REASONS FOR JUDGMENT
Favreau J.
[1]
These are appeals heard on common evidence with
the appeal of 7547978 Canada Inc. (docket 2013-2929(IT)I) from the
decisions made by the Minister of National Revenue (the Minister) dated May 3,
2013, regarding the insurability of the employment of workers under paragraph 5(1)(a)
of the Employment Insurance Act, S.C. 1996, c. 23, as amended (the EIA) and appeals from
assessments made in respect of 7547978 Canada Inc. dated November 5, 2012.
[2]
In rulings dated May 3, 2013, the Minister
determined that the employment of Michel Anderson, Jean-Éric Charron, Francis
Casey, Vicky Brazeau and Carl Thibert-Granato while working for Richard
Meunier during the period from January 1, 2010, to June 15, 2010, and, while
working for 7547978 Canada Inc. during the period from June 16, 2010, to
December 31, 2011, was insurable employment given that the contract of service
requirements were met and that there was an employer/employee relationship
between those individuals and Richard Meunier during the first period, and
between those individuals and 7547978 Canada Inc. during the second
period.
[3]
In rulings also dated May 3, 2013, the Minister found
that Maxim Meunier’s employment while working for 7547978 Canada Inc. during
the period from January 1, 2011, to December 31, 2011, was insurable employment
given that the contract of service requirements were met and that there was an
employer/employee relationship between Maxim Meunier and 7547978 Canada Inc.
Even though Maxim Meunier is related to 7547978 Canada Inc., the
Minister was satisfied that a substantially similar contract of employment would
have been entered into if Maxim Meunier had been dealing with 7547978
Canada Inc. at arm’s length and that, consequently, Maxim Meunier’s
employment was included in the insurable employment.
[4]
In another decision dated May 3, 2013, the
Minister determined that the employment of the 139 workers listed in Appendix A
of said decision, while working for 7547978 Canada Inc. during the 2010 and
2011 taxation years of said company, was insurable employment given that the
contract of service requirements were met and that there was an employer/employee
relationship between those individuals and 7547978 Canada Inc.
[5]
In assessments dated November 5, 2012, the
Minister assessed 7547978 Canada Inc., in respect of its 2010 and 2011 taxation
years, for unpaid employment insurance premiums for 139 workers of said company.
In those assessments, the following amounts were claimed from 7547978 Canada
Inc.:
|
Year
|
Employment Insurance
|
Penalties
|
Interest
|
Total
|
|
2010
|
$11,675.11
|
$1,167.61
|
$1,103.00
|
$13,945.72
|
|
2011
|
$8,230.06
|
$823.00
|
$361.00
|
$9,414.06
|
|
|
|
|
|
|
[6]
To make his decisions in respect of 7547978
Canada Inc., the Minister relied on the following assumptions of fact:
[translation]
(a) 7547978 Canada Inc. operates a company specialized in merchandizing,
sampling and display mounting for large retailers;
(b) 7547978 Canada Inc.’s sole shareholder is Richard Meunier Côté;
(c) 7547978 Canada Inc. was incorporated in 2010, but prior to that, the
company had been operating under the name of Entreprises Darik for over
10 years;
(d) The duties of the workers consisted of putting up and taking down
shelves, and arranging and labelling merchandise;
(e) The workers’ wages varied between $10 and $13 an hour;
(f) The workers were hired and paid directly by 7547978 Canada Inc.;
(g) The workers were supervised by a team leader who was also employed
by 7547978 Canada Inc.;
(h) The place of work, schedule and tasks were determined by 7547978 Canada
Inc.; and
(i)
Wages were paid weekly.
