Date: 20000529
Docket: 98-1177-UI
BETWEEN:
GÉRARD LECOURS,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Charron, D.J.T.C.C.
[1]
This appeal was heard in Québec, Quebec, on February 11,
2000, for the purpose of determining whether the appellant held
insurable employment within the meaning of the Unemployment
Insurance Act and the Employment Insurance Act (the
Act) when employed by Les Entreprises Forestières
Etchemin Ltée, the payer, from June 1 to October 2, 1992,
from November 16 to December 11, 1992, from May 17 to November 5,
1993, from July 18 to November 18, 1994, from June 5 to November
10, 1995, and from June 10 to September 7, 1996.
[2]
In a letter dated August 20, 1998, the respondent informed the
appellant that the employment in question was not insurable
because it did not meet the requirements of a contract of service
and there was no employer-employee relationship between him and
the payer.
The facts
[3]
The facts on which the respondent relied in making his decision
are set out as follows in paragraph 7 of the Reply to the Notice
of Appeal:
[TRANSLATION]
(a)
The payer, which was incorporated on December 13, 1974, operated
a forestry business. (no knowledge)
(b)
The payer signed contracts with heavy machinery owners to have
wood cut and transported. (admitted)
(c)
The appellant owned a skidder until 1993; in 1995, he sold the
skidder and purchased a forwarder worth $235,000. (denied as
written)
(d)
The skidder and the forwarder are two pieces of machinery with
the same function: to pick up the wood felled by another machine
and transport it to the desired location. (admitted)
(e)
During the 1992 and 1993 seasons, the appellant owned his own
skidder and leased his services and his machine to the payer.
(denied as written)
(f)
In 1994, the appellant incorporated a company under the name of
3105-3424 Québec Inc. (hereinafter the
“employer”), which was the owner of a forwarder.
(admitted without prejudice)
(g)
The appellant was the sole shareholder of the employer. (denied
as written)
(h)
In 1992 and 1993, the appellant was the only person who operated
his skidder. (admitted)
(i)
Since 1994, the payer has leased the services provided through
the employer's forwarder; (denied as written) the appellant
alternated with Alain Boivin operating the forwarder, because it
could be operated 24 hours a day. (admitted)
(j)
During the years at issue, the appellant always worked for the
payer with his skidder or with the employer's forwarder.
(denied as written)
(k)
The payer signed a contract with the appellant and 3105-3424
Québec Inc. whereby it leased the machinery; a total
amount was specified based on a rate per cubic meter of wood
transported by the machine. (denied as written)
(l)
The payer paid a fixed weekly wage to the appellant and the other
operator of the forwarder. (admitted)
(m) The
appellant or the employer was responsible for all costs of
operating the machinery; they had to take care of all repairs and
maintenance. (denied as written)
(n)
If the machine broke down for an extended period, income from
cutting would cease coming in and the appellant would no longer
receive any pay from the payer. (denied as written)
(o)
The payer paid the total income of the appellant and the employer
based on the volume of wood transported; it subtracted the gross
wages paid to the appellant and his man from the amounts
calculated on the basis of the established rate scale. (denied as
written)
(p)
In 1992 and 1993, the appellant owned a skidder and worked for
the payer under a contract for services and not a contract of
service. (denied)
(q)
From 1994, the payer continued to operate in precisely the same
way except that the contract it negotiated was with 3105-3424
Québec Inc. (denied)
[4]
The appellant admitted that all the subparagraphs of paragraph 7
of the Reply to the Notice of Appeal were true, with the
exception of those that he denied or stated that he had no
knowledge of, as indicated in parentheses at the end of each
paragraph.
Testimony of Gérard Lecours
[5]
Gérard Lecours is an operator and owner of forestry
machinery. Prior to and up to April 13, 1994, he owned a skidder
that he operated himself, cutting and transporting wood, while
employed by Les Entreprises Forestières Etchemin
Ltée, the payer. On April 13, 1994, 3105-3424
Québec Inc. purchased a Timberjack forwarder, which it
leased to the payer for performing its woodcutting and wood
transportation operations. The machine cost $235,000 (Exhibit
A-5). Gérard Lecours was the sole operator of his skidder
in 1992 and 1993, but, since 1994, the payer has leased the
forwarder from 3105-3424 Québec Inc., which the appellant,
alternating with Alain Boivin, operated 24 hours a day. During
the years at issue, the appellant always worked for the payer
using his skidder or the forwarder. The payer leased the
machinery from the appellant or from 3105-3424 Québec
Inc., as the case may be, for a total amount that was calculated
according to the scaling of the wood cut and transported. The
payer paid the appellant and the other operator a fixed weekly
wage. The appellant filed as Exhibit A-6 the following equipment
leases:
lease of June 1, 1992, between the payer and the
appellant;
lease of May 15, 1993, between the payer and the
appellant;
lease of May 30, 1994, between the payer and 3105-3424
Québec Inc.;
lease of May 29, 1995, between the payer and 3105-3424
Québec Inc.;
e)
lease of June 1, 1996, between the payer and 3105-3424
Québec Inc.
