REASONS FOR JUDGMENT
Lafleur J.
[1]
The appellant is appealing
from the decision of the Minister of National Revenue (the Minister) dated June
7, 2013, which states that the appellant was not engaged in insurable
employment with 9207-0077 Québec inc. (the payer) (sometimes called Rénovation
MPF) within the meaning of the Employment Insurance Act, S.C. 1996, c.
23 (the Act), during the period from April 12, 2010, to August 20, 2010 (the
period). The Minister
concluded that the conditions for the existence of a contract of service had
not been met and that therefore there was no employer‑employee
relationship between the payer and the appellant.
I. Facts
[2]
At the hearing, only the
appellant testified on his own behalf. The respondent called as witnesses Lyne Courcy, an appeals
officer at the Canada Revenue Agency (CRA), and Nathalie Chapdelaine, an investigator
for Service Canada.
[3]
According to the appellant,
he was hired by the company MC DUBOIS (note: no evidence was provided at the
hearing regarding the legal status of this business; in this judgment, I will
call it “MC DUBOIS”) to do excavation work in the construction industry. He confirmed at the hearing that he was
hired by Normand Dubois; they entered into a verbal agreement and shook hands.
No contract was signed by the parties. Among other things, the appellant was helping
Normand Dubois’s son, who had little experience in excavation. His tasks also included mechanical maintenance of heavy
machinery. The appellant was initially hired to work on a low‑income
housing construction site managed by a general contractor named Cordev. He did not really know the Dubois family, except by
reputation.
[4]
For his work with MC DUBOIS,
the appellant was paid by cheque every week and worked about 60 hours per
week. In August 2010, he
worked far too much, that is, six days per week, about 70 to 80 hours per week;
therefore, he decided to quit his job because he found the conditions to be
very difficult. His long hours are explained
by the nature of his work: very early in the morning, he had to transport the
machinery from the site in St-Joseph-du-Lac to the sites where it needed to be
used, and the machinery was brought back to the St‑Joseph‑du‑Lac
site late at the end of the day. The appellant
confirmed on cross‑examination that he was not paid for his additional
hours nor was he paid [Translation]
“under the table”.
[5]
At the hearing, the
appellant filed the following documents in evidence:
1. A copy of the record of employment for the
period from April 12, 2010, to August 20, 2010, issued by the payer
(Exhibit A-1);
2. Copies of 15 pay stubs issued by the payer
(Exhibit A-2), including a stub indicating reimbursement for boots.
3. A copy of a T-4 slip for the 2010 taxation year
prepared by the payer (Exhibit A‑3);
4. A copy of his bank statements where some of the
appellant’s pay deposits are shown (Exhibit A-4);
5. A copy of the telephone list containing the
telephone numbers of his superiors as well as some of the members of the Dubois
family: the document is titled [Translation]
“MC DUBOIS Phone List” (Exhibit A-6). Among the names on the list are those of the foreman Alain
Flamand, excavator driver Daniel Morin, a truck driver named Pierre and some
members of the Dubois family.
[6]
The appellant agrees that he
worked for MC DUBOIS but that his paycheques and record of employment were
issued by the payer. The
appellant did not find this situation abnormal.
[7]
The appellant confirmed that
he did not know the payer’s shareholder, Michel Lapointe. However, the
appellant knew that he was working for a very wealthy man who owned a broad
range of equipment and heavy machinery. He worked to exhaustion for the Dubois
family.
[8]
The appellant stated that he
could not fault his employer for anything. He later learned through the media that Mr. Dubois was
part of a vast money‑laundering network. At the hearing, the respondent filed as Exhibit I‑4 a copy of an
article from the La Presse newspaper dated February 10, 2014,
describing the Dubois family’s forfeiture and the prison sentence imposed on
Mr. Dubois for various criminal offences.
[9]
The appellant added that he
also had to wear a uniform. At the hearing, the appellant filed photos in a
bundle (Exhibit A-7) showing the trailer that he had parked at the
St-Joseph-du-Lac domain so that he would not have to commute every day from his
St-Hyacinthe home to his workplace in St-Joseph-du-Lac and to transport the
machinery he was in charge of, which had the MC DUBOIS logo on it.
[10]
The appellant also filed a
copy of an accident report describing an accident that he allegedly had with a
vehicle belonging to his employer (Exhibit A‑5).
