Date: 20010403
Docket: 2000-441-EI, 2000-443-CPP
BETWEEN:
TRIUMPH IMPLEMENTATION CONSULTING CORPORATION,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
GAÉTANE DOLCI,
Intervenor.
Reasons for Judgment
Lamarre Proulx, J.T.C.C.
[1]
This is an appeal from a decision of the Minister of National
Revenue (the "Minister") to the effect that
Ms. Gaétane Dolci was employed in insurable
employment while working for the Appellant for the period from
April 28, 1997 to January 29, 1999, within the meaning
of the Employment Insurance Act
(the "Act") and the Canada Pension
Plan.
[2]
The legal basis for the Minister's decisions appears to be
paragraph 6(g) of the Employment Insurance
Regulations and subsection 34(1) of the Canada
Pension Plan. In this manner, it would appear that the
Minister considered the Appellant to be a placement agency. The
Reply to the Notice of Appeal however states that the basis of
the employment status is paragraph 5(1)(a) of the
Act and alternatively paragraph 6(g) of the
Employment Insurance Regulations. The Reply, under the
Canada Pension Plan follows the same reasoning: the basis
is paragraph 6(1)(a) of the Canada Pension
Plan and alternatively subsection 34(1) of the Canada
Pension Plan Regulations.
[3]
Mr. Thomas Nash was the witness for the Appellant. Ms.
Gaétane Dolci was the witness for the Respondent.
[4]
Mr. Nash is the Appellant's President. He has a BA in
electrical engineering and a management degree. His first
employment was at Canadian Pacific ("CP") in the
computer and communication division. He worked in Toronto for CP
from 1990 to 1996. He explained that in 1996, CP went through a
major reorganisation. It is at that time that Triumph
Implementation Consulting Corporation ("Triumph") was
incorporated on September 23, 1996. Triumph did consulting
work for the Railway Division of CP in 1996 in the implementation
of computer systems aimed at the transportation side.
[5]
The Project Consulting Agreement that was entered into by the
Appellant and CP, on September 30, 1996, was produced as
Exhibit A-1. The services were for the system design,
development and implementation consulting services for the
Integrated Customer Service System and Price Worksheet Project.
Between September 1996 and around mid-December 1996,
Mr. Nash was acting in the capacity of a project
advisor.
[6]
Around December 1996, Mr. Nash was asked if he could take on
a larger role. The ICSS project was nearly terminated and
Mr. Nash was asked to take the role of Project Director for
the Work Sheet project. The budget of the project in 1997 was of
$5 million. About 40 people reported to Mr. Nash
of whom 32 were CP employees, in the accounting, marketing, sales
and customer service areas. Others were IT contractors and
consultants. Mr. Nash was located in Toronto and the project
was spread between Toronto, Montreal and Calgary. Different
people were working on the project in all three cities.
[7]
Soon it was felt that there was a need for additional help for
data entering. There had been a number of people laid off a few
months prior who had had exposure to this particular computer
system, so that the training time would not have to be
extensive.
[8]
This explains why the Appellant required the services of
Ms. Dolci. Mr. Nash explained that he spoke to
Ms. Dolci by phone and offered her a contract for a short
period of time, as a six month period was first anticipated. In
fact, Ms. Dolci remained on the payroll of Triumph more than
a year and a half. Mr. Nash offered and Ms. Dolci
accepted a pay of $20 per hour. He explained to her that the work
would be on the CP premises, that it would be using the Price
Worksheet software, for data loading and manipulation primarily,
which she was already familiar with, and asked her to see
Mr. Ed Starnino, who would be the overseer and who
would be located on the same floor as her. Mr. Nash told
Ms. Dolci that the working hours could be fairly flexible.
There was no need to ask permission for doctor's
appointments, but if there was an extended period of time, like a
week, Mr. Nash would have to be informed so that he could
understand and possibly negotiate the impact on the project.