[6]
Clause 2 of each lease provides:
[TRANSLATION]
The lessor undertakes to deliver the equipment in good repair,
and to warrant to Entreprises Forestières Etchemin
Ltée that it can be used for the purpose for which it is
leased and that the maintenance and repairs required to ensure
the performance of the agreement and the use of the equipment
will be carried out, subject to the right of Les Entreprises
Forestières Etchemin Ltée to take care of minor
maintenance of the equipment and carry out emergency repairs
required to ensure that it is kept in operation.
[7]
In Clause 7, concerning the status of the employees, it is agreed
that:
[TRANSLATION]
The Lessor acknowledges that, subject to the rules of Les
Entreprises Forestières Etchemin Ltée, the
equipment operators shall be regular members of Les Entreprises
Forestières Etchemin Ltée, and agrees that it may
not supervise or control the said employees during field
operations and acknowledges without reservation the management
authority of Les Entreprises Forestières Etchemin
Ltée and its agents and, more specifically, its
foremen.
[8]
The appellant was the sole shareholder and director of 3105-3424
Québec Inc. The appellant received his weekly wages from
the payer, which paid him vacation pay and provided drug
insurance and employment insurance coverage. It was 3105-3424
Québec Inc. that paid for the liability insurance. The
appellant received no wages from 3105-3424 Québec
Inc. Prior to 1994, the appellant paid for liability insurance,
for gas, for transportation of the equipment to the forest and
for repairs in case of a breakdown. The payer paid the cost of
bringing the machine back to town. Since 1994, 3105-3424
Québec Inc. has paid for repairs. The appellant worked
from 5:00 a.m. to 5:00 p.m.
Testimony of Yvon Roy
[9]
An accounting clerk employed by the payer, Yvon Roy stated that
Gérard Lecours had worked for the payer for 8 to 10
years. Since he owned a machine that could move the wood to the
road, the payer hired Mr. Lecours to do it. The payer did
not have that kind of equipment and needed it urgently. The payer
measured the wood that was cut down and brought to the road by
the appellant and it calculated the cost of transporting the
wood, which it apportioned on the basis of 40% for the operator
and 60% for the use of the equipment. In 1992 and 1993, the
appellant owned a skidder that he leased to the payer and
operated himself or had another person operate. The operator was
hired by the payer or the appellant, as the case may be. Each
shift lasted 10 hours: one during the day and the other at night,
as the payer decided. In the event of a breakdown, the owner of
the machine was responsible for the repairs, and payment of the
operator's wages and the rental for the machine was
suspended. Beginning in 1994, the payer leased a forwarder from
3105-3424 Québec Inc., and the appellant operated
it. In this case, it was the lessor, 3105-3424
Québec Inc., that was responsible for repairs. The payer
paid the owner the rental for the machines and paid the
operators' wages to the operators themselves, after making
source deductions from the cheque for things such as taxes,
unemployment insurance, pension plan, group insurance, pension,
meals and sleeping arrangements, if necessary. The payer's
foreman transmitted work instructions to the workers.
Analysis of facts in light of the law
[10] It must
now be determined whether the activity carried on by the
appellant is included in the concept of insurable employment,
that is, whether there was a contract of service.
[11] The case
law has laid down four essential tests for identifying a contract
of employment. The leading case is Montreal v. Montreal
Locomotive Works Ltd., [1947] 1 D.L.R. 161. Those tests are:
(1) control, (2) ownership of the tools, (3) chance of profit and
(4) risk of loss. The Federal Court of Appeal added thereto the
“degree of integration” in Wiebe Door Services
Ltd. v. M.N.R., [1986] 3 F.C. 553, but this list is
not exhaustive.
[12] In
Attorney General of Canada v. Charbonneau, a decision
rendered on September 20, 1996 (A-831-95), Décary J.A. of
the Federal Court of Appeal explained that:
Moreover, while the determination of the legal nature of the
contractual relationship will turn on the facts of each case,
nonetheless in cases that are substantially the same on the facts
the corresponding judgments should be substantially the same in
law. As well, when this Court has already ruled as to the nature
of a certain type of contract, there is no need thereafter to
repeat the exercise in its entirety: unless there are genuinely
significant differences in the facts, the Minister and the Tax
Court of Canada should not disregard the solution adopted by this
Court.