[11]
Ms. Chapdelaine, a major
fraud investigator at Service Canada since 2008, explained to the Court that,
after cross-referencing the data, she had met with some claimants who admitted
that they had bought records of employment. The Sûreté du Québec uncovered a false invoicing scheme in
which claimants were employed by companies that had no activity. One of the main companies involved was the payer.
[12]
Ms. Chapdelaine told the
Court that charges had been laid against the payer’s sole shareholder, Michel
Lapointe, and that no judgment had been rendered yet.
[13]
Ms. Chapdelaine met with the
appellant to fill out the Statutory Declaration to the Commission, which was
signed by the appellant and Ms. Chapdelaine on May 4, 2011. A copy of it
was filed as Exhibit I-1 (the statutory declaration). The statutory declaration contains a description of the
work done by the appellant in 2007 while he was in Alberta and how his
salary was paid at the time. At the hearing, the appellant stated that some parts of the
statutory declaration were false because he admitted that he had been paid in
cash for his work in Alberta while the statutory declaration indicates that he
had been paid by cheque.
[14]
In addition, the appellant
specified that he did not mention the Dubois family or the St-Joseph-du-Lac
domain in the statutory declaration because he was afraid of reprisals from Mr.
Dubois or his associates. He added that he did not want to report anyone.
[15]
According to Ms.
Chapdelaine, the search she performed at the time on the Quebec enterprise
register website showed that MC DUBOIS belonged to Mr. Dubois’s daughter,
who was also awaiting trial on various criminal charges.
[16]
Ms. Courcy, an appeals
officer with the CRA since 1990, testified at the hearing and filed report
CPT110, a report on an appeal concerning the appellant, as Exhibit I‑5. Ms. Courcy stated that, during a
phone interview with Michel Lapointe (sole shareholder of the payer) on
January 17, 2013, he told her that he had not controlled the payer since 2007
and that he had never signed any paycheques or records of employment—he no
longer took care of the payer’s business but sometimes deposited money for the
business. He also admitted that a stamp with his signature had been made and
that it was used to put his signature on various documents without his
knowledge. I quote from paragraphs 19
to 22 of Ms. Courcy’s report:
[Translation]
19. Starting in 2007,
he associated Rénovation MPF. At that time, he met Mr. Desrochers and lost
control of the business. He
no longer knew what was going on in the business and, even when he asked
questions, he did not get answers. The
business became 9207-0077 Québec inc. Normand Duval made the decisions, and he
referred to Normand Dubois, but he does not know where the office for his
business is located.
20. He did not sign any paycheques.
21. He did nothing in
the business in the hopes of obtaining benefits in the future. He signed nothing except a stamp in his
name, which was used to sign various documents without his knowledge. He was promised many things such as money. Over the years, he may have received $20,000 in periodic
payments of $5,000.
22. He knows that
there was money laundering; sometimes he made deposits for the business. Philippe Larocque was in charge of
the files. He no longer controlled anything
and did not know any employees including Robert Blain. He did not sign a record of employment for Robert Blain.
[17]
Ms. Courcy also stated that
the payer never filed any GST or income tax returns or provided any financial
statements to the CRA.
II. Positions of the parties
[18]
The appellant claims that he
was employed by MC DUBOIS during the period and that he therefore was engaged
in insurable employment within the meaning of the Act.
[19]
The respondent maintains
that the appellant was not an employee of the payer during the period and,
accordingly, was not engaged in insurable employment within the meaning of the
Act.
III. The Act
[20]
Because the facts in this
case took place in Quebec, we must analyze the situation in light of the
private law applicable in Quebec.
[21]
Section 5 of the Act expressly defines insurable
employment:
5. (1) Subject to
subsection (2), insurable employment is
(a) employment
in Canada by one or more employers, under any express or implied contract of
service or apprenticeship, written or oral, whether the earnings of the
employed person are received from the employer or some other person and whether
the earnings are calculated by time or by the piece, or partly by time and
partly by the piece, or otherwise;
(b) employment
in Canada as described in paragraph (a) by Her Majesty in right of
Canada;
(c) service in
the Canadian Forces or in a police force;
(d) employment
included by regulations made under subsection (4) or (5); and
(e)
employment in Canada of an individual as the sponsor or co-ordinator of an
employment benefits project.
