REASONS
FOR JUDGMENT
Archambault J.
Founded in 1892, Industrial Alliance Insurance
and Financial Services Inc. [Industrial Alliance, IA, or the Company]
is a life and health insurance company whose primary mission is to provide
financial protection to its insureds and their beneficiaries in the event of
death, disability, or illness, and to help clients achieve financial
independence at retirement or accomplish special projects.
To carry out this mission, Industrial Alliance
offers a wide range of life and health insurance products, savings and
retirement plans, RRSPs, mutual and segregated funds, securities, auto and home
insurance, mortgage loans, and other financial products and services. It is
known for the personalized service provided by its professional agents,
who are attentive to the ever-changing needs of their clients.
The fourth largest life and health insurance
company in Canada, Industrial Alliance is at the head of a large financial
group with operations in all regions of Canada, as well as in the United
States.
Industrial Alliance . . . employs more
than 3,700 people, and manages and administers over $70 billion in assets.
[Emphasis added.]
[1]
The issue in this appeal is whether one of its
former professional agents, Mr. Mazraani, was an employee of the Company during
the period from April 10, 2012 to November 23, 2012 (relevant
period). Mr. Mazraani is appealing a
decision of the Minister of National Revenue (Minister) regarding the
insurability of his employment under the Employment Insurance Act (Act). Because the contract was concluded in the province of Quebec, the solution
to this issue depends on whether Mr. Mazraani was working under a contract of
employment pursuant to article 2085 of the Civil Code of Québec (Civil
Code or Q.C.C.) or as an independent contractor under a
contract of enterprise or for services pursuant to article 2098 Q.C.C.
[2]
The Minister decided that Mr. Mazraani did
not hold insurable employment. In doing so, she relied on the following
assumptions of fact set out in paragraph 5 of the Reply to the Notice of Appeal:
a) The Payer is a personal insurance and financial services
company whose principal activity is the sale of life, disability and health
insurance; (admitted)
b) The Payer’s head office is located in the city of Québec,
and it has several branches throughout the Province of Quebec; (admitted)
c) In the Province of Quebec, the insurance and financial
services industry is regulated by the Autorité
des marchés financiers (the “AMF”); (admitted)
d) In order to sell insurance and other related financial
products in Quebec, individuals and companies must hold a valid license from
the AMF; (admitted)
e) The Appellant was hired by the Payer as a financial advisor
in April 2012; (admitted)
f) Prior to working for the Payer, the Appellant had already
worked for several years as a financial planner with another major insurance
company; (admitted)
g) At the time of his hiring by the Payer, the Appellant’s AMF
license was inactive; (admitted)
h) Between April 3, 2012 and June 7, 2012, the Appellant
attended a mandatory training course which was offered by the Payer, on the
basis of two hours a day, three days a week; (admitted)
i) The completion of this training course was required in
order for the Appellant to meet regulatory requirements and to reactivate his
AMF license; (denied)
j) The Appellant did not receive any remuneration for his
attendance and completion of this training course; (denied)
k) On May 3, 2012, the Appellant and the Payer entered into a written
contract with an effective date of April 30, 2012; (admitted)
l) This contract provided, inter alia, that:
i. The Appellant was authorized to solicit and obtain
applications and requests for the various contracts and financial services offered
either directly or indirectly by the Payer; (admitted)
ii. The Appellant was liable for any amount incurred by
or owed to the Payer or a client due to a mistake, negligence, fraud or
dishonesty by him or one of his mandataries; (admitted)
iii. The Appellant was remunerated by way of a “fund”
that was set up by the Payer; (denied)
iv. The Appellant was remunerated on a weekly basis by way of
advances on the balance of this fund; (admitted)
v. The balance of this fund was obtained by calculating the
commissions and bonuses paid to the Appellant, less any charges, weekly
advances and other fees, expenses and commitments made in the performance of
his duties; (admitted)
vi. The Appellant would remain liable to the Payer after the
termination of the contract for any negative balance in this fund; (denied)
vii. The Appellant was an independent contractor, and the
contract specified that it must not be interpreted as establishing an
employer-employee relationship between him and the Payer; (denied)
viii. The Appellant agreed to pay all expenses incurred in
the exercise of his duties, including but not limited to the following:
-
obtaining or renewing the licenses
necessary to exercise his duties; (admitted)
-
obtaining or renewing professional civil
liability insurance; (admitted)
-
membership dues
in professional or other associations; (admitted)
-
his business office, including secretarial fees and office supplies; (admitted)
-
information systems, long-distance calls and
facsimiles; (admitted)
-
travel,
solicitation and publicity; (admitted)
-
training and
upgrading; (denied)
ix. The Appellant was not authorized to:
-
bind the Payer by
any promise or agreement; (admitted)
-
incur any liability whatsoever on behalf of the Payer; (admitted)
-
accept a risk on
behalf of the Payer; (admitted)
-
commit the Payer to any relationship whatsoever;
(admitted)
-
use brochures,
advertisements or printed matter bearing the Payer’s name or logo that had not
been preapproved in writing by the Payer; (admitted)
m) In a letter from the Payer dated April 27, 2012, the
Appellant was also advised that his agent contract would be terminated if he
did not receive any remuneration for five consecutive weeks; (denied)
n) The Appellant was affiliated with the Payer’s branch
located in Ville LaSalle; (admitted)
o) The Appellant’s tasks were to solicit and obtain
applications for the Payer’s insurance products from potential clients;
(admitted)
p) The Appellant would set up appointments over the phone
with potential clients, and meet with them in order to present and sell them
products offered by the Payer or other affiliated companies; (admitted)
q) These meetings often took place at the clients’ homes;
(denied)
r) The Appellant had access to a cubicle at the Payer’s
Ville LaSalle branch where he could also work from; (admitted)
s) The Appellant was required to transmit to the Payer
all of the applications for insurance that he obtained from potential
clients; (admitted)
t) The Appellant was paid exclusively on commission;
(denied)
u) The Appellant was entitled to receive advances on
these commissions; (denied)
v) Upon each successful sale of the Payer’s products, the Appellant
would earn a percentage of the total value of the insurance contract;
(admitted)
w) The Appellant was not subject to direct control by the
Payer; (denied)
x) The payer did not supervise the amount or the quality
of the work performed by the Appellant, aside from ensuring that the
Appellant complied with legislative and regulatory requirements;
(denied)
y) The Payer did not dictate the way in which the Appellant
had to perform his tasks; (denied)
z) The Payer did not assign a particular territory to
the Appellant; (admitted)
aa) The Payer did not provide the Appellant with a list of
clients to contact; (admitted)
bb) The Appellant determined his own work schedule;
(denied)
cc) The Payer did not control the hours worked by the
Appellant or his absences; (denied)
dd) The Appellant’s attendance at the Payer’s premises was
not compulsory, nor was it monitored; (denied)
ee) The Appellant was not entitled to vacation or sick leave
with the Payer; (denied)
ff) The Appellant was required to pay for his own
professional liability insurance; (admitted)
gg) The Appellant had the option to provide his own computer
or to rent one from the Payer; (denied)
hh) The Appellant rented a laptop computer from the Payer in
order to perform his work; (admitted)
ii) The cost of the computer rental was deducted from
the Appellant’s compensation fund on a weekly basis; (admitted)
jj) The Appellant was required to use his own vehicle to
travel for his work for the Payer; (admitted)
kk) The Appellant did not receive any compensation or
allowance from the Payer for the use of his vehicle; (admitted)
ll) The Appellant had a chance of profit and a risk of loss
in providing his services to the Payer; (denied)
mm) The Appellant had no guarantee of a steady income while working
for the Payer; (denied)
nn) The Appellant was responsible for any and all expenses
incurred in the performance of his work for the Payer; (denied)
oo) The Appellant did not receive any compensation or allowance
from the Payer for his work-related expenses; (denied)
pp) In the event that policies for which the Appellant
received a commission were cancelled within a certain time after taking effect,
the Appellant was liable to reimburse the Payer a pro-rated amount of the
commission received upon the successful sale of said policies; (admitted)
qq) The payer issued a T4A slip (Statement of other
income) in the name of the Appellant for the 2012 taxation year; (admitted)
rr) The payer reported that the appellant earned an amount of
$7,084.91 in self-employed commissions; (admitted)
ss) No deductions at source were made by the Payer from
the Appellant’s income in respect of income tax, employment insurance or the
Quebec Pension Plan; (admitted)
tt) In his income tax return for taxation year 2012, the
Appellant declared gross commission income from self-employment in the amount
of $7,084; (admitted)
uu) The Appellant reported that he incurred $7,098 in expenses
to earn this income from the Payer in 2012; (admitted)
vv) The Appellant declared a net loss of $14
from his commission income earned from the Payer in 2012. (Admitted)
[Emphasis added.]
[3]
The appeals officer who confirmed the decision
of the rulings officer indicated that she had been an appeals officer for about
19 years, dealing with employment insurance matters. She confirmed the independent
contractor status in part because she thought that Mr. Mazraani looked
more like a self-employed or independent contractor as he was required to
supply or pay for his own tools. This is what she actually stated in referring
to Mr. Mazraani’s pay slip showing the charges deducted from the amount he
was paid by IA:
MR. JILWAN: All right. So this element, what
this element brought to your analysis?
MS. LAMBERT: Well this looks more like a
self-employed non-insurable, because he has to supply his own tool or to
pay to supply his tool.
[Emphasis added.]
[4]
She also consulted the data regarding
Mr. Mazraani’s income as filed with the Canada Revenue Agency (CRA),
and she noted that he had claimed a $14 loss in respect of his activities for
Industrial Alliance. She wrote in the English summary of her report that the worker “had a possibility for
loss” and that this element was “indicative of a contract
for services”. Furthermore, she testified that employees are not allowed
the “expenses” that Mr. Mazraani claimed.
[5]
In the summary referred to above, the appeals
officer wrote under the heading “Provision of labour” that the “worker did not have a set schedule, or a minimum number
of hours to be worked.” She believed the version
of the payer given to the rulings officer by Mr. Eric Leclerc, the LaSalle
Branch manager, who said that the Company did not supervise the worker’s work
and did not tell the worker how to carry out his work. The appeals officer did
not get any direct information from the Company because it never returned her
phone calls and did not reply to her letter. The
only documents from the Company or from Mr. Mazraani are the Agent
Contract, submitted by the former, and the “rapport de paie”, submitted by
the latter and showing the expenses for which he was being charged by the Company!
[6]
Mr. Bruno Michaud, Senior Vice-president,
Sales and Administration, explained that Industrial Alliance works through 52 branches
(which are also described as firms or agencies) in the province of Quebec and
the Ottawa region in order to sell its products. Both
in Quebec and outside that province, the Company also sell its products
through general independent agencies or insurance brokers.
[7]
In paragraph 7 of the decision (CRT reasons)
of the Commission des relations du travail du Québec (CRT) in Blackburn
and Kaliszczak c. Industrielle Alliance, assurance et services
financiers inc, 2014 QCCRT 0737, it is
stated that Industrial Alliance operates close to 50 agencies in Quebec, which
are constituted of teams of four or five representatives, each team being “associée à un directeur des
ventes”. These sales managers all “relèvent d’un directeur d’agence”, who is the
person in charge of the branch. These branch managers report to one of the superintendents “qui sont tous sous
la responsabilité du vice‑président du “réseau carrière”. In his testimony before this Court, Mr. Michaud said that this
vice-president would report to him, the Senior Vice‑president, Sales and Administration. He also added that there were
“five superintendents who are responsible for on average 10 branches each” and
“[t]hey would act as a coach for the branch manager.” This description shows a highly hierarchical organization which carries out the Company’s
mission, and it shows as well that the superintendents act toward the branch managers
(who are all IA employees) as the sales managers do toward the agents (who are not
considered by the Company as employees), that is, as coaches!
[8]
During his testimony−and as described in the CRT
reasons−Mr. Michaud stated that Industrial Alliance used to treat all
its agents as employees before 1993, while many, if not most, of its
competitors were treating theirs as independent contractors. So there were incentives
for Industrial Alliance to do likewise. One of the reasons indicated by Mr. Michaud
was that its employees asked for the change. However, Mr. Michaud also
acknowledged, in response to one of my questions, that there were benefits to
the Company as well, such as being freed from contributions to the Régime de rentes du Québec (Quebec Pension
Plan).
[9]
Here is the description by the CRT of the
business organization plan change made by Industrial Alliance:
[8] Bruno Michaud est l’un des dirigeants d’Industrielle
Alliance. Il y travaille depuis près de 32 ans. Actuellement, il occupe le poste
de vice-président principal, vente et administration en assurance et rente
individuelle. Il affirme que le modèle d’affaire « réseau carrière »
actuel existe depuis le 1er janvier 1993.
[9] Auparavant, explique-t-il, tous les
représentants d’Industrielle Alliance étaient des salariés payés à commission.
À ce moment, l’entreprise était pratiquement la seule à utiliser ce modèle d’affaire.
En fait, la majorité de l’industrie utilisait des travailleurs autonomes
comme représentants et cette formule a fait peu à peu son chemin, car de plus
en plus de représentants y voyaient plusieurs avantages, surtout d’un point
de vue fiscal. Aussi, lorsque l’occasion se présenta de procéder à l’intégration
au sein d’Industrielle Alliance d’un important contingent de représentants,
plus de 100, en provenance d’une autre compagnie d’assurance qui possédaient
déjà ce statut, la décision fût [sic] prise de revoir le modèle d’affaire
d’Industrielle Alliance afin que ses représentants soient dorénavant
considérés comme des « travailleurs autonomes ».
[10] Outre un changement à son modèle d’affaire,
cette nouvelle orientation impliquait pour Industrielle Alliance de revoir sa
relation contractuelle avec ses représentants, donc de revoir la rédaction
de son contrat de représentant. Pour ce faire, il fallait, dit-il,
éviter des ennuis avec les autorités fiscales en lien avec le changement de
statut de leurs représentants. C’est pourquoi Industrielle Alliance a jugé
opportun de soumettre son nouveau contrat de représentant à Revenu Canada pour
examen et acceptation.
. . .
[11] S’il est vrai que le contrat de
représentant a subi plusieurs modifications entre 1993 et 2011, Bruno Michaud
tient toutefois à préciser que le contrat est en substance le même.
Aussi, indépendamment des modifications, toutes les parties reconnaissent que
les représentants déclarent depuis ce temps aux autorités fiscales la
rémunération qu’ils reçoivent d’Industrielle Alliance à titre de revenu d’entreprise.
[Emphasis added.]
[10]
According to Mr. Michaud’s testimony before
this Court, Industrial Alliance acquired another company in January 1992
and all the agents of that particular company were treated as independent
contractors. Therefore, the Company made the business decision to treat all its
agents as independent contractors, except for the sales managers.
[11]
It is evident from the Agent Contract (Agent
Contract) reproduced below and signed by Mr. Mazraani that great care
was taken in implementing IA’s intent to treat its agents as independent
contractors. First, the contract is entitled “Agent
Contract” and not “Employment Contract”. Furthermore, section 4 explicitly states that the
agent is an independent contractor and that the contract does not establish an
employer-employee relationship. In addition, there is the fact that Industrial
Alliance requires that its agents be responsible for many expenses, such as
those which are described in section 4 of the contract, which would include paying
rent for the use of the computer and software.
[12]
In addition to having, I am sure, the benefit of
professional help in drafting this contract, Industrial Alliance approached the
CRA (then Revenue Canada) employment insurance division to look over the
contract and get their input on how to ensure that its agents would in fact be
treated as independent contractors. Not only did the CRA representative indicate
that the status of agents as independent contractors would be confirmed, but he
made specific suggestions as to how to improve the contract, such as removing section
5 and modifying others. For instance, the CRA representative suggested replacing,
in section 8 of the French version, the words “RÈGLEMENTS ET INSTRUCTIONS” by “POLITIQUES”. The letter of November 3, 1993 in which these suggestions are made concludes
with the statement that, on receipt of the modified copy of the contract, they
would confirm the independent worker status of the agents effective January 1,
1993. This occurred on December 23, 1993. Both
letters are addressed to the attention of Mr. Bruno Michaud, “Assistant
vice-president Marketing, Assurance et rentes
individuelles”.
[13]
When asked by Mr. Mazraani to distinguish between
the way in which the Company handled its agents before 1993, when they were
treated as employees, and the manner in which it did so afterwards, when they
were treated as independent contractors, Mr. Michaud gave the following
answers:
MR. MICHAUD: The main change, as I said this
morning, was that advisors could incorporate themselves, could hire
employees and that was the main -- the main purpose of the ---
JUSTICE ARCHAMBAULT: So before 1993, people
could not hire their own assistant?
MR. MICHAUD: No.
JUSTICE ARCHAMBAULT: No, okay. So they could
hire assistants ---
MR. MICHAUD: I would say they could but the
expense ---
JUSTICE ARCHAMBAULT: They could?
MR. MICHAUD: --- the expense was not
deductible. So from a tax point of view, since ---
JUSTICE ARCHAMBAULT: I thought it was? [sic]
MR. MICHAUD: No, no. I’m sorry, it was not
because they were employees. They were commissioned employees.
. . .
JUSTICE ARCHAMBAULT: Yeah, okay.
Do you see any other differences?
MR. MICHAUD: That’s the main difference.
[Emphasis added.]
[14]
I asked again and was more specific:
JUSTICE ARCHAMBAULT: So was there any
difference in the handling of the representatives before ‘93 and after? . .
.
. . .
JUSTICE ARCHAMBAULT: Is there any -- like for
example, the way you would train them, coach them, motivate them, these are
examples of ---
JUSTICE ARCHAMBAULT: Would there be any change
between before and after?
MR. MICHAUD: These three examples I don’t
think there was so many change.
. . .
JUSTICE ARCHAMBAULT: Yeah, okay. So there
was not much change in the terms of the training of your representative, in the
coaching of them, in the motivation.
MR. MICHAUD: Yeah.
. . .
MR. MICHAUD: The other big change was
they were able to sell their -- sell their clientele.
JUSTICE ARCHAMBAULT: That didn’t happen before
‘93?
MR. MICHAUD: Before, no, no.
[Emphasis added.]
[15]
Mr. Michaud acknowledged that some things
remained the same, such as:
MR. MICHAUD: Yes, but I would say going back
there, you have to keep in mind that for the insurance business, most of the
advisors were insurance agents. There was also and there’s still the
relationship of principle [sic] and agent between the insurance carrier
and the advisor. And if the advisor would do something wrong, then the
life insurance company would be held responsible. It was as simple as this.
JUSTICE ARCHAMBAULT: Before?
MR. MICHAUD: And still.
JUSTICE ARCHAMBAULT: And still the case?
MR. MICHAUD: Still, yeah.
[Emphasis added.]
[16]
The manager of the LaSalle Branch, Mr. Leclerc,
was the last of the IA witnesses to testify, and this occurred on the fifth day
of the hearing. He stated that his branch had an average of 45 financial advisors (agents),
of which around 15 had less than two years of experience. Around 13 or 14 new agents are hired every year. He insisted that the people who are called sales managers are
really only coaches, that their role is only to assist and help the agents, and
that they do no supervision of the work of the agents. When I mentioned that
the Company had produced a lot of training materials for its agents, he replied
that they were documents found on its internal Internet and that the agents were
free to use them. He added that the Company never follows up to ensure that
they perform their work in the manner suggested in these training documents.
[17]
However, later on, after further questioning, he
acknowledged that these training materials were also used in the numerous
training sessions given by IA personnel (usually the sales managers) and that
the sales managers were also spending more than 50% of their time on the road
accompanying the agents and helping them to improve their sales techniques and
assisting them in any way that was required.
[18]
I counted 53 agents on the intercom phone number
list for the personnel of the branch as of May 2012 and six sales managers in
addition to the branch manager, Mr. Leclerc. So,
that gives an average ratio of one sales manager for eight agents. Mr. Michaud
testified that the sales managers are not appointed by the branch manager but
by the superintendents. Both the branch manager and the sales managers are
treated as employees.
[19]
Mr. Mazraani received in 1986 a Bachelor of
Science in business computing from the Lebanese American University in Beirut,
Lebanon. In 1991 and 1992, he also studied at Concordia University in Montreal
in computer sciences but did not obtain a degree. In 2002, he attended a
Canadian securities course in Montreal. He worked for London Life Insurance
from 2008 to March 2011 as an agent. He was involved in selling financial
products such as life, disability, critical illness and liquidity insurance.
[20]
On December 21, 2011, Mr. Mazraani submitted
an application to work for Industrial Alliance. According
to Mr. Mazraani’s testimony, he was hired on April 3, 2012, when he met Mr. Leclerc,
who introduced him to his new sales manager, Mr. Beaulé. The latter trained
and supervised him even though the formal contract was only signed on May 3. He was not informed at that first meeting that he was being hired
as an independent contractor:
MR. MAZRAANI: That -- in the meeting,
especially the first meeting, we never discussed -- either was Mr.
Leclerc or Mr. Beaulé that I am building my own business. It was I have
just to do whatever ---
JUSTICE
ARCHAMBAULT: You’re saying they never specifically stated that you were going
to build your own business?
MR. MAZRAANI: No.
[Emphasis added.]
[21]
He started work on April 4, by attending the theoretical
training. He was advised by letter on April 12, 2012 that he was allowed to use
the Intranet and was given an access code and a password for that purpose. In this letter, it is stated that “[l]’extranet est réservé exclusivement à la
force de vente. Son développement est également progressif et les divers
secteurs de la compagnie seront appelés à y ajouter diverses fonctionnalités.” The weekly rent for
the laptop was $18.05 before taxes.
[22]
On April 27, 2012, Mr. Mazraani was formally
informed by Mr. Arsenault, an IA sales superintendent, that the Company
was offering him an agent contract and that he could begin underwriting
insurance and annuities contracts for the Company as a financial security
advisor on April 30, 2012. In this letter (April 27 letter), Mr. Mazraani is
reminded that the Act Respecting the Distribution of Financial Products and Services
(Distribution Act) required that he “hold a valid licence in order
to operate in the disciplines or categories of discipline [he was] authorised
to operate in.” He apparently got his licence back
on April 30, after studying for and passing an exam. He had been unemployed
from the time of the termination of his relationship with London Life in March 2011 up to the time he started working for Industrial Alliance.
[23]
In the April 27 letter, it is stated: “[You]
will be part of service unit 35 of team 90 and you will also be in
charge of the policies and clientele that currently make up part
of this service unit. Your sales director will be Mr. René Beaulé”.
[Emphasis added.] This service unit was located at the Ville LaSalle Branch which
was also known as the Mercier Agency. The letter adds: “You will be compensated
according to our career establishment program. The initial amount of your
advances on commissions will be $600 per week and an amount of $2,500 will be
deposited in your career establishment fund.” He was advised as follows: “if
during the period in which you are regulated by the career establishment
program, you do not receive any remuneration for five consecutive weeks, we
will terminate the program. We will also terminate your career agent’s contract”.
[24]
At paragraph 47 of the CRT reasons, it is indicated
that the advances on commission paid during the training (“stage”)
period or at the beginning of the parties’ relationship were not reimbursable:
. . . les parties reconnaissent que les
avances de commission non-remboursables sont versées uniquement pendant le
stage ou au début de l’embauche. Par la suite, il est entendu que toutes les
avances de commissions sont remboursables.
[25]
It appears from Mr. Mazraani’s bank
statements that he started receiving his advances on commissions on May 3, 2012,
and there were similar payments made each week thereafter in May, for a total
of $2,555. All these payments were equal payments, except for the last one,
which was lower−$304 instead of $562.
[26]
In order to be allowed to sell financial
products, Mr. Mazraani was required, under the Distribution Act, to hold a
licence issued by the AMF. According to Mr. Michaud, Mr. Mazraani was
not allowed to start acting as a financial advisor before April 30 because he
only got this licence at that time. The application for the licence was made to
the AMF by Mr. Mazraani on February 6, 2012. In that application, he asked
for reinstatement of his certificate. In
the section headed “Choice of Ways to Carry on Business”, there is a statement
by Industrial Alliance, made on April 11, 2012, confirming that Mr. Mazraani
will be “attached to our firm . . . without being an employee . .
. to pursue activities in the following sector . . . insurance of persons”. [Emphasis
added.] Under the fourth heading, “Statement”, Mr. Mazraani confirms that
he will not be carrying on activities (paid or not) in a field other than that
which is connected with his practice as a representative. If he had indicated
otherwise, he would have been required to send in the “Dual Employment form”.
[Emphasis added.] Under heading number 6, “Fees payable to the AMF – Contribution
to the Chambre de la sécurité financière”, there is an item, “Contribution to the Chambre de la sécurité financière”, for which a sum of $237 appears. This is in addition to the
mandatory fee for each sector or sector class and for “study of application”.
[27]
In addition to the April 27 letter, Mr. Mazraani
received the Agent Contract together with the “Commission
and Bonus Schedule and Remuneration Rules” (Remuneration
Rules). Here are some of the relevant portions of the contract, signed
on May 3, 2012, but effective April 30, 2012:
AGENT CONTRACT
______________________________
. . .
2- AGENT’S
RIGHTS AND POWERS
a) The
Company authorizes the Agent to solicit and obtain applications and requests
for the various contracts and financial services offered either directly
by the Company or through another company with which the Company has signed
a distribution agreement (hereinafter called the “authorized entity”). The
Agent agrees to offer quality service.
b) The
Agent agrees to make all reasonable efforts to maintain in force all contracts
issued by the Company and for which he/she is responsible as an Agent.
c) The
Agent agrees to deliver immediately to the applicant each contract for
insurance or other financial products, in accordance with legislation
and instructions from the Company.
d) The
Agent agrees to submit to the Company, or the authorized entity, all
applications for insurance, annuities or financial products that he/she has
obtained.
However, after
advising the Company, the Agent could give an application or request to
other insurers if:
i) the Company
refuses to issue a contract; or
ii) the Company doesn’t
offer the type of product requested.
e) The
Agent is liable for any amount incurred by or owed to the Company or a
client due to a mistake, negligence, error, omission, fraud or dishonesty by
him/her or one of his/her mandataries.
3- REMUNERATION
During the term of
the contract, the Agent requests that weekly advances be paid to him/her
and he/she agrees to reimburse them. Hence, the Company has created a
“fund” on behalf of the Agent in which all weekly advances are posted.
In consideration of
the contracts established subsequent to applications or requests submitted by
the Agent, the Company pays to his/her fund all remuneration related to these
contracts as established according to the Company’s Commissions and
Bonuses Schedules and Remuneration Rules, adjusted from time to time,
which form an integral part of this contract.
The Agent
acknowledges that the remuneration paid into the fund following the sale of a
contract shall only become vested when the insurance contract has been
in force for a certain period, as provided for in the Commissions and
Bonuses Schedules and Remuneration Rules, subject to any adjustments to be
made.
In the event of termination
of a contract before the related remuneration is vested by the Agent, the
Company debits a negative charge in the Agent’s fund. This charge is a
percentage of the commission and bonus, as established by the Commissions and
Bonuses Schedules and Remuneration Rules.
The balance of the
Agent’s fund is obtained by calculating the commissions and bonuses
paid, and deducting the charges, weekly advances and other fees,
expenses and commitments make [sic] in the performance of his/her
duties. The Agent remains liable to the Company, even after the termination of
the contract, for any negative balance in the establishment fund. Hence, in the
event where the advanced remuneration would not be reimbursed from the vested
commissions, the Agent will accumulate a debt towards the Company which he/she
will have to repay.
Individual Life Insurance, Individual
Disability Insurance and Group Insurance
The commissions and bonuses payable to the Agent for premiums under these contracts
are determined in accordance with the schedules in effect on the date on
which the insurance becomes effective.
Individual Annuities and Group Pensions
The commissions and
bonuses payable to the Agent for premiums under these contracts are determined in
accordance with the schedule in effect when a premium is received,
when a premium or interest credit is reinvested or when the premiums received
and the credited interest are applied to the payment of an annuity.
Other Products and Financial Services
The commissions and
bonuses payable to the Agent for other types of contracts and financial
services are determined in accordance with the schedules in effect when
the Company is remunerated by the supplier of such products or services.
4- STATUS AND FEES
The Agent is an
independent contractor and this contract must not be interpreted as
establishing an employer-employee relationship between the Company and the
Agent. As such, the Agent agrees to pay all expenses incurred in the
exercise of his/her duties.
Without limiting the
generality of the foregoing, the Agent agrees to pay the following fees and
expenses:
- obtaining
or renewing the licenses necessary to exercise his/her duties;
- obtaining
or renewing professional civil liability insurance;
- membership
dues in professional or other associations;
- his/her
business office, including secretarial fees and office supplies;
- information
systems, long-distance calls and facsimiles;
- travel,
solicitation and publicity;
- training
and upgrading.