. . .
Here, the payer was a forestry business. It assigned the work
of felling and hauling the wood to crews of two persons—a
feller, who cut the trees, and a skidder operator, who picked
them up and transported them to the edge of a forest road. The
respondent was the owner of the skidder, a piece of heavy
machinery valued at about $15,000, and he was responsible for the
cost of maintaining and repairing it. He had himself recruited
the feller, with whom he made up a crew. He and the feller were
paid by volume, based on the number of cubic metres of wood cut
down, and the contract did not specify any volume; the volume was
measured every two weeks by a "measurer" employed by
the payer.
. . .
The respondent worked about thirty-two hours per week and his
daily work period was generally, but not necessarily, within the
period proposed in the internal regulations, that is, between
7:30 a.m. and 4:00 p.m. A foreman employed by the payer checked
every second day to ensure that the respondent's crew was in
fact cutting the trees that had previously been identified by the
payer. The method of payment was as follows: one quarter of the
amount owing to the crew was paid to the respondent, one quarter
was paid to the feller, and half was paid to the respondent for
the use of the skidder. Thus three cheques were issued by the
payer every two weeks. The cost of transporting the skidder at
the beginning and end of the season was borne by the respondent;
in the event that there was a change of location during the
season, it was borne by the payer.
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.
. . .
One factor on which the judge relied, and which led him to
conclude that [TRANSLATION] "there could be no chance of
profit and risk of loss" during the contract, was the fact
that the respondent was paid a wage, at the rate of $2.50 per
hour. This is a major factual error. In fact, the respondent was
paid based on his volume of production, and the mere fact that
his skidder had broken down would be sufficient for him to find
himself with nothing.
. . .
[13] Counsel
for the appellant led evidence that the appellant and
Alain Boivin formed a team and entered into a contract of
employment with the payer, Les Entreprises Forestières
Etchemin Ltée, while the Timberjack forwarder was leased
to that same business. Consequently, the lease of the machine and
its repair and its operation should not be taken into
consideration in analysing the contract of employment itself. The
appellant rendered services to the payer as a skidder operator
during the periods at issue. That evidence was
uncontradicted.
[14] The
evidence in this case differs on a number of points from that
presented in Charbonneau, supra, and Canada
(Procureur général) v. Rousselle et al.,
124 N.R. 339. For instance:
(a)
The appellant herein was paid by cheques from the payer;
(b)
In paragraph 7(f) of the Reply to the Notice of Appeal, the
Minister of National Revenue describes 3105-3424 Québec
Inc. as the employer, which is false;
(c)
From May 30, 1994, it was 3105-3424 Québec Inc. that bore
all costs of operating its equipment, but the transportation at
the beginning and the end of the season was taken care of by the
payer;
(d)
It was 3105-3424 Québec Inc. that owned the Timberjack
forwarder purchased on April 13, 1994;
(e)
The appellant received his instructions from the payer's
foreman;
(f)
The work day began at 5:00 a.m. and ended at 5:00 p.m.;
(g)
The appellant received weekly wages of approximately $700 paid to
him by the payer.
[15] However,
the evidence reveals that the work performed by the appellant was
done under the payer's supervision and that there was a
relationship of subordination between the appellant and the
payer. It was the payer that owned the business necessary for
carrying on its activities. The payer alone could make profits or
incur losses in operating its business, not the appellant, who
only received a fixed wage. Finally, the appellant performed his
work on the payer's job site and was well integrated into its
business. I therefore find that the payer was operating a
business and that the appellant was employed by it during the
periods at issue, since the tools were leased to the payer by a
corporation independent of the payer.
[16] The
burden of proof was, to be sure, on the appellant, and he
successfully discharged that burden on a balance of probabilities
for the periods from July 18 to November 18, 1994, June 5 to
November 10, 1995, and June 10 to September 7, 1996. In respect
of the periods from June 1 to October 2, 1992, November 16 to
December 11, 1992, and May 17 to November 5, 1993, the appellant
had a contract for services with the payer and the appeal is
dismissed with regard to those periods.
[17]
Accordingly, the appeal is allowed and the decision of the
Minister is varied.
Signed at Ottawa, Canada, this 29th day of May 2000.
"G. Charron"
D.J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 23rd day of April
2001.
Erich Klein, Revisor
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