Brulé v. M.N.R., docket 97-1965-UI

Date: 19990118

Docket: 97-1965-UI

BETWEEN:

PHILIPPE BRULÉ,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Appeal heard on October 28, 1998, at Rivière-du-Loup, Quebec, by the Honourable Judge Alain Tardif

Tardif, J.T.C.C.

[1] This is an appeal from a decision dated October 9, 1997. In that decision, the respondent informed the appellant that his work for Centre Horticole du Témiscouata Inc. (“the payer”) during the period from June 5 to August 12, 1995, did not meet the requirements for being considered as having been performed under a contract of service within the meaning of the Unemployment Insurance Act (“the Act”).

[2] The appellant testified at length. Although he spoke very well and obviously has a very good knowledge of the French language and its subtleties, determining the terms and conditions under which he worked was very difficult, even arduous. He constantly used terms like “hourly basis”, “commission”, “consulting”, “plan”, “quotation”, “accumulation” and “professional fee”, yet never gave a clear, precise explanation of how the work he performed met the requirements for a genuine contract of service.

[3] He accumulated not hours of work but contracts. He received commissions that had nothing to do with sales volume; their amount was always the same.

[4] Given the appellant’s language ability and facility of expression, it would have been very easy for him to give answers that clearly explained the nature of the work he performed for Centre Horticole du Témiscouata Inc. and for which he was paid as an employee. Not only did he not provide a satisfactory description of the terms and conditions under which he worked, but he instead knowingly fostered confusion by giving answers in which ambivalence was the rule: he received two types of earnings, one type—he claimed—as a self-employed worker and the other as an employee.

[5] In the instant case, the appellant deliberately gave answers over which he had perfect control for the obvious purpose of creating a kind of confusion that allowed for two possible interpretations.

[6] I believe it is possible for one person to work as an employee in respect of some activities and as a contractor in respect of others. Indeed, this reality has been recognized by the Labour Court in Notrel Inc. vs C.S.D. Syndicat démocratique des distributeurs.

[7] In that case, the Labour Court found that two different regimes applied to dairy workers in the performance of their duties. When they made deliveries to commercial customers, they were subordinate to Notrel and were paid essentially on a commission basis; the Labour Court found that in those circumstances they were simply commission salespersons and thus employees. In delivering milk to residential customers, the dairy workers had a very large measure of autonomy and their earnings consisted of the profit made on the resale of milk. The Labour Court was of the view that autonomy and profit were inconsistent with the status of employee, and it therefore held that the dairy workers were not employees but contractors as regards that aspect of their work.

[8] I consider it important to point out that the burden of proof was solely on the appellant. If the requisite burden of proof is not discharged, the Court is obliged to confirm the validity of the determination. I agree that such is the Court’s obligation. However, a person whose work can be thus divided up into two types of contracts must show a clear demarcation in the way each of them is performed; it thus becomes essential to show very clearly the distinction or distinctions that exist between the performance of work under the contract of service and the performance of work done as a contractor.

[9] The appellant was the only person who testified in support of his appeal, even though it was necessary to supplement deficient, confused evidence on the essential elements, including the earnings issue and the relationship of subordination.

[10] The payer testified not for the appellant but for the respondent. However, the Court obtained from that witness hardly any more information on the terms of the agreement that existed during the period at issue.

[11] Mr. Comète, the payer company’s representative, certainly admitted that he paid the appellant the amounts shown on the record of employment, but he was much less specific about the justification for and breakdown of those amounts. He referred to a portion paid as commission, which the appellant received consistently for each pay period so that he could deduct some of the expenses he incurred in the performance of his work. The payer company paid the other portion as an hourly wage of $9.00. The number of hours worked was not recorded in any way, nor was the work performed by the appellant controlled in any way. The entire work relationship was built essentially on a kind of relationship of trust.

[12] Mr. Comète’s testimony showed unequivocally that there was no relationship of subordination whatsoever. It was clear from his testimony that the payer company had accepted the appellant’s offer or proposal. Since the business had formerly offered its customers a similar service, which it had ceased providing following the death of the person who performed that work, it accepted the appellant’s offer.

[13] The payer company found the appellant’s plan interesting and saw it as an opportunity to increase its income. It therefore agreed to implement the appellant’s suggestion with all its attendant conditions, on a trial basis, so that it could assess the potential of this additional service.

[14] Mr. Comète clearly stated as well that he decided not to renew the agreement; he had not liked the experience, which he found to be a rather negative one. He admitted that he did not exercise close or even continuing control over the quality of the appellant’s work; he insistently repeated that it was a matter of trust based on mutual interests. He even maintained that he accepted the appellant’s offer because he would not be incurring very much financial risk.