[9]
Triumph paid Ms. Dolci. Once a week at first, and then once
every two weeks. Ms. Dolci would send, by e-mail, the
number of hours that she had worked during the pay period. She
would describe the number of hours worked on a daily basis, total
them and multiply by $20/hour. Exhibit A-2 are such
invoices send by e-mail. Exhibit A-3 are a few
cheques that were used to pay Ms. Dolci.
[10] There
were two other persons recruited at the same time as
Ms. Dolci, Delphina James and Faye Linton, who had
also worked previously for CP.
[11]
Mr. Nash stated that if Ms. Dolci had proven to be
inadequate, it would have been his decision to terminate her work
and find a replacement.
[12] The
project was completed in January of 1999 and Triumph's
contract with CP came to an end at that time.
[13]
Mr. Nash stated that his own contract with CP
(Exhibit A-1) provided for a bonus but not
Ms. Dolci's. In this agreement, there is no provision
concerning the hiring of employees by Triumph. Triumph invoiced
CP for the work done by Ms. Dolci, the other two persons and
Mr. Nash himself.
[14]
Mr. Nash stated that Ms. Dolci, partway during that
time period, had expressed that she would have preferred to be a
CP employee.
[15]
Ms. Dolci's testimony was no different. She stated that
she began to work for CP in 1992. Her third and last job was
under Mr. Ed Starnino and she worked entering the
information on the Price Worksheet Project. She began that last
position in March 1996. There were other people working on
the Price Worksheet Project, namely Delphina James and
Faye Linton.
[16] At the
end of the month of April 1997, Mr. Starnino contacted her
by telephone. He asked her whether she was interested in doing
the same type of work that she used to do before she was laid
off. He told her that Mr. Tom Nash would pay for her
services. He informed her that she would be paid $20/hour, that
there would be no vacation, no sick days or overtime, that she
was expected to do at least 40 hours a week, that she would
work at the offices of Canadian Pacific and that Mr. Nash
would phone her soon. She was entitled to determine her work
schedule. She had an assigned space, a desk, a computer, a
telephone and a filing cabinet, provided by Canadian Pacific. She
never had to consult with Mr. Nash on how to complete the
data entry. She normally worked between 7:30 a.m. and
3:30 p.m. to be able to be on site at the same time as the
other employees from whom she needed the answers and resources,
and also to be there when they themselves needed to ask her
questions. She never had an autonomous status with Canadian
Pacific.
[17]
Exhibit A-4 is a letter from Revenue Canada to the
Appellant, dated March 12, 1999. It says the following:
We received a request from the Department of Human Resources
Development for a ruling regarding the insurability of
Gaétane Dolci employment for the period of
April 28, 1997 to January 29, 1999.
Gaétane Dolci engagement with you was insurable under
paragraph 6(g) of the Employment Insurance
Regulations, and pensionable under section 34(1) of the
Canada Pension Plan Regulations.
This is because it meets the two requirements for insurability
and pensionability under the above Regulations.
The first requirement is that Gaétane Dolci performed
services for your client, Canadian Pacific Railway Company, and
was under the direction and control of the client.
The second requirement is that Gaétane Dolci is paid by
you for performing these services.
[18]
Exhibit A-5 is a letter to Triumph from the Appeals
Division for the Minister. It is dated November 4, 1999. It
says the following:
It has been decided that this employment was insurable for the
following reason: Gaétane Dolci was engaged under a
contract of service and, therefore, was considered an employee of
Triumph Implementation Consulting Corporation during the periods
in question. It has also been decided that this employment was
pensionable in accordance with the Canada Pension Plan.
...
The decision in this letter is issued pursuant to
paragraph 6(g) of the Employment Insurance
Regulations, based on paragraph 5(1)(a) of
the Employment Insurance Act and also based on
paragraph 34(1) of the Canada Pension
Plan.
[19]
Paragraph 6(g) of the Employment Insurance
Regulations reads as follow:
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.