[7]
In the alternative, the Deputy Attorney General
of Canada maintains that the employment insurance premiums were payable,
relying on the following additional facts:
[translation]
(a) Impact Détail is also a company specialized in merchandizing,
sampling and display mounting for large retailers that operate in Quebec;
(b) Impact Détail obtained contracts from big stores like Loblaws;
(c) 7547978 Canada Inc. obtained subcontracts with the clients of
Impact Détail, like Loblaws;
(d) 7547978 Canada Inc. invoiced clients directly or invoiced Impact
Détail for the contracts and subcontracts completed by 7547978 Canada Inc.’s employees;
(e) The places of work were determined by 7547978 Canada Inc. based on its
contracts or subcontracts with the clients;
(f) The schedule and the tasks performed by the workers were determined
by 7547978 Canada Inc.’s clients;
(g) 7547978 Canada Inc. supplied workers to complete contracts or subcontracts
with clients;
(h) 7547978 Canada Inc.’s clients or their staff supervised the workers
while they put up and took down shelves, and displayed and labelled merchandise;
(i)
7547978 Canada Inc.’s clients or their staff explained
the tasks to be completed to the workers;
(j)
7547978 Canada Inc.’s clients or their staff often
provided workers with planograms to follow in order to complete the tasks requested;
(k) The tasks to be carried out by the workers had to comply with the
instructions provided by 7547978 Canada Inc.’s clients and had to be completed
to their satisfaction;
(l)
The clients’ employees completed tasks similar
to those completed by 7547978 Canada Inc.’s workers, e.g. putting up and taking
down shelves, arranging and labelling merchandise; and
(m) The invoices sent by 7547978 Canada Inc. to Impact Détail or
clients provided the amounts paid per hour to each worker and the amounts for
travel (i.e. mileage), accommodation and meals when the workers had travelled
for work.
[8]
The appellants challenge the merits of the
determinations made by the Minister and claim that the workers could not have been
engaged in insurable employment because they were not employees of Richard
Meunier or 7547978 Canada Inc. According to them, there was no employer/employee
relationship between the workers and Richard Meunier, during the first period, and
between the workers and 7547978 Canada Inc., during the second period. In the
case of 7547978 Canada Inc., the following grounds are raised to justify the
absence of an employer/employee relationship:
[translation]
(a)
7547978 Canada Inc. exercised practically no
control over the workers;
(b)
the workers were on a call list and when a
contract was awarded to 7547978 Canada Inc., it contacted those on the call
list to check their availability. If they were available, 7547978 Canada Inc. retained
their services for that contract;
(c) no tools or training were offered to the workers by 7547978 Canada
Inc.;
(d) 7547978 Canada Inc. had no control over the workers’ activities, did
not supervise the work performed and gave no orders or instructions on how to
perform the work;
(e) 7547978 Canada Inc.’s clients established the work plan, determined
the specifications of the services to be rendered and prepared display plans to
follow and the workers themselves decided which method to use to complete the
mandate assigned;
(f) 7547978 Canada Inc. did not offer any guarantee to those on the list
that they would be hired for the next contract;
(g) the workers had no job security with 7547978 Canada Inc. They could go
long periods without work depending on 7547978 Canada Inc.’s contracts and/or
their availability;
(h) all of the workers were free to work elsewhere, at any time, for any
other company and even in the same field. There was no exclusivity agreement
between the workers and 7547978 Canada Inc.;
(i)
it has been established, by the case law, that the
parties’ intention has probative weight on the determination of a working
relationship;
(j)
it is evident that parties’ intention was that it
was a contract of enterprise, which the workers acknowledged in writing.
Testimony
[9]
Richard Meunier testified at the hearing. He
explained that he has worked in the food industry for more than 40 years. In
2005, he started his company and did business under the name “Entreprises Darik”. The company does merchandizing,
sampling and display work for large retailers, such as grocery stores and drug
stores, and promotes products for different companies through demonstration and
tasting kiosks on the clients’ premises to promote and present products
directly to consumers.
[10]
Mr. Meunier ran his business on his own until
June 2010, the date on which he incorporated. 7547978 Canada Inc. The head
office and only place of business for 7547978 Canada Inc. are in Mr. Meunier’s residence,
which is located at 2 Chemin des Orchidées in l’Ange-Gardien, Quebec.
[11]
The main clients of Mr. Meunier and 7547978 Canada
Inc. are the companies Vincor, Dare, Planters, Vachon and especially Impact Détail
Inc., whose business volume represents 70% to 75% of the company’s total
business. The retailers to which services are rendered are located in Quebec and
Ontario. Impact Détail Inc. runs the same type of company as that run by Mr. Meunier,
except that it does not promote products using demonstration and tasting kiosks.
Impact Détail Inc. deals with representatives who work at the head office
of big companies, such as Loblaws, Sobeys, etc., and awarded subcontracts to
Mr. Meunier until June 2010 and, subsequently, to 7547978 Canada Inc.
[12]
The execution of the mandates assigned to Mr. Meunier
and his company requires the provision of services by non-specialized workers. The
nature of the work to be performed by the workers is determined either on site
by the retailer or by a representative of the parent company (e.g. Loblaws), or
in advance through planograms, photographs or other detailed descriptions of
the floor displays previously provided by the retailer’s parent company.