[15] The respondent’s evidence was completed by the testimony of Paul Dessurault and Sylvie Côté, who are, respectively, an investigator for Employment and Immigration’s human resources office and a Revenue Canada appeals officer. I feel it is important to point out that the parties told the Court that these two witnesses’ testimony applied both to the instant case and to appeal No. 97-1966(UI) of this Court.

[16] The two witnesses stated clearly and unequivocally that the appellant had repeatedly tried to confuse matters by all sorts of evasions. Since they obtained information in dribs and drabs, it took both time and energy to find out that the appellant was actually running his own business using various arrangements or structures with the obvious goal of qualifying for unemployment insurance benefits.

[17] During Paul Dessurault’s investigation, he was unable to obtain a copy of the documentary evidence, although it was highly relevant. The persons who had the documents all passed the buck, and the invoices or papers were never submitted to him.

[18] Moreover, Mr. Dessurault’s testimony established that the appellant was involved with a number of structures or organizations. He had a firm name that was exclusively his, a majority interest in the capital stock of a company and a minority interest in another company; records of employment had been issued to the minority shareholders of each of the companies, including the appellant. The evidence also revealed that the two companies in question were in more or less the same business. Ms. Côté’s testimony basically fleshed out, confirmed and corroborated Mr. Dessurault’s testimony.

[19] Ms. Côté and Mr. Dessurault established on a clear balance of evidence that the appellant did everything he could to obtain unemployment insurance benefits. The courts have often recognized that taxpayers have the right to plan, structure and arrange their affairs so as to obtain the benefits provided for by the Act.

[20] However, that right and that recognition require that there be genuine planning in which everything that is done is consistent with the chosen legal structure. There is no entitlement to the benefits or advantages provided for by the Act if the structures serve solely as a screen or front for activities that are actually carried on very differently.

[21] In the case at bar, the weight of the evidence is that the appellant had the skills and qualifications he needed to perform specialized seasonal work.

[22] Since he worked only about three months a year, he arranged his affairs so that he could receive unemployment insurance benefits the rest of the year.

[23] Since his work was also low paying, the appellant had to devise a way to earn more so that his unemployment insurance benefits would be higher. Not content with the arrangement that entitled him to generous unemployment insurance benefits, he wanted to exploit the system a little more by deducting his expenses from his income, a privilege generally granted to independent contractors. He therefore came up with a kind of combined wages-commission arrangement. Once that arrangement was articulated and defined, he submitted it to Centre Horticole du Témiscouata Inc. Since Mr. Comète was concerned only with the possible costs and benefits, he agreed to it with no conditions or control.

[24] The two witnesses’ testimony also established that the appellant’s earnings never varied during the period at issue. The amount of each cheque was made up of two different components, namely hourly wages and commission.

[25] The contract between the appellant and the company run by Mr. Comète was nothing more than a contract between two independent, autonomous businesses, although it was so presented and disguised as to make the appellant appear to be an employee of Mr. Comète’s company. Why did the payer company agree to be involved in such a scheme?

[26] Mr. Comète saw it as an opportunity to carry out a potentially promising experiment at a reasonable cost. He therefore did not question the arrangement suggested by the appellant, and he basically accepted all the conditions blindly, reasoning that he was not incurring much risk in the venture.

[27] To succeed, the appellant had to show that his work was performed under a genuine contract of service.

[28] In the case at bar, the appellant deliberately chose to foster confusion through his answers; his evidence never demonstrated that he performed his work as an employee under a relationship of subordination arising out of a power to control. Rather, the evidence showed that he did his work as a self-employed worker or contractor.

[29] Having chosen to seek to discharge the burden of proof that lay upon him solely through his own testimony, he must accept all the consequences of that choice. The result was incomplete, deficient evidence with respect to which credibility was moreover a very important issue. Now the appellant’s testimony was not very credible at all, and a number of his explanations were quite simply implausible. The respondent’s evidence confirmed and corroborated the validity of the determination.

[30] The appellant deliberately organized, planned and disguised the work he performed as a contractor to make it appear to be work done under a contract of service. Moreover, the Court noted a number of times that the appellant was perfectly well aware of all the requirements for a contract of service versus those for a contract for services. He constantly sidestepped the difficult questions and avoided answering highly relevant ones.

[31] The appellant has definitely not discharged the burden of proof that lay upon him.

[32] The appeal is therefore dismissed.

Signed at Ottawa, Canada, this 18th day of January 1999.

“Alain Tardif”

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 7th day of September 1999.

Erich Klein, Revisor