[20]
Subsections 34(1) and (2) of the Canada Pension Plan
Regulations read as follows:
(1)
Where any individual is placed by a placement or employment
agency in employment with or for performance of services for a
client of the agency and the terms or conditions on which the
employment or services are performed and the remuneration thereof
is paid constitute a contract of service or are analogous to a
contract of service, the employment or performance of services is
included in pensionable employment and the agency of the client,
whichever pays the remuneration to the individual, shall, for the
purposes of maintaining records and filing returns and paying,
deducting and remitting contributions payable by and in respect
of the individual under the Act and these
Regulations, be deemed to be the employer of the
individual.
(2)
For the purposes of subsection (1), "placement or employment
agency" includes any person or organization that is engaged
in the business of placing individuals in employment or for
performance of services or of securing employment for individuals
for a fee, reward or other remuneration.
Argument
[21] Counsel
for the Appellant referred to the following cases: Edmonton
Nursing Services Assn. v. Canada (M.N.R.), [1991] T.C.J. No.
145 (Q.L.); Rod Turpin Consulting Ltd. (c.o.b. Tundra Site
Services) v. Canada (M.N.R.), [1997] T.C.J. No. 1052
(Q.L.); Computer Action Inc. v. M.N.R., [1990] T.C.J.
No. 101 (Q.L.); Bartimaeus Inc. v. Canada (M.N.R.),
[1999] T.C.J. No. 216 (Q.L.); Sheridan v. Canada
(M.N.R.), [1985] F.C.J. No. 230 (Q.L.) and Edmonds
(c.o.b. A-1 Lumpers) v. Canada (M.N.R.), [2000] T.C.J.
No. 98 (Q.L.).
[22] In
Edmonton Nursing (supra), he referred to the
following passage:
The Appellant is a non-profit organization registered under
the Societies Act of Alberta, set up by a group of private
duty nurses, which maintains a registry of nurses and nurses'
aides who are available for private duty nursing. Each of the
nurses and nurses' aides listed in the registry pays an
annual fee of $125.00 to the Appellant for maintaining their name
on the registry. Various institutions, individuals and
organizations contact the Appellant when they require nurses or
nurses' aides and the Appellant in turn contacts workers in
its registry who might be able to fill the position.
...
"Agency" refers to agent, and "agent" by
definition appears to be "one who or that which acts".
And "employment" refers to "employ", and that
therein in subpart states, "to find work or occupation
for".
In the absence of any other reference I have come to the
conclusion, using the plain meaning of words, that an agent is
one who acts on behalf of and employment is the action of
employment, and that the Edmonton Nursing Services Association is
an association who finds work for its members and therefore is an
employment agency within the meaning of 12(g).
...
[23] In the
decision of Rod Turpin (supra), it was found
that the Appellant was not a general contractor. The only
responsibility the Appellant had to the client was to provide
qualified workers. The Appellant was acting as an employment
placement agency, as contemplated by paragraph 12(g)
of the Unemployment Insurance Act Regulations. At
page 3 :
The contract between the Appellant and Cominco was verbal.
Cominco would contact the Appellant and say we need so many
journeymen electricians at the Polaris Mines site starting on
such and such a date for approximately such and such a period.
The Appellant would find the necessary journeymen electricians
and arrange to get them to the Polaris Mines site.
The Appellant's responsibility to Cominco was only to the
extent that the personnel it provided were qualified to do the
work that was to be performed.
...
The Appellant argues that it is not a placement agency but to
look at it as a general contractor. This I cannot accept. General
contractors usually by the terms of their contracts with clients
are responsible to the client to construct the project contracted
to be constructed in a good and workmanlike manner. Herein, the
only responsibility the Appellant had to Cominco was to provide
qualified workers as specified by Cominco.
[24] In
Computer Action Inc. (supra), counsel for the
Appellant referred to the excerpt at page 5:
Counsel for the Appellant submitted that the Appellant was not
a placement or employment agency within the meaning of section
12(g). He argued that the Appellant provided a marketing
service for consultants. I do not find the argument persuasive.
The term "placement agency" is not defined in the
Regulations and must be given its ordinary meaning read in
context, VIZ, an organization engaged in matching requests for
work with requests for workers. It was argued as well that the
appellant differed from a normal employment or placement agency
in respect of the arrangement as to fees. In my view, nothing in
the language of regulation 12(g) ties the meaning of the
term "placement agency" to the presence or absence of
any particular type of arrangement for the remuneration of the
agency as suggested at one point by counsel for the
Appellant.