(2) Insurable employment does not include
(a) employment
of a casual nature other than for the purpose of the employer’s trade or
business;
(b) the
employment of a person by a corporation if the person controls more than 40% of
the voting shares of the corporation;
(c) employment in
Canada by Her Majesty in right of a province;
(d) employment
in Canada by the government of a country other than Canada or of any political
subdivision of the other country;
(e) employment
in Canada by an international organization;
(f) employment
in Canada under an exchange program if the employment is not remunerated by an
employer that is resident in Canada;
(g) employment
that constitutes an exchange of work or services;
(h) employment
excluded by regulations made under subsection (6); and
(i)
employment if the employer and employee are not dealing with each other at
arm’s length.
[22]
The Act does not define what
constitutes a “contract of service or apprenticeship”.
[23]
In NCJ Educational Services
Limited v. Canada (National Revenue), 2009 FCA 131, Justice Desjardins of
the Federal Court of Appeal stated the following:
[49] Since paragraph 5(1)(a) the Employment
Insurance Act does not provide the definition of a contract of services,
one must refer to the principle of complementarity reflected in section 8.1 of
the Interpretation Act, R.S.C. 1985, c. I‑21, which teaches
us that the criteria set out in the Civil Code of Québec must be applied
to determine whether a specific set of facts gives rise to a contract of
employment. . . .
[24]
Section 8.1 of the Interpretation Act,
R.S.C. 1985, c. I‑2, provides the following:
8.1 Both the common law
and the civil law are equally authoritative and recognized sources of the law
of property and civil rights in Canada and, unless otherwise provided by law,
if in interpreting an enactment it is necessary to refer to a province’s rules,
principles or concepts forming part of the law of property and civil rights,
reference must be made to the rules, principles and concepts in force in the
province at the time the enactment is being applied.
[25]
Thus, we must refer to the
provisions of the Civil Code of Québec (CCQ) to determine what that
expression means. Its relevant provisions read as
follows:
1378. A contract is an agreement of wills by which one or
several persons obligate themselves to one or several other persons to perform
a prestation.
Contracts may be divided into contracts of adhesion and
contracts by mutual agreement, synallagmatic and unilateral contracts, onerous
and gratuitous contracts, commutative and aleatory contracts, and contracts of
instantaneous performance or of successive performance; they may also be
consumer contracts.
. . .
1425. The common intention of the parties rather than
adherence to the literal meaning of the words shall be sought in interpreting a
contract.
1426. In interpreting a contract, the nature of the
contract, the circumstances in which it was formed, the interpretation which
has already been given to it by the parties or which it may have received, and
usage, are all taken into account.
. . .
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.
[26]
Therefore, for there to be a
contract of service within the meaning of the Act, that is, a contract of
employment within the meaning of the CCQ, the following three elements
must be present (see 9041-6868 Québec inc. v. Minister of National Revenue,
2005 FCA 334, para. 11):
i.
performance of work;
ii. remuneration; and
iii.
a relationship of subordination.
[27]
As the Federal Court of
Appeal teaches us in 9041-6868 Québec inc. v. Minister of National Revenue,
supra, the control criterion is the determinative factor in such a
relationship:
[12] It is worth
noting that in Quebec civil law, the definition of a contract of employment
itself stresses “direction or control” (art. 2085 C.C.Q.), which makes control
the actual purpose of the exercise and therefore much more than a mere
indicator of organization. . . .
[28]
In Grimard v. Canada,
2009 FCA 47, [2009] 4 F.C.R. 592, the Federal Court of Appeal affirmed this
principle and also invited the courts to use the common law criteria in
analyzing the legal nature of a work relationship, regardless
of whether they have to rule under Quebec’s
civil law regime:
[37] This excerpt
mentions the notion of control over the performance of work, which is also part
of the common law criteria. The difference is that, in Quebec civil law, the
notion of control is more than a mere criterion as it is in common law. It is
an essential characteristic of a contract of employment: see D & J
Driveway, at paragraph 16; and 9041-6868 Québec Inc. v. M.N.R., 2005
FCA 334, 350 N.R. 201.
. . .
