchard
also stated that the heavy equipment owner was responsible for the costs of
operator overtime.
[46] In order to distinguish a contract of service from a contract for
services, the Court must examine the tests outlined in Wiebe Door Services
Ltd. v. M.N.R., [1986] 3 F.C. 553, which are the degree of
control, ownership of tools, chances of profit and risks of loss, and
integration of the employee in the employer's business.
[47] With respect to the degree of control, the fact that the foreman
marked the area to be cut, ensured compliance with the quality standards
pursuant to the laws and regulations of the Ministère des Ressources
naturelles, etc. is not sufficient control to conclude that the Appellant was
an employee of the Payor. In addition, the Appellant stated, during his
testimony, that he supervised his fellow team members.
[48] The tools that were the property of 1863‑2265 Québec Inc.,
owned by the Appellant.
[49] The chances of profit and risks of loss were assumed by the
Appellant's company, as is shown in the financial statements submitted as
Exhibit I‑1.
[50] 1863‑2265 Québec Inc. was the Appellant's business and
the latter was integrated into its operations.
[51] In Michel Simard and M.N.R.,
[2002] T.C.J. No. 468, Savoie D.J. of this Court said the
following:
2425‑9483 Québec Inc. was
the worker's business. Thus, the worker and his company, 2425‑9483 Québec Inc.,
became integrated with the appellant at the beginning of the project in order
to carry out the agreed work. However, one must recognize that the meaning and
scope of a contract is determined not by the title the contract is given, but
rather by the relationships between the parties and by the parties' conduct.
That is what determines the true nature of the resulting contract.
[52] The facts related in this case are analogous to those in the case
under review. Savoie D.J. concluded that the Appellant's employment was not
insurable because it did not meet the requirements for a contract of service.
Therefore there was no employer‑employee relationship. At paragraph of
his judgment, Savoie D.J. said the following:
In addition, the appellant's actual
employer was 2425‑9483 Québec Inc. However, his employment with
that employer is not insurable because the appellant controlled more than 40%
of the voting shares of that corporation.
[53] In light of the circumstances and of the evidence presented, the Court
concludes that the Appellant was in the service of 1863‑2265 Québec Inc.
and not in the service of Coopérative forestière Manicouagan‑Outardes.
In addition, the Appellant's employment during the period at issue was not
insurable since he controlled more than 40% of the voting shares in 1863‑2265 Québec Inc.
[54] As a result, the appeal is dismissed and the
decision of the Minister is confirmed.
Signed at Ottawa, Canada, this 11th day of September 2003.
Somers, D.J.T.C.C.
on this 22td
day of March 2004.
Shulamit Day‑Savage,
Translator
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