[25] In the
decision Vendor Surveillance Corp. v. Canada (M.N.R.),
[2000] T.C.J. No. 620 (Q.L.), the Court found that although
the Appellant was a placement agency, the consultant was not
under the control of the client of the placement agency.
Therefore, the worker had a status of self-employed and not
of an employee. I will quote the following passage from
page 4 of this decision:
... With respect to the fact that the employee had to
submit time sheets and expense reports in order to be paid at an
hourly rate determined by the payer, Vulcain Alarme Inc.,
Létourneau J. referred to the decision in Canada v.
Rousselle et al. (1990),
124 N.R. 339, in which Hugessen J., then sitting on the
Federal Court of Appeal, stated the following at page 344:
Fixing the amount of remuneration or defining the purpose of
the exercise is not controlling work. These aspects exist in a
contract for services as much as in a contract of service. It is
still more the case that control does not lie in the act of
payment, whether by cheque or otherwise.
...
Létourneau J. then referred to a passage in
Charbonneau v. M.N.R., [1996]
F.C.J. No. 1337, in which Décary J. said:
... 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 evidence revealed that Mr. Budgen did not receive
instructions from a supervisor in New York. Rather, he made daily
calls to someone at Northrop in Dallas to keep them informed of
the different problems faced by the suppliers. Northrop did not
indicate to Mr. Budgen on a daily basis the work to be done. It
was rather Mr. Budgen who kept them informed of his input and
instructions regarding any changes or adjustments to the
suppliers' operations. Mr. Budgen was not subject to any
control with respect to his hours worked. He filed a time sheet
using the honour system and was paid on the basis of the time
sheet. The fact that overtime had to be approved was part of the
contractual arrangement. Mr. Budgen agreed to being paid on the
basis of a 40-hour week for the work that had to be done. This is
not in my view necessarily indicative of an employer-employee
relationship as he could and did in fact work more than 40 hours
per week without additional remuneration. Furthermore, Mr. Budgen
could work at home at his own convenience without Northrop being
informed of this fact. It is obvious that he did not have to work
during the business hours of Northrop, which was located in
Dallas and in Florida. Although he was told that it was
preferable that he be present at the suppliers' place of
business during the working hours of their employees, nobody
checked to see that he was. He was in a sense free to organize
his schedule to suit himself.
[26] Counsel
for the Appellant also relied on the decision of Quantum
Information Resources Ltd. v. Canada (M.N.R.), [1991] T.C.J.
No. 420 (Q.L.). He referred first to the headnote and to the
following passages:
The appellant corporation was in the business of providing
computer programming services for computer users and
manufacturers, and employed approximately five hundred employees,
supplemented by additional specialized workers when needed. The
supplemental workers, whose status was the subject matter of this
appeal, worked on fixed term contracts that characterized them as
subcontractors and placed ultimate control over their performance
in the hands on the clients of the appellants. The Minister
determined that these supplemental workers were engaged in
insurable employment. The appellant appealed against this
determination to the Tax Court of Canada.
HELD: Appeal allowed. The appellant kept full control
over the relationship of the client and its subcontractor and
compensated the subcontractor in such a way as to lead to the
conclusion that the subcontractor was self-employed.
...
Quantum is a corporation incorporated under the laws of Canada
and has as its objects the following: to provide computer
programming services for computer users and computer
manufacturers; to provide system analysis and design services for
commercial and scientific application; and to act as consultants
in the field of electronic data processing. It canvasses various
businesses that use computers and offers its services to them. To
carry out the above-mentioned objects, Quantum employs
approximately five hundred employees and supplements these
computer programmers and computer analysts with qualified persons
that can be called on from time to time when it is unable to
provide the services to its clients from within the numbers of
its own employees. Mr. Rafie and Mr. Roberge were qualified
programmers whose services were called upon when needed by
Quantum. They both signed similar contracts with Quantum whereby
they agreed to carry out the specific task required by the
clients on behalf of Quantum as "subcontractors". The
body of subcontractors made up approximately two percent of
Quantum's work force of programmers. Their contracts were for
a fixed term and provided that they would receive no fringe
benefits as employees, no deductions at source for taxes, pension
plans, U.I. premiums, medical or dental insurance; each
subcontractor was responsible for his own expenses; the fixed
term could be extended by mutual consent; compensation was on an
hourly basis; the hours of work were designed to accommodate the
client and were to be certified by the client before being
submitted to Quantum for payment; and the agreement could be
terminated by each of the parties with reasonable notice.