If the Agent
operates his/her own company, he/she must provide the Company with all
information that this latter deems necessary to
evaluate it, such as the names of shareholders and the number of shares held by
each one and the names of directors. The Agent must also annually provide the
Company with a copy of his/her company’s insurance certificate. The Agent
must be the only person authorized to sell insurance products in the name of
his/her company. As a director and shareholder, the Agent remains
responsible for the company.
The Company reserves
the right to terminate the Agent contract when a change occurs in the management
or control of the Agent’s company.
5- MINIMUM PRODUCTION
The Company reserves
the right to set minimum production and business persistency standards
for the Agent and to amend these standards from time to time.
. . .
7- RULES AND POLICIES
The Agent agrees to
comply with all laws, rules and codes of ethics
applicable to the performance of his/her duties. The Agent also agrees to
comply with all Company policies, which include the Market Conduct Standards
and the Policy for Using Electronic Communications. The goal of these
policies is to standardize administrative procedures, reduce the
time taken to process a request and ensure that everyone respects the
regulations of the life and health insurance industry.
8- MODIFICATIONS
Subject to a written
notice of seven (7) days that must be sent to the Agent, the Company may
modify the Commissions and Bonus Schedules and Remuneration Rules, the
Market Conduct Standards, the Policy for Using Electronic Communications,
as well as any other provision of this contract. The modifications take effect
when the seven (7) days notice expires.
9- PERMITS
AND INSURANCE
The Agent agrees to obtain the licenses required by legislation
of the province in which he exercises his/her duties and maintain professional
liability insurance in force. The Agent agrees to provide proof of the
validity of his/her license(s) and professional liability insurance at the
Company’s request.
10- RECEPTION OF AMOUNTS
The Agent must immediately
remit to the Company any amount that he/she receives on behalf of the
Company.
The Agent must
inform the Company in writing of the opening (and of all subsequent
changes) of a trust account for the performance of his/her duties. The
Agent agrees to provide the Company with all information that this latter
deems necessary to evaluate the sound management of the trust account. The
Agent authorizes the Company to verify the transactions in the trust account(s)
with the financial institution. The Company shall send the Agent a written
notice seven (7) days before checking with the financial institution concerned.
The Agent who pays
into a trust account any amount of money that he/she receives on behalf of the
Company, shall remit the entire amount to the Company within the required
timeframe. The Company reserves the right to terminate the Agent contract due
to inappropriate management of the trust account.
The Agent must not
grant a premium rebate to clients by paying the amount requested
by the Company or authorized entity in full or in part.
11- ASSIGNMENT
a) Assignment
The Agent
acknowledges that the Company has right of preference on all amounts payable
to the Agent or to any person making a claim for him/her or on his/her
behalf under the present contract, as security for any amount that might be
owing by the Agent to the Company. The signing of the present contract by the
Agent shall in fact constitute an assignment of these amounts. The Agent agrees
to refrain from assigning, transferring, pledging or in any other way disposing
of any amounts owing to him/her or that might be payable to him/her under the
present contract.
b) Assignment
of Right of Representation
The Agent may sell or otherwise dispose
of his/her right to represent Company clients with respect to individual
life insurance, guaranteed investment or segregated fund contracts, subject
to the Company’s standards and conditions in effect on the date
of the transaction. The standards and conditions are described in
the Company’s Commissions and Bonuses Schedules and Remuneration Rules.
12- LIMITATIONS OF THE AGENT’S
RIGHTS AND POWERS
The Agent is not authorized to:
- bind the Company by any promise or agreement;
- incur any
liability whatsoever on behalf of the Company;
- accept a risk
on behalf of the Company;
- commit the
Company to any relationship whatsoever;
- use
brochures, advertisements or printed matter bearing the Company’s name or
logo that have not been previously approved in writing by the Company.
13- PROPERTY OF DOCUMENTS AND
MATERIAL
Forms, handbooks,
policies, computer software and other Company documents at the Agent’s disposal
remain the property of the Company and must be surrendered on request or
on cancellation of this contract. Client files remain the property of the
Company.
The Company is
committed to respecting the confidential nature of any information received
from the Agent in conjunction with an insurance application. Unless required by
law, the Company agrees to not provide this information to any other agent to
allow this agent to compete with the initial Agent. Notwithstanding the
preceding, the Company reserves the right to appoint another Company agent
to provide service under a policy in place of the initial Agent,
whether this contract is in force or terminated, if one of the following events
occurs:
i) the
Agent does not have a valid insurance permit;
ii) a
request to this effect was made by the client;
iii) the
service provided by the Agent is not satisfactory for the client or
the Company;
iv) the
Agent acts to the detriment of the interests of the client or
the Company;
v) the
Agent contract is suspended or terminated.
14- SUSPENSION OF THE CONTRACT
The Company may
suspend this contract under any reasonable grounds, whether or not related
to duties of the Agent, by giving the Agent notice. The effective date of the
suspension corresponds to the date the notice is sent.
No remuneration
is payable during the suspension and the Agent
loses the right to all commissions payable during this period.
Without limiting the
generality of the preceding, when this contract is suspended, the Agent is not
authorized to solicit, obtain applications or perform transactions related to
Company clients. During a suspension, the Agent must abstain from
contacting Company clientele as an Agent.
The restrictions and
obligations resulting from the suspension apply to all business of the Company
and that of its authorized entities.
15- CANCELLATION OF CONTRACT
With or
without cause, the Company may
terminate this contract by giving seven (7)
days written notice to the Agent at his/her last known address.
With or without
cause, the Agent may terminate this contract
by giving written notice to the Company. The cancellation date is the date of
receipt by the Company of the written notice.
This contract is
automatically terminated in case of death, fraud, dishonesty, serious error or
bankruptcy on the part of the Agent.
No remuneration
is payable as of the date this contract is cancelled and, if there is a debt owed by the Agent to the Company, such debt
is immediately payable to the Company by the Agent. The Agent remains
responsible for any commission or bonus charges on insurance contracts
terminated after the cancellation of this contract. The commission and bonus charges
are those described in the Commissions and Bonuses Schedules and Remuneration
Rules. These charges constitute a debt owed by the Agent to the Company and are
payable to the Company upon request.
When this contract
is cancelled because the Agent ceases to act as an Agent, the Company
becomes the assignee of the client records.
16- NON-COMPETITION
For a period of two
(2) years beginning on the date of the cancellation of this contract, the
Agent must not act as an Agent or broker on behalf of clients of the Company
who are part of the service unit served by the Agent at the time of the
cancellation of the contract, by selling or soliciting, directly or
indirectly, on the Agent’s own behalf, or on behalf of any other individual,
company or corporation, life insurance contracts, annuities or disability
contracts, or any other type of contract or financial service offered either
directly by the Company or through another company with which the Company has
signed a distribution agreement. The Agent agrees that each infraction of this
commitment shall result in a charge equivalent to the total of the annual
premiums of the cancelled or annulled contracts, in the case of life insurance
and disability insurance contracts, and to the commissions paid, in the case of
annuity contracts and other types of cancelled or annulled contracts, as
special damages, without prejudice with respect to any other recourse by the
Company, notably the right to request an injunction to halt such a violation.
17- LEGAL PROCEEDINGS
. . .
19- SCHEDULES, CODE AND POLICIES
The Agent
acknowledges that he/she has read and received all the necessary
explanations regarding the following documents:
•
Commissions and Bonuses Schedules and
Remuneration Rules;
•
Market Conduct Standards;
•
Policy for
using electronic communications.
. . .
[Emphasis added.]
[28]
Mr. Michaud testified that no agent was
entitled to approve the issuance of an insurance policy; this could only be done
by an underwriter in the Quebec City office. Not even the sales manager, the
branch manager or the five superintendents were allowed to do so.
[29]
Mr. Michaud, in his testimony, confirmed
that the costs for the use of a car, a home office, a computer and a cellular
telephone, for long distance calls and for liability coverage were all items
which all the agents were responsible for paying. He also confirmed that no
taxes were being withheld at source from the agents’ remuneration, i.e., the
commissions paid to the agents.
[30]
Industrial Alliance provided some benefits, such
as health insurance coverage for Mr. Mazraani and his family, but the cost
of those benefits was charged to him and deducted from his commissions. Mr. Mazraani obtained liability insurance coverage (from
Lombard General Insurance Company of Canada), as required by his Agent Contract,
and the cost of that insurance coverage was deducted from his commissions. However, Mr. Michaud admitted in his testimony that an
employee agent would also need this kind of insurance because everyone holding
a licence as a financial advisor needs such coverage. Also,
IA would not need to check whether an agent has this coverage because “we know
for most of them because we have a plan that most of our advisors are
using because it’s more convenient.” [Emphasis added.]
[31]
There are several exceptions to the rule that costs
were charged to Mr. Mazraani. For example, the contribution of $237 to the
Chambre de la sécurité financière was an expense that was reimbursed to him by Industrial Alliance.
During his testimony, Mr. Michaud explained that it used to be considered the
insurance company’s expense as opposed to the individual agent’s. At the
beginning, that expense used to be charged directly to the insurance companies
or the firms. However, given that a particular agent could be working for more
than one such company or firm, it was decided to bill the individual agents directly
in order to avoid double or triple payment of that contribution. In his
testimony, Mr. Michaud was adamant that Mr. Mazraani paid the cost of
obtaining the licence to work as a financial advisor. For him, a contribution
to the Chambre de la sécurité financière was a separate item and it was the only one that was paid by
Industrial Alliance.
[32]
However, there are other expenses that were incurred
by Industrial Alliance and not charged to Mr. Mazraani, such as the cost of
the business cards given to the agents. Similarly, the costs for the office
where Mr. Mazraani performed his services 80% of his time were borne by
Industrial Alliance; these costs included the cost of the premises, the cost of
the phone system and the monthly payment for the local and toll-free telephone service.
Only the costs for cellular telephone service and long-distance calls were paid
by the agents. The Company also paid the cost of developing the software provided
to the agents and the cost of the Intranet and Internet services used by them.
[33]
Mr. Michaud also acknowledged that no fees
were charged for the ongoing training offered by Industrial Alliance. If such
training was offered by somebody else, its cost would be borne by the
individual agents. However there is no evidence that this type of activity took place.
Mr. Michaud acknowledged one exception to this rule: If a particular agent
decided to take courses to become a financial planner, Industrial Alliance
would reimburse to the agent the fees incurred upon his successfully completing
the program.
[34]
Starting April 4, 2012 and until April 30, 2012,
the effective date of the contract, Mr. Mazraani was given training by
Industrial Alliance. The document entitled “Coaching Guide Professional
Development Program for Financial Advisors” (Coaching Guide), addressed
to the branch manager, describes its purpose as follows:
This coaching guide was created
to help you follow, in close collaboration with the sales manager, the
professional development of your new financial advisor. It will enable you
to support your sales manager in his role as coach, training
supervisor and sales manager for his new recruit.
[Emphasis added.]
[35]
It also states: “Obviously, each sequence of the
guide highlights the essential elements of compliance to be considered
by the training supervisor and his trainee”. [Emphasis added.] The
Coaching Guide further says: “We suggest that you have regular meetings with
your new advisor, alone or with your sales manager present. We suggest five
to six meetings during the thirteen weeks of the internship.” It concludes
as follows: “In closing, we hope that this tool meets your needs and helps you
to be more efficient in the important support role that you fill with
your colleagues for your agency’s growth and development. Your SUPER
VISION (supervision) and your ENTHUSIASM make all the
difference!” [Underlining only added.]
[36]
The new trainees receive instruction on
different topics, including the trainee’s duties, the rules
on maintaining client files and the Market Conduct Standards Code (Conduct
Standards). The coaching guide also describes 20 steps, from
prospecting to handling objections to closing techniques to delivery to service
to follow-up. The performance of the trainee is appraised on a
scale of 1 to 5. In addition the form asks the branch manager to indicate whether
the training supervisor has verified the client files for the current
week. This request appears every time certain steps have been completed.
[37]
Mr. Mazraani filed a list of training
sessions setting out the training topics for new agents. It shows 28 training presentations given over a period of ten
weeks, generally two hours per day, three days per week. This training started
on April 3 and ended on June 7, 2012. Among the topics, there were “Approche” (April 4), “Techniques conclusion” (April 18), “Gestion du temps” (April 24), and “Transition - Stratégies de vente” (June 7).
[38]
In her e-mail of May 1, 2012, dealing with “Formation nouveaux Conseillers − nouvelle grille”,
the “secrétaire administrative” informs the new agents that “Il est très
important de lire toute l’information disponible sur Extranet avant chaque
formation . . . Vous pouvez consulter votre directeur des ventes pour connaître
la matière à lire.” In an e-mail dated May 14, 2012, to
Mr. Mazraani, among other persons, she writes: “Veuillez noter que vous aurez une formation . . . sur
les références d’assurance auto et habitation.” [Emphasis
added.] That training was to be given on May 31. She does not invite him; she
tells him that he will receive this training! A reminder regarding that training
session was sent to Mr. Mazraani on May 28 by the same administrative
secretary, and this time a copy was sent to his sales manager and the branch
manager.
[39]
The following is a description of the material
that was provided as Exhibits A-47 and A-57. They are described as training “modules”,
are for the most part dated September 2002 and are intended for agent training.
The modules include Module 2, “The Art of Selling” (21 pages); Module 3, “Planification, Organisation, Contrôle” (21
pages); Module 5, “Approach” (57 pages) plus an annex entitled “How to handle the
Objections on the Telephone” (10 pages); Module 7, “Conclusion” (33 pages)
and “How to handle objections” (9 pages) plus an annex entitled “The face to face
objections” (10 pages); Module 8, “Delivery” (31 pages); and Module 9, “Service and Follow-Up”
(25 pages). In addition to these modules, there is another document, entitled “Closing”,
which has 11 pages.
[40]
Here are some samples of the instructions
that can be found in this training material. In “The Art of Selling”, on page 7, it is stated: “The agent should
use his appearance to project an image of a successful person . . . Therefore, be
impeccable, with a businesslike appearance and not provocative (washed
hands, clean nails, clean haircut, shined shoes, dry-cleaned suit, fresh breath,
etc.) . . . Your pen should also be a sign of your success. One does not
sign an important contract with a cheap pen. Use a compartmentalized
briefcase. Arrange your documents neatly, use labelled
folders which will allow you to find the forms you want rapidly.” [Emphasis
added.]
[41]
At page 8 and following,
there is a description of the different buyer personality types. The document tells
how to behave with each. With the expressive buyer, the agent is told to
“[a]void details . . . being abrupt, cold or sticking too close to the
agenda.” With the personality type described as
amiable and characterized by gentleness, the following conduct is advised: Present
your case calmly, without being intimidating.” Avoid saying to these persons “[h]ere’s
how I see things” and “manipulating or forcing
them to agree . . . being condescending or humiliating them by using
subtleties or insults.”
[42]
On page 13, the cycle of selling is described as
consisting of the following: prospecting, approach, interview, conclusion,
delivery, service and follow-up. The module on the art of selling also briefly
describes each of these steps, but they are discussed in more detail in the
modules discussed below.
[43]
On page 5 of Module 3, “Planification, Organisation, Contrôle”, there is
this enlightening statement :
Débuter votre carrière de représentant c’est
comme ouvrir votre propre entreprise. Vous êtes particulièrement avantagé
puisque cette forme d’entreprise n’engage pas l’investissement de vos
économies personnelles, la recherche d’un local, l’achat de matériel et la
tenue d’un inventaire. Elle nécessite cependant l’investissement de
votre temps et de votre talent.
[Emphasis added.]
[44]
This passage is very instructive because it does
not say that one is opening one’s own business, but that it is like starting
up one’s own business, thus implying that the agents are not carrying on a
business. Furthermore, such a description is often used to differentiate, from
an economic point of view, between a business and an employment. Carrying on a
business normally requires capital and labour while employment normally only
requires labour. This puts in its proper context the minor importance of some
of the expenses that are to be incurred by the agents pursuant to the Agent
Contract, that is, expenses such as the cost of their licence, payment for the
use of a computer ($18 dollars per week), travel costs and the costs for the use
of their car, while the Company covers major items such as the rent for the
office and the cost of training, of the office equipment, of developing or
buying software specific to the insurance industry, of telephone service, of
supervision, etc.
[45]
On page 6 of Module 3, where the planning of
their activities is dealt with, the agents are reminded of the importance of
attending the branch office meetings:
Vous devez équilibrer vos activités. Le travail
de représentant consiste à vendre de l’assurance mais aussi à
prospecter, préparer des dossiers, servir ses clients, voyager sur la route,
régler la « paperasse » au bureau, assister aux rencontres d’agence,
étudier etc.
[Emphasis added.]
[46]
On the same page, the module indicates that
agents should plan their work by doing the following things:
1. Préparer vos journées de manière à fournir au
moins 8 heures de travail véritable. . .
2. Fixer l’heure de votre départ sur la
route. Flâner au bureau ou à la maison n’est pas très payant.
3. Penser à vos rendez-vous avant de vous y
rendre. Imaginer des objections que le client éventuel pourrait vous exprimer
et préparez vos réponses. . . .
4. Dîner avec un Centre d’influence –
pensez toujours « Prospection . . .
5. Prévoyez deux rendez-vous par
jour au minimum.
. . .
7. Planifiez une partie de la journée pour
préparer vos dossiers et tenez vos rapports sur vos activités quotidiennes
prévues ou imprévues.
8. Réservez-vous du temps pour lire.
9. Ne vous occupez pas de vos affaires
personnelles pendant vos heures de travail et vice versa.
10. Rappelez-vous que le temps est pour
vous du capital. À vous de bien planifier chaque heure, chaque minute.
[Emphasis added.]
Page 7 is headed “Vos objectifs et les attentes de la compagnie”. [Emphasis added.] Under that
heading, on page 8, agents are told: “Avec l’aide
du directeur des ventes, déterminez vos objectifs
en effectuant les exercices suivants . . .” [Emphasis added.]
[47]
At page 9, there are self-serving statements
that are more consistent with an intention on the part of the Company to treat its
agents as independent contractors. For example, we find the following under the
heading “Définition de l’organisation”:
C’est un horaire de travail organisé
efficacement, de manière à réaliser les activités qui vous permettent d’atteindre
vos objectifs. Le représentant travaille pour lui-même; il contrôle et est
entièrement responsable des résultats de son travail. Il est définitivement
un propriétaire unique. . . .
[Emphasis added.]
[48]
The index for Module 5, dealing with the
approach, gives a good indication of the module’s content:
When
must the potential client be contacted?
.
. .
How to prepare
telephone approaches?
. . .
Methods of approach
. . .
Sales dialog
. . .
Scheduling a meeting
. . .
[Emphasis added.]
[49]
Here are some examples that are given of
sales dialogue to use according to the “source and prospecting tool”, and depending,
for example, on whether the agent is dealing with an existing client, relatives,
friends or acquaintances, or whether he is doing direct solicitation. Of great
interest, for example, is how the agents are told to introduce themselves
when they call a prospective client: “My name
is . . . of Industrial Alliance Insurance and Financial Services.
Can you spare a few minutes to speak with me?” [Emphasis added.] (Page 20). Later on in this dialogue, the agent is told to say: “Since my company is
asking me to obtain as many [surveys from
prospects] as I can, I asked [name of the person who gave the referral] to tell
me if they knew of anyone else who would be interested in helping me with this
task. . . .” [Emphasis added.] Another example of an approach on the phone is
the following:
Good morning . . . Mr... My name is… I’m
calling from Industrial Alliance Insurance and Financial Services. I am
your new agent, and I am the one handling your file. I have been asked by my
Company to meet you and make your acquaintance.
[Emphasis added.]
[50]
Another suggested approach is: “Mr… my name is… from
Industrial Alliance Insurance and Financial Services. You are insured
with us, so the Company has asked me to meet you.” [Emphasis added.]
[51]
Module 7, entitled “Conclusion”, instructs the
salesperson on the following subjects: “Why close?
When to close the sale? How to close the sale?” [Emphasis added.] For instance, it states:
. . . More than 98% of all people sign a policy for emotional
reasons, and only 2% do it for rational reasons. Thus, you must
concentrate your efforts on arousing their interest in acquiring
insurance, increasing the desire to sign and bringing the potential client to
action.
[Emphasis added.]
[52]
This module provides “some
words and practices that the agent can use to persuade his potential clients to
act. We advise you to memorize them and learn their exact definitions
from a good dictionary.” [Emphasis
added.] For instance, at pages 12 and 13:
People will not sign
anything without closely reading the document first. The word “sign” means “bond” or “commitment” and creates resistance. If you ask the client to sign
something, he will surely answer “I’ll
think about it.” Use words like “authorize” or “give your
approval’’.
. . .
. . . closing the sale begins as early as the
first minutes of the sales interview. With the help of your director,
carefully analyze the following diagram and understand the process.
[Emphasis added.]
[53]
At page 28 of Module 7, the agent is instructed
by the Company to record his sales: “In order to follow
through on your contracts, from sale to delivery, record all relevant
information in the ‘Personal Sales Record’ (F20-123A) or on the
Extranet – Agency Management”. [Emphasis
added.] Also, on page 29, after the agent has been successful in getting
his potential client to sign an application, the Module urges:
The day you file your
proposal, write to him and congratulate him for his decision and thank
him for his trust in you.
For example, you could send him a thank-you
card that is available at the agency (F900-02A). On the other hand, if
you prefer to write him a letter, you could use the following example, which
is available in Interface.
[Emphasis added.]
[54]
The “How to handle objections” part of Module 7 provides a lot of different scenarios and guidelines
regarding how to deal with objections. These are some examples from that
document. On pages 4 and 5, we find the following:
Handy tricks to help face the objections.
. . .
b) If an objection surfaces:
•
Never argue. The representative should never respond to an objection by
arguing with the potential client. Instead of jumping at the occasion of
winning the debate, use the objection as an opportunity to learn more.
•
Never attack. . . . Try to feel what he is feeling. . .
•
Listen
carefully. Let him always express his objection without
interrupting him. . . .
•
Use “and”, instead of “but”. When you have an objection, try to use “and” instead of “but”. A
potential client who hears “but” could feel confronted or rejected. . . .
. . .
•
Answer positively.
Answer in a way that makes the potential client feel that you are taking
care of him.
[Emphasis
added.]
[55]
There are more examples in “The ‘face to face’ objections” Annex, including this one on page 4 relating to the “I don’t need to buy
life insurance” objection:
Agent “You insure your office, your
chair, the curtains and the inventory, but you haven’t insured the thing
most precious in life: yourself. . . .
[Emphasis
added.]
[56]
On page 5, the “I have to think about it”
objection is dealt with:
Agent “I’m relieved to hear that
you want to think about it a bit because it will take about 2 or 3 weeks
after the medical exam before the company can decide if it wants to assume
the risk.” . . .
[Emphasis
added.]
[57]
On page 6, the following is suggested should the
prospect say “ I’d like to speak to my wife about it”:
Agent “I agree with you perfectly.
But what would she object to? More money if you die? More money when you
retire? More money if you should be disabled?
[Emphasis
added.]
[58]
On page 7, the “I can’t afford it” objection is
covered:
. . .
Agent “What would you do if, one
day you received a notice telling you that your taxes have gone up $120 a month?”
Wait for his response. Invariably, he’ll
answer that he will find the money, never mind how. Tell him the following:
Agent “It’s the same thing for
insurance: You’ll find the money to pay for the premium. There is a difference
however, between paying taxes and paying a premium. When you pay taxes, your
money disappears but when you pay premiums, they assure you are protected.”
[Emphasis added.]
[59]
In Module 8, “Delivery”, the index discloses the
following topics “Why to deliver the policy? When
to deliver the policy? How to deliver the policy? The delivery
interview”. [Emphasis added.] More specifically, it is stated at page 5 that the “purpose of this module is to teach you how to
prepare for the delivery of the policy and to insure you that your new prospect
will remain your client for many years to come.” [Emphasis added.] Under the item “when to deliver the
policy”, it is stated:
. . . It is strongly
recommended that the policies be delivered 14 days at the very latest
after the Company has issued them. . . . Because, don’t forget that the more
time that goes by between the signing of the application and the confirmation
of its acceptance, the more your client will be inclined to change his mind.
[Underlining only added.]
[60]
Further instructions are given at page 6:
In short, when the agent delivers the
insurance policy to the client and he notices that changes have taken place
in the insurability of the person since the application had been signed, he
must notify the insurer immediately, and while awaits the
instructions from the insurer, he should not deliver the policy.
[Emphasis added.]
[61]
Under the subject heading “How?”
it is stated at page 6:
To ensure that
your potential client will become and remain a long-term client, you should
prepare yourself carefully before the interview. There are 9 steps
to follow to prepare for it well.
. . .
2. Enter transaction in “My Sales Register” (F20-123A)
. . .
[Emphasis added.]
[62]
At page 13, eight steps to be followed in
order to deliver a policy well are set out. The following guideline is given at
page 14 in connection with the first step: “If
such an interview takes place in your office, you should, of course, take all
the necessary precautions to ensure that neither your client nor yourself be
disturbed and that you can direct all of your attention to your client.” At page 22, it says: “As soon as
you return to the agency, do not forget, above all, to send the ‘Endless
Chain’ thank you letter (Interview module)” [Emphasis
added.] This is what Module 8 says an agent should do if he delivers a
policy with an additional premium, i.e., greater than the premium
discussed at the preliminary stage (at page 25):
. . . you should let the applicant see that
he has a weak point. According to them, it is good to make him understand
that it may be his last chance to obtain insurance, by emphasizing, for
example, the fact that he was lucky that his proposal had not been refused.
Never excuse yourself to an applicant for the Company having issued a policy
at a special rate. Mention only the advantageous points; don’t
mention the disadvantages. Show a positive attitude and be proud that the applicant can
transfer this additional risk to your company.
[Emphasis added.]
[63]
Module 9, “Service and
Follow-Up”, following a similar pattern to the other modules, deals with
the why, when and how of providing service and follow-up;
it also speaks about how one should approach an insured? At page 5, the document explains in the following terms why service
is so important:
Once a policy has gone
past the expiration date at the beginning of the second year, without renewal
and without any apparent reason, this means a loss for the insured, a loss for
the agent and a loss for the company.
The insured has paid a premium, which he has thrown
out of the window. The agent is deprived of the renewal commissions and of the
conservation bonus. The company pays the administrative costs, which
exceed the income achieved.
[Emphasis added.]
[64]
The above excerpt clearly illustrates that the Company’s
interests are always at issue, contrary to the impression given by certain
self-serving statements noted above and below which focus only on the agent.
[65]
At page 6 of the module it is stated:
. . . After the
registration of the policy, to reinforce your sale, you send the “Thank
you” card (Conclusion module). You then deliver the contract and take
the time to give your client all pertinent information (Delivery module) - this
is part of your service toward your client.
[Emphasis added.]
[66]
At page 7 of the module there is a
description of how one provides service and does follow-up: “. . . it is very important to organize your computer,
which generates your activities automatically. With a mini-file, you have
monthly indexes useful for inserting your client’s cards in order to
communicate with him at a good opportunity.” [Emphasis
added.] Among the points covered on page 8, there is this one relating to
birthday cards: “14 days before the
birthday of a client or a potential client, you are notified to prepare his
birthday card. . . . Your director will show which way you
can get them back weekly, or you can have recourse to “Help” from the tool bar”. [Emphasis added.] On page 15, the following
instructions are given regarding an approaching contract anniversary “You send the letter which follows as well as the “Updating
Your File” brochure (F13-248A) the week before this date, followed by a
telephone call.” This is part of the suggested dialogue for that activity:
Hello, it’s… from
Industrial Alliance. I just received your updating document from your
file.
[Emphasis added.]
[67]
In addition to the morning sessions referred to
in the list of training sessions, Mr. Mazraani
stated that he had three weeks of technical training from 1:30 to 3:30 in the
afternoon on Tuesdays and Thursdays. The lecturers were employees of Industrial
Alliance, usually sales managers. This training included use of the computer
and the software.
[68]
The software, which was designed by or for
Industrial Alliance and which describes its financial products for its
potential clients, constitutes a key tool for the distribution of its financial
products. As an example of the documentation that would be generated by this
software, Mr. Mazraani filed a document dated September 6, 2012 describing
a Genesis universal life insurance policy that he submitted to one of his
clients. The nine-page document contains sections with such headings as “A Financial
Solution for All of Your Needs” and “Plan Details”. Information is given on the
coverage, the average return for the first year and the projected values over a
57-year period based on certain investment assumptions. There is also a “Highlights”
section containing the definitions of words used in the document and there is an
“interest rate sensitivity test”. None of that, in my view, could have been
generated without a computer, at least not as quickly and accurately as it was
done with such a tool.
[69]
In addition, Mr. Mazraani was trained for
one hour by a secretary on the use of the telephone system provided to him by
Industrial Alliance. Not only did he receive training on how to use the
telephone system, but he was given several examples of messages to be used.