[43] In short, in
my opinion there is no antinomy between the principles of Quebec civil law and
the so‑called common law criteria used to characterize the legal nature
of a work relationship between two parties. In determining legal subordination, that is to say, the
control over work that is required under Quebec civil law for a contract of
employment to exist, a court does not err in taking into consideration as
indicators of supervision the other criteria used under the common law, that is
to say, the ownership of the tools, the chance of profit, the risk of loss, and
integration into the business.
[29]
As described by Justice
Mainville in 1392644 Ontario Inc. (Connor Homes) v. Canada (National
Revenue), 2013 FCA 85, a two-step test must be used to make that
determination:
1.
Ascertain the subjective
intent of each party to the relationship: this can be determined by examining
the contract or the actual behaviour of each party;
2.
Ascertain whether an
objective reality sustains the subjective intent of the parties – are the facts
consistent with the parties’ expressed intention? – by referring to the criteria established in the case law,
namely, control, ownership of the work tools, the chance of profit and risk of
loss, and integration into the payer’s business.
IV. Analysis
[30]
In his submissions, the
respondent claims that the issue of whether a person is engaged in insurable
employment under the Act must be analyzed based on a particular employer. Thus, according to the respondent, for
the appellant’s appeal to be allowed, the Court must find that a contract of
employment existed between the appellant and the payer. The respondent adds that, in this case, it is possible that
the appellant provided services, but because the services were not provided to
the payer, it must be concluded that the appellant was not engaged in insurable
employment within the meaning of the Act.
[31]
I am of the view that the
respondent’s restrictive interpretation of the expression “insurable
employment” is not consistent with the Act.
[32]
First, paragraph 5(1)(a)
of the Act sets out that insurable employment is “employment in Canada by one
or more employers, under any express or implied contract of service or
apprenticeship, written or oral, whether the earnings of the employed person
are received from the employer or some other person . . .”. [Emphasis added.]
[33]
Thus, the definition of
“insurable employment” itself provides for the situation where a person is
bound by a contract of employment to another person, while a different person
pays the remuneration.
[34]
In addition, the Insurable
Earnings and Collection of Premiums Regulations (SOR/97-33) made under the
Act also provide for situations where the person who pays a worker’s
remuneration is considered the “deemed employer” and is obliged to collect and
remit employment insurance premiums. The relevant parts of these Regulations
are as follows:
INTERPRETATION
1. (1) The definitions
in this subsection apply in these Regulations.
. . .
(2) For the purposes of
Part IV of the Act and for the purposes of these Regulations, “employer”
includes a person who pays or has paid earnings of an insured person for
services performed in insurable employment.
. . .
PART III
DEEMED EMPLOYERS
. . .
Other Deemed Employers
10. (1) Where, in any
case not coming within any other provision of these Regulations, an insured
person works
(a) under the
general control or direct supervision of, or is paid by, a person other than
the insured person’s actual employer, or
(b) with the
concurrence of a person other than the insured person’s actual employer, on
premises or property with respect to which that other person has any rights or
privileges under a licence, permit or agreement,
that other person shall, for the purposes of maintaining
records, calculating the insurable earnings of the insured person and paying,
deducting and remitting the premiums payable on those insurable earnings under
the Act and these Regulations, be deemed to be the employer of the insured
person in addition to the actual employer.
(2) The amount of any
employer’s premium paid by the person who is deemed to be the employer under
subsection (1) is recoverable by that person from the actual employer.
(3) Where a person who
is deemed under these Regulations to be an employer of an insured person fails
to pay, deduct or remit the premiums that an employer is required to pay,
deduct or remit under the Act or these Regulations, the provisions of Parts IV
and VI of the Act shall apply to the person as if the person were the actual
employer.
[Emphasis added.]
