Date: 19991123
Dockets: 98-1115-UI; 98-1116-UI; 98-1117-UI; 98-1118-UI
BETWEEN:
CHARBONNEAU BERCIER TAILLON COURTIERS D'ASSURANCE
LTÉE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
SERGE BERCIER, MARC CHARBONNEAU, GILLES TAILLON AND CHRISTIANE
TAILLON,
Interveners,
AND
BETWEEN:
SERGE BERCIER,
Appellant,
et
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
CHARBONNEAU BERCIER TAILLON COURTIERS D'ASSURANCE
LTÉE,
Intervener,
AND
BETWEEN:
MARC CHARBONNEAU,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
CHARBONNEAU BERCIER TAILLON COURTIERS D'ASSURANCE
LTÉE,
Intervener,
AND
BETWEEN:
GILLES TAILLON,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
CHARBONNEAU BERCIER TAILLON COURTIERS D'ASSURANCE
LTÉE,
Intervener.
Reasons for Judgment
Somers, D.J.T.C.C.
[1] These appeals were heard on common evidence at Ottawa,
Canada, on October 6, 1999.
[2] The respondent informed the appellant company and the
appellants of his decisions finding that the brokers and
receptionist held insurable employment when they were associated
with the appellant company during the period in question, that
is, from January 1 to December 31, 1996, because they
were employed under a contract of service within the meaning of
paragraph 3(1)(a) of the Unemployment Insurance
Act, now paragraph 5(1)(a) of the Employment
Insurance Act.
[3] Subsection 3(1) of the Unemployment Insurance
Act reads in part as follows:
3.(1) Insurable employment is employment that is not included
in excepted employment and is
(a) employment in Canada by one or more employers,
under any express or implied contract of service or
apprenticeship, written or oral, whether the earnings of the
employed person are received from the employer or some other
person and whether the earnings are calculated by time or by the
piece, or partly by time and partly by the piece, or
otherwise.
[4] Paragraph 5(1)(a) of the Employment
Insurance Act is similar to paragraph 3(1)(a) of
the Unemployment Insurance Act.
[5] In making his decisions, the respondent relied on the
following assumptions of fact, according to which the brokers and
the receptionist were employed under a contract of service. Those
assumptions of fact were admitted or denied as follows:
[TRANSLATION]
(a) the appellant is a company which operates a general
insurance agency; (admitted)
(b) the appellant has two offices, one located at 144 East,
Main Street, Hawkesbury, Ontario, and the other at 440
St-Philippe Street, Alfred, Ontario; (admitted)
(c) the appellant's shareholders are the following
companies: (admitted)
Gestion MG Charbonneau Inc. 33 1/3%
Gestion S & L Bercier Inc. 33 1/3%
Gilles Taillon Courtier d'assurance Inc. 33 1/3%
(d) the shares of the corporations referred to in
subparagraph (c) above are held respectively by
Marc Charbonneau, Serge Bercier and Gilles Taillon
and their respective spouses; (admitted)
(e) Marc Charbonneau, Serge Bercier and
Gilles Taillon (the "brokers") were also hired by
the appellant to perform the day-to-day administration of the
appellant, manage the staff and act as insurance brokers;
(denied)
(f) the brokers are not related persons within the meaning of
section 251 of the Income Tax Act; (denied)
(g) there is an arm's length relationship between the
appellant and the brokers; (denied)
(h) there is an arm's length relationship between the
brokers; (denied)
(i) the appellant had 12 full-time employees, including
the brokers, and one part-time employee; (admitted)
(j) the brokers met each week to plan the appellant's
operations and review the business's results; (admitted)
(k) the appellant provided the brokers with premises and
necessary equipment; (admitted)
(l) the brokers determined their work schedules by consulting
each other; (denied)
(m) the brokers consulted each other in making important
decisions concerning the appellant; (admitted)
(n) the brokers received a salary from the appellant;
(admitted)
(o) the receptionist did bookkeeping and secretarial work for
the appellant; (no knowledge)
(p) the receptionist performed her duties at the
appellant's office in Alfred, Ontario; (no knowledge)
(q) the receptionist reported directly to Gilles Taillon,
who is her spouse and one of the brokers; (no knowledge)
(r) the receptionist received an annual salary of $35,000; (no
knowledge)
(s) the receptionist had sick leave and paid vacation; (no
knowledge)
(t) the receptionist's hours of work were fixed by the
appellant; (no knowledge)
(u) the appellant provided the receptionist with premises and
necessary equipment; (no knowledge)
(v) the appellant issued T4 slips to the brokers and to the
receptionist for 1996; (admitted)
(w) there was a contract of service between the brokers and
the appellant; (denied)
(x) there was a contract of service between the receptionist
and the appellant. (no knowledge)
[6] As the appellant company's receptionist,
Christiane Taillon, discontinued her appeal, there was no
knowledge of subparagraphs (o) to (u) and (x).