[70]
Even after the initial training, Mr. Mazraani
continued to receive training and supervision by Industrial Alliance. This
training was offered to all agents. In Mr. Mazraani’s words, the training
sessions were to inform him (and the other agents) about the financial products
offered by Industrial Alliance and to show him how to do his work, including
how to use the Intranet and software applications, how to follow the compliance
rules, how to request blood samples from potential clients, and how to approach
clients for solicitation purposes.
[71]
There is a document listing thirteen training sessions
for all agents for the period from August 13 to September 24, 2012.
These sessions usually ran from 9:30 a.m. to 10:30 a.m. or 11 a.m. The topics included “La prospection” (August 13), “Tout sur l’agenda” (August 23),
“Tout sur la messagerie” (August 30), “Tout sur la gestion des contacts”
(September 6), and “[C]omment générer une liste
d’envoi” (September 20). Some of these topics suggest
training on how to do things. Some of the other sessions were for the purpose of
informing the agents about financial products or services; such was the case
with the one on September 12: “Présentation Inter-Action – Formation nouveau système hypothécaire”. Service
Inter-Action was a new IA subsidiary carrying on a mortgage brokerage business,
which wanted to get referrals from the branch’s agents.
[72]
In an e-mail of May 4, 2012 concerning Solicour, it is stated: “L’objectif de ces rencontres est de faire
connaître les services de Solicour mais surtout de former les
représentants à développer des affaires d’assurance collective”. This e-mail is directed at people with no
experience in the collective insurance sector. The subject of the presentation
referred to in the e-mail is “Pourquoi et comment faire
de l’assurance collective!”. There
is another e-mail, on which appears the notation “Important
à noter à votre agenda”, that is addressed to all
the members of the LaSalle Branch and whose subject is “Rencontre préparatoire Concours du président”. The topics listed are “Idées de prospection”, “Suggestions de structure de travail” and “Objectifs de l’agence”. [Emphasis added.]
[73]
There is another list showing eleven meetings
and other activities including two training sessions qualifying
for professional development units (PDU or, in French, UFC,
unités de formation continue),
scheduled from October 25 to December 13, 2012.
For instance, the list indicates a meeting to take place
on October 25, a Thursday, between 9:30 a.m. and 10:30 a.m., and a branch
meeting (“Réunion d’agence”)
for 2 p. m. on November 22.
[74]
Danielle Harrison, “adjointe à la direction – formation” de l’Agence Mercier, sent the following e-mail dated
September 18, 2012, whose subject line reads “Important
−
Atelier publipostage Gestion clients”. This was a
workshop for the “création et la fusion de lettres
pour envoi postal”. In an e‑mail of October 1, 2012, IA’s “secrétaire administrative” informs the personnel of changes to
the training schedule, in particular with regard to the presentation “Comment
préparer un dossier hypothécaire”.
[75]
The following description by the CRT of what went
on in the Laval Branch discloses a similar pattern:
[75] Il y a d’abord deux réunions hebdomadaires
entre le directeur des ventes et ses représentants. La première est une réunion
d’équipe. Plusieurs sujets sont abordés, tels que les objectifs de
vente pour l’équipe, les règles et les procédures corporatives,
les pratiques commerciales, des conseils de vente, etc. La seconde
est une réunion de supervision où le directeur des ventes
rencontre chaque représentant de son équipe, à l’exception de certains
« senior ». La discussion a notamment pour objet leur
rapport d’activité et le traitement de certains dossiers. Les réunions
hebdomadaires sont d’une durée approximative de une heure trente.
[76] Ensuite, il y a les réunions de suivi
trimestriel entre le directeur des ventes et ses représentants, en expliquant
que l’objectif poursuivi vise à faire un suivi quant à la réalisation du
plan d’affaire et des objectifs de vente des représentants.
[77] Monsieur Blackburn mentionne deux autres
réunions, soit les réunions d’agence mensuelles qui se tiennent généralement l’avant-midi,
lesquelles visent le directeur d’agence, les directeurs des ventes et tous les
représentants, soit les réunions de formation trimestrielle dispensée
par Industrielle Alliance.
[78] Enfin, il précise qu’à chacune de ces
réunions, les présences sont prises, soit par le directeur de l’agence
ou les directeurs des ventes et que le représentant qui ne peut y participer a
l’obligation d’en informer son directeur des ventes et de lui exposer les
raisons de son absence.
[79] Messieurs Blackburn et Kaliszczak
affirment que la majorité des représentants (95%) sont présents aux réunions.
[80] Le directeur de l’agence de Laval,
André Pavan reconnaît qu’il tient un registre de présence, mais il
ajoute qu’il l’utilise uniquement lorsque la réunion concerne une formation
reconnue par l’AMF. Il mentionne qu’une de ses responsabilités consiste à s’assurer
que les représentants de son agence ont rempli leurs engagements de formation
continue (30 unités réparties sur 2 ans, en assurance de personne, en assurance
générale et en conformité), tout en rappelant que la majorité de la
formation est obtenue à l’interne. Quant à son registre, il note un taux de
présence de 73% pour la dernière année et il estime que pour les années
antérieures, les taux de présence sont sensiblement les mêmes. Ceci dit, il
nie tenir un registre similaire ou prendre en compte la présence des
représentants à d’autres types de réunion.
[81] Tous les témoins reconnaissent qu’aucun
représentant n’a subi de sanction, de réprimande ou de conséquence pour ne pas
avoir assisté à l’une ou l’autre des réunions de l’agence de Laval, ni pour
avoir omis, refusé ou négligé de produire un rapport sur ses activités.
[Emphasis added.]
[76]
So, it is not surprising that Mr. Mazraani
and some of the witnesses referred to in the CRT reasons felt compelled
to attend the meetings.
[77]
In addition to specific presentations describing
particular insurance products, which were made to the agents, there were numerous documents available
on the Intranet describing how to act as a salesperson and how to perform sales
work.
[78]
Mr. Mazraani performed most of his duties
at the offices of the LaSalle Branch, in a cubicle not far from his sales manager,
Mr. Beaulé. The cubicle was for Mr. Mazraani’s exclusive use and had his
name on it. His telephone extension number was 422. Although he was working
from Monday to Thursday, he considered himself a full-time employee of
Industrial Alliance, putting in at least 35 hours per week, as he was regularly
reminded to do by Mr. Beaulé or Mr. Leclerc. He reserved Fridays for personal
matters. He said that he was selling reading glasses at the flea market in Saint-Eustache
on weekends in order to supplement his family income. He had three children and
a wife to support.
[79]
Mr. Mazraani was generally responsible for
soliciting his own potential customers to purchase Industrial Alliance’s
financial products. He testified that, although the Company claims that he was
free to offer financial products from other financial institutions under the
Agent Contract, he did not do so. It would have been difficult to do so given
the minimum production targets that he had to reach to remain in the employment
of Industrial Alliance. In addition, given the complexities of the financial
products he had to master, it was illusory to think that he could represent
other financial institutions. In addition, there were several restrictions,
such as dealing with an “authorized entity”, as stipulated in section 2 of the
Agent Contract. For instance, an IA subsidiary, Solicour, made available to him
the products of other financial services companies. This subsidiary earned a
commission on these products. Another restriction mentioned in the Agent
Contract was that he could submit applications or requests to other insurers only
if the financial product was not available within the Industrial Alliance group
or it refused to issue a policy.
[80]
That was likewise the case for the two agents, Blackburn
and Kaliszczak, in the Laval Branch. At paragraph 51 of the CRT reasons, it is
stated:
. . . Ils vendent essentiellement les produits
d’assurance et les produits financiers d’Industrielle Alliance en raison de la
structure de la rémunération qui ne favorisent pas la vente d’autres produits.
Pour eux, il s’agit d’une activité marginale qui n’est pas encouragée, en
ajoutant que ce type de transaction doit être systématiquement approuvé par
le directeur de l’agence. . .
.
[Emphasis added.]
[81]
In addition to all the training and the module materials
described above that Mr. Mazraani received both before he officially started
working and after, Industrial Alliance gave numerous instructions to its agents
not only on what to do, but also on how to do their work.
[82]
For instance, Mr. Mazraani was asked, in
accordance with the power to assign clients mentioned in the April 27 letter, to look after a particular client of the LaSalle Branch who was not
one of his. This occurred at least once, when his sales manager asked him to
deal with a problem of a returned cheque for a premium paid by a policyholder
who had not been solicited by Mr. Mazraani. In support of his testimony in
this regard, Mr. Mazraani filed Exhibits A-6 and A-7, which provide the
name of this particular client of the branch. The returned cheque was in fact a
pre-authorized bank withdrawal that was returned to Industrial Alliance marked “insufficient
funds”.
[83]
Section 7 of the Agent Contract stipulates that
the agent agrees to comply with all Company policies, whose purpose is
described as being: “to standardize administrative
procedures, reduce the time taken to process a request and ensure
that everyone respects the regulations of the life and health insurance
industry.” [Emphasis added.] These policies include
the Conduct Standards and the Policy for Using Electronic Communications (Communications
Policy). The Conduct Standards are set out on two pages. It consist of 13
articles appearing on page 1 (Conduct Standards on page 1);
on page 2 are the “Industry
Monitoring Standards” (Industry Standards), of which there are one or more for each of 18 different items and
for which there are descriptions of the controls to be put in place by the Company
and of the sanctions to be applied for failure to comply. Section 19 of the
Agent Contract refers to these documents, under the heading “schedules, code
and policies”, as documents that an agent must acknowledge having read.
[84]
The “primary
objective” of the Conduct Standards is to establish
guidelines for all the Company’s operations. The Conduct Standards on page 1
read as follows:
Introduction
The primary
objective of this market conduct standards code is to establish guidelines
for all of the Company’s operations and to make sure the interests of our
clients always take priority in our daily operations.
This part of the code primarily covers
the market conduct standards of sales personnel.
A number of controls have been or will be introduced to make sure that the articles of
the code are respected. Above all, we believe that training employees and
sales personnel is still the best way to avoid any mistakes that
could prejudice to our clients,
whether it be intentional or not.
Articles
1) The
intermediary agrees to properly inform and advise the client and follow the
rules of his/her code of ethics.
2) Any
advertising or offer of a product or service made by the Company or a
member of the sales force must be clear and true. Such
advertising or offer must not falsely represent the product and must not
contain any incomplete statements, demonstrations or comparisons designed to
mislead the client.
3) Any
document, notice, statement or contract destined for the client must be clear
and understandable and must provide the client with all necessary information.
Moreover, any documents issued by the Company may not be modified by any
member of the sales force.
4) Any
solicitation of current or future clients must be carried out in such a way as
to not mislead the client about the real purpose of the solicitation.
5) Before
recommending a product or a service to a client, the intermediary must fully
determine the client’s needs, objectives and financial situation. To do
this, he/she will carry out a needs analysis, establish objectives and
determine the client’s investor profile.
6) The
intermediary must encourage the client to keep his/her existing contracts in
force. However, if, in the interest of the client, we have to modify
or replace his/her contracts, the client must be informed of the advantages
and consequences of the change, and the change must be made in accordance with the
rules prescribed by law or the regulations in effect.
7) The
intermediary shall faithfully and completely forward all information
obtained from the client and required by the Company, for the analysis and
evaluation of any insurance application. The agent must also inform the
Company of any situation that could change the Company’s decision.
8) All
information obtained from the client will be treated confidentially and will
only be used for the purposes authorized by the client.
9) All
individual insurance or annuity applications must be immediately sent
to the Company. The same applies to any request for change made by the
client.
10) All
amounts remitted by a client to an intermediary must be immediately
forwarded to the Company.
11) All
amounts owed to a client by the Company must be immediately forwarded
to the client.
12) Any
insurance contract or other document issued by the Company must be
delivered to the client within 21 days of its being issued. If additional
information must be obtained when the contract is delivered, this
information must be immediately forwarded to the Company. Also, when
delivering the contract, the intermediary must explain the contents of the
contract to the client and inform the client of any change, extra premium or
amendment made by the Company. Finally, the intermediary must inform the
Company and return the contract if there is any change in the insurability
of any of the insureds.
13) Application
of Controls and Sanctions
- In all cases, failure to comply with these standards may be
reported by Company personnel.
- When more than one sanction is indicated, they will apply
gradually in the event of subsequent offences.
- The agent’s contract will be terminated if the intermediary
fails to comply with the standards following three (3) written notices in a
continuous period of 24 months.
- Any failure to comply with the standards that leads to
termination of the contract will be considered a serious offence. Contract
termination will be reported to the provincial regulatory body.
- Notwithstanding the foregoing, the indicated sanctions may vary
and may be combined with any other measure deemed appropriate by the chief
compliance officer or his/her replacement.
- In all cases, the costs incurred by the Company due to the
agent’s failure to comply will be charged to the agent. This includes any
fines imposed on the Company due to the agent’s wrongful acts.
[Emphasis added.]
[85]
With respect to the Communications Policy, the IA in-house counsel stressed that this document was intended to
fulfil IA’s obligation under An Act respecting the
Protection of Personal Information in the Private Sector (Information Protection Act),
and principally under section 10, which provides as follows:
10. A person carrying on an enterprise
must take the security measures necessary to ensure the protection of the
personal information collected, used, communicated, kept or destroyed and
that are reasonable given the sensitivity of the information, the purposes for
which it is to be used, the quantity and distribution of the information and
the medium on which it is stored.
[Emphasis added.]
[86]
However a reading of the document shows a
different reality. First, the document starts with the following paragraphs:
This document summarizes the main points of
the Company’s general policy on the use of electronic communications
i.e., the Internet and email. All Company agents must agree to
respect this policy. Given the nature of their work, it is important
that the rules below be followed so as not to result in data loss on
their computer or interruption of their connection to the head office.
1. Access to electronic communications is
given with the sole purpose of assisting agents in work-related activities.
Use of this access for any other purpose, particularly illegal
activities, personal commercial activities, unethical or
offensive practices, conversations or access to sites considered to be
offensive or that may adversely affect the interests of the Company and
any other related activities is strictly prohibited.
2. To ensure optimal service to all
agents and for billing purposes, the Company regularly gathers statistics on
the frequency and duration of Internet accesses and the number and the size
of email messages sent and received. In case of reasonable doubt, the Company
reserves the right to monitor the use and content of such communications more
closely.
. . .
4. Agents cannot provide privileged
information (trade secrets, client lists etc.) or personal information
concerning salaries, management personnel, suppliers, clients or other Company
representatives to third parties without the required authorization.
5. Any use that does not comply
with the Company’s security policy may lead to sanctions that can range
from the relocation of access rights to termination of the agent’s contract.
[Emphasis added.]
[87]
The policy also provides additional rules
respecting Internet use. It describes several precautions that must be taken,
including:
1) Agents must assume that
information found on the Internet (Web) is not reliable and
should consult other sources to verify information.
2. Agents should be careful when
downloading files from the Internet and take note of the following:
(a) Agents who lease a computer
from the Company must not download any files meant to enhance the performance
of their computer. . . .
(b) Almost all information found
on the Internet is protected by exclusive rights. Agents should not download
any applications or software unless they have the required license.
(c) In a number of cases, viruses
contracted from the Internet have gone on to infect other computers at several
companies. Therefore, each time files are downloaded, agents should scan the
files in question for viruses using antivirus software.
3. Agents offering opinions in
discussions forums on the Internet should include the following statement
after their comment:
“This message is an expression of the
author’s personal opinions. The Company will not be held liable in any way
for the opinions expressed herein.”
[Emphasis added.]
[88]
These extracts from the policy clearly show that
the Company is telling its agents how the use the Intranet and the Internet, to
which they are given access. There are specific instructions on how to use it,
constraints as to the length of time for which it can be used, a prohibition against
using applications unless the proper licence is obtained, and a prohibition against
giving out information about salaries and management personnel. These are
concerns expressed in relation to matters that are of interest to the Company
and that are not within the scope of the Information Protection Act as
described by the in-house counsel in her testimony.
[89]
Another example of guidelines and instructions
benefiting the Company is the statement that opinions expressed by the agents
should not be considered the opinion of the Company.
[90]
This is equally true for the Industry Standards,
which appear on page 2 of the Conduct Standards. For
example, with respect to the media, it is stated that agents must not encourage
a client to use the media to resolve a problem. Failure to comply with this
requirement results in termination of the agent’s contract, as would also be
the case for violations with respect to money laundering. No other sanction is mentioned
in these two cases! Another Industry Standard, which is
similar to article 3 of the Conduct Standards on page 1, is the prohibition against
modifying any document issued by the Company. Also,
it is stated that any advertising of products and services has to be approved
by the Company’s communications department. Another standard is that a policy
being replaced should never be terminated before the new one is issued. One of
the sanctions described for failure to comply with these last three standards
is termination of the agent’s contract.
[91]
In section 10 of the Agent Contract, there is
one specific direction which requires that an agent not grant a premium rebate
to clients. In the same section, the agent is instructed to “inform the Company
in writing of the opening (and of all subsequent changes)
of a trust account for the performance of his/her duties.” The Company
will thus be in a position to exercise its power to control. Finally, the agent
must immediately remit to the Company any amount that he or she receives
on behalf of the Company.
[92]
Other examples of instructions are found in the
memo sheet entitled “Keep Your Clock on Time All Year Long”,
where it is stated:
1 When I arrive at the office, the first thing I do is to
enter my activities and results from yesterday into the agency’s
management system.
2 I take my messages, read my email and consult my
agenda for the day.
3 I devote 60% of my time to prospection by making a
sufficient number of calls in order to obtain 10 appointments a week.
4 I remember, every time that I see or speak to a
client or a prospect, to ask for referrals in life insurance and renewal
dates for mortgage loans and home and automobile insurance.
5 I take the time to call my clients on their birthdays.
6 I take the time to do the medical follow-up of my files
and to deliver my contracts as soon as I receive them.
7 I take part in agency meetings and I consult
the information on the extranet.
8 I do what’s necessary so that my work week is full before
leaving for the weekend.
9 I contribute to the development of the agency by referring
candidates to my manager.
10 I contribute to the success of my team, my agency and « L’équipe solidaire » by doing
my part during company sales promotions.
[Emphasis added.]
[93]
In an e-mail sent by Nicole Duclos, “superviseure administrative”, [Emphasis added] an assistant to the branch manager, of
which the subject line reads “IMPORTANT CONFORMITÉ « Précisions et
ajustements »”, we find the following instructions:
Pour que vos dossiers soient conformes, veuillez vous assurer de sauvegarder l’illustration et le
profil de l’investisseur électronique que vous avez préparés pour le client
avant la vente où [sic] le jour de la signature de la proposition F1E. À
noter que lorsque vous ne sauvegardez pas, la date de préparation de l’illustration
est différente de la date de signature de la proposition ce qui n’est pas
conforme.
Je vous rappelle que la déclaration du
proposant F13-743 doit être imprimée (recto-verso) afin qu’elle soit
signée par le client. Ne pas oublier de cocher la case à l’effet que le
client déclare avoir pris connaissance de la déclaration du représentant qui
figure au verso.
Vous trouverez ci-joint un aide-mémoire à
jour afin que vous puissiez nous remettre vos dossiers dans l’ordre indiqué.
Veuillez ne pas brocher les différents documents remis pour expédition
au Siège Social car ils doivent débrocher à la réception pour mettre à l’imagerie
votre dossier.
[Emphasis added.]
[94]
Mr. Mazraani filed the aide-mémoire for compliance (“conformité”). This
document indicated to him the order in which each document had to be filed, specified
that all originals of documents were to be grouped together, as were all the
copies thereof which were to stay in the file and indicated where the originals
and copies had to be filed. For example, this aide-mémoire required that the
original of a document be sent to the head office and that a copy be retained
in the file. During her testimony, the in-house counsel
acknowledged that this document was not a compliance measure taken pursuant to
the Distribution Act, but was an administrative compliance measure taken for
the greater efficiency of IA’s operations.
[95]
There is another compliance checklist entitled “Conformité, Éléments à corriger − Grille de suivi” (Compliance Checklist), which indicates the sources of the various
requirements. Some of these requirements refer to regulations, some to industry
standards or to internal rules. That
checklist reads in part as follows:
AJOUTER AU DOSSIER
1. Notes dans la section “Communications” du dossier
client AMF REGL. 2 ART. 6.
2. CTC (Renseignements personnels – objectifs
et planifications) + détaillé AMF REGL. 2 Art. 6
3. ABF (Bilan financier) + détaillé AMF REGL.
2 ART. 6
4. Description des polices en vigueur dans le
Temps d’arrêt incomplète AMF REGL. 2 ART. 6
. . .
6. Déclaration du proposant (F-13-743) ACCAP
. . .
À CORRIGER
17. Actif et passif incomplet. AMF REGL. 2 ART.6
18. Bilan financier erroné, ne tenant pas
compte des contrats existants ou remplacés AMF REGL. 2 ART.6
19. Temps d’arrêt papier n’est pas signé par
le proposant AMF REGL. 2 ART.6
. . .
21. Refus d’assurance au conjoint, non
initialisé par le proposant AMF REGL. 2 ART.6
. . .
24. Les initiales du proposant sont absentes
sur la F-13-743 AMF REGL. 2 ART.6
. . .
32. Divergence − Initiales du directeur
n’apparaissent pas sur le formulaire « Profil de l’investisseur » Règle interne
de la compagnie
[Emphasis added.]
[96]
In July 2012, Industrial Alliance wrote a memorandum
describing what its agents were to do as a result of changes being made to
premium rates for particular insurance products. It reads in part as follows:
. . .
Que faire?
1. Détruire les quantités que vous avez
en stock à votre agence.
2. Utiliser le fichier électronique de la
F32 joint à ce courriel. Imprimez-le et remplissez-le au besoin. La version
électronique en format PDF de cette proposition est également disponible sur l’extranet
et dans le centre de documentation.
3. De nouveaux exemplaires papier seront
disponibles le 25 juillet 2012 à votre centre d’approvisionnement habituel.
Lorsque vous en commanderez, veuillez prendre en considération que nous préparerons
éventuellement une version en format PDF dynamique (qui peut être remplie à l’écran).
[Emphasis added.]
This
represents a higher level of micromanagement than one would expect from most
employers with regard to their employees!
[97]
The following is another example. On June 28, 2012,
the Company sent out a memorandum entitled “Kiosque Square Décarie, Règles et procédures”. Under the heading “RÈGLES INTERNES”, we find the following instruction: “SVP être à l’heure selon l’horaire établi.”
[98]
Industrial Alliance prepares advertising
material to be used by its agents, such as agendas and office calendars. This
marketing material is personalized and can include a photo of the agent. The
direction given by the Company regarding such photos is “TENUE VESTIMENTAIRE: Homme: VESTON, CRAVATE Femme: TENUE
PROFESSIONNELLE”. Although it is the agents who pay for the marketing material, it is
Industrial Alliance that tells them how to dress.
[99]
Mr. Mazraani also received a leaflet
from the Company explaining how to access the “Gestion
Clients” tool starting June 18.[103]
[100]
Industrial Alliance
does compliance verification. Although new legislation has in recent years raised
the standards, compliance control was something that the Company had done long
before these new standards came into force in 1998, as was acknowledged by Mr. Charbonneau,
a veteran of about 29 years as an IA agent. When asked about these new
standards and the consequential need for training, he offered the following
statements:
MR. CHARBONNEAU: So you don’t need to get
training to read that we have to put “renseignements
personnels” or whatever, those are things that we
would do. It’s just that now it’s better done, so we see all the papers is
done.
. . .
JUSTICE ARCHAMBAULT: So are you saying that
you never attended any session to explain to you when the new conformity rules
came in?
MR. CHARBONNEAU: No, the new conformity rule
came in, but I mean ---
JUSTICE ARCHAMBAULT: Did you receive a
training for that?
MR. CHARBONNEAU: Well we got the training
at the office ---
. . .
MR. CHARBONNEAU: --- at the branch.
. . .
MR. CHARBONNEAU: But we -- all of that was
something that we would be doing over the years, it’s just now it’s more
---
. . .
MR. CHARBONNEAU: --- refined.
. . .
JUSTICE ARCHAMBAULT: At the beginning you need
some training to be made aware of it.
MR. CHARBONNEAU: Exactly.
JUSTICE ARCHAMBAULT: But once you get going
you don’t need to be told every time?
MR. CHARBONNEAU: Exactly, but also what I
meant is that all those things that they ask, it’s something that we’ve been
doing over the years ---
. . .
MR. CHARBONNEAU: --- so it wasn’t ---
. . . .
MR. CHARBONNEAU: --- nothing new.
[Emphasis added.]
[101]
He provided the
following description of how compliance is ensured by the Company:
JUSTICE ARCHAMBAULT: I have a note here about
activity report. Do you file activity report? You don’t file them. So how
would your sales manager or branch manager know about the new clients you bring
in, how is he being informed about that?
. . . .
JUSTICE ARCHAMBAULT: Because you said they
do sometime review it, so ---
MR. CHARBONNEAU: Yes, exactly.
JUSTICE ARCHAMBAULT: --- so I’m assuming that
they don’t review it because you ask him to do it?
M. CHARBONNEAU: Non.
JUSTICE ARCHAMBAULT: They do it out of
their own; right?
MR. CHARBONNEAU: Exactly.
JUSTICE ARCHAMBAULT: So how do they know? The
file cabinet is in your office; correct?
M. CHARBONNEAU: Oui.
JUSTICE ARCHAMBAULT: So they have the right
to go into your ---
MR. CHARBONNEAU: Yes.
JUSTICE ARCHAMBAULT: --- and they look at
it ---
MR. CHARBONNEAU: Yes.
JUSTICE ARCHAMBAULT: --- and that’s how it’s
done?
MR. CHARBONNEAU: Yeah, they could do it “au hasard”.
JUSTICE ARCHAMBAULT: Some kind of a spot
check?
M. CHARBONNEAU: Oui.
JUSTICE ARCHAMBAULT: . . . So they just -- they just do it?
MR. CHARBONNEAU: Exactly.
[Emphasis added.]
[102]
The in-house
counsel, Ms. Beaudet, corroborated Mr. Charbonneau’s testimony that
the compliance department only checked, on a random basis, 5% to 10% of the
transactions. She testified that the level of compliance
was not specified in the legislation and that it was the Company’s decision to
do it at that level. This was considered reasonable in the Company’s circumstances.
In this context, compliance means checking whether the agent has fulfilled his or
her obligations under the Distribution Act, such as inquiring about the client’s
situation or needs.
[103] The staff at the branch office did go over the documentation
prepared by Mr. Mazraani, as evidenced by a note in the file of one of
Mr. Mazraani’s clients in which, by mistake, the amount shown as the first
premium was $23,886,001. This number should have been $75.87. An assistant of Mr. Leclerc,
Ms. Laporte, acting on his behalf, informed the head office of the error. She
then reported the error to Mr. Mazraani’s hierarchical superior, Mr. Beaulé,
not to Mr. Mazraani. It was Mr. Beaulé who informed him.
[104] When it was suggested to him by counsel for IA that agents could employ
a sales assistant, Mr. Michaud said they could, and I asked for the
following clarifications:
JUSTICE ARCHAMBAULT: . . . So there is no
contractual relationship between that assistant and the company?
MR. MICHAUD: No. . . .
. . .
MR. MICHAUD: The only thing that we require
these employees of the advisors to do is to sign kind of a confidentiality
agreement that they don’t disclose the information about the clients
because ---
. . .
JUSTICE ARCHAMBAULT: . . . But is that an
undertaking they take directly towards you or towards the -- towards the
advisor?
MR. MICHAUD: I don’t have the details.
I don’t know.
. . .
JUSTICE ARCHAMBAULT: . . . if I’m not
mistaken, I thought in the judgment I read that they need to have this
employee assistant approved by you. Am I mistaken?
MR. MICHAUD: They don’t need to approve
but we just want to make sure that they don’t hire let’s say somebody that
would not be suitable but the decision ---
. . .
JUSTICE ARCHAMBAULT: If you were not happy
with an assistant that they hired, what would you do?
MR. MICHAUD: I don’t have any control. I don’t
control the quality of the work that they do. So I don’t know ---
JUSTICE ARCHAMBAULT: No, let’s say they
have a bad reputation.
MR. MICHAUD: Oh, I would say to the advisor
maybe you should find somebody else.
JUSTICE ARCHAMBAULT: Maybe or would you
insist?
MR. MICHAUD: I would say -- I would say it
never happened. So ---
JUSTICE ARCHAMBAULT: So you don’t know. But
you don’t know what you would do?
. . .
MR. MICHAUD: I would say we would strongly
recommend ---
JUSTICE ARCHAMBAULT: If someone had connection
with the mafia?
MR. MICHAUD: Yeah, I would -- I would
certainly strongly recommend that he looks after somebody else.