...
Taking into consideration the evidence heard in these appeals,
I am satisfied that Quantum established on a balance of
probabilities that it was not in fact a placement or employment
agency and that when it entered into the agreements with Mr.
Rafie and Mr. Roberge, it was for the purpose of achieving its
own objects and not for the benefit of the two subcontractors.
Although Quantum charged its client more than it paid to the
subcontractors, this was not done so much for the purpose of
generating income, but it was done to keep its client happy when
it was unable to meet the particular demand at that point in time
from within its own resources of employees. Quantum kept full
control over the relationship of the client and its subcontractor
and compensated the subcontractor in such a way as to lead to the
conclusion that the subcontractor was self-employed
[27] In
Quantum Information Resources (supra), counsel for
the Appellant submits that, similarly to the Appellant in that
case, the present Appellant contracted as principal with the
client, not as an agent. His contract with Canadian Pacific was
to provide computer advisory services and project management
services. He hired workers to carry out the duties to meet the
goals, the incentives and the bonuses. He never advertised as a
placement agency and he is not a placement agency. Ms. Dolci
had, on a daily basis, contact with Mr. Starnino but he was
not there to control her but to report to Mr. Nash. If a
problem had occurred, it would have belonged to Mr. Nash to
terminate the employment of the worker.
[28] Counsel
for the Appellant submitted that although he does not have to
argue the point that the worker was not in an employee situation
with the Appellant's client, he is going to address to some
extent the situation. There was no control exerted by CP over
Ms. Dolci. Her schedule was flexible. Her presence at CP was
required by Mr. Nash.
[29] Counsel
for the Respondent argued that Ms. Dolci, the worker, was
doing the same work after and before her hiring by the Appellant.
He argued that the price was not determined by Mr. Nash. He
submitted that the Appellant was a placement agency, since it had
hired three persons. A placement agency does not need to
register. There is no definition of a placement agency or an
employment agency. It may be a matching of requests.
[30] He also
referred to the decision of Vendor Surveillance Corp.
(supra) and to paragraph 18 thereof, stating that
there is no requirement in the Act that the placement
agency be registered under a provincial statute. He submitted
that the Appellant was working as a placement agency on an
ad hoc basis for business reasons. So if the Appellant was a
placement agency, now he has to turn to see whether the worker
was under the control of Canadian Pacific. He submitted that the
worker felt part of the team, she went to meetings, she reported
to Mr. Starnino, from whom she received directions. She was
consulted by Minneapolis and worked with the other CP employees.
She had no chance of profit, no risk of loss, she did not have
the ownership of tools and about the integration test, she was
part of the team receiving instructions from employees.
[31] Counsel
for the Appellant reminded the Court that the Appellant engaged
in the management of a project, bringing all parties together to
complete the project. Mr. Nash realized he would need more
people power. He decided to bring additional services. It was a
data entry position. It was decided that it was better if people
who were familiar with the mode of entering the data would be
recruited. That was a smart business decision. On the $20/hour
that was paid to the workers, he had a $5/hour profit. He was
taking the risk. The instructions came from the Mr. Nash as
project manager. He was the supervisor. To find that the
Appellant would be a placement agency and to accept the
Respondent's position would be too wide a proposition.
Conclusion
[32] It is my
view that the evidence has shown clearly that the Appellant was
not acting as a placement agency. It was acting as a consultant
when it entered into the agreement with CP. The services to be
rendered were the design, the development and the implementation
of a computer system or program that was called the Price
Worksheet Project. The Appellant did not have as one of its tasks
the finding and the placement of employees for a third party.