[7] The burden of proof is on the appellants, who must show on
a balance of evidence that the Minister's decisions are
ill-founded in fact and in law.
[8] The appellant Charbonneau Bercier Taillon Courtiers
d'Assurance Ltée is a company which operates a general
insurance agency. The appellant company has two offices, one
located at 144 East, Main Street, Hawkesbury, Ontario, and the
other at 440 St-Philippe Street, Alfred, Ontario. The
appellant's shareholders are Gestion MG Charbonneau
Inc., Gestion S & L Bercier Inc. and Gilles Taillon
Courtier d'assurance Inc., each of which holds 33 1/3% of the
shares.
[9] The shares of the above corporations are respectively held
by Marc Charbonneau, Serge Bercier, Gilles Taillon
and their spouses. There is an arms length relationship among the
brokers.
[10] Marc Charbonneau admitted in his testimony that he
wears, as he put it, [TRANSLATION] "a shareholder's and
a broker's hat". The shareholders, including
Marc Charbonneau, Serge Bercier and
Gilles Taillon, respectively represent the three management
companies. He said that the appellant shareholders looked after
the administration of the appellant company and were also
brokers.
[11] Marc Charbonneau admitted subparagraph 4(j) of
the Reply to the Notice of Appeal, which states that the brokers
met each week to plan the appellant company's operations and
review the business's results. He also admitted that the
brokers received a salary from the appellant company.
[12] Moreover, the Shareholders' Agreement
(Exhibit A-1) refers to a disability salary to be paid
should Marc Charbonneau, Serge Bercier or
Gilles Taillon be unable to perform their duties.
[13] The appellant Charbonneau Bercier Taillon Courtiers
d'Assurances Ltée is the owner of the offices.
[14] There is well-settled case law recognizing four basic
criteria for distinguishing a contract of service from a contract
for services.
[15] In Wiebe Door Services Ltd. v. M.N.R., [1986]
3 F.C. 553, the Federal Court of Appeal listed those four
criteria:
(a) the degree or absence of control exercised by the
employer,
(b) the degree of integration,
(c) ownership of the tools, and
(d) the chance of profit or risk of loss.
[16] (a) Control
The appellant company exercised control over the brokers.
Although brokers Marc Charbonneau, Serge Bercier and
Gilles Taillon were directors, it was the corporate
appellant that had control over the directors acting
simultaneously as directors and brokers. The appellant company is
a corporation, separate from its shareholders and directors. As a
corporation may have control over these persons, the existence of
such control is sufficient to conclude that this element suggests
there was a contract of service.
[17] (b) Degree of integration
The three brokers worked exclusively for the appellant
company. Their expertise was essential to the company's
operations, so that this element enables us to conclude that
there was a contract of service.
[18] (c) Ownership of the tools
As the appellant company is the owner of the offices, this
element leads us to believe that there was a contract of
service.
[19] (d) Chance of profit or risk of loss
The three brokers are both shareholders and employees. Since
they may receive income as shareholders, their chance of profit
or risk of loss is based on the company's performance, but as
employees, they have no such chance or risk. The three brokers
have two sources of income and in their capacity as employees
they are tied to the appellant company by a contract of
service.
[20] The appellant Marc Charbonneau refers to
paragraph 5(2)(h) of the Employment Insurance
Act, which concerns "employment excluded by regulations
made under subsection (6)". There was no evidence that the
circumstances of the employment in these cases were governed by
regulation.
[21] The witness relied on paragraph 5(2)(b) of
the Employment Insurance Act in claiming that his
employment was excluded because he controlled more than 40% of
the voting shares of the corporation. There was no evidence that
the brokers personally and individually held 40% of the voting
shares.
[22] The brokers should not confuse
paragraphs 5(1)(a) and 5(2)(i) of the
Employment Insurance Act. Paragraph 5(2)(i) of
the Employment Insurance Act governs persons who are not
dealing with each other at arm's length. There is no evidence
that the brokers and the appellant company were not dealing with
each other at arm's length.
[23] Having regard to all the circumstances, the sole
testimony of Marc Charbonneau, the admissions and the
documentary evidence, the Minister correctly concluded that the
brokers held insurable employment within the meaning of
paragraph 3(1)(a) of the Unemployment Insurance
Act, now paragraph 5(1)(a) of the Employment
Insurance Act, during the period in issue, since there was a
contract of service.
[24] The appeals are dismissed and the Minister's
decisions confirmed.
Signed at Ottawa, Canada, this 23rd day of November 1999.
"J.F. Somers"
D.J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 11th day of September
2000.
Erich Klein, Revisor
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