[105] At the Laval Branch, it would seem that the Company plays a
greater role than Mr. Michaud was prepared to recognize in this appeal:
[34] Monsieur Blackburn n’est pas totalement
en accord avec l’affirmation voulant qu’Industrielle Alliance ne joue aucun
rôle à l’égard des adjointes des représentants dans la mesure où la liste
des tâches est approuvée au préalable par le directeur de l’agence
[Emphasis added.]
[106] Mr. Mazraani stated that there were regular meetings with his
sales manager Mr. Beaulé to discuss his performance, to motivate him to
become a better salesperson. He testified on several occasions that they “push
you all the time”. These meetings would often happen after a training session.
As corroboration of his statements, Mr. Mazraani filed a copy of pages
from his own agenda. For September 5, 2012, he wrote: “Met with Eric [Leclerc] Wants
to see Activities. Explained it is very hard despite all activities
left office unhappily.” [Emphasis added.]
[107] You find examples of similar meetings which are described in the CRT
reasons. In the following excerpt from those reasons, the setting of sales
objectives, the development of a business plan and the requirement for
attendance at meetings are discussed:
[67] La clause 5 du contrat de représentant
prévoit la possibilité pour Industrielle Alliance de fixer une norme minimale
de production, et selon les dires de monsieur Blackburn, elle est peu élevée
(+/-30 000 $ par an).
[68] Selon messieurs Blackburn et Kaliszczak,
tous les représentants confectionnent un plan d’affaire, lequel a été
négocié et discuté avec le directeur des ventes. Outre le fait que celui-ci
est remis, il est revu et validé annuellement en fonction du niveau de
réalisation des objectifs fixés. Le plan d’affaire est à ce point sérieux qu’un
suivi trimestriel est effectué par le directeur des ventes. De plus, les
objectifs de vente sont inscrits dans le système informatique de gestion
de l’agence afin de contrôler les activités des représentants.
[69] Bruno Michaud, André Pavan et Isabelle
St-Jean estiment que le plan d’affaire, les objectifs de vente et le
choix de développer une clientèle parmi une autre, relèvent exclusivement du
choix du représentant.
[70] Pour illustrer le caractère facultatif de
la démarche, André Pavant mentionne que le tiers des représentants ne dévoile
pas leur plan d’affaire ou leurs objectifs de vente. Isabelle St-Jean est de ce
nombre. Pour eux, il n’y a rien d’anormal là-dedans puisque dans le modèle d’affaire
d’Industrielle Alliance, le rôle d’un directeur des ventes est de faire du « coaching » et de la formation, en insistant sur le
fait que les représentants ne sont pas tous rendus au même niveau. Plus
précisément, il mentionne qu’à l’heure actuelle, il compte 21 représentants
à l’agence de Laval qui ont moins de 12 mois d’expérience sur un total de
51 et entre 2 et 3 qui ont moins de 24 mois d’expérience. Or, ce sont eux et
eux seuls, dit-il, qui font rapport de leurs activités à leurs directeurs
des ventes et même encore là, il réitère que cette démarche s’effectue dans
une perspective de « coaching ». Quant aux autres, c’est-à-dire ceux qui ont plus de 24 mois d’expérience,
ils ne font aucun rapport au sujet de leurs activités. Ils ont fait leurs
preuves et ils savent surtout quoi faire pour réussir.
[71] Le témoignage de
Bruno Michaud va dans le même sens. Lorsqu’un représentant est nouveau dans l’industrie,
il est évident que le directeur des ventes va l’aider ou l’assister pour
établir son plan d’affaire ou ses objectifs de vente. Toutefois, ce type d’intervention
est toujours réalisé dans une perspective d’aide ou de conseil et jamais
avec l’idée de contrôler ou d’imposer quoi que ce soit. Bien souvent,
dit-il, les nouveaux représentants ne sont pas en mesure de faire une bonne
évaluation de leur situation ni des implications reliées à la réalisation d’un
objectif. Ils ont besoin de « coaching »
et de prendre conscience qu’un chiffre d’affaires de X implique un niveau de
prospection de Y ou un nombre Z de clientèle : c’est mathématique. C’est
bien beau se fixer des objectifs, mais encore faut-il savoir quoi faire pour
les réaliser. Enfin, il mentionne que les représentants exercent des
activités dans une industrie qui est très règlementée [sic] et que les
directeurs des ventes agissent également comme maîtres de stage. Dans cette
perspective, il est normal qu’en début de carrière, le contrôle et la
surveillance exercés soient plus grands, à tout le moins pendant la période
de stage.
[72] Au sujet du rôle du
directeur d’agence, André Pavan et Bruno Michaud l’associent davantage à une
responsabilité qui consiste à s’assurer de la conformité de toutes les
transactions effectuées et de maintenir un niveau de formation qui respecte les
exigences de l’AMF.
La présence aux réunions
[73] Selon messieurs Blackburn et Kaliszczak, les représentants
ont l’obligation d’assister à plusieurs réunions et ils doivent faire rapport
de leurs activités.
[Emphasis
added.]
[108]
To show how important the involvement of the
sales manager was in the execution and supervision of the work of the agents
and how integrated the agents are into the organization of the Company, Mr. Mazraani
testified that his sales manager informed him on June 22, 2012 that he would be
away for a week and that if Mr. Mazraani needed any assistance he could
ask any manager at the agency. There
is at least one other such e-mail sent by Mr. Beaulé; it is dated October
2, 2012. In it, he indicates to the members of his team that he will be away on
vacation and tells them to see the other managers or Nicole, who was the “superviseure administrative” [Emphasis
added.], should they have any questions or need
help.
[109] Mr. Mazraani also felt compelled to justify his absence from
the office to Industrial Alliance by providing a medical certificate, which he
sent to the attention of Mr. Eric Leclerc. This
certificate indicated that he would not be able to report for work from
September 19 to September 21, 2012 inclusive. Mr. Mazraani felt that it
was a normal thing for an employee to advise his employer of his absence. Mr. Blackburn
said substantially the same in his appeal. If he was not present at the Laval
office, he would inform his sales manager, as indicated in the following
excerpt from the CRT reasons:
[41] Monsieur Blackburn affirme toutefois que
le représentant qui n’est pas présent à l’agence de Laval, pour une raison ou
pour une autre, se doit, à tout le moins, d’en informer son directeur des
ventes.
[110] Other interesting facts also emerge from the CRT reasons, for instance, with regard to the freedom that agents were supposed to
have in choosing when to take their vacation:
[25] Cependant, monsieur Blackburn déclare
que dans les faits, la direction de l’agence de Laval encourage fortement
les représentants à prendre leurs vacances d’été durant les deux premières
semaines de juillet. Pour ce qui est des mois d’août et de septembre
qui correspondent à la période du concours du président, il affirme qu’il n’est
pas question de prendre des vacances. Ceci dit, il reconnaît qu’il n’a
pas été personnellement témoin d’une situation où un représentant aurait subi
une mesure disciplinaire ou une terminaison de contrat pour ce motif. Enfin,
son témoignage est silencieux sur le nombre de jours de vacances autorisé, s’il
en est, ni n’aborde la question des jours fériés.
[26] Monsieur Kaliszczak abonde dans le
même sens, notamment sur l’affirmation voulant qu’il n’est pas question de prendre des vacances pendant
la période du concours du président. Il explique qu’il a déjà tenté, sans
succès, d’en faire la demande à son directeur des ventes de l’époque
(monsieur Blackburn) en 2009 ou en 2010.
[Emphasis added.]
[111] As an illustration of the steps taken by the Company to stimulate
sales, reference may be made to Industrial Alliance instituting the “Concours du président”, the aim of which is to
recognize the best performers. During the competition, statistics of sales are
distributed to the agents. For example, the data for the week of August 6,
2012, show the ranking of 263 agents across Quebec. We see the same with
respect to the branch managers and the sales managers.
[112] The Company can exercise its control through various mechanisms
under the Agent Contract. For example, under section 14 dealing with the suspension
of the contract, “[t]he Company may suspend [the]
contract under any reasonable grounds, whether or not related to duties of the Agent,
by giving the Agent notice. . . .” No remuneration is payable during the
suspension and the agent loses the right to all commissions payable during that
period.
[113] Similarly, under section 15 dealing with the cancellation of the contract,
the Company may terminate the contract, with or without cause, by giving seven day’s
written notice. In that case, no remuneration is payable as of the date the contract
is cancelled and, if any debt is owed by the agent to the Company, such debt is
immediately payable to the Company by the agent.
[114]
The intervenor in this appeal, Industrial
Alliance, asked two of its successful agents to testify to describe the type of
relationship that they have with the Company. The first was Mr. Charbonneau,
who was also “attached” to the LaSalle Branch. He has been an agent with the Company
since 1987. He did not remember if he had been hired as an employee or an
independent contractor. However, it should be remembered that Mr. Michaud
testified that IA’s agents were treated as employees prior to 1993. His Agent
Contract, which is dated October 25, 1993, specifies that it was in force on
October 18, 1993. This date is consistent with the testimony given by
Mr. Michaud that the status of its agents changed in 1993. When asked
whether there was anything different prior to 1993 or after 1992, Mr. Charbonneau
stated that there was nothing different in the way that he carried on his
activities.
[115]
The status of Mr. Charbonneau also changed
in August 2004 after he incorporated himself. The agent corporation contract
also entitled “Agence de carrière” is between Industrial Alliance and Conseils
financiers Yvanjay Inc., the company of Mr. Charbonneau,
who is described as the authorized representative of that entity. It is worthy of note that he contacted the Company before he
incorporated his own company to replace himself.
[116]
Mr. Charbonneau transferred his
right to represent his clientele to Conseils financiers
Yvanjay Inc. In section
5 of this contract, it is stipulated that it is of the essence of the contract
that Mr. Charbonneau “conduise
lui-même toutes les affaires de l’agent étant plus particulièrement entendu que
le représentant autorisé doit être la seule personne autorisée à transiger de l’assurance
ou des produits financiers pour le compte de l’agent.” Moreover,
the authorized representative “se porte caution conjointe et solidaire des dettes et obligations de
l’agent.” So it is not a surprise
that Mr. Charbonneau thought that his old contract as an agent for the Company
still remained in force after the agent corporation contract came into effect.
As far as he is concerned, it looks as if nothing changed after this incorporation.
However, section 20 of the agent corporation contract states :
“Le présent contrat remplace tout
contrat antérieur entre l’agent ou son représentant autorisé et la Compagnie.”
[117] During his testimony, Mr. Charbonneau, like Ms. Stephanie Woo,
the other successful agent who testified at the request of Industrial Alliance,
stated that he believed he was not required to attend the training sessions and
other regular meetings, although he acknowledged that he usually did attend. He
did not remember−and this is the most generous interpretation−that the Company could, in
certain instances, exercise its right to make it “mandatory” for its agents to attend certain meetings.
[118]
Mr. Charbonneau testified that he
had employed for many years an assistant to help him with the clerical
work, that he fixed and paid the assistant’s salary, determined the assistant’s
work schedule, etc. He also confirmed that he could work on a team with other
agents at the branch and that they could share their commissions.
G. Stephanie Woo
[119]
The second agent who testified for
Industrial Alliance was Ms. Stephanie Woo. She was hired in March 2012, about the same time as Mr. Mazraani and signed a contract similar to his, which described her status as being that of an independent
contractor. However when asked by IA’s counsel about her remuneration for her
first year, she gave the following revealing answer:
MS. WOO: [] thousand ([],000) starting from
March to December.
JUSTICE ARCHAMBAULT: These are your
commissions ---
MS. WOO: My salary ---
[Emphasis added.]
[120]
To be as successful as she has been, she
followed the instructions received from the Company, which she described as
follows :
MS. WOO: Okay, first of all when I started,
the company gave us a recipe saying that if you met or called x amount
of people, it’s a game of numbers and sales; right? And so they told us if you
met up with this amount of people, you should get this amount of appointments
and you should make this amount of sales. And they told me there’s no secret to
this recipe, if you follow it you’ll get it.
. . .
MS. WOO: --- that’s what I did. And so I
did follow the recipe of booking 12 appointments a week, asking for
referrals. And every single week on the Friday, if I didn’t get 12 to 14
appointments for the next week, I would not go home until I got my appointments.
[Emphasis added.]
[121]
She testified that in order to get your
licence from the AMF, you have to pass an exam and that you normally prepare
for that exam by buying books on the examination subjects, reading them on your
own and understanding them, thus putting yourself in a position to pass the
exam. Once you get your licence, you start a three-month internship (“stage”)
working at the insurance company that you are attached to. The Company did not provide
her any particular training to help her pass the AMF exam and obtain the licence
to act as a financial advisor. But if she had any questions, she could ask the branch
manager. This testimony makes it clearer that all the training that the agents get
from the Company is for the purpose of showing them how to perform their work
for IA!
[122] Ms. Woo also confirmed that she had purchased the right to
represent other customers from someone who had left the Company and that she
had herself sold the right to represent some of her clients. During her
testimony, she gave similar answers to those of Mr. Charbonneau with
respect to her freedom in setting her schedule, soliciting clients, taking
holidays and determining when she would take them and for how long.
[123] Ms. Woo acknowledged that she kept her sales manager informed of her
activities, which included informing him about the hours she spent outside the
office, the clients which she was seeing and the sales which she made, although
she felt that she was not required to do so:
JUSTICE ARCHAMBAULT: Then why did you do?
MS. WOO: Because I’m personally the type of
person that wants to be checked up on, ask, encouraged.
[Emphasis added.]
[124] She described the role of her sales manager as being to help her
improve her sales techniques and show her how to approach clients and how to
deal with particular problems, such as obtaining a void cheque from a client. This
assistance (her sales manager would “[g]uide, support” her) would take place
both in the office and on the road when she met her clients. Her sales manager would accompany her to visit a client whenever
she needed such assistance. During her three-month training, she would attend training sessions
three times a week for two or three hours per day. She
thought that attendance at these training sessions was not a requirement, but
she attended all of them because she wanted to be a successful agent. She also
got technical training, on the telephone system, for example:
JUSTICE ARCHAMBAULT: Did someone tell you how
the telephone system work at the office?
MS. WOO: Our secretary -- a secretary the first day came ---
. . .
JUSTICE ARCHAMBAULT: --- would have told you
how to do it?
MS. WOO: Exactly.
[Emphasis added.]
[125] She also attended the weekly Monday meetings to learn about
different subjects, such as sales techniques, to be informed about new products
or about office rules, to receive pep talks, to hear about the birthdays
of team members or to discuss performance as reflected in data
distributed weekly. She acknowledged that there were incentives offered by the Company
and that she herself received gifts such as a bottle of wine, a watch, pens, glasses
and a wine cellar. Like Mr. Mazraani, she indicated that she would meet
with her sales manager after the meetings. She also confirmed that payment of
insurance premiums by clients was not made to her but to the Company. She also
testified that she set her own targets for increasing her sales on an annual
basis.
[126] In 2012, when she was hired, she would spend approximately 10 hours
a day doing her prospecting at the branch office. From 2013 to 2015, she said,
she spent approximately three hours per day at the branch and the rest of her
time was spent meeting her clients outside the office.
[127]
The Agent Contract stipulates in section
13 that the client files remain the property of the Company. Pursuant to the same section, the Company has the right to appoint
another agent if the Company is not satisfied with the service provided by “the
initial agent”. Section 15 of the Agent Contract provides: “When this contract is cancelled because the Agent
ceases to act as an Agent, the Company becomes the assignee of the client
records.”
[128] In addition, the agent must comply with the non-competition clause in
section 16 of the Agent Contract for a period of two years, beginning on
the date of cancellation of the contract. The agent must not act as an agent or
broker selling to or soliciting clients of the Company who are part of the
service unit served by the agent at the time of the cancellation of the
contract.
[129] Mr. Michaud described what would happen, on the retirement of a
particular agent from the firm, to that agent’s clients. Normally, the departed
agent would get a commission on a yearly basis for the first ten years in
respect of the premium paid by the client for his or her insurance coverage.
So, if an agent left three years after having made the sale, and provided that
the client continued to pay the premium, the agent would continue to get his
share of the commission. However, he also indicated that the departing agent
could sell the right to represent these clients to other IA agents and that the
Company would intervene to consent to such transfer. It would not allow such
transfer to be made to someone working for another company. This is in accordance with section 11 of the Agency Contract and section
H.10 of the Remuneration Rules,
which provides:
. . .
The company reserves the right to approve
any future assignment beforehand. The company cannot refuse its approval
without valid reasons.
The assignee must be under contract with
the company at the time of the transaction.
[Emphasis added.]
[130] When I asked how much would be paid for the right to represent other
clients, Mr. Michaud indicated that he had seen a transaction for as high
as $750,000. Surprised, I asked for clarification as to why that right was
worth so much. From Mr. Michaud’s explanation, I understood that what the
other agents would be paying for is the right to receive the commissions that
would be paid for the balance of the period during which commissions could be
collected on the contracts. In other words, what the departing agent is doing
is selling the future flow of his commissions. Obviously, the acquiring agent
would have the opportunity to sell other financial products to the clients who
used to deal with the departing agent. When I asked if there was any benefit in
only selling the names of the clients without the flow of the commissions, Mr. Michaud
acknowledged that this would be worth little, if anything.
[131] Furthermore, the Remuneration Rules set out additional conditions
for the assignment of life insurance contracts. These conditions further
restrict the power of an agent to assign such rights. The rules vary according
to the status of the selling agent and the type of product involved and whether
the agent is one with experience or without experience. For instance, for an
agent without experience, the conditions are the following for life insurance:
i) The
agent must have kept his/her contract with the Company in force for at least seven
(7) consecutive years; or
ii) The
agent must have $150,000 in in-force premiums with the Company at the time of assignment.
Orphaned clients are excluded from the in‑force premiums calculation.
[132] So it is clear that the clientele belongs to Industrial Alliance and
not to the agent. So contrary to what Mr. Michaud asserted in answering
Mr. Mazraani on cross-examination by him, Mr. Mazraani did not own
any clientele. He could not even sell his future flow of commissions because he
did not meet the minimum requirements. Mr. Mazraani was right in believing
that he owned only his AMF licence. Since
this licence only allows him to sell insurance if “attached” to an insurance
company, it is worth nothing if he cannot be hired by another insurance
company! When Mr. Mazraani’s contract was terminated, Industrial Alliance
removed all of his client files and kept them. Mr. Mazraani has not been
able to work as an agent since his contract was terminated in November 2012.
[133] To decide if Mr. Mazraani held insurable employment during the
relevant period, the Court must determine whether he worked pursuant to a
contract of service (contract of employment).
[134]
When the CRA issued to Industrial Alliance
on December 23, 1993 its opinion that IA’s agents were independent
contractors and not employees for the purpose of the Act, the most prevalent approach
applied by the CRA (acting on behalf of the Minister), this Court and the Federal
Court of Appeal to cases originating from the province of Quebec was the common
law approach described in Wiebe Door Services Ltd. v. M.N.R., [1986]
3 F.C. 553 (FCA) and the decision of the Supreme Court of Canada in 671122
Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983,
[2001] S.C.J. No. 61 (QL), 2001 SCC 59. The Civil Code of Lower
Canada and the Quebec jurisprudence was rarely considered for the purpose
of distinguishing between an employee and an independent contractor in determining
if a contract of employment existed. Under
the common law, the key question to be asked was, and still is, “Whose business is it?” In Sagaz, Major J.
enunciated what might be described as the “total relationship” test:
47 Although there is no universal test to
determine whether a person is an employee or an independent contractor, I agree
with MacGuigan J.A. that a persuasive approach to the issue is that taken by
Cooke J. in Market Investigations, supra. The central
question is whether the person who has been engaged to perform the
services is performing them as a person in business on his own account. In
making this determination, the level of control the employer has over
the worker’s activities will always be a factor. However, other
factors to consider include whether the worker provides his or her own
equipment, whether the worker hires his or her own helpers, the degree
of financial risk taken by the worker, the degree of responsibility for
investment and management held by the worker, and the worker’s opportunity
for profit in the performance of his or her tasks.
48 It bears repeating that the
above factors constitute a non-exhaustive list, and there is no set formula
as to their application. The relative weight of each will depend on the
particular facts and circumstances of the case.
[Emphasis added.]
[135] Given this approach followed in 1993, and given that the behaviour
of employees on commission resembles to a great degree that of people carrying
on a business, it is not surprising that the CRA expressed the opinion that,
for the purposes of the Act, IA’s agents were independent contractors under the
Agent Contract submitted to the CRA.
[136] However, as I explained in an article that I wrote about 10 years
ago, in 2005, the courts must now take into account, in applying the Act, the changes
in the relevant legislation, starting with the addition in 2001 of section 8.1 to
the Interpretation Act. Pursuant
to this new section, one has to apply the law of Quebec when defining an employment
relationship governed by Quebec law in cases where the relevant civil law
concept is not defined in a federal statute such as the Act. So, to determine
if Mr. Mazraani held insurable employment under the Act, this Court must look
at the Quebec legislation because the Agent Contract was concluded in Quebec.
[137] What is the Quebec law which defines an employment relationship? The
answer is to be found in the new Civil Code of Québec, which
was introduced in 1994 and which defines expressly a contract of employment.
Therefore, as of 1994, there is no doubt as to what a contract of employment is
(before that, it was a jurisprudential concept) and the only essential element
that has to be considered under the Code is whether there is a relationship of subordination
between the payer and the payee. When
one compares the provisions of the Civil Code relating to the contract of
employment with the provisions dealing with the contract of enterprise or for
services, it is clear that the contracts are the same, except for the fact that
there is no relationship of subordination in the case of a contract of
enterprise.
[138] It is useful to reproduce in side-by-side format the relevant Civil
Code provisions:
|
Contract of employment
2085 A contract of employment
is a contract by which a person, the employee, undertakes for a limited
period to do work for remuneration, according to the instructions
and under the direction or control of another person, the employer.
2086 A contract of employment is
for a fixed term or an indeterminate term.
2087 The employer is bound not
only to allow the performance of the work agreed upon and to pay the
remuneration fixed, but also to take any measures consistent with the
nature of the work to protect the health, safety and dignity of the
employee.
2090 A contract of employment is tacitly
renewed for an indeterminate term where the employee continues to carry
on his work for five days after the expiry of the term, without objection
from the employer.
2091 Either party to a contract for
an indeterminate term may terminate it by giving notice of termination
to the other party.
The notice of termination shall be
given in reasonable time, taking into account, in particular, the nature of
the employment, the specific circumstances in which it is carried on and the
duration of the period of work.
2093 A
contract of employment terminates upon the death of the employee.
2094 One of
the parties may, for a serious reason, unilaterally resiliate the
contract of employment without prior notice.
|
Contract of enterprise or for
services
2098 A contract of enterprise or
for services is a contract by which a person, the contractor or the
provider of services, as the case may be, undertakes to another person, the
client, to carry out physical or intellectual work, or to supply a service,
for a price which the client binds himself to pay to him.
2099 The contractor or the provider
of services is free to choose the means of performing the
contract and, with respect to such performance, no relationship of
subordination exists between the contractor or the provider of
services and the client.
2100 The contractor and the provider of
services are bound to act in the best interests of their client, with
prudence and diligence. Depending on the nature of
the work to be carried out or the service to be supplied, they are also bound
to act in accordance with usage and good practice, and, where
applicable, to ensure that the work carried out or service supplied is
in conformity with the contract.
2101 Unless a contract has been entered
into specifically in view of his personal qualities or unless the very nature
of the contract prevents it, the contractor or the provider of services
may employ a third person to perform the contract, but its
performance remains under his supervision and responsibility.
2103 The contractor
or the provider of services supplies the property necessary for
the performance of the contract, unless the parties have stipulated
that only his work is required.
He shall supply only property of good
quality; he is bound by the same warranties with respect to the property as a
seller.
A contract is a contract of sale, and
not a contract of enterprise or for services, where the work or service is
merely accessory in relation to the value of the property supplied.
2104 Where the property is supplied by
the client, the contractor or the provider of services is bound to use it
with care and to account for its use; where the property is manifestly unfit
for its intended use or where it has an apparent or latent defect of which
the contractor or the provider of services should be aware, he is bound to
inform the client immediately, failing which he is liable for any injury
which may result from the use of the property.
|
[Emphasis
added.]
[139]
Before describing how legal scholars and the
case law have interpreted the relationship of subordination concept, it is
useful to start with the comments of the Quebec Minister of Justice on article
2085 Q.C.C. that accompanied the Civil Code bill:
[TRANSLATION]
This article restates the rule enacted by
article 1665(a) C.C.L.C. The definition contained in the new article
establishes more clearly the difference between a contract of employment
and a contract for services or contract of enterprise. The sometimes fine
line between the two kinds of contracts has caused difficulties both in the
scholarly literature and in the case law.
The definition indicates the essentially temporary nature of a
contract of employment, thus enshrining the first paragraph of
article 1667 C.C.L.C., and highlights the chief attribute of such a
contract: the relationship of subordination characterized
by the employer’s power of control, other than economic
control, over the employee with respect to both the purpose and the
means employed. It does not matter whether such control is in fact exercised
by the person holding the power;it
also is unimportant whether the work is material or intellectual in nature.
[Emphasis added.]
[140] The following comments by the Quebec Minister of Justice on article
2099 are also useful:
[TRANSLATION]
Through this new article, the Code affirms the
independence of the contractor or provider of services
in a contract of enterprise or for services. It has historically
been agreed that the nature of the work furnished by the contractor or the
provider of services presupposes that these persons enjoy virtually total
independence, in relation to the client, concerning the
manner in which the contract is performed.
The tests stated are those identified by the
case law in this area, which clearly recognized that the contractor assumes
the direction of the work and defines the means of execution, even
though the client determines the result to be achieved under the
contract and retains the right to ensure that the work is in
conformity with the contract.
[Emphasis added.]
[141] The relationship of subordination concept is well described by Professor
Robert P. Gagnon:
[TRANSLATION]
(c) Subordination
90 — Distinguishing factor — The
most significant feature characterizing a contract of employment is
the subordination of the employee to the person for whom he works. It
is by this feature that a contract of employment can be distinguished from
other onerous contracts which also involve the performance of work for
the benefit of another person for a price, such as a contract of enterprise or
a contract for services under articles 2098 ff C.C.Q. Thus, while
the contractor or the provider of services “is free”, under
article 2099 C.C.Q., “to choose the means of performing the contract”
and while between the contractor or the provider of services and the client “no
relationship of subordination exists . . . in respect of such
performance,” it is a characteristic of a contract of employment, subject to
its terms and conditions, that the employee personally performs the work
agreed upon under the employer’s direction and within the framework
established by the employer.
. . .
92 — Concept —
Historically, the civil law first developed a so-called strict or classical
concept of legal subordination that was used as a test for the application
of the principle of the civil liability of a principal for injury caused by the
fault of his agents and servants in the performance of their duties
(art. 1054 C.C.L.C.; art. 1463 C.C.Q.). This classical legal
subordination was characterized by the immediate control exercised by the
employer over the performance of the employee’s work in respect of its
nature and the means of performance. Gradually, it was relaxed, giving rise to
the concept of legal subordination in a broad sense. The
diversification and specialization of occupations and work techniques often
mean that the employer cannot realistically dictate regarding, or
even directly supervise, the performance of the work. Thus, subordination
has come to be equated with the power given a person, accordingly
recognized as the employer, of determining the work to be done,
overseeing its performance and controlling it. From the opposite
perspective, an employee is a person who agrees to be integrated into the
operating environment of a business so that it may receive the benefit of
his work. In practice, one looks for a number of indicia of supervision
that may, however, vary depending on the context: compulsory attendance at a
workplace, the fairly regular assignment of work, imposition of rules of
conduct or behaviour, requirement of activity reports, control over
the quantity or quality of the work done, and so on. Work in the home does not
preclude this sort of integration into the business.
. . .
94 — Result —
In borderline cases, article 2085 C.C.Q. does not exclude resort to an
examination of the situation and the parties’ economic relationship in order to
determine the nature of their legal relationship. However, it does not
authorize a characterization as a contract of employment on the basis of
economic subordination. The subordination that it contemplates is
essentially legal in nature. However, even in its most relaxed and
attenuated forms, the situation of legal subordination should suffice to
place the worker in the employee category. The exclusion of any
relationship of subordination between a client and a contractor or provider
of services now legitimizes this conclusion (art. 2099 C.C.Q.).
Lastly, it will be noted incidentally that employee status can coexist,
in the same person and in connection with the same economic or professional
activity, with another status such as shareholder or director
of the company, independent contractor or even
employer.
[Emphasis added.]
[142] Industrial Alliance intended to conclude a contract for services
with Mr. Mazraani. It signed an Agent Contract which explicitly stipulates
that it does not create an employer-employee relationship. Industrial Alliance
even got help from the CRA in drafting its Agent Contract and got a written
opinion from the CRA that the agents were independent contractors for the
purposes of the Act. That opinion comforts the Company in its position.