[33] The
ultimate control over the worker was exercised by the Appellant
and not CP since it is the Appellant that had the direction of
the project. It is a case similar to that of Quantum
Information Resources Ltd (supra). However, I do not
reach the same conclusion as to the work status of the worker.
The judge in Quantum Information Resources Ltd
(supra) found that the worker was in circumstances of
self-employment. In this instance, I cannot but find that the
circumstances of work of the worker were those of an employee,
that is the Appellant's employee.
[34] The
duration of the contract, the nature of the work, the hours of
the work, the site at which the work had to be performed and the
mode of remuneration are elements pointing towards the status of
employee.
[35] I will
now refer to the usual criteria: the control, the ownership of
the tools, the chance of profit or risk of loss and the
integration test.
Control: Ms. Dolci had to be present 40 hours
a week on CP premises which was the Appellant's situs of work
for the particular project. She entered data in the computer
system. She does not seem to have required much instructions as
to how to do it. She was hired because she had had previous
experience with that particular work and she had been found to be
a conscientious and skilful worker. In her previous experience,
she was an employee.
Ownership of Tools: They were provided by CP and not
the worker.
Chance of Profit or Loss: There does not appear to be
any. She was paid on an hourly basis.
Whose Business Is It (or the Integration Test): The
previous conduct and the conduct of the worker at the times in
question is not that of an independent contractor. The worker did
not offer or advertise her services as a consultant. It was the
Appellant's business. The Appellant needed workers to
accomplish its task in the time allotted. It hired the services
of the worker.
[36] The
decisions of the Minister appear to have assessed the Appellant
principally as a placement agency. The Reply to the Notice of
Appeal is more general. It submits first that the worker is the
Appellant's employee and further submits that the Appellant
acted as a placement agency. The facts described in the Reply to
the Notice of Appeal are substantially the same as those found in
the evidence except that in the Reply there is a greater emphasis
on the control exercised by CP than what the evidence revealed.
The Worksheet Project had been contracted out of the main
organisation. It had been privatised. The Appellant had the lead
role in the realisation of the computer program and it was its
responsibility. That is why it was paid for. The worker was under
its supervision and the worker had to perform in accordance with
the expectation otherwise the Appellant had the authority to
terminate the worker's contract of service.
[37] The
worker was in a contract of service with the Appellant for the
period under appeal. The appeal is dismissed.
Signed at Ottawa, Canada, this 3rd day of April, 2001.
Louise Lamarre Proulx
J.T.C.C.
COURT FILE
NO.:
2000-441(EI) and 2000-443(CPP)
STYLE OF
CAUSE:
Triumph Implementation Consulting
Corporation and M.N.R.
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
December 8, 2000
REASONS FOR JUDGMENT
BY:
The Hon. Judge Louise Lamarre Proulx
DATE OF
JUDGMENT:
April 3, 2001
APPEARANCES:
Counsel for the
Appellant:
Paul S. Carenza
Counsel for the
Respondent:
Arnold Bornstein
For the
Intervenor:
The Intervenor herself
COUNSEL OF RECORD:
For the
Appellant:
Name:
Paul S. Carenza
Firm:
Thorsteinssons
Toronto, Ontario
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-441(EI)
BETWEEN:
TRIUMPH IMPLEMENTATION
CONSULTING CORPORATION,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
GAÉTANE DOLCI,
Intervenor.
Appeal heard together with appeal No.
2000-443(CPP)
on December 8, 2000 at Toronto, Ontario by
the Honourable Judge Louise Lamarre Proulx
Appearances
Counsel for the
Appellant:
Paul S. Carenza
Counsel for the
Respondent:
Arnold Bornstein
For the
Intervenor:
Ther Intervenor herself
JUDGMENT
The
appeal from the decision of the Minister of National Revenue is
dismissed and the Minister's decision is affirmed, in
accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 3rd day of April, 2001.
J.T.C.C.
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