[35]
In R. v. Insurance Corp. of British Columbia, 2002 FCA 104, the Federal Court of Appeal
explains the purpose of the Regulations:
[8] The purpose of the
Regulations and the statute which authorizes them is in part to facilitate
collection of employment insurance premiums, an activity which is essential to
the scheme as it now exists. The Act clearly authorizes the kind of provision
which has been adopted by the Governor in Council in section 10 of the
Regulations. In examining section 10 one sees that it is to apply inter alia
where an employed insured person is being “paid by a person other than [his
or her] actual employer”. In such case that “other person” must maintain
records of employment and calculate, deduct, and remit the appropriate
premiums. The proposition is simple enough and its purpose clear: premiums are
to be deducted at the source where salary or wages are calculated and
administered, and where checks or pay-packets are issued. The term “paid” ought
to be interpreted in context, and it is not necessary to examine technical
sources in order to attribute to it a meaning that would defeat the clear
purpose of the section. It would be equally possible, if one were to dwell on
abstract legal concepts, to hold that a person can be an “actual employer” only
if that person is paying the “employee” from his or her own resources and not
at the expense of another. But that would also defeat the purpose of the
section by precluding its application to any situation where a third party was
actually providing and administering the wages or salary.
[36]
That Federal Court of Appeal
decision was followed by Associate Chief Justice Lamarre of this Court in Union
of Saskatchewan Gaming Employees Local 40005 v. Minister of National Revenue,
2004 TCC 799, and more recently by Deputy Judge Porter in 6236251 Canada
Inc. v. Minister of National Revenue, 2007 TCC 101.
[37]
In this case, it is clear
that the appellant was paid by the payer. At the hearing, the appellant filed copies of 15 pay stubs
issued by the payer (Exhibit A‑2). The
cheques are all numbered consecutively and bear a date showing that the
appellant was paid every week. In addition,
the pay stubs indicate employment insurance deductions. However, there are no copies of pay stubs for four weeks,
namely, from July 31, 2010, to August 20, 2010. The appellant gave no reason to
justify the lack of documentation for that period. In my view, this does not change the fact that the payer
did pay the appellant during the period.
[38]
The payer also gave a record
of employment to the appellant for the period. At the
hearing, the appellant filed a copy of the record of employment for the period
from April 12, 2010, to August 20, 2010, prepared by the payer (Exhibit A‑1).
[39]
In addition, the T-4 slip
for the 2010 taxation year, which the payer gave to the appellant, indicates
that the appellant had contributed $310.08 to employment insurance. A copy of
the T-4 slip was filed at the hearing as Exhibit A-3.
[40]
Even though Mr. Lapointe,
President and sole shareholder of the payer, confirmed to Ms. Courcy that he
did not know the appellant (which the appellant also confirmed in his
testimony) and that he had not issued records or prepared pays for him, the
report filed by Ms. Courcy as Exhibit I-5 confirms that Mr. Lapointe had no control over the payer’s
activities and that his name was sometimes put on documents with a stamp, which
he himself had consented to having made. Although this part of the testimony is hearsay, I will
nonetheless quote the relevant part of the report below:
[Translation]
19. Starting in 2007,
he associated Rénovation MPF. At that time, he met Mr. Desrochers and lost
control of the business. He
no longer knew what was going on in the business and, even if he asked
questions, he did not get answers. The
business became 9207-0077 Québec inc. Normand Duval made decisions and deferred
to Normand Dubois, but he does not know where his business’s office is.
20. He did not sign any paycheques.
21. He did nothing in
the business in the hopes of obtaining benefits in the future. He signed nothing except a stamp in his
name, which was used to sign various documents without his knowledge. He was promised many things such as money. Over the years, he may have received $20,000 in periodic
payments of $5,000.
22. He knows that
there was money laundering; sometimes he made deposits for the business. Philippe Larocque was in charge of
the files. He no longer controlled anything
and did not know any employees including Robert Blain. He did not sign a record of employment for Robert Blain.
[41]
Thus, the fact that Mr.
Lapointe did not know the appellant and that Mr. Lapointe claimed that he
did not sign any cheques or records of employment does not change the fact that
the appellant was paid by the payer, cashed the paycheques issued by the payer
and received a record of employment issued by the payer in respect of his work.
[42]
In light of the foregoing,
if I conclude that the appellant and another person are bound by a contract of
employment, I would have to conclude that the payer is the appellant’s deemed
employer for the purposes of the Act.
[43]
Let us now turn to the issue
of whether the appellant was bound by a contract of employment with another
person under the CCQ during the period. To answer this question, I must examine
the three criteria for the existence of such a contract, namely, the prestation
of work, remuneration and the relationship of subordination.
[44]
I note that the evidence has
shown that the agreement between the appellant and Mr. Dubois was verbal. The
appellant could not call Mr. Dubois as a witness because of the particular
circumstances concerning Mr. Dubois and his family and close collaborators as
shown in Exhibit I-4.