[13]
Mr. Meunier recruited workers by simple word of
mouth, without any interviews, photographs or résumés. Social insurance numbers
were requested only when workers agreed to carry out a mandate. Mr. Meunier
made a list of the workers and their telephone numbers; the first people on the
list were those who had the most availability and the most experience. When
workers were needed, Mr. Meunier called the workers on the list and told
them the place, date and time of the work.
[14]
No training was provided to the workers and no
written contract was entered into with the workers. The workers who were called
were free to accept or reject Mr. Meunier’s offer of work. If they rejected it,
no sanction was imposed on them. No exclusivity was required on the part of the
workers.
[15]
The workers were paid at an hourly rate of $11 to
$12 when they were stock clerks or product promoters. Planogrammers earned an
additional two dollars per hour. In addition to the hourly wage, workers were
paid for the travel time from their place of residence to the place of work and
received an allowance for the kilometres driven from their place of residence
to the place of work. The hourly rate paid to the workers was the same whether
the services were rendered during the day or at night.
[16]
For mandates in remote areas, Mr. Meunier reimbursed
travel costs to those who owned a vehicle only if the vehicle was used to
transport four workers. Accommodations were reimbursed upon submission of
invoices but only if there was double occupancy in the hotel room and meal
costs were reimbursed at a fixed allowance of $30 per day.
[17]
Mr. Meunier always had a team leader on work
sites to handle communications with the representatives of the retailer and/or
the retailer’s parent company, to receive instructions regarding the work to
perform and to assign workers to the required tasks. Also, the on-site team
leader was responsible for keeping a log of the hours worked by the workers,
which had to be countersigned by the retailer’s representative. If a worker was
absent, sick or unable to work, the on-site team leader had to find a
replacement or communicate with Mr. Meunier so that he could find another
worker. On several occasions, Maxim Meunier, Richard Meunier’s son, acted
as a team leader for his father’s company on work sites.
[18]
Mr. Meunier also specified that, for tastings, he
gave instructions to workers about how to perform their work and he ensured
that the kiosks and equipment were safe. Normally, the food was provided by the
retailer and cooked on the retailer’s premises. The retailer also provided
plates, napkins, linens, utensils, tables and warmers. All of the equipment
provided by Mr. Meunier was invoiced to the retailers. Mr. Meunier,
however, provided the hats, long pants and t-shirts to the workers assigned to
that activity.
[19]
Maxim Meunier also testified at the hearing. He
worked for Entreprises Darik from 2005 to 2009 and for 7547978 Canada Inc.
in 2011 as a self-employed worker. He did not recall if he had worked for his
father in 2010 given that he had been looking for stable work. He confirmed
that, when he worked for his father, he performed the same tasks as the other
workers, and he benefitted from the same working conditions in terms of pay. He
also confirmed that the retailers liked to consult one individual to communicate
with the workers assigned to a site.
[20]
Richard Boulay, director and majority
shareholder of the company Impact Détail Inc., testified at the hearing. He
explained that his company offered a store layout service using planograms designed
by wholesalers on behalf of big companies, such as Loblaws, Metro and Sobeys. According
to him, he earns 95% of his sales from services performed by his own employees,
which currently number around 300 to 350 part-time employees.
[21]
Mr. Boulay stated that he offered subcontracts
to Richard Meunier because his company has little presence in the Outaouais
region. He has no written contract with Mr. Meunier and the pay offered is an
hourly rate with an allowance for meals, accommodation and transportation. When
Mr. Meunier agrees to carry out a mandate, the manager at Impact Détail Inc.
sends him a confirmation e-mail specifying the retailer’s address, the nature
of the work to be performed, the duration of the work, the number of workers
required, the date and the time of start of work. On site, the workers perform
their work according to the directions of the retailer’s manager or the project
lead of the retailer’s parent company, as applicable. Mr. Meunier assigns one
of his workers the responsibility of representing the company for communications
with the retailer and of recording the hours worked, which must be validated by
the retailer.
[22]
Mr. Meunier invoices Impact Détail Inc. for the services
rendered under a contract and pays wages to the individuals who worked on the
project. Impact Détail Inc. issues an invoice to the retailer’s parent
company and pays Mr. Meunier’s invoice.
