Services Multi-Groupes inc. v. M.N.R., docket 97-849-UI

Date: 19971222

Docket: 97-849-UI

BETWEEN:

SERVICES MULTI-GROUPES INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Tardif, J.T.C.C.

[1] This is an appeal from a determination dated March 4, 1997. In that determination by the Minister of National Revenue (“the Minister”), it was found that the work done by Noëlla Ruel for Services Multi-Groupes Inc. from May 1 to September 10, 1996, was insurable employment because, according to the respondent, there was an employer-employee relationship between her and that company.

[2] To support his determination, the Minister relied on the following facts:

(a) The appellant, which was incorporated in May 1995, specializes in group insurance brokerage services.

(b) Ownership of the appellant’s voting shares was divided equally among the worker, Laurent Roy and Robert Morier (none of whom are related).

(c) The appellant’s three shareholders are authorized to sign its cheques, and two signatures are required on each cheque.

(d) The appellant’s office was located at 288, rue Marquette, suite [?], in Sherbrooke. Mr. Roy and Mr. Morier shared suite 302 at the same address with three or four brokers.

(e) Mr. Roy and Mr. Morier were responsible for selling insurance, while the worker handled the administrative aspects of the files.

(f) The worker was responsible for preparing bids and negotiating with insurance companies; she had to sit down with the salesman (Mr. Roy or Mr. Morier) to prepare the files, since they worked as a team.

(g) The worker worked during the company’s usual business hours and might work as many as 70 hours a week.

(h) The worker could take time off work, but she had to notify one of the other two shareholders.

(i) The three shareholders met every week to discuss files, prospects, off-budget expenses and the bank account; everything was decided by the three of them.

(j) The worker had a fixed salary of $35,000 a year ($2,916.67 a month), payable once a month.

(k) The worker could also do sales; all the sales commissions were paid to the appellant and divided among the three shareholders.

(l) The worker used her own car for travelling; she was reimbursed by the appellant for gas and entertainment expenses.

(m) The worker had wage loss insurance to cover absence or sickness.

(n) Although the worker was one of the appellant’s shareholders, she could not act without the other two shareholders being involved; her work was essential to the appellant, which controlled her work through the other shareholders.

(o) During the period at issue, there was a genuine employer-employee relationship between the appellant and the worker.

[3] The appellant’s agent, Laurent Roy, admitted the facts described in subparagraphs (a), (b), (c), (d), (f), (g), (h), (i), (j), (k), (l) and (m).

[4] The content of subparagraph (e) was qualified by the payer’s agent; the appellant had no knowledge of subparagraph (n) and subparagraph (o) was denied.

[5] Prior to joining Services Multi-Groupes Inc., Noëlla Ruel had held a licence to sell group insurance until 1984. Starting in 1984, although she worked in the same field, it was neither necessary nor helpful for her to have such a licence. Since it was quite expensive to keep the licence valid, she stopped paying the cost of renewing the licence and therefore lost it.

[6] Following discussions with Mr. Roy and Mr. Morier, it became necessary for her to obtain the licence again. Ms. Ruel therefore took steps to do so. Since more than 10 years had passed since she had given it up, she had to go back to square one, which meant that the process took a long time; she finally did obtain her licence, a copy of which was filed as Exhibit A-1.

[7] During the waiting and transition periods, the company took an approach designed essentially to avoid having problems and complications with the Association des intermédiaires en assurance de personnes du Québec and competitors.

[8] It was clear from the testimony of the two witnesses that the three shareholders had decided to pool their expertise to improve performance in terms of both productivity and quality.

[9] The method used to pay Ms. Ruel was not based on the quality or quantity of the work she did; it was essentially dictated by concerns related to the Association’s requirements and the group’s worries about possible reprisals by the competition.

[10] This is a case in which the tests laid down by the courts are most welcome in characterizing the nature of the employment contract between Ms. Ruel and Services Multi-Groupes Inc. Here again, though, the application of the tests to the facts in the evidence — the burden of proof being on the appellant — does not automatically provide an easy or fast answer.

[11] The integration test suggests that there was a contract of service. No decisive conclusion may be drawn from the ownership of the tools test, since the evidence on this point was incomplete. While some tools were owned by the company, each individual had to provide his or her own car, which was an important tool given its value and its usefulness in doing the job.

[12] The evidence on the risk of loss and chance of profit tests was not very extensive; I would say, however, that there seemed to be no risk of loss during the period at issue, since Mr. Roy and Mr. Morier had, so to speak, guaranteed Ms. Ruel a minimum income of $35,000. This was supposed to ensure that she could meet her obligations during the transition period, since she was used to receiving a fixed, regular salary as an employee in her previous experience with working as an employee.

[13] In the case at bar, as in many cases of this kind, the main test, namely control by the payer over the work done, becomes the ultimate method of determining the nature of the legal relationship that existed between the parties.

[14] The basis for the respondent’s determination that there was a power to control originates in the facts alleged in subparagraphs (e), (f) and (h), which read as follows:

(e) Mr. Roy and Mr. Morier were responsible for selling insurance, while the worker handled the administrative aspects of the files.

(f) The worker was responsible for preparing bids and negotiating with insurance companies; she had to sit down with the salesman (Mr. Roy or Mr. Morier) to prepare the files, since they worked as a team.

(h) The worker could take time off work, but she had to notify one of the other two shareholders.

[15] These facts can obviously support a conclusion that an employer-employee relationship existed. However, the same facts lose some of their relevance when they are assessed in light of the explanations provided by Mr. Roy and Ms. Ruel.

[16] It thus becomes very difficult, if not impossible, to identify some mechanism by which the work done by Ms. Ruel could be controlled.

[17] The three individuals involved had special expertise in a specialized field of activity. The pooling of the expertise that each of them had resulted in greater efficiency and productivity. Is it possible to speak of control or authority in such a context? The three partners were directly involved in all decisions relating to their business activities.

[18] A collegial approach was taken to doing the work. I do not think that Ms. Ruel’s obligation to notify one of the shareholders if she was going to be away can mean that, as a result, one of them had the authority to control the work she did. These are irrelevant details, and the only rationale for them was to ensure that the business operated smoothly.

[19] The courts have, of course, stated in a number of decisions that the mere fact that there is a power to control is sufficient to create an employer-employee relationship. However, that power must actually be available and capable of being exercised. In the case at bar, the evidence showed that a collegial approach was taken to doing the work. Ms. Ruel, Mr. Roy and Mr. Morier were legally dependent on the company as regards the product of the work they each did. The company had not provided for or delegated any authority to any of the partners, who acted as a unit. The partners’ financial dependence on the company did not give them the power to regulate what Ms. Ruel did.

[20] The preponderance of the evidence, which was made up of the testimony of Ms. Ruel and Mr. Roy, showed to the satisfaction of this Court that during the period at issue there was no significant factor amounting to some kind of right to control the work done by Ms. Ruel. She was autonomous in doing her work.

[21] The constraints and apparent supervision to which Ms. Ruel was subject were minor and applied to the other partners in the group. That supervision was desired by everyone and followed by everyone to ensure that the business was efficient and profitable.

[22] For these reasons, the appeal is allowed, since the work done by Ms. Ruel was not a contract of service within the meaning of the Unemployment Insurance Act.

Signed at Ottawa, Canada, this 22nd day of December 1997.

“Alain Tardif”

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 16th day of November 1998.

Kathryn Barnard, Revisor