[45]
Based on the appellant’s
evidence at the hearing, I am of the view that the appellant performed a
prestation of work for MC DUBOIS or for Mr. Dubois during the period. The appellant’s testimony was clear; the
appellant appeared to me to be credible, honest and frank.
[46]
The appellant had to
transport heavy machinery. He had to help Mr. Dubois’s son in his
excavation work. He also had to ensure that the heavy machinery was in good
working order. He showed the
Court some photos of the machinery with the MC DUBOIS logo on it.
[47]
During the hearing, the
respondent described the contradictions in the statutory declaration. However, the appellant seemed sincere to
me when he said that he did not want to implicate Mr. Dubois or his
companies for fear of reprisals. In addition,
although the appellant’s actions concerning his job in Alberta in 2007 may not
have complied with the Act, I cannot infer that the appellant’s testimony at
the hearing is tainted by bad faith. Accordingly,
I will not use this factor in this case.
[48]
As I found above, the
evidence provided by the appellant has shown that he received remuneration from
the payer for his work. The respondent did not dispute
this fact. This criterion has therefore been met.
[49]
As I have stated above, the
courts have put forward a list of supervision indicia to determine whether the
giver of work exercises sufficient control over the performance of work for
there to be an employer-employee relationship. The Court may rely on this list of indicia to determine
whether the third criterion for the existence of a contract of employment
within the meaning of the CCQ is met. These
indicia are ownership of the work tools, the chance of profit and the risk of
loss as well as the extent to which the work performed by the alleged employees
is integrated into the deemed employer’s business.
[50]
In addition, as the Court
explained in 9041-6868 Québec inc. v. Minister of National Revenue, supra,
. . . The reason for
this is that the diversification and specialization of occupations and work
methods often made it unrealistic for an employer to be able to dictate or even
directly supervise the performance of the work. Consequently, subordination
came to include the ability of the person who became recognized as the employer
to determine the work to be performed, and to control and monitor the
performance. Viewed from the reverse perspective, an employee is a person who
agrees to integrate into the operational structure of a business so that the
business can benefit from the employee’s work. In practice, one looks for a
certain number of indicia of the ability to control (and these indicia can vary
depending on the context): mandatory presence at a workplace; a somewhat
regular assignment of work; the imposition of rules of conduct or behaviour; an
obligation to provide activity reports; control over the quantity or quality of
the services, etc.
[51]
Based on the appellant’s
testimony, he had to wear a uniform; he took care of machinery with the MC
Dubois logo on it; he had to be at the site in St‑Joseph‑du‑Lac
in the morning to transport the machinery in the morning and in the evening
when it had to be returned; he provided a phone list on which the name of a
foreman, Alain Flamand, appears; and he worked long hours. The respondent did not dispute this evidence.
[52]
In addition, the appellant
provided no work tools. The
appellant also filed a cheque indicating that the payer reimbursed him $203.16
for his boots (Exhibit A‑2).
[53]
The appellant had neither
the chance of profit nor the risk of loss with respect to the activities: he
regularly received his paycheques and deposited them in his bank account.
[54]
Based on the appellant’s evidence,
I am of the view that the appellant was bound by a contract of employment with
Mr. Dubois or with MC DUBOIS.
[55]
I would also like to mention
that it is clear from the appellant’s testimony that he did not personally know
the members of the Dubois family; he sincerely believed that he was working for
Mr. Dubois or MC DUBOIS. The
fact that the payer or the members of the Dubois family are involved in a false
invoicing scheme and that the payer is a shell company with no activity should
not penalize the appellant who was engaged in insurable employment with Mr.
Dubois or MC DUBOIS.
[56]
For all of these reasons, I
find that the appellant was engaged in insurable employment for the purposes of
the Act during the period. I therefore allow the appellant’s appeal and modify
the Minister’s decision in order to conclude that the appellant was engaged in
insurable employment with Mr. Dubois or MC DUBOIS during the period from April
12, 2010, to August 20, 2010.
Signed at Ottawa, Canada, this 24th day of June 2015.
“Dominique Lafleur”
Translation certified true
On this 7th day of August 2015
Margarita
Gorbounova, Translator
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