[23]
Mr. Boulay pointed out that the time between the
date a mandate is offered and the date the mandate is carried out was sometimes
very short. Often, mandate offers are provided on a Wednesday and services can
start Monday of the following week.
[24]
Vicky Brazeau, one of the workers who rendered
services for Mr. Meunier, testified at the hearing about the conditions under
which her work was performed. She did product tastings and followed planograms submitted
by the parent companies of retailers. Furthermore, she sometimes acted as an
on-site team leader for Mr. Meunier. Mr. Meunier would give her timesheets
accompanied by a route map for getting to the retailer.
[25]
In her testimony, Ms. Brazeau talked about the circumstances
surrounding a trip to Sept-Îles when working for Mr. Meunier. She used her car
and transported three other workers with her. She was reimbursed for her mileage
and her meals but Mr. Meunier had made the hotel room reservation and had paid
the cost of the accommodation directly. She did not receive any advances from Mr. Meunier
to pay for her travel costs.
[26]
For her services, Ms. Brazeau was paid each week
by cheque. No tax was withheld on her pay and she was not entitled to any benefits.
She reported the income earned for her services with Mr. Meunier as self-employment
earnings.
[27]
Karine Grenier, a trust account examiner with
the Canada Revenue Agency (the CRA), and Marie-Josée Simard, an appeals officer
with the CRA, testified at the hearing to explain the developments in the file
of Mr. Meunier and of the workers from whom he retained services. The initial
audit started in June 2011 and it was initiated because of the high number of
subcontractors while there were no employees working for the company. In
January 2012, Natasha Vermette, the auditor, requested a ruling on the
insurability of certain workers from the CRA. After analysis, the CRA found
that, during the period in dispute, the workers were employees and that their
employment was insurable under paragraph 5(1)(a) of the EIA. Confirmation
letters to that effect are dated July 6, 2012. Said rulings were applied to all
of the workers, that is, to 105 workers for 2010 and to 70 workers for 2011. Following
those rulings, the CRA cancelled the T4As that Mr. Meunier had had his
accountant prepare at the beginning of the audit and issued T4s to all of the
workers and reassessed them. The T4As contained errors because all of the
amounts paid to the workers were treated as fees, including the expense
reimbursements for meals, mileage, etc. and the cash advances made to the workers.
[28]
In October 2012, counsel for Mr. Meunier appealed
the Minister’s rulings. On May 3, 2013, after the CRA reassessed the workers, it
stated that the workers’ employment was insurable employment.
The law
[29]
Paragraph 5(1)(a) of the EIA states the
following:
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;
[30]
Subsection 5(2) of the EIA provides a list of non-insurable
employment. Paragraph 5(2)(i) states that insurable employment does not
include employment if the employer and employee are not dealing with each other
at arm’s length.
[31]
Subsection 5(3) of the EIA sets out the
following rules in cases where the employer and the employee are not dealing
with each other at arm’s length:
(3) For the
purposes of paragraph (2)(i),
(a) the question of whether persons are not dealing with each
other at arm’s length shall be determined in accordance with the Income Tax
Act; and
(b)
if the employer is, within the meaning of that Act, related to the employee,
they are deemed to deal with each other at arm’s length if the Minister of
National Revenue is satisfied that, having regard to all the circumstances of
the employment, including the remuneration paid, the terms and conditions, the
duration and the nature and importance of the work performed, it is reasonable
to conclude that they would have entered into a substantially similar contract
of employment if they had been dealing with each other at arm’s length.
[32]
The determination of the status of a worker who works
in Quebec is governed by the rules of the Civil Code of Québec. The Civil
Code of Québec uses the expressions “contract of
employment” and “contract of enterprise or for
services”, which are defined in articles 2085 and 2098:
Art. 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.
Art. 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.
[33]
The main characteristic of a contract of
enterprise or for services is stated in article 2099 as follows:
Art. 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.
Analysis
[34]
Counsel for the appellants first demonstrated,
with supporting statistics, that the workers did not work very many days on an
annual basis and earned very little. That is normal for casual or part-time
work. That factor is, however, not relevant for the purpose of determining the
tax status of the workers involved. I would like to note here that the workers
of Impact Détail Inc., who perform the same type of work as that performed by
the workers and the majority of whom are also part‑time employees, are
considered by their employer as employees.
[35]
According to counsel for the appellants, Mr.