[143] However, that status was not discussed with Mr. Mazraani when
he was verbally hired on April 3, 2012. He only learned about it when he was
presented with the written contract around the 27 of April. He acknowledged
that section 4 of his Agent Contract, which describes his status as an
independent contractor, was discussed with him at that time. In any event, he
had no power of negotiation given that he had been unemployed since March 2011,
when his contract with London Life was terminated. Mr. Mazraani also
acknowledged that he filed his income tax return on the basis of the T4A that
had been issued by Industrial Alliance and said he did so because he had no
other choice. T4As are issued for business income (earned by self-employed persons)
and not employment income. However, Mr. Mazraani truly believes that he
was an employee of Industrial Alliance and that he behaved like one. He stated
in his written submissions: “With
all that, my blood, my soil, my skin, my bones, and all my active cells feel
and sense that I was hired as full employment”. He
worked most of the time at the IA branch office in a cubicle near the office of
his sales manager. When he was sick, he provided a medical certificate from his
doctor to justify his absence. He understood that it was mandatory to attend to
IA meetings and training sessions.
[144] Mr. Mazraani is not the only one to believe himself to have
been an employee of IA. There are at least two other such agents, namely those
who went before the CRT asking for the benefit of the Standards Act’s protection
for employees. In addition to these agents, there are IA management people who
also believe that Mr. Mazraani was hired under a contract of employment. In an e‑mail to Mr. Mazraani on November
20, 2012 at 8:56 p.m. concerning the “Terminaison de contrat de travail”, the manager of the Mercier Agency, Mr. Eric Leclerc,
states in the first paragraph: “Votre
contrat de travail prévoit que vous ne pouvez pas être plus de 4 semaines
consécutives sans rémunération sinon il y aura bris de contrat.” It is interesting to note that, in the “Member’s statement for Group Insurance” provided by Industrial Alliance with regard to the
benefits of Mr. Mazraani, the Company uses the expressions “annual salary” and “Basic AD&D Employee” in relation to
the income of Mr. Mazraani. This is very close to admitting that Mr. Mazraani was hired as
an employee. Even Ms. Woo described her commissions as “salary” and
referred to the branch secretaries as “our secretaries” during her testimony,
as seen above.
[145] As is recognized in the jurisprudence, the fact that the parties
agree to characterize their contract as a contract for services is not
necessarily determinative of the nature of the contract. If there is evidence to show that the contract does not fairly and
adequately reflect the true nature of the relationship, the courts are permitted
to ignore the description given in a particular contractual document and
determine the true relationship between the parties. In France, they apply a
similar approach and the recharacterization of a contract results from the
application of the reality principle.
[146] Therefore, although a particular contract may have been properly drafted
to reflect a contract for services, if the parties do not behave in accordance
with the piece of paper that governs their relationship and the factual
situation is such that the payer has the power to exercise direction and control
with regard to how particular work is to be performed and the worker is not “free to choose the means of performing the contract” or does not “assume . . . the direction of the work and define . .
. the means of execution”, then the relationship would be an employment relationship and the
worker would not be an independent contractor.
[147] In this particular case, in my view, there are plenty of facts to
support the position that the intent expressed in the contract does not
properly reflect the conduct of the parties. First, the contract is a contract
of adhesion. Mr. Mazraani did not have any opportunity to discuss whether
he wanted to be an independent contractor or an employee. It was the policy of
Industrial Alliance at that time to have only independent contractors and that
had been its policy since 1993. Therefore, he had to accept this contract as is
and, as can be seen from a reading of it, it is a contract that basically
protects the interests of the Company and not the interests of Mr. Mazraani.
A good illustration of this is section 15 of the contract, which stipulates: “No remuneration is payable as of the date this contract is cancelled
and, if there is a debt owed by the Agent to the Company, such debt is
immediately payable to the Company by the Agent.” Furthermore,
at that time, Mr. Mazraani was in a vulnerable position given that he had
been unemployed for several months when he was hired by Industrial Alliance.
[148] Then there is strong direct and circumstantial evidence which shows
that Industrial Alliance had the power to direct and control the work of Mr. Mazraani
and to instruct him in the performance of it. Let
us deal first with some of the circumstantial evidence, which is the usual
situation in which the Court finds itself.
[149] First, there is the business card,
which shows that Mr. Mazraani was a “Financial Security Advisor” working
for Industrial Alliance, because the logo and the name of the Company appear on
it. There is no indication on that business card that Mr. Mazraani was an independent
contractor or agent, nor does it show him as representing several insurance
companies as an insurance broker or an independent representative would do. Any ordinary person looking at Mr. Mazraani’s business card
would assume that Mr. Mazraani was an employee of the Company in the same
way that this person would look at Mr. Michaud’s business card and believe
that he is an employee of the Company. In the case of Mr. Michaud, he is
clearly considered an employee by Industrial Alliance. And our ordinary person
would be even more comforted in his belief when, as we have seen, IA agents
introduce themselves to potential clients in this sort of fashion: “Good morning . . . My name is . . . from Industrial
Alliance” and I have been asked by “my company
to meet you”! [Emphasis added.]
[150] Second, Mr. Mazraani did not represent several insurance
companies as a normal insurance broker or any other independent contractor
would do, although the Company claims that he was free to do so. This is a red
herring. The reality was such that Mr. Mazraani−like the two agents described
in the CRT reasons−did not represent other companies. It might very well have been a
different story had he represented ten insurance companies. The fact that Mr. Mazraani
worked only for Industrial Alliance constitutes a strong indication that he was
working under the instructions, direction and control of the Company.
[151] Third, Industrial Alliance provided him with an office where he
performed his services most of the time. His cubicle was close by the office of
the sales manager, which put him in the position of being supervised directly
by this sales manager. Not only did he have his own cubicle, but he also had
his own telephone line in this office. To use again the words of Professor Gagnon,
we can see that Mr. Mazraani “[agreed] to be integrated into the operating
environment of a business so that it [might] receive the benefit of his work”. The Company described him as being so integrated in the April 27 letter:
“[You] will be part of service unit 35 of Team 90 and you will also be
in charge of the policies and clientele that currently make up part of this
service unit. Your sales director will be Mr. René Beaulé.” [Emphasis added.] Mr. Mazraani is at the bottom of the
hierarchical chain of command going from the senior vice-president to the vice‑president
to the superintendent to the branch manager to the sales manager (often referred
to in the present case as a sales director), who was Mr. Mazraani’s immediate
superior. What do managers (or directors), such as branch managers and sales
directors, do? They direct. When one performs work “under the direction” of
another, one is considered an employee pursuant to article 2085 Q.C.C.
[152] This case is the exception to the general rule that it is usual to
decide the issue of the existence a relationship of subordination mostly on
circumstantial evidence because direct evidence of the exercise of the power to
instruct, direct and control is not always available, or is difficult to
produce due, for instance, to the “diversification
and specialization of occupations and work techniques [which] often mean that
the employer cannot realistically dictate regarding, or even directly
supervise, the performance of the work.” [Emphasis
added.] But in this appeal plenty of direct evidence was produced of this
power having been exercised by Industrial Alliance during the relevant period.
This direct evidence corroborates the circumstantial evidence and supports the ultimate
conclusion that the Company here had the power to instruct the agents
and to direct and control their work, and more particularly the work of
Mr. Mazraani.
[153] This direct evidence comes from the Agent Contract, the Conduct
Standards (including the Industry Standards), the Communications Policy, the voluminous
training material, the numerous e-mails, the intra-office notices, the leaflets,
and the testimony of Mr. Mazraani, all of which have been described above in
detail in the “Factual Description” part of these reasons, which includes, but
is not limited to, the sections dealing with “training”, both the training
provided during the initial period, for new trainees, and the ongoing training provided
for all agents, with the “other instructions” on what to do and how to do it,
and with the “supervision and control” of Mr. Mazraani. I will not repeat
all those facts, but shall give a general overview highlighting some of that
evidence and comment on the most important and relevant items. I will also deal
with the testimony given by some of the IA witnesses and the work of the appeals
officer.
[154] One very revealing document is the memo sheet entitled “Keep Your Clock on Time All Year Long”, which describes 10
tasks to be performed by the agents. These tasks range from entering activities
in the agency’s management system to an agent’s devoting
60% of his time to prospecting so as to obtain at least 10 appointments a week
to attending branch meetings.
Another one is Module 3, which lists 10 items dealing with the planning of the
agents’ work. These run from doing at least eight hours of real work to obtain
a minimum of two meetings with potential clients every day to not dealing with personal
matters during working hours.
[155] The Agent Contract refers to the Conduct Standards and the Communications
Policy, which Mr. Michaud, the vice-president of the Company, did not seem
to be aware of, if we are to believe him. The Conduct Standards on page 1
consist of 12 articles describing how the work of the agent is to be performed
and a thirteenth that deals with the sanctions for failure to comply with the
other 12. The Industry Standards are dealt with in 72 boxes which contain not
only the standards but also the means of control and the sanctions that could
result from failure to adhere to the standards. In addition to these standards,
there is the Communications Policy, which sets out clear instructions from
Industrial Alliance to its agents on how and how not to use the Internet
services provided to them. Actually, these rules are not limited to its
Intranet service but also apply to the Internet in general. The Company tells the
agents how they should be behaving on the Internet. Not only does it lay down the
rules that the agents must follow, but it also sets forth the sanctions applicable
in case of failure to comply with them:
5. Any use
that does not comply with the Company’s security policy may lead to
sanctions that can range from the revocation of access rights to
termination of the agent’s contract.
[Emphasis added.]
[156] The Conduct Standards (including the Industry Standards), the
Communications Policy and the voluminous training material, like the other
direct evidence, constitute clear indications that Industrial Alliance not only
has the power to issue instructions and directions to its personnel but in fact
does so. It should be stated that this only makes sense, given the type of work
to be performed and the size of the organization. Because it is Industrial
Alliance’s name which appears on the business card or is mentioned when an
agent meets a potential client, it is in Industrial Alliance’s own interest to
ensure that its agents are being monitored and controlled and that they are
being given instructions on how to better serve the commercial interests of the
Company. It is its public image, its reputation and its liability which are at
stake. As Mr. Michaud himself said, it is the Company that has the “deep
pocket”.
[157] In the “Training” section under the “Factual Description” heading in
these reasons, we saw that the training given by Industrial Alliance to its
agents was not limited to explaining its products as financial institutions or
promoters would do to promote their products. One can think, for instance, of stock
brokerage firms that do so-called “road shows” to explain products such as tax
shelters to members of a brokers’ syndicate which will distribute those
products to their individual clients. One can even contemplate a company like
Industrial Alliance making these kinds of presentations to members of independent
insurance brokerages or financial services firms (cabinets de services
financiers) such as Financière S_entiel, the one referred to in note 161 above,
which represents 18 different insurance companies.
[158] Here Industrial Alliance, in its dealings with its own branches and
its own agents, goes a lot further. Not only does it explain its financial
products and those of its group, it trains its agents in the art of selling, how
to organize one’s work, how to plan, how to approach and solicit clients, what
to say when introducing oneself over the phone, how to talk to people of different
personality types, how to dress to meet potential clients or when having their
picture taken for the Company’s calendars, what kind of pen to use for signing policy
applications, how to deal with objections face to face and on the phone, how to
conclude a sale, how to close, how to develop a relationship over the years,
when to send birthday cards and what to say on such occasions. It even has
models to be followed which can be found on its Intranet.
[159] This training does not stop after the three months of initial
training for the new agents who keep arriving every year. It is offered to all
the agents on a continuing basis because there is always something new to
communicate to them. Most of them benefit from the stimulation, the motivation,
and the competition among themselves (Concours du président). The training could, for instance, take the form of an explicitly
mandatory presentation to show them new features of the Intranet (Gestion Clients). It
could be training to show them how to do a “publipostage” (direct-mail
solicitation). It could be training to promote products offered by the group. It
could be training to show the agents how to produce a client file and in what
order the documents are to be filed so as to facilitate things for the Company,
for instance, the work of the underwriters−the only ones who can
decide to issue a policy−and the work of the compliance personal in examining clients’ files.
[160] The Company told the agents how to use its telephone system and the
Internet. There were instructions on how to use the Intranet that was put in
place by the Company. There were restrictions as to the length of time during
which its agents could use its Intranet and Internet services and as to the
purposes for which they could use them. The Company told them not to use these
services for personal commercial work, or to use them in a way that could
adversely affect the interests of the Company, or to divulge any information of
a confidential nature, such as the salaries of its personnel. It also provided
them with a disclaimer to use when expressing an opinion and told them what they
could download and what they could not. The Company stated that it would
monitor the use of those services. Here again, it was in the Company’s interest
to exercise supervision and control over its agents to ensure its efficient
operation.
[161] The Company exercises control over every aspect of its agents’ work,
as illustrated by section 12 of the Agent Contract, which prohibits the “use [of] brochures, advertisements or printed matter bearing the
Company’s name or logo that have not been previously approved in writing by the
Company.” Industrial Alliance tells the agents that
they cannot modify any IA publicity material without the approval of the Company.
The agents are required to remit the money they collect from their clients to
the Company immediately. They cannot grant any rebate to their clients or go to the media to deal with particular problems. In Mr. Mazraani’s
case, the Company told him what to do and what not to do. He was told to look
after a client of the branch that was not one of his. This was specifically
mentioned in the April 27 letter: “you will also be in charge of the
policies and clientele that currently make up part of this service unit.” So the Company was “determining the work to be done” to use the
words of Professor Gagnon. Mr. Mazraani was told not to look after another client
because another agent of the Company was responsible for that particular
client. Under section 13 of the Agent Contract, the Company could have given
its approval for that client’s file being handled by Mr. Mazraani because the
client had so requested, but the Company turned Mr. Mazraani down and
thereby exercised its control over him. So the agents
are not free to run their alleged business as they wish.
[162] In addition, the agents were expected to attend meetings, although
the official version of the Company was that attendance was not compulsory.
Agents with a lot of experience and who were good producers−like Mr. Charbonneau−may not have
been expected to attend all meetings, which seem to have been numerous. However,
when an important meeting took place, the Company exercised its power to direct
all its agents to attend, as illustrated by at least two e-mails that
were introduced in evidence by Mr. Mazraani.
[163] The Company supervised the agents’ work and corrected mistakes when any
were found, as happened in the case of an application submitted by Mr. Mazraani
for one of his clients. The correction was made by one of the branch manager’s
assistants, who then informed Mr. Mazraani’s superior, that is, his sales
manager who thereafter advised Mr. Mazraani. Mr. Mazraani, like some
agents at the Laval Branch, felt compelled to produce a medical certificate to
explain his absence from the office. There is no evidence that the Company
informed him that this was not necessary. It should be mentioned that the sales
managers kept their agents informed of their absence for holidays and vacation
and told them from whom they could get help during their absence.
[164] During his testimony, Mr. Mazraani
indicated that he met with his sales manager regularly and that they had
discussions on how he could make more sales and on the level of sales expected of
him by the Company. This is corroborated by the training material, in which the
agents are told what objectives the Company expects of them. On page 7 of Module 3, “Planification, Organisation,
Contrôle”, there is this heading: “Vos objectifs et les attentes de la compagnie”. [Emphasis added.] It is stated
under that heading (on page 8):
“Avec l’aide du directeur des ventes,
déterminez vos objectifs en effectuant les exercices suivants. . . .” [Emphasis added.]
[165] Further evidence of the power to control that the Company had over
the work of its agents is found in section 13 of the Agent Contract, where it
is stipulated that the Company reserves the right to appoint another Company
agent to provide service under a policy in the initial agent’s place, whether
the contract is in force or has been terminated, in the event that the service
provided by the agent is not satisfactory for the client or for the Company
or if the agent acts to the detriment of the interests of the Company.
[166] There is also the power described in section 14 of the Agent Contract,
where it is stated that the Company may “suspend the contract under any
reasonable grounds”, whether or not related to the duties of the agent,
that no remuneration is payable during the suspension and that the agent loses
the right to all commissions payable during that period. During the suspension,
the agent is not authorized to solicit or obtain applications or do transactions
relating to any of the Company’s clients.
[167] Under section 15, the Company can cancel the contract with or
without cause by giving seven days’ notice, and it is provided that no
remuneration is payable as of the date the contract is cancelled (but if the
agent is still indebted or owes any amount to the Company, such debt is
immediately payable to the Company). Lastly, when a contract is cancelled, the Company
becomes the assignee of the agent’s client records.
[168] Section 16 states that, for a period of two years beginning on the
date of the cancellation of the contract, the agent must not act as an agent or
broker on behalf of the clients of the Company who were part of the
service unit served by the agent at the time of the cancellation of the
contract.
[169] Here, Mr. Mazraani was working on the premises of Industrial
Alliance; his office was located near his sales manager, Mr. Beaulé. He
attended on a weekly basis meetings which he felt were mandatory; he received substantial
training from Industrial Alliance when he began working for them and he
continued to receive training throughout the duration of his work for IA, which
lasted seven months. The Company provided him with all the most important
tools, i.e., the data on the Intranet and the materials necessary for soliciting
applications for insurance policies by Mr. Mazraani’s potential clients. Being
present on the premises of the Company, he was able to contribute to its
success and, as we saw above, this is something the Company expects from its
agents, as evidence by the following from the memo sheet entitled “Keep Your Clock on Time All Year Long” states: “I contribute to
the success of my team, my agency and “L’équipe solidaire” by doing my part during company
sales promotions.”
[170] Mr. Mazraani was not in a position to choose the means of
execution. Had he been, it would show that he was an “independent” contractor.
He could not actually make a sale; this was the prerogative of the
underwriters. He could only solicit and propose clients’ applications. He could
not negotiate the premium. He could not even grant a rebate. He could not
receive a payment in his name. He had to remit any money or cheques to the
Company “immediately”. Generally, he only sold products of the Company and if
ever a product that his client needed was unavailable from the Company, he could
obtain it through a subsidiary of the Company, which also shared in the
commissions. He was told by the Company that he could not represent a
particular client because that client had used another IA agent in the past. When
a mistake occurred in entering information about an application on the Intranet,
Mr. Mazraani did not even have the authority to correct it. This is what
Mr. Leclerc stated:
JUSTICE ARCHAMBAULT: And my question to you is
who has the authority to go and make the change?
MR. LECLERC: My staff.
JUSTICE ARCHAMBAULT: Your staff?
MR. LECLERC: Yes.
JUSTICE ARCHAMBAULT: Under your management?
MR. LECLERC: Yes.
JUSTICE ARCHAMBAULT: Not the financial
advisor?
MR. LECLERC: No.
JUSTICE ARCHAMBAULT: That was my question.
. . .
MR. LECLERC: Because if everybody start to
call at the head office it will be like a zoo.
[171] This shows that the Company was exercising control over the work of
Mr. Mazraani. It was the Company that decided who did what. So it is not
surprising to see Mr. Mazraani arguing that he did not have a business:
“Simply I was a porter for their policies to be delivered and for their money
to be picked up. I do not decide I do not control and I do not get paid by the
client. Industrial Alliance is everything and everything is theirs.”
[172] In this case, we can see that Mr. Mazraani, like the other
agents, was “integrated into the operating environment of a business so that it
[might] receive the benefit of his work”, to use the words of Professor Gagnon,
cited above. Professor Bich, now a Quebec Court of Appeal judge, described the
concept of relationship of subordination this way:
[TRANSLATION]
. . . Although
the employee sometimes in practice enjoys substantial leeway in carrying
out the work, he is still, however, subject to the employer’s control:
because the employee’s activity is integrated into the context established
by the employer and is performed for the employer’s benefit, it is only
normal that there would be control on the one hand and subordination on the
other.
[Emphasis added.]
[173] What percentage of employers give such detailed instructions to
their employees on how to do their work as those given here? It is ironic that a
number of decisions have been rendered in which courts and administrative
tribunals have concluded that life insurance agents are independent contractors
despite having received a great deal of training on how to do their work and
that courts have held to be employees part-time professors, called chargés de cours in Quebec, who received
no training and no instructions on how to teach!
[174] As described above, the training was substantial. The initial training
went from April to June and there was ongoing training thereafter. Mr. Mazraani
considered this training to be mandatory and this view is shared by the
Minister, who made it one of her assumptions with respect to the initial
training in the Reply to the Notice of Appeal. The
training was organized by the Company, presented at the Company branch office
and all paid for by the Company, even that training which qualified for PDUs!
The sales managers were there to help and assist the agents. They were also in a
position to supervise the agent’s work and tell them how to improve it. The
Coaching Guide required them to verify the “client files for the current week”. The goal of an insurance company is to make sales of financial
products. So it was not surprising to hear Mr. Leclerc state that the
sales managers spend more than half of their time on the road with their
agents, although the official version of the Company is that they do not
supervise them! If one of its agents, in whom the Company has invested a lot of
time for training, does not produce adequately, the Company loses money. The Company wants its salespersons to succeed and, therefore, as
indicated by Ms. Woo, they gave them hints and a recipe for how to
proceed. This is clearly an instance of the Company indicating to the agents
how to do their work.
[175] The nature of the work performed by Mr. Mazraani was such that
it required not only knowledge but long-term training, coaching on
how to do that work and continuous supervision by the sales manager in
the performance of his duties. This is due in part to the intricacies and
complexities of the financial products being offered by the Company, which required
that the Company provide the tools for explaining those financial products to
potential clients of the Company. The numerous training components in Exhibit
A-48 illustrate this point. The Genesis universal life insurance policy is a
financial product that affords both life insurance protection and a wide range
of investment options designed for the accumulation of large amounts of money in
a tax shelter. The document filed as Exhibit A-48 could not have been generated
efficiently without software designed by or for Industrial Alliance, and a sale
of the Genesis product could not have been made as efficiently without this
document. That is why the use of the computer with the software provided by the
Company was essential for the purpose of generating the proposals made to
individual clients and supplying the information required in order for the
client to make an informed decision and in this connection training was
required. The fact that Mr. Mazraani paid weekly rent of $18 for the use
of the computer is nothing but a red herring.
[176] On several occasions, Mr. Michaud and Mr. Leclerc were
asked whether the agents were required to attend meetings and they indicated
that they were not. This is what Mr. Michaud stated:
MR. MAZRAANI: Do you believe that the
training, especially the first training, was mandatory?
. . .
MR. MICHAUD: Yeah. It’s not -- it’s not
mandatory but again, it shows you interest in developing your business
if you’re not attending. We’re trying to help the people build their business
and we provide training to these people. So usually they don’t even ask the
question is it mandatory or not. They are attending and they’re part
of the meeting, especially the first one.
[Emphasis added.]
[177] In other words, it was not necessary to mention that attending
meetings was a requirement; the context made it such that people would attend
them, as would normally be the case in any firm which suggests to its employees
that they attend meetings and as was in fact the case for Mr. Mazraani,
Mr. Charbonneau and Ms. Woo. Naturally, agents with a lot of
experience and who were good performers were not expected to attend all
the meetings if the Company did not make them mandatory. That is the most
plausible version of the reality of the requirement to attend these branch
meetings. This is common sense: the circumstantial evidence favours the version
of Mr. Mazraani over the misleading evidence of the Company.
[178] Furthermore, the training material introduced as direct evidence by
Mr. Mazraani shows a different picture than the one presented by the IA
witnesses. It describes the work of agents as follows:
“Le travail de représentant consiste à vendre de l’assurance mais aussi à . .
. assister aux rencontres d’agence”. [Emphasis added.] There is also the memo sheet entitled
“Keep Your Clock on Time All Year
Long”, where it says: “7. I
take part in agency meetings . . . .”
[179] In addition, Mr. Mazraani was able to find, in the course of the
six-day hearing of this appeal, spread over five weeks, direct evidence to
contradict the evidence of several IA witnesses, including the testimony of
Mr. Michaud and that of Mr. Leclerc. He was able to retrieve at least
two e-mails that made it mandatory to attend branch meetings which were not
PDU trainings sessions. The first is an e-mail dated May 29, 2012 indicating on
its subject line: “IMPORTANT − FORMATION NOUVEAU LOGICIEL GESTION CLIENTS”. In it, the “secrétaire
administrative”, Nathalie Gagnon,
writes the following instruction to all members of the LaSalle Branch,
also known as the Agence Mercier:
IMPORTANT – À TOUS LES MEMBRES DE L’AGENCE
MERCIER
. . .
Ce changement affectera vos méthodes de
travail au quotidien.
Il est obligatoire que vous
soyez présents à cette réunion sans exception.
[Emphasis is not mine.]
[180] The meeting was scheduled for Monday, June 18 in the conference
room. This additional information is provided:
L’objectif est d’expliquer les raisons et les
bénéfices de cette nouvelle solution par une présentation Power Point live et une
démo de l’application.
Par la suite, vous aurez accès à des capsules
de formation (vidéo e-learning) qui vous seront expliquées à la réunion du 18 juin.
[181] This is a very good example of the exercise by an employer of its
right to exercise control and direction over the work of its workers. Not only
is it mandatory to attend the meeting, but the e-mail explains that the
change will have a daily impact on the way that they do their work.
[182] There is also a notice and another e-mail sent to the agents about a
“RÉUNION
D’AGENCE” to be held on June 4, at 10 a.m. and stating, in the notice, “VOTRE PRÉSENCE
EST IMPÉRATIVE” and in the
e-mail, “VOTRE PRÉSENCE
EST PRIMORDIALE”. The topic is “Annonce des nouveautés à venir”.
[183] In addition, according to several of the IA witnesses, more
particularly, Mr. Michaud and Mr. Leclerc, there was no taking of the
attendance of agents at branch meetings, except for the training sessions qualifying
as PDU’s, that is, the continuing education units required by the regulatory
bodies. Again, Mr. Mazraani was able to find a list of those not in
attendance at the “présentation I.A Inter-Action” on September
12, 2012, which was not a PDU training session. The
purpose of the presentation was to promote a subsidiary’s mortgage service so
that the agents could refer clients who needed this new service. Because of the large number of absentees, another
presentation was scheduled for November 1, 2012.
[184] It should be repeated that most employees working in larger
organizations are not told that attending meetings is mandatory. However,
everyone in the organization knows that non-attendance will not be well
regarded. The situation is the same here, as recognized by Mr. Michaud in
the extract reproduced above. In the end, as I have stated before, the issue
here is whether the Company had the power to control and to direct the work
performed by its workers and the evidence clearly shows that it did. Not only
did it have the power, but it exercised that power. The e-mail concerning a
particular meeting at which a new client management system was to be put in
place indicated that attendance was mandatory for all, without
exception.
[185] Evidence was introduced and argument put forward to show that
Industrial Alliance supervised and controlled the quality of the work performed
by its agents only because of its obligations under the Distribution Act. The
in-house counsel testified that the above-described Compliance Checklist was created for the purpose of fulfilling legislative and
regulatory requirements. Section 85 of the Distribution
Act provides as follows: “A firm and its executive officers shall oversee the
conduct of the firm’s representatives. They shall ensure that the
representatives comply with this Act and the regulations.”
[186]
I recognize that part of the Compliance Checklist
deals with issues resulting from those requirements, such as knowing your
clients and their needs. However, contrary to the statements made by the in-house counsel, the
checklist does not wholly result from such requirements. In his testimony, Mr. Michaud
acknowledged that requirements such as knowing your client and ensuring that he
is well informed when a financial product is being offered to him come not only
from the regulations but also from industry standards established by the CLHIA
(ACCAP), which seemed more important to him than the regulations. For instance, item 24 of the checklist deals with missing initials
of the subscriber-applicant on Form F-13-743, which document is referred to in item
6 on the checklist, where it is shown as being required by the CLHIA (ACCAP). The
checklist shows as the legal source for item 24, section 6 of Regulation 2 which provides: “Where a firm, an
independent representative or an independent partnership uses statistics in its
advertising or written representations, the source of the statistics must be
clearly identified.”Even counsel representing the Company before
this Court did not deal with this specific issue or, more generally, with why
the compliance required by the Distribution Act and its regulations should not
be taken into account for the purpose of determining whether a relationship of subordination
existed between the Company and its agents, and more particularly, Mr. Mazraani.
He cited in his written argument before the Court and his additional written
submissions sent to the Court on July 3, 2015, numerous Quebec court and
tribunal decisions which state as a kind of mantra:
35 Ce contrôle administratif et déontologique implique une
certaine subordination mais pas nécessairement ou "indéniablement"
la subordination juridique au sens où on l’entend dans le cadre d’une relation
employeur-employé.
[Emphasis added and note omitted.]
[187] This statement was made by the Superior Court judge because the member
of the CRT had concluded:
[200] L’encadrement obligatoire des parties
par la Loi qui subordonne l’agent au courtier suffit à conclure à un
lien de subordination. Il n’est pas conciliable avec la relation d’affaires
usuelle entre deux entrepreneurs.