Meunier and 7547978 Canada Inc. do not exercise any control over the
workers. In my opinion, that allegation is incorrect. Mr. Meunier and 7547978 Canada
Inc. exercise some control over the workers. First, Mr. Meunier gives instructions
to the workers by telling them the work location, the start time, the general
nature of the work and the estimated duration of the work. When the work
location is far, Mr. Meunier organizes transportation by car based on his
requirements, and reserves hotel or motel rooms according to his protocol. In
all instances, Mr. Meunier has a team leader on site to keep track of the
hours worked by each worker and to facilitate communication with the
representative of the retailer or the retailer’s parent company. Specific instructions
regarding the work to perform are provided on site by the representative of the
retailer or of the parent company or by providing planograms, if not previously
provided. Workers are assigned to each required task by the on-site team
leader, either alone or together with the representative of the retailer or of the
parent company, based on the worker’s experience. If there are complaints or
problems, the representative of the retailer or of the parent company contacts
the on-site team leader so that he or she can resolve the problem or obtain one
or more replacements.
[36]
For workers conducting product demonstrations or
tastings, the control exercised by Mr. Meunier is more pronounced because, in
addition to providing certain clothing, he must ensure that the workers are safe
by ensuring, in particular, that the equipment being used is safe.
[37]
When Mr. Meunier calls workers to offer them
work, they have no negotiating power concerning their conditions of employment:
over wages, the time the work must be performed or how the work must be
performed. Their only choice is to accept or reject the offer of work. The lack
of a true negotiating power indicates that there was a relationship of
subordination between the workers and Mr. Meunier.
[38]
The main obstacle to recognizing the existence
of a contract of enterprise or for services between, on the one hand, Mr.
Meunier and 7547978 Canada Inc. and, on the other hand, the workers, stems from
the fact that the workers do not have the freedom to choose the means of
performing the contracts. The workers have, in fact, no freedom with respect to
the means of performing the contracts. The terms and conditions of the work to
be performed are in most cases pre‑established by Impact Détail Inc. together
with the managers of the parent companies of the retailers. The most prominent
example is when planograms are provided. In that case, workers must reproduce the
design on the planograms in a very specific way.
[39]
Even if terms for executing contracts came from the
retailers or their parents companies, Mr. Meunier had to, under his subcontract
with Impact Détail Inc., respect them and ensure that the workers
respected them. That contractual relationship results in establishing a
relationship of subordination regarding the performance of the employment
contract between Mr. Meunier and 7547978 Canada Inc. and the workers. However,
control over the results of the work to be performed under a contract was
exercised by the retailer’s representative onsite.
[40]
The workers’ intention to be considered self‑employed
is not a relevant factor in this case because the relationships with Mr. Meunier
and 7547978 Canada Inc. were based on verbal agreements that were not
subject to interpretation. Furthermore, said declaration of intent was not
corroborated by the conduct of the parties. The absence of a true negotiating power,
the direction of the workers in the organization of work, the existence of a
relationship of subordination with the workers and the absence of freedom with
respect to the means of performing the work are all factors that contradict the
declared intent of the workers.
[41]
The application of common law tests, as stated
in Wiebe Door Services Ltd. v. Minister of National Revenue, 87 DTC
5025, that is (a) the degree or absence of control exercised by the
alleged employer, (b) ownership of the tools, (c) the chance of profit and the
risk of loss and (d) the extent to which the work performed by the alleged
employees is integrated into the business of the alleged employer, would not
have changed the result of the analysis of the determination of the workers’
tax status. The concept of control over workers was examined in the previous
paragraphs; the workers did not have to use any tools; the workers had no
chance of profit or risk of loss while the factor of integration into the
activities of Mr. Meunier’s company is very rarely used and not very
determinative.
[42]
For these reasons, I find that the workers were engaged
in insurable employment for Mr. Meunier and 7547978 Canada Inc. for the
relevant periods. Maxim Meunier also was engaged in insurable employment for
his father and 7547978 Canada Inc. because his conditions of employment
were similar to those of other workers.
[43]
Consequently, the appeals are dismissed and it
is not necessary to consider the alternative argument raised by the respondent
that Mr. Meunier and 7547978 Canada Inc. were acting as employment
agencies.
Signed at Ottawa, Canada, this 7th day of May 2015.
“Réal Favreau”
Translation certified true
on this 19th day
of June 2015
Janine Anderson,
Translator
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