[Emphasis added.]
[188] I have no quarrel with the above conclusion of the Superior Court. Indeed,
it would be inappropriate to rely on a statute such as the Real Estate
Brokerage Act, R.S.Q., c. C-73.1 and on the Règles de déontologie de l’Association des courtiers et agents
immobiliers du Québec to decide
whether a person is bound by a contract of employment or a contract for
services under the Civil Code. However, the fact that a brokerage firm is
subject to particular legislation, such as the Real Estate Brokerage Act,
which recognizes explicitly that agents can be “employed by or authorized to
act on behalf of a broker”, should not be relied on to exclude the possibility that the agents could
be employees. Industrial Alliance and other payers should not be allowed to use
the conclusion stated in paragraph 35 of the La
Capitale decision as a licence
to dress up a contract of employment as a contract for services.
[189] Both in its evidence and in its argument, Industrial Alliance has declared
that it only supervised the work of the agents in order to comply with its
obligations under the Distribution Act and
the Information Protection Act. It
did not identify which of its supervisory activities were required by those statutes
and would not have been consistent with the existence of a contract of
employment. It should be pointed out that neither Mr. Michaud nor Mr. Charbonneau
saw any differences between the treatment of agents when they were considered as
employees before 1993 and their treatment when they were considered as
independent contractors after 1992!! So, after 1992, we basically have the same
relationship as existed before 1992, except that we have a contract that states
that it does not create an employer-employee relationship.
[190] I would rephrase as follows the statement in paragraph 35 of La Capitale,
quoted above: The administrative control required by legislation such as the Real
Estate Brokerage Act and the Distribution Act imply a certain control or supervision,
but not necessarily such as will lead to a conclusion that there exist a
relationship of subordination as described or referred to in articles 2085 and 2099
Q.C.C and not necessarily incompatible with such an employer‑employee
relationship. In other words, the analysis of the facts has to be done by
applying the relevant provisions of the Civil Code (and not such specific
legislation) and answering, as I have suggested above, the key question: Does
the payer have the power to instruct, direct and control? For a worker to be
considered an employee under the Civil Code, there must be a contract between
the payer and the worker, and the contract is the legal source for the
existence of an employer-employee relationship. So it is the contract that must
be looked at along with the conduct of the parties to see if that conduct is consistent
with the terms of the contract. Here, there is plenty of evidence establishing
the existence of IA’s power to give instructions to, and to direct and control
the work of, its agents, and this is without even taking into account the supervisory
function fulfilled by IA to comply with its obligations under the Distribution
Act and the regulations thereunder.
[191] It should be stressed that the Civil Code and the other legislation
do not have the same objective. The Real Estate Brokerage Act, the
Distribution Act and other similar legislation are intended to protect the
public from (past) abuses. When such abuses become wide spread in an industry,
political pressure builds in the public to have the legislators intervene to do
something about them. Before the legislators decide to intervene, the industry often
proposes that it take measures to curtail these abuses and promises to self-regulate
without the establishment of public bodies, such as the AMF and the
professional orders governed by the Professional Code. The industry (for
example, the life insurance industry) would form an association (such as the CLHIA/ACCAP)
which would adopt industry standards and require that its members abide by
them. When this solution does not achieve its goal, partly because such
an association cannot impose its standards on a company unless that company
accepts to be bound by them, legislators may have to respond to public pressure
and adopt measures to protect the public, such as requiring that an agent hold
a valid licence and that he pass an examination to qualify for that licence and
imposing certain obligations and standards on the various players in the
industry.
[192] The purpose of such legislation is to protect the public and not to
decide who is an employee or who is an independent contractor. When a
particular financial services company is required under this kind of
legislation to ensure that its agents comply with that legislation, the
legislative intent is that it will apply whether the agent is an employee of
the company or not. Given the well-known problem of distinguishing between an
employee and an independent contractor, the
legislature would not want a particular financial services company to evade its
obligations by taking the position that an agent attached to the company is not
one of its employees. So it is that the scope of the legislation is broadened
in this fashion. Also, when an industry wants to protect its business model of
doing business though independent contractors, the legislature can reply to
that industry that the wording of its legislation does not prevent this
business model from being used.
[193] The purpose of the Civil Code is described in its preliminary
provision as follows:
The Civil Code comprises a body of rules
which, in all matters within the letter, spirit or object of its provisions, lays
down the jus commune, expressly or by implication. In these matters,
the Code is the foundation of all other laws, although other laws may
complement the Code or make exceptions to it.
[Emphasis added.]
[194] To illustrate this, let us look at section 85 of the Distribution
Act, which I reproduce once more: “A firm and its executive officers shall
oversee the conduct of the firm’s representatives. They
shall ensure that the representatives comply with this Act and the
regulations.” [Emphasis added.] A representative can be an employee or an independent contractor. So
section 85 cannot be used to argue that an agent cannot be an employee because
it is the Act that requires a firm to “oversee the conduct” of the agent. This
would constitute an absurd result and defeat the purpose of the legislation
since section 85 is to apply to representatives who are either employees or
independent contractors. The proper analysis, in my view, is that a firm which
has entered into a contract of employment with its agent has the power to oversee
the conduct of this agent pursuant to the contract, but it also has the
obligation to do so pursuant to the Distribution Act, which sets out the
statutory requirements to be met. In this way, the purpose of both the legislation
and the contract is achieved.
[195] Coming back to the question of the Compliance Checklist, additional comments
are in order. First, I cannot see, for many items on the checklist, a close
relationship between the section of the regulation cited as a source and the
item appearing on the checklist. For example, as with item 24 mentioned above, for
item 2, “CTC (Renseignements personnels − objectifs et
planifications) + détaillé”, the checklist cites the Distribution Act, Regulation 2, article 6.
Out of the 36 items appearing on this checklist, almost half (15) refer to this
article!
[196] There are some exceptions. For instance, items 14 to 16 deal with
documents that are to be destroyed, such as medical questionnaires, copies of cheques
after delivery, and copies of driver’s permits and health cards. The legal
source of this requirement is the Information Protection Act.
[197] Second, some of the items in the Compliance Checklist are not,
contrary to what IA’s in-house counsel stated, limited to legislative and regulatory
compliance. An example is item 32, “Divergence – Initiales
du directeur n’apparaissent pas sur le formulaire « Profil de l’investisseur ».
The source of this compliance requirement is shown as “Règle interne de la compagnie”. Another example, mentioned above, is item 6
“Déclaration du proposant”. The CLHIA (ACAP), not the
regulation, is indicated as the source of this compliance requirement.
[198] Third, even if there were legislative and regulatory obligations to
supervise for compliance the work done by an agent, Industrial Alliance would
have done or should have done with regard to compliance virtually the same
supervision and control of this work as it had done before the legislative and regulatory
measures were adopted in 1998, as confirmed by Mr. Charbonneau. Such
supervision and control would have consisted, for instance, in making sure that
the client was well informed and that the product offered corresponded to the
financial needs of the client. A company would want its agents to have on file
updated financial statements, such as a balance sheet. This would be so because
not only would the Company’s liability be at stake (as acknowledged during his
testimony by IA’s vice-president), but its reputation would be at serious risk
of being destroyed or adversely affected. Therefore, it is very important for
such a company to be in a position to control the quality of agent’s work and
to tell him what to do and what not to do.
[199] For instance, if a client found out that he had bought something
which did not correspond to his needs or to his means, he would in all
likelihood be upset on realizing this and would let it be known, at least to
his family and friends, if not to the public through television shows specializing
in the stories of abused consumers, with the risk which that would entail of
giving not only the Company but also the life insurance industry in general a
bad reputation. This is why Industrial Alliance imposes on its agents not only its
Conduct Standards on page 1 and its Communications Policy, but also the Industry
Standards, which prohibit, for instance, an agent from encouraging a client to
go to the media to disclose a problem with an insurance company. As we saw above, as a member of the CLHIA (ACCAP),
Industrial Alliance was required to adhere to that association’s code of ethics.
[200] Outside of the Compliance Checklist, not all compliance supervision
exercised by the Company was done to fulfil industry or legislative obligations.
Much of it was for the more efficient operation of the Company’s business, as
seen, for instance, in this e-mail from the “superviseure
administrative” with the subject line “IMPORTANT CONFORMITÉ” « Précisions
et ajustements »:
Vous trouverez
ci-joint un aide-mémoire à jour afin que vous puissiez nous remettre vos
dossiers dans l’ordre indiqué. Veuillez ne pas brocher les
différents documents remis pour expédition au Siège Social car ils doivent
débrocher à la réception pour mettre à l’imagerie votre dossier.
[Emphasis added.]
[201] In his testimony, Mr. Charbonneau said that he was free to determine
his daily schedule, free to serve clients anywhere, free to decide when to take
his vacation and how long it would last, and that there were no restrictions on
his territory. This statement must be contrasted with the letter of April 27
which states that if no income is received for five consecutive weeks the
contract will be terminated. In addition, section 5 of the Agent Contract the Company reserves
the right to modify its minimum production standards.
[202] There is also the memo sheet entitled “Keep Your
Clock on Time All Year Long”, which contains the following:
3. I devote 60% of my time to prospection
by making a sufficient number of calls in order to obtain 10 appointments a
week.
. . .
8. I do what’s necessary so that my work
week is full before leaving for the weekend
[Emphasis added.]
[203] There is Module 3, which instructs the agents as follows: “1. Préparez vos journées de manière à fournir au moins 8
heures de travail véritable” and “5. Prévoyez deux
rendez-vous par jour au minimum.” [Emphasis added.] There is also the
memo referred to above saying: “SVP être à l’heure selon l’horaire établi.” Finally, there is the
statement in the CRT reasons “qu’il
n’est pas question de prendre des vacances pendant la période du concours du
président. Il [one of the complainants] explique qu’il a déjà tenté, sans succès, d’en faire la demande à
son directeur des ventes . . . .”
[204] Even if Mr. Charbonneau’s statements were all true−which is not the
case−that would not necessarily be conclusive evidence that there was not
a relationship of subordination between the agents and Industrial Alliance. The
existence of restrictions with regard to such things as work schedule,
territory, and when to take vacation and for how long could be an indication of
the existence of such a relationship of subordination. Their absence, however,
does not conclusively prove that the Company has no power to direct and control
the workers. The important question is whether the Company had any power to
control and direct the work of its workers or agents, and it is the duty of
this Court to determine whether such power did in fact reside in the Company. It
is worth repeating here the comments made by the now Chief Justice of the
Federal Court of Appeal in Groupe Desmarais
Pinsonneault & Avard Inc. (supra):
5 The question the trial judge
should have asked was whether the company had the power to control the
way the workers did their work, not whether the company actually
exercised such control. The fact that the company did not exercise
the control or that the workers did not feel subject to it in doing
their work did not have the effect of removing, reducing or limiting the
power the company had to intervene through its board of directors.
[Emphasis added.]
[205] In its training materials, the Company states: “Le représentant travaille pour lui-même; il contrôle et est
entièrement responsable des résultats de son travail. Il est définitivement un
propriétaire unique”. In
my view, this is an embellishment of the reality and a self-serving statement.
Although it is clear that the Company wants its agents to act with a lot of
autonomy−i.e., to organize their time so as to be productive−the agents are
working as part of the business of the Company, and it is also for the benefit
of the Company that they are producing sales. The Company is more candid in
Module 9, “Service and Follow-Up, at page 5, when it recognizes that what an agent does has a financial
impact on the Company itself:
Once a policy has gone
past the expiration date at the beginning of the second year, without renewal
and without any apparent reason, this means a loss for the insured, a loss for
the agent and a loss for the company.
The insured has paid a premium, which he has thrown
out the window. The agent is deprived of the renewal commissions and of the
conservation bonus. The company pays the administrative costs, which
exceed the income achieved.
[Emphasis added.]
[206] In my view, the fact that the agents are given a large degree of
autonomy in performing their duties is only normal given that the Company
cannot supervise the agents all the time. The compensation structure ensures
that the agent will perform; otherwise, he will earn no commission. If an agent
does not produce commission income for five weeks, that agent can be terminated
and, indeed, Mr. Mazraani was terminated for that reason. This is the
normal situation for any employee salesperson working on commission only.
[207] Much was said about the fact that the agents did not have to make
any activity reports to the Company. The testimony of the various IA witnesses,
including Mr. Leclerc, on this point was again contradicted by the Company’s
internal documents. On the memo sheet entitled “Keep Your
Clock on Time All Year Long”, we find this instruction: “When I arrive
at the office, the first thing I do is to enter my activities and results from
yesterday into the agency’s management system.” In his testimony at the end of
the hearing, Mr. Leclerc tried to lessen the impact of these internal
documents, which were hurting IA’s case. He stated that the “Registre de mes ventes, F20-123” no longer existed
in 2012. When I inquired if it had been replaced by another system, he
replied that there was something “that do the same job”. When asked by counsel
for IA if that system existed in 2012, he replied: “Yes, but I think nobody
used it.” Mr. Leclerc also testified that the “copie
de vos activités de la semaine” mentioned in Module 3 was
an idea conceived in the head office, but that nobody used it. This is what he
stated:
M. LECLERC: Non, mais ce que je veux vous dire
là-dessus c’est que des fois t’as des gens biens [sic] pensant dans
un siège social qui disent « Ils devraient faire ça comme ça. »
. . .
M. LECLERC: Et ils vont mettre ça dans un
guide.
. . .
M. LECLERC: Ça correspond pas à la réalité.
. . .
M. LECLERC: Ça fait que quand on reçoit ça, on
dit « Bien, non, on n’utilise pas ça. »
[Emphasis added.]
[208] Mr. Leclerc is a branch manager, but he is almost at the bottom
of the chain of command. The important decisions regarding the way to run IA’s
operations are taken, I would think, at the head office, which has more
authority than he. If Mr. Leclerc decides not to comply with head office
decisions, that is his business. However, my perception that Industrial Alliance
has the power to tell it agents how to do their work is confirmed again.
[209] In addition, there seems to be a bit of a misconception as to what constitutes
an activity report. In this particular case, it is evident that any time an
agent brings to Industrial Alliance an application to have an insurance policy
issued the Company knows if a particular contract is entered into. It must know
because it is its underwriters who make the decision to issue a policy, and the
entire remuneration of its agents is computed by reference to the premium that
the Company will receive from its life insurance policies issued to its
clients.
[210] There is in Module 3 a section entitled “Contrôle” where it is stated,
under the heading “Relevé
hebdomadaire du représentant (F15-125)”: “Ce rapport est automatiquement compilé pour vos crédits de
vente dans Extranet − Gestion d’agence. (Voir votre directeur des ventes pour une
formation à ce sujet.). Par la suite, celui-ci sert au rapport S.I.R.A.” This document may be a good tool to help the agents be informed
about their own performance, but, equally, it provides to the Company relevant
data enabling it to see how its agents are performing! This was established by
Mr. Leclerc when he was cross-examined by Mr. Mazraani about the
reasons for his termination. The main reason was that he had not produced
commission income for five consecutive weeks. At one point it was not clear
whether he was terminated at the end of the fourth or the fifth week. So
Mr. Leclerc gave this revealing answer (June 15 transcript, pages 209-210):
LE JUGE ARCHAMBAULT: O.k. Vous l’informiez que
ça va se terminer?
M. LECLERC: Ça va se terminer.
LE JUGE ARCHAMBAULT: Mais vous le faites au
moment où il n’a pas encore atteint ses cinq semaines. Vous êtes d’accord avec
ça?
. . .
M. LECLERC: C’était atteint pour nous parce
que le rapport de rémunération, FASAT -- il s’appelle FASAT au lieu de
SIRA -- le lundi matin, on le reçoit et puis ça nous indique, pour la
semaine cinq, le montant de rémunération qu’il va recevoir, puis c’est
écrit 0, parce que les chèques de commission, ils les reçoivent le jeudi.
Puis moi, le lundi, je sais déjà, par le système comptable, qu’il
va recevoir 0 pour une cinquième fois consécutive.
[Emphasis added.]
[211] The statistics on the agents’ performance are also distributed to
the agents for the “Concours du président”; this creates emulation among them
and increases sales. It also shows that the Company is in a position to
evaluate the performance of its agents without any additional formal activity
report being provided by those agents! I am sure that if someone like Mr. Mazraani
only produced five sales during the course of seven months, his supervisor, the
sales manager, would discuss that agent’s performance and suggest ways to
improve it. Mr. Mazraani testified that this is in fact what happened. He filed
as evidence a copy of his own agenda. For
September 5, 2012, he wrote: “Met with Eric [Leclerc] Wants
to see Activities Explained it is very hard despite all activities left
office unhappily.” [Emphasis added.]
[212] Ms. Woo testified that she kept her sales manager informed not
only of the hours she spent outside the office, but also as to when she met her
clients and when a sale was concluded. Therefore, it is very plausible that
there were at least informal activity reports made by Mr. Mazraani to Mr. Beaulé
and/or Mr. Leclerc.
[213] For a business operating a manufacturing plant with assembly lines,
such as a snowmobile manufacturer, control over the schedule of the assembly
line workers is of the utmost importance because all of the employees on the
line are interdependent. Given the nature of the IA agents’ work and the
remuneration structure adopted to pay them, their situation is completely
different. As long as an agent produces sufficient premium income, the Company
does not need to know how many hours per week the agent is working, whether the
work is performed in the morning or in the evening, or whether it is done on
the premises of the branch or at the client’s home or office. Industrial
Alliance does not need to exercise any control over these aspects of the agents’
work. In other words, what count is the number of sales, not the number of
hours. Unlike the situation on an assembly line, the Company cannot be beside
its agents all the time to check whether they are doing their work, even if the
sales managers are on the road with IA’s agents for more than 50% of their
time!
[214] However, the Company can exercise its power to instruct and direct
when operational needs so require. There are several examples of this which are
described in these reasons. Among these are the schedules fixing the day and
the hour of all the training sessions, which, according to Mr. Mazraani
were mandatory. The training ran from April 3 to December 13, 2012. There is
also the memo dealing with a promotional activity to begin on June 28, 2012. In
that memo, entitled “Kiosque Square Décarie, Règles et procédures”, we find the following instruction: “SVP être à l’heure selon l’horaire établi.” Other examples include the modifications of meetings at which attendance
was mandatory or “primordiale”,
as we have seen above.
[215] Finally, it is interesting to note that Mr. Leclerc, the manager
of the LaSalle Branch, stated that he did not know what exactly his sales
managers were doing with regard to the training of the agents, although the
Coaching Guide clearly establishes that it was part of his duties to be aware
of this. He explained that the sales managers were professionals and knew what
to do. So the Company does give its employees a large degree of autonomy
in the performance of their functions. This is no different than the way the Company
treats its agents in giving them considerable autonomy.
[216] When Mr. Michaud and Mr. Charbonneau
were asked whether there were any differences in the handling of the agents
when they were considered as employees before 1993 and when they were considered
as independent contractors after 1992, neither one indicated that in the latter
case there were fewer constraints with respect to their freedom in performing
their work, i.e., with regard to the scheduling of their activities, the limitation
of their territory or the requirement to attend meetings. Nor did they testify
that, after 1992, the agents were “free to
choose the means of performing the contract” to use the words of article 2099 Q.C.C. or that they “enjoy[ed]
virtually total independence, in relation to the client, concerning the manner
in which the contract [was] performed” to use the words of the Quebec Minister
of Justice.
[217] Instead, Mr. Michaud gave a list of
irrelevant and baseless points of law, including the assertion that an
employee could not, before the change, deduct the salary of an assistant, could
not incorporate himself and could not sell his right to represent clients.
These answers are consistent with the fact that nothing
of substance change in the way that the Company exercised its power to direct
and control the work of its agents.
[218] Much emphasis was placed by Industrial Alliance on the fact that Mr. Mazraani
had to pay his computer costs, for his long-distance calling expenses, the cost
of his cellular phone expenses, the cost of his licence, the costs of
secretarial help, etc. However, the Company supplies to its representatives
significant assets and services which are of great importance in the agent’s
activities. First, it provides free of charge the use of office space (a
cubicle), a desk, a filing cabinet and a telephone. In addition, the Company provides,
and remains the owner of, all forms and books, policies, computer software and
other Company documents that it places at its agents’ disposal. Furthermore, the Company pays for all the training which it
provides to its agents, whether at the beginning stages or thereafter,
including the training which qualifies as PDU’s.
[219] But, in the end, the incurring of expenses is not a factor that
needs to be considered here as it is in the common law provinces, although it
is not an irrelevant fact to consider in the analysis of the circumstantial
evidence of the existence of the “power” to direct, instruct and control. For
instance, if a worker provided heavy machinery such as a bulldozer and a power
shovel costing tens of thousands of dollars to carry out his work, this would
make it less likely that the worker would have allowed the payer to exercise direction
and control over the way to perform the work and use his machinery! Such circumstantial
evidence is not conclusive, but is an element to consider in determining whether
that power existed.
[220] Great emphasis was also put, in the evidence and in the arguments of
Industrial Alliance, on the fact that it does not provide a list of clients to its
agents. However, the most important issue is whose clients they are once they
are found by the agents and, in this particular case, it is clear from the
evidence described above that any client that an agent is soliciting belongs to
the Company, contrary to the argument made by the Company’s lawyer. If the
agents were true independent contractors, you would expect that they would able
to keep their clients when they leave the Company, whether voluntarily or not, and
be able sell them to anyone they wished, if that is what they wanted to do. Here
the agents cannot sell their clientele to whomever they wish. That is because
the clients belong to the Company and only in certain circumstances, as we have
seen above, does the Company allows its agents to sell the future flow of
commissions, which is the only thing belonging to the agents, and even that they
can only sell to another IA agent!
[221] In connection with the relevant factors to be considered in deciding
whether we have a contract of employment, I would adopt the same comments as
those made above regarding expenses. Ownership of the clientele is not a factor
recognized under the Civil Code, contrary to the situation in common law.
However, it could constitute an item of circumstantial evidence that could help
the Court draw an inference that the Company had the power to direct and
control the work of its agents. The fact that the Company owned the clientele
makes it more likely that it had this power because it gave it an incentive to
protect its asset. But, as stated above in relation to expenses, this is not
conclusive.
[222] When witnesses are affirmed or sworn, they affirm or swear that they
will tell the truth, the whole truth and nothing but the truth. Experience
teaches that not all witnesses fulfil this commitment. Some lie; some mislead;
some are mistaken; some believe that they are telling the truth when the
reality is actually quite different; some embellish the facts. However, when
executives of well‑known and reputed corporations, members of the legal
profession, and people in authority, such as a police officer, are testifying, the
expectation is that they will have higher standards in honouring their oath.
[223] In this particular appeal, there were a senior vice-president of the
fourth largest life insurance company in Canada, an in-house counsel, and a
branch manager who testified. Their testimony was, to say the least, troubling.
Some of their statements embellished reality, others were misleading and still
others bordered on perjury.
[224] During his testimony and before the training materials described
above were filed, Mr. Michaud testified that he was not aware of any written
guidelines on the way in which the work of the agents was to be performed:
JUSTICE ARCHAMBAULT: Okay. So . . . is
there a binder or something like that that you give to your agents what
they have to do to ---
MR. MICHAUD: I don’t know if there’s a
binder to be honest with you.
. . .
JUSTICE ARCHAMBAULT: --- I say binder but I’m
saying guidelines . . . or whatever?
MR. MICHAUD: Yeah, I know there’s some
guidelines that are being given to the advisors when they start with the
company. . . .
. . .
JUSTICE ARCHAMBAULT: In writing or verbally?
MR. MICHAUD: I don’t know.
JUSTICE ARCHAMBAULT: You don’t know.
MR. MICHAUD: I don’t know.
JUSTICE ARCHAMBAULT: So are you not aware
of any written guidelines that -- is that the only thing that you’re
telling them to do?
MR. MICHAUD:
No. There’s probably something but I haven’t seen it to confirm.
[Emphasis added.]
[225] How could Mr. Michaud not have remembered whether there were written
guidelines and voluminous training materials showing the agents what to
do and how and when to do it? How could he have forgotten that sections 7 and
19 of the Agent Contract referred to schedules, codes and policies? One such
document was the Conduct Standards (which included the Industry Standards), and
another, the Communications Policy, which, according to the in-house counsel,
were always attached to the agents’ contracts. Mr. Michaud
never mentioned these written guidelines. There is no possibility of confusion stemming
from the use of the word “guidelines” because the Conduct Standards use this term
in their introduction. This is all rather surprising on the part of a person
who obtained a favourable opinion from the CRA with respect to the Agent
Contract and who was, and still is, Senior Vice-president, Sales and
Administration.
[226] Furthermore, Mr. Michaud appeared to be evading my question
when I asked him whether there was “a binder or something like that that
you give to your agents what they have to do”. He replied: “I don’t know if
there’s a binder to be honest with you”. When people say “to be honest with
you”, alarm bells start ringing! In view of the existence of such detailed
standards issued by both the Company and the industry and of such voluminous
training materials (at least 228 pages), as described above, one wonders whether
Mr. Michaud was not intentionally misleading the Court when he gave these
answers. It was fortunate that I was able to read, before the closing of the
evidence, the Agent Contract, which referred to the Conduct Standards, (which
included the Industry Standards) and the Communications Policy, and that I asked
for these documents.
[227] Mr. Michaud and Mr. Leclerc were misleading the Court when
they said that the role of the sales manager was only to coach and
motivate IA’s agents. The Coaching Guide used by the Company to train its agents
contradicts their testimony. As we saw above, the Coaching Guide states
that its purpose is to “enable you [the branch manager] to support your
sales manager in his role as coach, training supervisor
and sales manager for his new recruit.” Obviously the Company
believes that the role of its sales managers is not limited to that of a coach.
The sales manager has also an actual sales manager’s role, which includes
managing sales. The Guide asks the branch manager to confirm, at various steps
of the Professional Development Program, whether the training supervisor
verified the client files for the current week. It concludes as follows:
“Your SUPER VISION (supervision) . . . make[s] all the difference!” [Underlining only added.]
[228] Furthermore, as we saw above, the sales managers, together with the
branch staff are indeed not only telling the agents what to do, how to do it
and even sometimes when to do it, but also supervising the work of the agents
both on the Company’s premises and on the road. The evidence described above
also makes it clear that they are monitoring the performance of the agents, reviewing
their work and even correcting it. Either Ms. Laporte or Mr. Beaulé
picked up the error in an application submitted by Mr. Mazraani and took
measures to correct it before Mr. Beaulé told Mr. Mazraani. Moreover,
I have no hesitation in concluding that Mr. Michaud was none too candid
and was being misleading when he suggested that Mr. Mazraani’s work was controlled
by his bank account. He was omitting the fact that the Company loses as well when an
agent is not performing, as we saw earlier in discussing Module 9.
[229] Mr. Michaud also downplayed the importance of the president’s
contest by portraying it as being just a gala celebration to acknowledge
the top producer. This is also contradicted by internal documents of the Company. For
instance, there is the e-mail with the notation “Important
à noter à votre agenda” which is addressed to all
the members of the LaSalle Branch and whose subject is “Rencontre préparatoire Concours du président”. The topics listed are “− Idées de prospection − Suggestions de structure de travail − Objectifs
de l’agence”. [Emphasis added.]
[230] Mr. Leclerc was present in the courtroom during the five days
of testimony. Nobody had asked for the exclusion of witnesses. Except for Mr. Mazraani,
he was the last witness to testify. He tried to deal with some of the most
damaging evidence against IA’s case to fix things up. By way of explanation of the
evidence already referred to above, Mr. Leclerc
stated that the Coaching Guide was not used to evaluate Mr. Mazraani
because, in Mr. Leclerc’s view, he was not a trainee. He had been hired as
a person with some years of experience, including his experience as an agent at
London Life. Mr. Leclerc’s testimony is an embellishment of reality and
is not credible because, first of all, Mr. Mazraani followed the initial 10-week
training program for new agents, as did the other trainees. In addition, there
are e-mails in which Mr. Mazraani is treated as a trainee. An
example is the e-mail sent to him by Nathalie Gagnon, with a carbon copy to
Mr. Leclerc and Mr. Beaulé, advising him to enter in his agenda “two training supervision” scheduled
for two different dates, in June and July, with Mr. Leclerc.
[Emphasis added.] The subject of the e-mail, which is dated
May 28, 2012, is “Training supervision K. Mazraani”. [Emphasis added.]
[231] Mr. Leclerc claimed that this e-mail was sent to Mr. Mazraani
by mistake because he did not consider him a trainee. However, his testimony again
is not credible. For one thing, a copy of that e-mail had been sent to him. So
he was aware of it at that point and, if it was a mistake, he should have done
something about it. But there is no evidence that Mr. Leclerc did any such
thing! When cross-examined by Mr. Mazraani, he stated that he did not
remember their having met on the dates specified in that e-mail.
[232] Moreover, Mr. Leclerc gave a completely different description of
Mr. Mazraani’s level of knowledge when Mr. Mazraani asked Mr. Leclerc
to explain why his assistant had corrected an error he had made in entering
data on the Intranet with respect to a life insurance policy application and
did not bring the error directly to his attention but instead went to his
superior, his sales manager.
This is what Mr. Leclerc stated :
JUSTICE ARCHAMBAULT: Mr. Mazraani is saying
that the documentation that we see doesn’t advise him that there was a
mistake. It was picked up by Mrs. [Laporte]. So why was he not the -- pourquoi c’est pas lui qui était le destinataire de l’information?
. . .
MR. LECLERC: For sure. Because he’s a rookie,
he doesn’t know nothing how to work -- how to repair, how to
correct the situation
. . .
MR. MAZRAANI: The question why Mr. Beaulé will
come to me and bring me the documents, not come directly to me?
JUSTICE ARCHAMBAULT: Do you have an answer for
that?
MR. LECLERC: He is a rookie. He
just starts.
JUSTICE ARCHAMBAULT: That’s your explanation?
MR. LECLERC: For sure. He cannot correct
by himself.
[233] In any event, even if, contrary to all appearances, the Coaching Guide
was not used to train and evaluate Mr. Mazraani during his initial training,
it shows that the Company had such a guide, which it used with its new agents,
and that it had the power to train them, evaluate them, supervise them−for example, by
“verifying their client files for the current week−” and
instruct them as to how to perform their work. It also recognizes that the role
of the sales managers is not limited to that of a coach and that the branch manager
has a supervisory role. This document is more credible than the testimony of
Mr. Leclerc.
[234] In his testimony, Mr. Leclerc also stated that the sales
managers do not tell the agents how to do their work, that they do not check whether
they are following the instructions appearing in the different modules and the
different documents described above. They only make suggestions when they meet
their agents, and they do this even when the agents are on the road. Indeed, he
acknowledged, to my surprise−and perhaps to the surprise of IA’s counsel−that more than 50% of the sales
managers’ time was spent on the road accompanying the agents:
MR. LECLERC: My coaches are more than 50
percent of the time in the field with the advisors.
JUSTICE ARCHAMBAULT: M’hm.
MR. LECLERC: So they help them. They
check and say “Hey, I have a suggestion. If you want, next time maybe
change this, change this, try this if you want.”
MR. TURGEON: But
this would apply to the trainee, to the new ---
MR. LECLERC: No, the new one. Only the new
one.
MR. MAZRAANI: Objection, My Lord.
JUSTICE ARCHAMBAULT: Yes. Go ahead. What is
your objection?
MR. MAZRAANI: Let him talk. He tried to talk
and he stop him by interfering and interrupting. Let him complete his ---
. . .
Me TURGEON: Mais ma question était de lui
demander à qui ça s’appliquait.
. . .
MR. LECLERC: Only the new advisors.
[Emphasis added.]
[235] I believe that, here again, Mr. Leclerc, with the help of
counsel for IA, is misleading the Court when he says that the “coaches” are
only making suggestions or that they only accompany those agents who are
trainees. With respect to both of these statements, Mr. Leclerc subsequently
changed his testimony. He admitted that sales managers could accompany agents even
after the initial training period and that the sales managers were
giving “direction” to the agents:
MR. LECLERC: Yes, to -- it’s to help them
to practice to become good advisors.
Because we have theoretical classes in the
morning with the material and these things ---
. . .
MR. LECLERC: --- but the rest of the day we
are -- we do field training for the new advisors.
JUSTICE ARCHAMBAULT: And is there a limitation
when the sales manager will stop attending?
If someone who has two years of experience he
would like to have the presence of the sales manager could he ask for ---
MR. LECLERC: Yes.
JUSTICE ARCHAMBAULT: And they will go?
MR. LECLERC: Yes.
JUSTICE ARCHAMBAULT: So you’re there to help
them to ---
MR. LECLERC: We are there to support them, also
to give them direction.
[Emphasis added.]
[236] The last statement seems to have been made in a momentary lowering
of his guard by Mr. Leclerc, but this answer is more plausible than his
earlier statement! It does not make sense that a company would not have the
power to give direction to and exercise control over, people working on its
premises in circumstances such as those in this case, where there is such a
large number (13 or 14) of new agents arriving every year. To have space
occupied by non‑producing or poorly producing agents would not be the
most efficient way to run its operations. As is recognized by the Company in Module
9, when an agent is not doing his or her job properly, it “. . . means . . . a loss for the company. . . . The
company pays the administrative costs, which exceed the income achieved.” The
Company terminated Mr. Mazraani because he was a poorly producing agent. In
addition, it was in the Company’s interest to show its agents how to do their
work and to supervise that work to lessen the risk of having its reputation
tarnished and of being exposed to liability. So I
have no hesitation in believing over the testimony of Mr. Leclerc the
testimony of Mr. Mazraani that he was working under the direction and
control of the Company. The whole of the evidence makes it more plausible that
a sales manager of the Company, which has such great power under the Agent
Contract to suspend or terminate that contract, would be perceived as giving
direction and not merely suggestions.
[237] According to the appeals officer’s report, Mr. Leclerc informed
the rulings officer that the “payeur vérifiait le
travail afin de s’assurer que les règles dictées par la loi étaient respectées,
mais il ne supervisait pas le travailleur et ne lui indiquait pas comment
effectuer le travail.” The same kinds of statements were repeated
by several IA witnesses in their testimony before this Court. In the evidence
described above, it is shown that the Company was in fact overseeing the work of
its agents in order to make its operations more efficient and not necessarily with
regard to matters related to statutory requirements under the Distribution Act.
Furthermore, much of what was covered by these requirements were things that
the Company would have done anyway because they represented good business
practices. So this information provided by Mr. Leclerc to the rulings
officer was misleading, to put it in the best possible light.
[238] To show that Industrial Alliance did not exercise direction and
control with respect to the work of its agents, including Mr. Mazraani,
Mr. Michaud and Mr. Leclerc stated that the office meetings and
training sessions were not mandatory and that no attendance check
was done. The only exceptions, they maintained, were the PDU training sessions. The same claim was made by an IA witness in the CRT case: the
attendance was required to be taken so that this information could be given to
the Chambre de la sécurité financière as part of a normal continuing education process to ensure that the
agents were properly qualified to deal with the public.
[239] At first blush, in my view, this appears rather surprising given that any
employee who starts a new job feels compelled to attend training sessions and
an employer expects its personnel to attend, and two of the training documents
say as much. But the two e-mails introduced by Mr. Mazraani concerning mandatory
meetings as well as the list of absentees, which
had nothing to do with PDU training sessions, not only demonstrate that this perception
is well founded but they raise considerable doubt about the truthfulness of the
testimony of several IA witnesses, but more particularly the testimony of both
Mr. Michaud and Mr. Leclerc. To say the least, they were less than
candid and were misleading in saying that the training and the office meetings
were not mandatory and that the attendance was only taken for PDU training sessions.
[240]
In his testimony, Mr. Michaud had a
problem with using the words “control” or “supervise”. Sometimes
he would deny that the Company controls or supervises the work of the
agents:
MR. MAZRAANI: My next question, who controls
the agent then?
MR. MICHAUD: Who controls what? The agent?
MR. MAZRAANI: The agent regarding performance,
regarding training, regarding application software, conformity, name it.
MR. MICHAUD: Regarding -- I will start with
compliance. We don’t control compliance. We monitor ---
JUSTICE ARCHAMBAULT: I beg your pardon?
MR. MICHAUD: We don’t control compliance. We
monitor the transactions that are being done by the advisors.
. . .
JUSTICE ARCHAMBAULT: Okay. With respect to the
other items he mentioned?
. . .
JUSTICE ARCHAMBAULT: He said performance,
training ---
. . .
MR. MICHAUD: The performance usually the sales
manager would work with the agent if the agent has some difficulty to help
him reduce because at the end of the day, the person who controls the
advisor’s performance is the advisor himself because he makes -- we are
paying our guys on commission. So if he doesn’t work, if he doesn’t sell, he
doesn’t get anything. So the bank account controls the advisor.
[Emphasis added.]
[241]
Sometimes, he would
use such a term and then retract it, as if it were improper to
acknowledge its applicability, as is illustrated in the following passage in
which Mr. Michaud is answering questions about the agents’ right to deal
with other insurance companies:
JUSTICE ARCHAMBAULT: So in -- so would you
say that it’s very rare or occasional or -- that they would represent
some other company other than through Solicour obviously?
MR. MICHAUD: Yeah,
it would be rare because at the end of the day, we’re also -- we have to
super -- not supervise but we -- if something wrong happens ---
JUSTICE ARCHAMBAULT: M’hm, you’re responsible.
MR. MICHAUD: --- we could be held responsible
because he’s attached to Industrial Alliance.
JUSTICE ARCHAMBAULT: M’hm.
MR. MICHAUD: Say that -- and we know there are
some advisors that are doing business with a brokers firm and -- but at the
same time, if they do something wrong, we know where they would go at. They
would go at the deep pocket. So we have -- we want to make sure
that the advisors are doing business with any other companies through our
group of companies.
[Emphasis added.]
[242] Sometimes, as we have just seen, he would say
not that the Company was supervising but that it was making sure something had been done. At other times, he would admit that the Company
did supervise, but only during the training. At other times, he would
temper the impact of the supervision by declaring that it was exercised in
order to comply with the law, for instance, the Distribution Act, as is
illustrated in the following:
MR. MICHAUD: Yeah, and make sure
that we have all the documentation in file to make sure that the advisor
did the right thing for the clients or completed what he had to complete. It’s
like we don’t supervise the work of the advisor but we have to make sure
that we get all the information needed to issue a policy if we should --
well, plus the application for the policy.
. . .
MR. MICHAUD: Yeah, but at the same time we
supervise the transaction. We have to make
sure it’s there.
JUSTICE ARCHAMBAULT: You have to make sure
that he follows the process and that is part of the process. Is that a fair
---
MR. MICHAUD: Yeah.
JUSTICE ARCHAMBAULT: --- comment?
MR. MICHAUD: And it’s the law.
. . .
MR. TURGEON: Because we have to understand and
we will show it with the proper legal background and regulation that the
firm has the; [sic] obligation to be sure that this is complied.
That’s a compliance issue.
[Emphasis added.]
[243] We can see another illustration of Mr. Michaud’s problem with
semantics, in this case with the words “approve” and “authorize” in the contexts
of agents incorporating themselves or hiring an assistant:
JUSTICE ARCHAMBAULT: Do they need the
authorization?
MR. MICHAUD: No. We give them guidelines
but they don’t need the authorization.
JUSTICE ARCHAMBAULT: . . . if I’m not
mistaken, I thought in the judgment I read that they need to have this employee
assistant approved by you. Am I mistaken?
MR. MICHAUD: They don’t need to approve but
we just want to make sure that they don’t hire let’s say somebody
that would not be suitable but the decision --.
[Emphasis added.]
[244] Later on I asked what the Company would do if the person was not
suitable:
MR. MICHAUD: Oh, I would say to the advisor maybe
you should find somebody else.
JUSTICE ARCHAMBAULT: Maybe or would you
insist?
MR. MICHAUD: I would say -- I would say it
never happened. So ---
. . .
JUSTICE ARCHAMBAULT: If someone had connection
with the mafia?
MR. MICHAUD: Yeah, I would -- I would
certainly strongly recommend that he looks after somebody else.
[Emphasis added.]
[245] I do not believe that this statement is a candid description of the
factual reality at the Company. I have no doubt that if Industrial Alliance were
unhappy with the behaviour of a particular agent, or if that particular agent
hired an assistant who would give the firm a bad reputation, or if the agent’s
assistant misbehaved on IA’s premises, Industrial Alliance would not only “strongly
recommend” but would tell the agent to bring about a change in the behaviour of
the assistant or to get rid of the assistant, especially if that assistant had
a bad reputation. After all, it is the Company’s own reputation that is on the
line and it is in the Company’s own interest to have the power to exercise
control and supervision over the work of its agents and their assistants.
Furthermore, section 14 of the Agent Contract specifically gives the
Company the power to suspend that contract on any
reasonable grounds, whether or not related to the duties of the Agent and,
pursuant to section 15, the Company may terminate the contract with or without
cause.
[246] The same comment can be made regarding the answer given by Mr. Michaud
on cross-examination by Mr. Mazraani. Mr. Michaud had stated that all
of his agents were happy about becoming independent contractors in 1993. When Mr. Mazraani
asked him whether that change would have been appealing to those who were
average performers, Mr. Michaud answered that all his agents were
happy. I asked how many advisors there were and was told 800. When questioned
whether he had asked each of those 800 advisors, he replied that none had resigned
and therefore he assumed that they were happy with the situation.
[247] Another example of misrepresentation of the facts by Mr. Michaud
is his answer that the IA subsidiary, Solicour (which acts as a kind of broker
between IA’s agents and competitors of IA in the insurance field that may offer
financial products not offered by IA), does not get remunerated for its services,
which answer he changed after further questioning:
JUSTICE ARCHAMBAULT: But your company gets
a commission out of this thing presumably. So ---
MR. MICHAUD: No, no. We’re paying
the advisor the commission that we get. He’s paid exactly the same
way he would be paid ---
JUSTICE ARCHAMBAULT: So you’re not making --
Solicour is not making any profit in this?
MR. MICHAUD: Well, I would say we keep
-- there’s a small margin that we keep, yes.
JUSTICE ARCHAMBAULT: Yeah. So there is a
little margin?
MR. MICHAUD: Yeah.
JUSTICE ARCHAMBAULT: Yeah. That’s what I
assumed.
MR. MICHAUD: Yeah, we’re not ---
--- (LAUGHTER)
MR. MICHAUD: We are trying to make some
profit somewhere.
JUSTICE ARCHAMBAULT: Usually nothing ---
MR. TURGEON: Not surprising, My Lord.
JUSTICE ARCHAMBAULT: Usually nothing is
done for free.
MR. MICHAUD: No, no, no, no.
JUSTICE ARCHAMBAULT: In the business world.
MR. MICHAUD: There’s no free lunch.
[Emphasis added.]
[248] There are other examples of Mr. Michaud not being forthcoming
in his answers:
MR. MAZRAANI: Okay. Would you please explain who
pays for local telephone services, business cards, all materials used by
agents?
MR. MICHAUD: Well, the telephone, the local
telephone it’s available at the agency. The other one was what?
JUSTICE ARCHAMBAULT: The question is who
pays.
MR. MICHAUD: The company.
JUSTICE ARCHAMBAULT: The company. So it’s not
available.
. . .
JUSTICE ARCHAMBAULT: Okay, okay. So the business
card, okay, is regulated. It is approved by the company and paid by
the company; right?
MR. MICHAUD: Well, the first -- the first
ones. I don’t know if we pay some others in the future but the first,
when a new agent comes in, we provide him with I don’t know 100, 200.
JUSTICE ARCHAMBAULT: At no cost or at cost?
MR. MICHAUD: Ah, yeah it’s peanut.
JUSTICE ARCHAMBAULT: At no cost?
MR. MICHAUD: At no cost.
JUSTICE ARCHAMBAULT: At no cost. So it is
at your cost.
MR. MICHAUD: Yeah, yeah.
MR. MAZRAANI: Not 500?
MR. MICHAUD: I don’t know. It’s maybe 500.
MR. MAZRAANI: Okay. Or 250 or 500.
MR. MICHAUD: I don’t know. And then the
only other material we’re paying for are all the forms that we’re
providing.
[Emphasis added.]
[249] So when we dig a little deeper, we get a different picture from
these IA executives. The sales managers are not just coaches who simply make
suggestions; they are there to supervise, assist and give direction. The Company’s
witnesses, especially the executives, did not refer in their testimony to the Company’s
expectations, and yet, as we have seen in the Company’s documentation, there
are expectations, as one would expect from any for-profit organization which
uses the services of salespersons. It is public knowledge that pressure is put
on these persons to produce, to achieve targets. If an agent does not produce,
he will not be kept in the organization. Mr. Mazraani said so; in his words,
they push you all the time. The Company pays a lot of overhead: rent,
equipment, Intranet, sales managers, etc. I believe that the portion of
Mr. Leclerc’s testimony in which he states that the Company gives
direction and that his reference, in an e-mail to Mr. Mazraani, to Mr.
Mazraani’s “contrat de travail” are
more plausible and believable than the portions of his testimony in which he
says that the Company only makes suggestions and does not provide instruction
or exercise control with regard to the work of the agents. Indeed, this is more
consistent with the broad discretion that the Company has to suspend or
terminate the Agent Contract under the many circumstances described in that contract.
[250]
Mr. Michaud and Mr. Leclerc
were not the only witnesses to have a problem with semantics. When Mr. Charbonneau
was asked to describe the role of the sales manager, he said it was to guide,
to help, to provide guidelines; then he realized he was not supposed to be using
words like guidelines and said “not guideline”:
MR. TURGEON: If I -- can you briefly explain
what is the role of the sales director?
MR. CHARBONNEAU: Well I believe their role is
to guide, to give information like formation to the agent to help us, you know,
if we need like to find information or provide us with any guideline I
guess, not guideline but I would say like if I need some information
regarding a certain aspect of anything, they would help me.
[Page 131 of the June 1 transcript; emphasis added.]
[251] There were also contradictions in his testimony, as when he was asked
whether he needed permission to open an account and whether approval was
required for sales:
MR. TURGEON: When -- do you need any
permission from Industrial Alliance to open a new account?
MR. CHARBONNEAU: To open a new account like a
new client?
MR. TURGEON: Yeah.
M. CHARBONNEAU: Non, never.
MR. TURGEON: Or to sell any product?
M. CHARBONNEAU: Non.
MR. TURGEON: Your sale have to be
approved?
MR. CHARBONNEAU: Non, when
everything is done properly, there’s no -- there’s no reason it should be
done.
MR. TURGEON: Okay.
JUSTICE ARCHAMBAULT: It’s not the decision
of the underwriter whether to take the risk or not?
MR. CHARBONNEAU: Well like me I see a client
---
JUSTICE ARCHAMBAULT: M’hm.
MR. CHARBONNEAU: --- and if I want to work
with the client, you know, as a mutual partner, I send the -- everything to the
Head Office of course, they decide at the end, you know, whether or not
they’re going to insure the person or not.
[Emphasis added.]
(3) The
in-house counsel
[252] Other troubling testimony was that of the in-house counsel. When she
filed the missing schedules to the Agent Contract, she stated that the Conduct
Standards were basically a repetition of what was to be found in the Regulatory
Code of Ethics and that any
differences were stylistic in nature. This is what she said:
JUSTICE ARCHAMBAULT: So if the legislation
applies -- the legislation applied to any representative, why do you attach it
to the contract?
MS. BEAUDET: It is a reminder.
. . .
MS. BEAUDET: So it summarizes the
representative’s obligation under the code. And it is only a reminder.
JUSTICE ARCHAMBAULT: Okay. And are each
articles, are they found in the code de déontologie or are they different?
MS. BEAUDET: The numbers are not the same but
the content is the same.
. . .
JUSTICE ARCHAMBAULT: You know, if I did a
comparison of each of them?
MS. BEAUDET: They are all ---
JUSTICE ARCHAMBAULT: It would be exactly
the same?
MS. BEAUDET: Yeah.
JUSTICE ARCHAMBAULT: Except the order?
MS. BEAUDET: Yes. And maybe the wording
is a little bit more practical.
JUSTICE ARCHAMBAULT: Oh, I see. You may
have changed the wording?
MS. BEAUDET: Yeah.
JUSTICE ARCHAMBAULT: So it’s not an exact
replica of the code.
MS. BEAUDET: Almost.
. . .
MS. BEAUDET: If you take for example, ---
JUSTICE ARCHAMBAULT: Yes?
MS. BEAUDET: --- Article 2:
“Any advertising or
offer of a product or service made by a company or a member of the sale force
must be clear and true.”
So you’ll find this
principle in the code.
JUSTICE ARCHAMBAULT: Yes. And how would
it have been changed? Just the way it’s ---
MS. BEAUDET: Yeah, we put the name company.
JUSTICE ARCHAMBAULT: I see.
MS. BEAUDET: And maybe we put a dot after
the -- just to make it more ---
JUSTICE ARCHAMBAULT: So small stylish ---
MS. BEAUDET: Stylish, yes.
JUSTICE ARCHAMBAULT: --- stylish difference.
MS. BEAUDET: Difference.
[Emphasis added.]
[253] However, this is not an accurate statement, contrary to what one
would have expected from someone testifying under oath and more particularly from
a person who is a member of the legal profession. The analysis above, notably
under the headings “Other instructions” in section IV E.(1) and “Regulatory
requirements ” in section V D.(2), makes it clear that the Conduct Standards, which
include on the back a much longer list of Industry Standards, are not merely a partial
repetition of the regulations under the Distribution Act or other similar
legislation. They establish numerous standards and guidelines not to be found
in the Regulatory Code of Ethics and which are mainly, if not solely, for the
benefit of the Company, or which correspond to industry standards. Indeed, this
is in conformity with section 7 of the Agent Contract, which expressly
stipulates that the “goal of these policies
[the Conduct Standards and the Communications Policy] is to standardize
administrative procedures, reduce the time taken to process a
request . . .” The Conduct Standards themselves describe their primary
objective as including the establishment of “guidelines for all of the Company’s operations”.
[254]
For instance, I do not believe that the following
provision in article 3 of the Conduct Standards (page 1:) “[m]oreover,
any documents issued by the Company may not be modified by any member of the
sales force”, can be found in the Regulatory Code of Ethics. That provision
even goes further than the Industry Standards, which only require that client
notices, statements and life insurance illustrations attached to contracts not
be modified by sales personnel. Similarly,
I could not find in the Regulatory Code of Ethics the standard set out in
article 6 of the Conduct Standards on page 1, namely: “The
intermediary must encourage the client to keep his/her existing contracts in
force.” However article 6 is very similar to what is found in the Industry
Standards with respect to replacements.
[255] The statement in article 10 of the Conduct Standards on page 1 that:
“[a]ll amounts remitted by a client to an
intermediary must be immediately forwarded to the company” appears to be more specific that what the Regulatory
Code of Ethics provides. [Emphasis added.] The same comment is
applicable to article 9 dealing with the transmission of insurance applications
and requests for changes and article 12 dealing with the delivery of any insurance
contract or other document issued by the Company, which must be “delivered
to the client within 21 days of its being issued.” This delivery requirement corresponds
to what is stated in the Industry Standards with regard to contract delivery.
[256]
In the article of the Conduct Standards dealing
with the application of controls and sanctions, we find the following statements,
which do not appear in the Regulatory Code of Ethics:
When more than one sanction is indicated, they
will apply gradually in the event of subsequent offences. The agent’s
contract will be terminated if the intermediary fails to comply with the
standards following three (3) written notice in a continuous period of 24
months.
[Emphasis added.]
[257] Among the numerous Industry Standards that an agent must adhere to,
there is a requirement not to encourage a client to use the media to resolve a
problem and a prohibition against an agent going to the media to resolve a
conflict. The control in this regard is to be exercised through a complaint
being reported by a compliance officer, and the only sanction stated for such
behaviour is termination of the agent’s contract. The source for this standard
is clearly neither legislative nor regulatory, contrary to the testimony of IA’s
in-house counsel. It is an industry standard developed to protect the interests
of insurance companies. It is not in their interest to have the complaints of a
particular client publicized in the media.
[258] Even where the Conduct Standards on page 1 are trying to repeat a
rule found in the Regulatory Code of Ethics, there is at least one instance in
which a word used in the Conduct Standards diminishes the clarity of what is
found in the Regulatory Code of Ethics: the word “disadvantages” in the Code
being replaced by the word “consequences” in the rule in the Conduct Standards dealing
with the obligation of agents to properly inform their clients about financial
products, as seen above.
[259] Similar comments made by IA’s in-house counsel regarding the
Communications Policy are also misleading. This
is what she stated at pages 15 and 16 of the June 2 transcript:
MS. BEAUDET: Regarding electronic
communications. And the reason of this policy is to make sure that I.A.’s trademark
is respected and also to protect personal information of our clients.
JUSTICE ARCHAMBAULT: So it is for the
trademark and what else?
MS. BEAUDET: And to make sure that the
personal information of our clients is protected. As you know, we are also
binded by the loi sur les renseignements -- la
protection des renseignements personnels.
MR. TURGEON: The Quebec Privacy Act.
MS. BEAUDET: Quebec Privacy Act.
. . .
MS. BEAUDET: So there is -- there’s some rules
under this law and other rules under the several legislations that we already
provided you that were taken and put into this policy to make sure that our
agent -- every agent is ---
. . .
MS. BEAUDET: --- is following the standard of
practice in this field.
[Emphasis added.]
[260] During her testimony, I asked her to comment on paragraph 2 of the
Communications Policy. Under my questioning, she had to change her testimony:
JUSTICE ARCHAMBAULT: You know, I just happened
to look at section 2:
“To ensure
optimal service to all agents and for billing purposes, the company
regularly gathers statistics on the frequency and duration and can access…”
“…and the company
reserves the right to monitor the use and content of such communication more
closely.”
Is that something that would be more in
the interest of your company?
MS. BEAUDET: Interest of our clients,
for sure.
JUSTICE ARCHAMBAULT: The “frequency and
duration” of the access? How does it benefit your clients?
MS. BEAUDET: In the number and size of email
messages sent and received.
“In case of
reasonable doubt, the company reserves the right to monitor the use and content
of such communication more closely.”
So it is, in fact, in Industrial Alliance’s
interest and clients’ interest.
JUSTICE ARCHAMBAULT: Would you say that it
is also in its business interest to monitor the duration of the internet access?
MS. BEAUDET: Actually, we would have to ask
the ---
. . .
MS. BEAUDET: The one who wrote the policy
. . .
(SHORT PAUSE/COURTE PAUSE)
MS. BEAUDET: Yes, but I’m reading it again
and the first -- at the first sentence it says: “To answer [ensure] optimal
service to all agents and for billing purposes, so I think that you have
your answer there.”
[Emphasis added.]
[261] One more rule issued by the Company in the Communications Policy that
I fail to see as being for the protection of the
personal information of IA’s clients is the rule that an agent cannot provide personal information
concerning salaries or management personnel to third parties without the
required authorization.
[262] Another example of misleading information coming from the in-house
counsel is her statements respecting the Compliance Checklist. As mentioned above,
she was not able to help the Court understand the relation between a regulation
under the Distribution Act and this checklist; but she did add the following
(June 15, transcript, page 7):
MS. BEAUDET: At least what I can tell you
is that everything that it is asked has a reference in the legislation.
JUSTICE ARCHAMBAULT: Yeah, except,
for example, 32 where it says “Règle interne de
la compagnie”.
And when it says ACAP, there’s no
reference to any legislation so I assume this is the -- what we would generally
call, what, industry standards?
MS. BEAUDET: Yeah.
. . .
MS. BEAUDET: And there’s a reference to a
form, F13 ---
JUSTICE ARCHAMBAULT: Are you familiar with
that form?
MS. BEAUDET: No.
[Emphasis added.]
[263] Another example of an inaccurate description of facts is found in a discussion
that took place after an objection by Mr. Mazraani, who said that he had
not seen the Conduct Standards and the Communications Policy before. The
in-house counsel stated that the Conduct Standards were taken from Mr. Mazraani’s
Agent Contract. She changed her version, however, after I repeated my question.
This is the exchange that took place (June 2 transcript, page 5):
JUSTICE ARCHAMBAULT: . . . −did you
check your file? Do you know if that particular -- this particular document
was in the file of Mr. Mazraani as being attached to the firm’s copy of
the contract?
MS. BEAUDET: Yeah, every --
these documents are attached to every contract.
JUSTICE ARCHAMBAULT: Yes, okay. Since that’s
your understanding, what I’m asking you specifically is did you check that
particular file?
MS. BEAUDET: I didn’t check the file.
JUSTICE
ARCHAMBAULT: Okay. You assumed that this is the practice file --
MS. BEAUDET:
Yes.
[Emphasis added.]
[264] This in-house counsel was not acting as counsel arguing IA’s
intervention in this appeal. She was a witness testifying under oath regarding the
facts of the case. Her testimony was surprisingly inaccurate and misleading on
key elements of her evidence.
[265] After listening to the evidence given by the vice-president and the
branch manager together with that of Mr. Charbonneau, one of the two IA
agents who testified, I have a distinct feeling that these individuals in their
testimony were imbued with the same salesmanship culture that the Company instills
in its agents. For example, the agents were taught in their training to use the
words “to authorize” or “give your approval” instead of “to sign”, the word
“investment” instead of “cost”. However the reality is that potential clients
were being asked to sign a life insurance policy application and to pay for such
financial products. These three witnesses would use the words “recommend”, “suggest”,
“check”, “coach” instead of “instruct”, “direct”, “supervise”, “supervisor” and
“boss” so that this Court would not have the right perception of what was going
on at the Company’s LaSalle Branch. I believe that a lot of play on words took
place during their testimony. They used many circumlocutions and periphrases to
avoid words like supervision, control and instructions. When things became too
problematic, they fell back on the evasive “I don’t
remember” or “I don’t know”.
[266] It is obvious from the testimony of the various IA witnesses that
they knew that they were not supposed to say that the agents were being
supervised, that meetings were mandatory and that agents were not free to do
whatever they wished. The reality is that the agents have offices on the
premises of the Company. They are being supervised by their employer. Instead
of acknowledging that they are, these witnesses said that the role of the sales
manager is to coach (help, guide, support and assist). In my view, this is the
role of any superior of any employee. And it is in the interest of the Company
that its employees be successful in doing their job.
[267] One can draw from the testimony of the IA executives and Mr. Charbonneau
that they were at the very least embellishing the facts in order to obtain a
favourable decision from this Court. I believe that this serves as a good
reminder for the courts that it is dangerous to accept, without documentary
corroboration, verbal testimony as an expression of the truth.
[268] The first witness to testify to describe the relationship between
the Company and the agents was the Senior Vice-president, Sales and Administration,
Mr. Michaud, who is based in Quebec City. He stated that the Company did
not supervise the work of Mr. Mazraani, who worked at the LaSalle Branch (in
Montreal). The best person to testify to describe his role in connection with
Mr. Mazraani would have been his immediate superior, Mr. Beaulé, who
was his sales manager. Yet, neither Mr. Beaulé nor any other sales manager
testified. Mr. Michaud was not present when this sales manager was meeting
with and supervising the agents on his team. Even the branch manager could not
properly describe in detail the work of his sales managers because he relied on
their professionalism in the performance of their duties. Mr. Leclerc acknowledged
this in his testimony on cross-examination by Mr. Mazraani regarding the one-on-one
training given by Mr. Beaulé to Mr. Mazraani (June 15 transcript,
pages 213 and 214):
MR. LECLERC: I don’t know that.
. . .
MR. LECLERC: If Mr. Beaulé decide to give more
information ---
. . .
MR. LECLERC: Mr. Beaulé can take initiative to
help the advisor more than the others. It’s his choice.
[Emphasis added.]
[269] Mr. Beaulé never testified. Although IA’s lawyer informed the
Court that Mr. Beaulé was no longer with the Company, IA could still have
asked him to testify. I draw a negative inference from his absence, as the
jurisprudence and the doctrine recognize can be done. In Enns v. M.N.R.,
87 DTC 208, at 210, my former colleague Judge Sarchuk stated:
In The Law of Evidence in Civil Cases,
by Sopinka and Lederman, the authors comment on the effect of failure to call a
witness and I quote:
In Blatch v. Archer, (1774), 1
Cowp. 63, at p. 65, Lord Mansfield stated:
"It is
certainly a maxim that all evidence is to be weighed according to the proof
which it was in the power of one side to have produced, and in the power of the
other to have contradicted."
The application of this maxim has led to a
well-recognized rule that the failure of a party or a witness to give evidence,
which it was in the power of the party or witness to give and by which the
facts might have been elucidated, justifies the court in drawing the inference
that the evidence of the party or witness would have been unfavourable to the
party to whom the failure was attributed.
In the case of a plaintiff who has the
evidentiary burden of establishing an issue, the effect of such an inference
may be that the evidence led will be insufficient to discharge the burden. (Levesque et al. v. Comeau et al.
[1970] S.C.R. 1010, (1971), 16 D.L.R. (3d) 425.) (emphasis
added)
These comments apply to the case at bar.
[270] As appears from the CRT reasons, the CRT member decided that a
particular agent could not have been an IA employee because he or she was able
to hire an assistant; the member based his decision on the Quebec Court of
Appeal decision in Dicom Express (supra). Several
comments are called for here. First, Mr. Mazraani did not hire an assistant,
so this issue does not arise for him. However, even if he had hired one, I do
not believe that it would be an impediment in this case. A strict reading of
the provisions of articles 2085 and 2099 Q.C.C. makes it very clear that the
key question to be answered for the purpose of determining if we have a
contract of employment is whether there exists a relationship of subordination between
the payer and the worker, that is, whether the Company had the power to give instructions
and direction to, and to control, the worker. If such power existed, then a court
must conclude that the contract is a contract of employment.
[271] The doctrine, which plays an important role in civil law
jurisdictions, recognizes “that employee
status can coexist, in the same person and in connection with the same
economic or professional activity, with another status such as shareholder
or director of the company, independent contractor or even
employer.” [Emphasis added.] Professor Gagnon added at paragraph 108:
a) L’exécution personnelle
108 – Principe
et limites – Il s’infère de la nature même du contrat de travail, tel que déjà
signalé, que le salarié exécute personnellement le travail convenu, « son
travail » comme le mentionne d’ailleurs l’article 2088 C.c.Q. Cette
obligation habituelle du salarié n’empêche toutefois pas les parties de prévoir
qu’il puisse ou qu’il doive prendre certaines mesures pour assurer son
remplacement en cas d’absence, ces mesures pouvant aller jusqu’à choisir
lui-même son substitut. Elle n’exclut pas non plus, sous réserve des
termes du contrat ou d’une directive contraire de l’employeur, la
possibilité que le salarié se fasse aider, compte tenu de la tâche à
accomplir, en embauchant lui-même des aides et en cumulant alors le
statut d’employé, d’une part, et celui d’employeur, d’autre part.
[Emphasis added.]
[272] Here, the evidence shows that the Company had the power of direction
and control over its agents who hire an assistant. It took measures to protect
itself by asking the assistant to sign a confidentiality agreement. It is not
clear to whom this undertaking of confidentiality was given because the
agreement was not filed in evidence and Mr. Michaud could not say.
However, I am convinced that the Company took the appropriate measures to
protect its interests. In addition, the Company would have taken steps to get
rid of an assistant who had a bad reputation or connections with criminal
organizations. Mr. Michaud said he would “strongly
recommend” to the agent that he get rid of such an assistant. Given all
the powers conferred in the Agent Contract with respect to suspending the contract,
reassigning clients (who belong to the Company and not the agent) to other
agents and terminating the contract (with all the consequences that these
measures could have on the payment of commissions and bonuses), such a
“recommendation” would not be a mere suggestion or the expression of a wish, it
would be an order.
[273] So the hiring of an assistant would not have the result of negating
the power of the Company to give instructions regarding, and to direct and
control, the work of the agent! It is not conceivable that the Company would
not exercise this power if the assistant of an agent got into a conflict with
the branch manager, a sales manager or another agent over an issue such as
access to the filing cabinet of the first agent for the compliance purposes or
if problems arose in the assistant’s work relationship with employees of the LaSalle
Branch. One can easily envisage what would happen if a LaSalle Branch employee
suffered sexual harassment by such an assistant on the Company’s premises.
[274] Industrial Alliance also cited in its argument before this Court the
Dicom Express decision at paragraph 29, where it is stated that someone’s
employee cannot be at the same time the employer of somebody else with respect
to the performance of the same work. First, this appears to be an obiter
dictum because there was no contract between the plaintiff, Mr. Paiement, and Dicom, the defendant, but only
a contract between Mr. Paiement’s company and Dicom. How can there be a
contract of employment without a contract? The Superior Court Judge had lifted
the corporate veil, but, at paragraph 30, the Quebec Court of Appeal reversed
that judge’s decision on this point. Second, let us review the actual statement
made by the Court of Appeal judge:
29 En effet, il y a, à mon avis,
antinomie entre le statut de salarié et celui d’employeur. L’on ne peut pas
être à la fois le salarié de quelqu’un et l’employeur d’un autre dans l’exécution
d’une même tâche, car le type de contrôle que comporte la subordination
juridique d’un employeur vis-à-vis son salarié ne peut se satisfaire d’un
tel partage.
[Emphasis added.]
[275]
There is no legislative or
jurisprudential support given by the judge for his statement, and I do not know of any. Nor did he discuss the merit of the
opinion expressed by scholars such as Professor Gagnon, mentioned above, who
have been writing on the contract of employment for a long time. Article 2101 Q.C.C. states that a provider of
services may use the services of a third party. There is in the provisions of
the Civil Code dealing with the contract of employment no statement that
an employee cannot use the services of a third party. The Civil Code is silent
on this point. Article 2099 Q.C.C. provides as a
condition for the existence of a contract for services that, with respect to
the performance of the contract, “no relationship of subordination [exist] between the contractor or
the provider of services and the client”. So if the evidence, both direct and circumstantial, discloses
that a payer not only had the power to give instructions regarding, and to direct
and control, the work of its worker, but in fact exercised that power, I do not
see how a court could conclude that there existed a contract for services just because
this employee happens to have hired an assistant to do clerical work. It can
only be a contract of employment.
[276]
However, the
statement of the Court of Appeal judge is not without merit, but it has to be
nuanced and assessed in the context of the relevant facts of that case, because
it is in that context that the statement at paragraph 29 was made. The most
important such facts are those described in the immediately preceding paragraphs
(27 and 28):
27 En effet, 2633-5380 Québec inc.
eut, pour sa part, cinq salariés différents, tous recrutés, engagés et
payés par Claude Paiement à titre de président. . . . Plus encore, la
société a recruté un chauffeur pour remplacer Claude Paiement après que son
permis de conduire lui fut retiré pour un an. Durant cette période, l’intimé
accompagnait son salarié, car il continuait de faire la cueillette et la
livraison des colis.
28 Tous ces faits sont révélés par Claude Paiement à
l’occasion d’un interrogatoire avant défense et sont, à mon sens, d’une importance
capitale dans la définition du statut de Claude Paiement et de sa société.
[Emphasis added.]
[277] If a worker involved in the delivery of letters and parcels also hires
5 or 10 employees to make the deliveries and uses his own trucks for those
deliveries, these are facts that raise considerable doubt as to the existence
of a power in a payer (such as Dicom Express) to instruct, direct and control that
worker. This fact should be considered as circumstantial evidence of the same
nature and relevancy as the situation in which a worker is hired with his
bulldozer and power shovel, worth tens of thousands of dollars, to perform his
work. If little or no direct evidence exists of the exercise of the power to
direct, instruct and control, then the likelihood of the existence of the power
could be nil or almost nil. In other words, the presence of a number of employees
should be a relevant fact to consider, but it is going too far to say that
whenever an employee hires an assistant that employee cannot ever be under the
direction and control of somebody else. The facts in this case show that such
power not only can exist but was actually exercised, even when an agent hired
an assistant. To create such an irrebuttable presumption of fact would require,
in my view, an amendment to the Civil Code. It would be all too easy for many
company executives to escape the obligation to make contributions under the Act
by asking that their secretaries be employed by them and not the company! More
to the point, there is nothing in the Civil Code that expressly precludes an
employee from being the employer of an assistant or that provides that someone
who would otherwise be an employee could not be one because he happened to have
hired an assistant.
[278] One last comment is in order for the purpose of justifying a prudent
and more nuanced approach on this subject. The National
Assembly has enacted the Taxation Act which, like the Federal Income Tax
Act, provides that an employee can deduct in computing the income from his
employment the salary of his assistant and his contribution in respect of this
assistant to such programs as the federal employment insurance program and the Quebec
Pension Plan (régime de rentes du Québec).
So it would be odd that the legislature would recognize such a situation in the
Taxation Act and prohibit it in the Civil Code, since both pieces of legislation
emanate from the National Assembly. If two interpretations are available and
one of them yields such an odd result, then the one that harmonizes the two
pieces of legislation should be favoured.
[279] It is also surprising to read in the CRT reasons the CRT’s
conclusion that the agents were not required to personally perform their duties.
First, there is such a requirement in the Agent Contract in cases where the
Company authorizes its agent to incorporate. Not only does the Agent Contract specifically
require that the work be performed personally by its former agent, but the “agent
corporation” Contract does so as well. Why
would it be different if an agent does not act through a corporate entity? So I
believe that there was an implicit condition in the Agent Contract that the
services be performed personally in all circumstances. It should be remembered
that the agents need a licence from the AMF to distribute life insurance and
other financial products. The Company would not allow the clerical assistant of
any agent to act as a life insurance representative without the proper licence.
[280] The list of cases dealing with the issues raised by this appeal is
long. In particular, the facts and issues in this appeal are very similar to
those described in the decision that I rendered in Financière
Banque Nationale (supra)
confirming that the advisor was an employee of the stock brokerage firm.
Contrary to the facts in this appeal, the advisor in that case was arguing that
he was an independent contractor while the company took the opposite view. But
the stock brokerage business, like the insurance business, is a highly
regulated industry. The brokerage firm was subject to the same kind of
legislation requiring compliance measures and imposing other supervisory
obligations. As here, there were guidelines to be complied with. The brokerage’s
advisors needed a permit from the AMF. The advisor in Financière Banque Nationale, like some
of the agents here, for instance Mr. Charbonneau, had an assistant working
for him. This assistant had been hired and was paid by the advisor. Similarly, the
advisor could share his commissions with other advisors or sell his right to
represent his clients, who belonged to the firm, as is the case here. The advisor spent a
lot of his time away from the office provided by his firm. He had a lot of
discretion in determining his schedule and his vacation. He was paid strictly
by commission and was responsible for many expenses, as is the situation with
the agents here.
[281] I am also aware that the present case might resemble that in Combined
Insurance Company of America v. M. N.R., 2007 CAF 60.
However, it should be remembered at the outset that each case turns on its own
facts and in many instances important facts are never introduced in evidence,
often because the worker cannot afford a good lawyer and does not know or
understand how important some of these facts are. The absence of important
facts may result in a court getting a picture that differs significantly from
reality, as is evident in the instant case. When one compares the facts as
presented by Mr. Leclerc to the CRA rulings officer and the facts that
were introduced before this Court over a six-day hearing, the decision cannot
be the same. Here, Mr. Mazraani may not have had the right profile to be a
good insurance salesperson, but he surely had a flair for minute details that greatly
helped his case.
[282] Also, I note that some observers have seen certain ambivalence in
the decision of the Federal Court of Appeal, wherein it reversed the decision
of this Court and opined that the decision in Wiebe Door should have
been considered. It did not refer to its own decision in 9041 (Tambeau),
supra, in which it stated that the Tax Court judge had come to the right
decision but had relied on the wrong source of the law. That
judge had relied on common law decisions such as Wiebe Door, when he
should have applied the Civil Code.
[283] Since then, I believe, it has been clearly established in the
jurisprudence that, in Quebec, the Civil Code, which defines clearly what constitutes
a contract of employment, is the law to be applied, and that the approach in Wiebe
Door and Combined Insurance is to be followed only in common law
provinces where no statutory definition of a contract of employment exists. In
the provisions of the Civil Code, there are no particular requirements with
respect to the ownership of tools or with respect to the opportunity for profit
or the risk of loss. The only legal criterion laid down by the National
Assembly when it adopted the Civil Code, which was applicable as of January
1994, was whether there was a relationship of subordination between the parties.
The courts are not at liberty, in applying a Quebec contract, to state that a relationship
of subordination is only one of the many factors to be considered and that “[t]he relative weight of each [factor] will depend on the
particular facts and circumstances of the case”, as was
stated in by the Supreme Court of Canada in Sagaz (supra at
paragraph 48), a case originating outside of Quebec.
[284] With respect to the CRT reasons, I would like to point out that the
analysis adopted by the CRT is based to a large extent on the common law
approach. For instance, it
referred to indicia such as “les chances
de profit et les risques de perte” and “la propriété des outils”. Furthermore, that decision focuses on the degree of control in the
execution of the work; it does not ask whether the Company had the power to
exercise such control.
[285] It was stated or implied by several IA witnesses that an employee
salesman paid by commission, such as an insurance agent, would not be able to
deduct the cost of an assistant’s salary. Mr. Michaud offered that opinion
to explain why the agents became independent contractors. This is a mistaken
opinion. Pursuant to subparagraph 8(1)(i) (ii) and paragraph 8(1)(l.1)
of the Income Tax Act, an
employee can not only deduct the salary of an assistant or a substitute, he can
also deduct his employer’s contribution for employment insurance and the Quebec
Pension Plan! An example of this is to be found in the case of Longtin v.
The Queen, 2006 DTC 3254, where an employee salesman was allowed to
deduct the salary he paid to his wife, who was acting as his assistant.
[286] Some IA agents think that it is more advantageous to them to be
independent contractors because they believe, wrongly in my opinion, that they
will be able to deduct more expenses if they are independent contractors. The
reality is that a salesperson earning commission income can deduct all his
expenses incurred to earn his employment income up to the amount of his commissions. It is not surprising, however, to see these misinformed IA agents
being very adamant in testifying before this Court that they were independent
contractors and, to support that view, in testifying that they did not feel
compelled to attend office meetings, although some of them were explicitly stated
to be mandatory, and that they felt free to take their holidays whenever they
wanted to, although some of them felt compelled to advise the Company when they
would take them and, as seen in the CRT reasons, there were restrictions
respecting the time the agents could choose for their holidays.
[287] It was stated also by Mr. Michaud that an employee could not
incorporate himself for the performance of his duties as an employee. However, it is public knowledge, as reflected in the jurisprudence,
that employers prior to 1993 allowed some of their employees to incorporate
themselves. So agent employees could have incorporated themselves before 1993. In
fact, the Income Tax Act had to be amended in 1984 to reduce the tax
advantages for employees adopting such a tax-planning strategy.
[288] A review of the summary of the appeals officer’s report shows that
she was misguided in applying the law on the issue of insurable employment. Although
she stated that the proper source of the law was the Civil Code, she applied−as was done in Combined
Insurance−the common law approach as described in Wiebe Door and
Sagaz. She put greater emphasis on the overall behaviour of Mr. Mazraani,
which made him look more like a businessperson than an employee. She appears to
lay more emphasis on the fact that he provided (or paid for) his own tools, that
he claimed a loss of $14, that there were no deductions at source and that Mr. Mazraani
declared his commissions as business income. The appeals officer stated:
Based on copies of payment reports, the
workers received only commission and had to pay expenses for the rental
of his computer, insurance for the computer, liability insurance, the use of
information services, and telephone costs. He had a possibility for loss.
[289] Her statement that Mr. Mazraani received only commissions seems
to imply that commission income is not to be treated as remuneration for
services provided pursuant to a contract of employment under article 2085 of
the Civil Code. In the Larousse on-line dictionary,
“rémunération” is defined as
“Prix d’un travail fourni, d’un service rendu : C’est la rémunération de
son travail.” The Oxford Advanced Learner’s
Dictionary, on-line, offers a similar definition of remuneration: “an
amount of money that is paid to somebody for the work they have done. Generous remuneration
packages are often attached to overseas postings.” Since the commissions
were paid for work performed by Mr. Mazraani, his situation fits these definitions.
Finally, section 5 of the Act itself makes this even clearer by its use of the
words “whether the earnings are calculated by time or by the piece, or
partly by time and partly by the piece, or otherwise”. [Emphasis added.]
[290] In my view, the appeals officer’s list of indicia shows the influence
of the common law, which adopts the four-in-one test described in the leading
case of Wiebe Door. This test attempts to determine “Whose business is it?” It considers the following
factors: control, ownership of tools, possibility of profit and the risk of
loss. None of these four factors is conclusive in the common law, rather one
must consider the overall situation. This does not take into account the
provisions of the Civil Code, which distinguishes a contract of employment from
a contract for services on the sole basis of the existence of a relationship of
subordination. The fact that an employee could incur losses is not a factor
recognized under the Civil Code. In addition, there are no restrictions in the Civil
Code that say that an employee cannot be responsible for any expenses. The
reality is that salespersons are very often responsible for many of their
expenses.
[291] In the English summary of her report, the appeals officer does not
even include a “relationship of subordination” heading, which, in my view,
shows how little attention she paid to that crucial element. In the French summary
of her report, there is such a heading: “Lien de
subordination”, under which she states:
Le travailleur effectuait des téléphones
pour obtenir des rendez-vous auprès de clients éventuels. Il n’était pas
supervisé. Il rencontrait les clients et leur vendait des polices d’assurance.
Ses entrées et sorties et ses heures travaillées n’étaient pas contrôlées
par le payeur. Le travailleur avait une carte magnétique qui lui permettait d’entrer
et sortir des locaux du payeur à sa guise. Le payeur ne planifiait ni ne
supervisait son travail. Le payeur n’indiquait pas au travailleur de quelle
façon d’exécuter [sic] le travail.
Ces éléments sont indicatifs d’un contrat de services.
[Emphasis added.]
[292] It is evident from the report that the decision of the appeals
officer was solely based on her perception that supervision was not exercised. The
key question, which she did not ask herself and which she did not answer, was
whether the Company had the power to exercise control over, and to give
instructions to, its workers and, in particular, Mr. Mazraani. This issue
is not limited to determining whether such power was exercised. As is
acknowledged in the jurisprudence and the doctrine, and by the Quebec Minister
of Justice at the time the Civil Code was adopted by the National Assembly, it
is the power to give directions that is the key element.
[293] Furthermore, the appeals officer never had the opportunity to meet representatives
of the Company. She relied only on the notes of the rulings officer, to whom Mr. Leclerc
had given the following Company version:
Le payeur vérifiait le travail afin de s’assurer
que les règles dictées par la loi étaient respectées, mais il ne supervisait
pas le travailleur ni ne lui indiquait pas [sic] comment effectuer le
travail.
[294] It is surprising and unfortunate that the Minister’s representative
preferred the Company’s version, given that the Company’s officials had not
returned her phone calls. With respect to her statement that the worker,
Mr. Mazraani, was not being supervised, this is a somewhat surprising display
of faith in the Company’s version when one considers that Mr. Mazraani had
an office (cubicle) on the premises of IA’s LaSalle Branch. This cubicle was
located near the office of his sales manager, with whom Mr. Mazraani had
regular contact. So it is difficult to understand how the appeals officer could
have concluded that Mr. Mazraani was not being supervised. In my view,
this situation should have made it more probable that the worker’s version was the
correct one.
[295] Had she had the chance to pursue her investigation, the appeals
officer could have discovered herself all the direct evidence that was
introduced before this Court by Mr. Mazraani showing that the Company did
exercise its right to give instructions to and to control the work of, its
agents and thus that their work was done under the direction of the Company.
[296] When he was absent for medical reasons, Mr. Mazraani felt
compelled to let his sales manager know and submitted to him his medical
certificate. Ms. Woo testified that she kept her sales manager informed of
all the steps she was taking in order to be a successful insurance sales
person, although she did not feel that she was required to do so. Most
employees do not have to be told that it is mandatory that they report to their
supervisors in order to be considered employees. Most employees acknowledge the
power of their supervisors to oversee their activities, and this power was being
exercised in this particular case with respect to Mr. Mazraani.
[297] Lawyers working as salaried employees for private law firms and for
the civil service are given broad discretionary powers with regard to how they carry
out their duties. However, they are all recognized as employees until such time
as, for instance, in the private sector, they are admitted into the
partnership. Professors working at the university and Cegep levels are given
wide discretion as to how to teach their students. This does not prevent them
from being recognized as employees of the universities and Cegeps, even if they
are only working on part-time basis as lecturers. There are numerous decisions
confirming that lecturers are employees of a university although they may be
working as independent professionals, and only a few hours per week, teaching
university students.
[298] In conclusion, the ultimate issue is whether Industrial Alliance had
the power to issue instructions to, and to direct and control the work of, Mr. Mazraani.
In this particular case, in light of the evidence as a whole, both
circumstantial and direct, I have no hesitation in concluding that the Company not
only had such power, but in fact exercised it on a regular and continuous basis
during the relevant period.
[299] It is evident that the Company tried its best to convert the status
of its agents from that of employees to that of independent contractors in
1993. As stated in the CRT reasons and in the testimony of Mr. Michaud
before this Court, most if not all of its competitors were using that business
model. In my view, there are obvious benefits for a company in doing so. For
instance, it does not have to contribute to the federal employment insurance
program or to the Quebec Pension Plan.
[300] Industrial Alliance tried, in effect, to convert a square into a
circle by creating an octagon in the hope that it would look as much like a
circle as possible, but in the end, the figure still has angles, and that prevents
it from ever becoming a circle. However how long one looks at the octagon to
find a circle, it will never be found. It should be remembered that, in order for
there to be a contract for services, there must be no relationship of subordination
involved. If there is such a relationship, then the contract is a contract of
employment. Professor Robert P. Gagnon stated in paragraph 94 of
his above-cited work (5th ed.):
. . .
However, even in its most relaxed and
attenuated forms, the situation of legal subordination should suffice to
place the worker in the employee category. The exclusion of any relationship
of subordination between the client and a contractor or provider of
services now legitimizes this conclusion (article 2099 of C.C.Q.). . . .
[Emphasis added.]
[301] Mr. Mazraani was, during the relevant period, an employee of
Industrial Alliance because he was performing his services “according to the instructions and under the direction or
control of” the Company, the employer, in accordance with section 2085
of the Quebec Civil Code. His Agent Contract was a contract of employment.
Therefore he held insurable employment during the relevant period while working
for Industrial Alliance.
[302] Before stating my final conclusion, I would like to add that,
although my decision is based solely on the legal principles of the Quebec civil
law and does not take into account the general objective of the Act of
providing relief to unemployed employees, its
result is, in my view, totally in harmony with the Act. Life insurance
companies hire a very large number of agents, who will not all succeed in that difficult
endeavour. The evidence in this particular appeal revealed that of the 45
agents at the LaSalle Branch around 15 had less than two years of experience. Thirteen or fourteen new agents are hired every year. To make one sale, an agent may be required to make hundreds of
calls. The Company does not have any obligation to remunerate its agents for
all this work unless a life insurance policy is issued and premiums are collected
by it, because under its business model the only remuneration which is payable is
the commission calculated by reference to the premium collected. As the high
personnel turnover indicates, many do not make it in that business. The
Company, in Mr. Mazraani’s view, is benefiting from a lot of unpaid work:
for instance, the canvassing, the soliciting and the preparation and
presentation of a financial plan with no positive result in the end. He even went
as far as to use the word “slavery” to describe the situation of many agents.
Mr. Mazraani is a man who is very upset, and with good reason. Industrial
Alliance claimed that an agent builds his own business, but the clients belong
to the Company, and when the agent leaves, a non-soliciting and non-competition
clause applies. Even Mr. Mazraani’s licence is of no value because he is
not attached to an insurance company, and he claims that he cannot use the
licence without being so attached. Therefore, it is the decent thing that those
who do not succeed should be entitled to employment insurance benefits. Persons
who work in a similar environment to the one in which Mr. Mazraani found
himself at Industrial Alliance deserve the protection of the law, as afforded
notably by the Act and the Standards Act.
[303] For all these reasons, Mr. Mazraani’s appeal is allowed and the
Minister’s decision is varied such that Mr. Mazraani is considered to have
held insurable employment during the relevant period.
[304] Industrial Alliance is ordered to pay Mr. Mazraani the sum of
$2,000 as costs. This hearing lasted longer than necessary because Industrial
Alliance was not forthcoming in providing an accurate factual description of
what took place. Additional hearing days were required, which allowed Mr. Mazraani
to provide evidence to contradict the misleading evidence introduced by Industrial
Alliance’s key executives who testified, and enabled the Court to get a clear
picture of the true facts. The Court relies on its inherent jurisdiction to
prevent and control any abuse of its process, recognized by the Federal Court
of Appeal in Fournier v.
Her Majesty the Queen, 2005 FCA 131, 2006 GTC 1181, paragraph 11:
[11] The judge stated that he had no
jurisdiction to impose costs on an appellant who unnecessarily delayed an
appeal process initiated within an informal proceeding. I should point out that
the Tax Court of Canada has the inherent jurisdiction to prevent and control an
abuse of its process: see Yacyshyn v. Canada, [1999] F.C.A. No. 196
(F.C.A.).
[12] The awarding of costs is one mechanism
for preventing or remedying abusive delays or procedures: see Blencoe v.
British Columbia (Human Rights Commission), [2000] 2 S.C.R. 307, at
paragraphs 179 and 183. In Sherman v. Canada (Minister of National Revenue —
M.N.R.), [2003] 4 F.C. 865, at paragraph 46, this Court addressed the
issue in the following terms:
It is now generally accepted that an
award of costs may perform more than one function. Costs under modern rules may
serve to regulate, indemnify and deter. They regulate by
promoting early settlements and restraint. They deter impetuous,
frivolous and abusive behaviour and litigation. They seek to compensate,
at least in part, the successful party who has incurred, sometimes, large
expenses to vindicate its rights.
[Emphasis added by Létourneau J.A.]
Signed this 12th day of April 2016.
“Pierre Archambault”
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